Smart and Smart

[2014] FamCA 262

FAMILY COURT OF AUSTRALIA

SMART & SMART [2014] FamCA 262

FAMILY LAW – PROPERTY SETTLEMENT – Addbacks – Consideration of addbacks post-Stanford – Where legal fees are sought to be added back – Disclosure of legal fees – Where further addbacks are sought – Exception not the rule – Where an addback is sought due to the asserted recklessness of the wife – Where such addback is denied – Contributions – Inheritance – Whether the wife contributed to the husband’s inheritance from his mother – Adjustments – Earning capacity – Where an adjustment is made in favour of the wife.

Family Law Act 1975 (Cth) ss 75(2), 79,
Family Law Rules 2004 (Cth) 19.04

Bevan & Bevan [2013] FamCAFC 116.
Cerini & Cerini [1998] FamCA 143.
Chorn & Hopkins (2004) FLC 93-204.
Kowaliw & Kowaliw (1981) FLC 91-092.
Omacini & Omacini (2005) FLC 93-218.
Stanford & Stanford (2012) 247 CLR 108.

APPLICANT: Ms Smart

RESPONDENT: Mr Smart

FILE NUMBER: BRC 10559 of 2011

DATE DELIVERED: 17 April 2014

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 11 April 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Bunning

SOLICITOR FOR THE APPLICANT: McLaughlins Lawyers

COUNSEL FOR THE RESPONDENT: Mr R.D. Williams

SOLICITOR FOR THE RESPONDENT: Emerson Family Law

Orders

(1)That the wife’s application for spousal maintenance is dismissed.

(2)That within thirty (30) days of the date hereof:

(i)The husband shall pay to the wife the sum of $48,223 (forty eight thousand two hundred and twenty three dollars);

(ii)The husband shall transfer to the wife (or at her direction) all of his right, title and interest in the real property situated at B Street, Suburb C in the State of Queensland, described as … on Registered Plan …, County …, Parish … Title Reference No. … (“the Suburb C property”);

(iii)The wife shall refinance the registered mortgage number … in favour of the D Bank, causing the husband to be discharged from any and all liability owing in respect of the debt secured by that mortgage and any personal guarantee he may have given in respect of that debt and the wife shall indemnify the husband in respect of all liability owing in respect of that debt and keep him so indemnified;

(iv)The wife shall transfer all her right, title and interest in shares in the company, E Pty Ltd, registered in F City, to the husband and the wife shall resign from any office she holds in the company;

(v)The wife shall relinquish all of her right, title and interest in any bank account, wherever held, that is still in the joint names of the husband and the wife and the husband and the wife shall take all necessary steps to ensure that those joint bank accounts are closed with the husband retaining as his sole property any money still held in any of those bank accounts.

(3)That save as otherwise provided in these Orders, the wife shall retain as her sole property absolutely all of the following:

(i)The Motor vehicle registration number … currently in her possession;

(ii)Her shares in H Bank;

(iii)Any money in bank accounts in her sole name, wherever held, including D Bank account number …; and

(iv)Her interest in G Pty Ltd, F City.

(4)That the wife shall retain as hers absolutely all of her interest in the I Super.

(5)That save as otherwise provided in these Orders, the husband shall retain as his sole property absolutely all of the following:

(i)Any money in bank accounts in his sole name, wherever held;

(ii)His shares in H Bank; and

(iii)His shares in J Pty Ltd registered on the K City Stock Exchange.

(6)That the husband shall retain as his absolutely all of his interest in the P pension plan.

(7)That the husband shall indemnify the wife against any and all liability arising out of ownership or operation of any of the companies, the shares in which he is retaining pursuant to these Orders, and he shall keep her indemnified against any such liability.

(8)That the wife shall indemnify the husband in respect of any and all liabilities arising out of ownership of the Suburb C property and shall keep him indemnified against any such liability.

(9)That the wife forthwith shall prepare an inventory of all items of personal property situated in the Suburb C property and divide that inventory into two separate lists of personal property, with each list to contain property of approximately equal value, as good as that can be practicably achieved by the wife. Each of the two lists shall be provided to the husband and he shall select the one list of personal property that he wants to retain, and advise the wife of that selection as soon as practicable after he has made it.

(10)That upon receipt by the wife of the sum of the sum of $48,223 payable to her by the husband pursuant to paragraph (1)(i) of these orders:

(i)The wife shall cause the items of personal property contained in the list selected by the husband pursuant to paragraph (9) of these Orders to be delivered to the husband at his direction and expense and he shall retain all such items as his sole property absolutely, the wife to retain all the items in the other list as her sole property absolutely; and

(ii)The wife shall immediately transfer all of  her right, title and interest in shares in the company, L Pty Ltd, registered in Country M and Country N company number … and in shares in the company, L Pty Ltd … to the husband and the wife shall resign from any office she holds in either of those companies with the husband to retain all of the shares in those companies as his sole property absolutely from that time on.

(11)That each party shall do all acts and things reasonably required in order to give effect to these Orders, including the signing or execution of all necessary documents and in the event that either party fails or refuses to do so then the Registrar of the Brisbane Registry of this Court is hereby appointed under s 106A of the Family Law Act 1975 (Cth) to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an affidavit of a solicitor on behalf of the requesting party as to the said neglect or refusal and the defaulting party shall pay the other party’s costs of and incidental to such request to the Registrar as agreed or assessed in accordance with the Family Law Rules on a party and party basis.

(12)That each party has liberty to apply to the Court in respect of matters relating to the enforcement or interpretation of these Orders, upon the giving of seven (7) days’ notice in writing to the other party.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Smart & Smart has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 10559 of 2011

Ms Smart

Applicant

And

Mr Smart

Respondent

REASONS FOR JUDGMENT

1.In late 2009, after thirty years of married life in which they raised three children and lived in a number of different parts of the world, Ms and Mr Smart ended their relationship and separated. At that time, they were living in a home at the Suburb C, where they had been since around 2002.

2.Their marriage was dissolved in early 2012. Around that same time, unable to agreeably finalise their financial affairs, the wife commenced proceedings in this Court for property adjustment orders pursuant to s 79 of the Family Law Act 1975 (Cth) (FLA).

3.There have been a number of interim proceedings and various Orders made since then, but the proceedings culminated in a one day trial before me, last week, on Friday 11 April, 2014 in which both parties were represented by solicitors and barristers and cross-examination of each of them took place.

4.Each of the parties is seeking orders adjusting their interests in property and each submitted that doing justice and equity between them requires appropriate property adjustment orders to be made. In the circumstances, I have no doubt that is correct.

The parties’ interests in property

5.At the commencement of the trial, a jointly prepared balance sheet was handed to the Court. It was made exhibit 6 in the trial. Examination of it, discussion about it and consideration of the evidence and filed written summaries of argument revealed a number of matters for the Court to determine before proceeding to consideration of issues of contribution and the other matters the Court is required to consider pursuant to s 79(4) (d) to (g) of the FLA when determining appropriate property adjustment orders.

6.Apart from disagreeing as to the manner in which the parties’ respective contributions should be treated and as to the question of whether the matters remaining to be considered pursuant to s 79(4)(d) to (g) should result in additional adjustment of their property interests to effect justice and equity, the parties particularly disagreed about the following issues:

(i)the value of the real property situated on the O City that the wife wishes to retain solely as her own;

(ii)whether or not amounts should be notionally “added” to the value of their net property and superannuation interests for the legal fees each has spent in the proceedings to date and treated as partial property settlement already retained by each of them;

(iii)whether or not other amounts should be notionally “added” to the value of their property and superannuation interests for money allegedly spent by the husband since separation that is said by the wife to be “unaccounted for”;

(iv)whether or not other amounts should be notionally “added” to the value of their property and superannuation interests in regard to circumstances surrounding damage to and sale of a motor boat the parties owned; and

(v)what is to happen with the contents of the O City home that for several years prior to their separation was their family home.

7.Turning firstly to the contents of the O City home, during the course of the trial, each party agreed with a proposed retention by each of them of some of those items based on a division by the wife of all of those items into two separate lists that she considers equal in value, with the husband to take possession of and retain as his property solely all of the items in the list of his choice from those two lists, and the wife to retain possession of and sole ownership of all of the items in the remaining list. Accepting that as an appropriate resolution of the dispute that remained between the parties about their household contents, I shall make orders that provide for such an adjustment and not consider that particular aspect of the matter further.

8.Also included in orders the wife sought from the Court at the outset of the trial, was an order that the husband pay her periodic spousal maintenance on an ongoing basis. In his oral submissions for the wife at the end of the trial, counsel for the wife did not press that application. With respect, that was an appropriate concession on behalf of the wife in the light of the evidence in the trial.

The Parties’ agreed interests in property

9.The parties agreed that their property interests, liabilities and superannuation interests include the interests and joint debt set out in the following table:

No.	Description	Value
ASSETS
1	Shares in company, L Pty Ltd 51 per cent of shares in husband’s name 49 per cent of shares in wife’s name	$511,000
2	Parties’ shareholding in E Pty Ltd	$4,684
3	Balance of funds held in trust account of wife’s solicitors – being remaining sale proceeds of boat, jet skis, trailer and motor vehicle	$43,559
4	Motor vehicle in wife’s possession	$22,500
5	Husband’s  bank accounts – balance in AUD	$38,893
6	Joint bank accounts – balance in AUD	$5,276
7	H bank Shares (200 shares – each holds 100 shares)	$1,904
8	G Pty Ltd (F City) held by the wife	$170
9	J Pty Ltd shares held by the husband	$7,046
Sub-Total	$635,032
LIABILITIES
10	Mortgage over B Street, Suburb C The husband and the wife are jointly liable	($210,622)
SUPERANNUATION INTERESTS
11	Husband’s P Pension – capitalised value of future income stream	$250,006
12	Wife’s I Super – value of accumulation fund	$18,500
Sub-Total	$268,506
BALANCE		$692,916

10.At the end of the trial, after hearing submissions and having some discussion with counsel for each party, I made an order that the money in the wife’s solicitors’ trust account referred to in item 3 of the above table be retained by the wife as part of her entitlement to property.

11.Further, the parties agreed that the wife had also received an amount of $20,000 from the sale of joint personal property (boat, jet skis, trailer and motor vehicle) in late 2013 that she was entitled to receive pursuant to previous orders of the Court and that such amount is also to be considered as part of her entitlement to property.

The value of the former matrimonial home

12.At the start of the trial, counsel for the husband sought leave to rely on a report from the real property valuer who had been jointly retained in the middle of last year to provide a report as to his expert opinion of the value of the O City property. The valuer had provided a report to both parties valuing the property at $850,000 as at 19 August 2013. However, in March of this year, the husband, through his solicitors, proposed to the wife that the valuer be jointly instructed to update his report as the market “may have improved” since his first report. The wife refused, but unilaterally the husband’s solicitors were able to persuade the valuer to provide an updated report as to his opinion of the value of the property as at 26 March 2014. The valuer was made aware that he was only being asked to provide the update on the instructions of the husband’s solicitors.

13.It was the updated valuation report that counsel for the husband sought leave to put into evidence and rely upon. That leave was opposed by counsel for the wife but, for reasons I gave orally after hearing each party’s submissions, I allowed the updated report into evidence.  If the valuer had not been available to be cross-examined during the trial by counsel for the wife, I would not have allowed the updated report in. The expert valuer’s opinion as to the value of the property at 26 March 2014 was $925,000.

14.Counsel for the wife cross-examined the expert valuer at the trial on issues arising out of the difference in his opinion as to the value of the property in August 2013 and the value of the property in March 2014. However, I consider that the factual information the valuer gave in his updated report about the fresh sales evidence he relied upon and the way in which he compared the subject property to those properties that had more recently sold certainly provided appropriate support for his opinion as to the increase in value of the property since August 2013. With respect, counsel for the wife was unable to persuade me that the expert real property valuer’s opinion as to the value of the property at 26 March, 2014 should not be accepted. I do accept the expert’s opinion and find that the value of the property for the purposes of determining appropriate property adjustment orders is $925,000.

How should the payment by the parties of their legal fees be treated?

15.At the commencement of the trial, counsel for the wife handed to the Court and the husband’s legal representatives, pursuant to the requirement of Rule 19.04(3) of the Family Law Rules 2004, a copy of the costs notice given to the wife prior to the trial pursuant to the obligation contained in Rule 19.04(2). It disclosed that the wife had actually paid a total of $27,604.25 in legal fees to that point in time, although she owed substantially more than that. There was no reference in that costs notice though, as required by Rule 19.04(5), to the source of the funds for the costs paid.

16.Counsel for the husband did not have a copy of such a costs notice given to the husband to hand to the Court at the commencement of the trial and was informed by me that one was expected to be provided before the end of the trial. That omission was rather surprising given that the jointly prepared balance sheet the parties handed to the Court at the commencement of the trial reflected that the amount spent by the husband on legal fees to that point and the source of that money were clearly issues in dispute.

17.During cross-examination of the husband, it became clear that the husband had spent a lot of money on legal representation with a firm of solicitors that had previously acted for him and that he also still owed that firm a lot of money. It also became clear that he had paid the firm of solicitors currently representing him money for their representation to this point in time. However, the husband could not give exact detail about the amounts actually paid to either firm. It also became clear that the wife’s legal representatives had been requesting detailed information about these matters in the lead up to the trial and were still seeking it.

18.In those circumstances, I informed the husband and his legal representatives that I required the Court to be informed before the end of the trial as to exactly how much he had paid to both firms of solicitors and how much he still owed for unpaid legal fees.

19.After the luncheon adjournment, counsel for the husband handed up a number of documents relevant to this issue and informed the Court that the documents revealed that the husband had been billed by the firm of solicitors who had first acted for him the total of $77,555 of which he still owed $43,535. Clearly, he had paid them $34,020. Other documents handed to the Court reflected that the husband had paid $36,423 to his current solicitors for work done and on account of work yet to be done. Accordingly, the husband has paid a total of $70,443 for legal work in the matter and still owes his former solicitors $43,535. However, as with the wife, the documents handed to the Court by counsel for the husband did not disclose the source of the funds that he had paid.

20.Although the Full Court observed in the post-Stanford[1] decision of Bevan[2] that “notional property” that is “added back” to a list of assets to account for the unilateral disposal of assets “is unlikely to constitute “property of the parties to the marriage of either of them” and thus is not amenable to alteration under s 79”, and also that “it is important to deal with such disposals carefully, recognising the assets no longer exist”, I do not consider that such observations altered the fact that the determination of the appropriate way to deal with unilateral pre-trial disposition of property is a matter within the discretion of the trial judge.

[1] (2012) 247 CLR 108.

[2] [2013] FamCAFC 116 at paragraph [79].

21.I am of the view that it is still appropriate to have regard to the Full Court’s previous decisions of Chorn & Hopkins,[3] Omacini[4] and Cerini[5] when considering this aspect of the discretionary exercise. Of course, notionally adding an amount to a list of assets does not create property which is amenable to adjustment itself, but, in my view, amounts notionally added may certainly be considered along with actual property and superannuation interests that are amenable to adjustment by the Court’s orders when determining the orders that are appropriate and, ultimately, just and equitable.

[3] (2004) FLC 93-204.

[4] (2005) FLC 93-218.

[5] [1998] FamCA 143.

22.Those authorities just referred to establish that “notionally adding back” should be the exception rather than the rule, but that it is not inappropriate where:

(i)the parties have expended money that existed at separation on legal fees;

(ii)where there has been an unreasonable premature distribution or disposition of property of the parties or either of them;  or

(iii)in the circumstances outlined by Baker J in his judgment in Kowaliw.[6]

[6] (1981) FLC 91-092.

23.There is an obligation for parties in property adjustment proceedings to fully and frankly disclose their financial circumstances to the other party and to the Court and to do so continuously to the point of trial. Indeed, I am of the view that where property interests or capital of the parties that existed at separation are the source of funds for the payment of legal fees by a party in the post-separation – pre-trial period, this obligation to fully and frankly disclose encompasses the obligation to disclose that use of property or capital to meet legal costs to the other party and to the Court in a timely fashion and not just in the form of the provision of the copy of a costs notice on the day of trial. This obligation, in my view, is met by parties ordinarily deposing in trial affidavits to the detail and circumstances of the payment of legal fees and the timely disclosure of documents relevant to this issue. A party should not be left to merely speculate about amounts spent on legal fees by the other party and the source of the funds for such payments until the morning of the trial, when failure to disclose at that point in time may present insurmountable difficulties in proving the reality of the issue.

24.In this particular case, ultimately, some concessions were made in respect of this issue. For the wife, it was conceded that just under $10,000 paid to her by the husband through the first set of solicitors who acted for him, pursuant to an interim order that had been made in the proceedings, was used by the wife to pay legal fees and that it should be “notionally added” to the property and superannuation interests of the parties and treated as part of the wife’s entitlements to property, already received by her. For the husband, it was ultimately conceded that the sum of $55,856 of the amount of $70,443 that he had actually spent on legal fees, should be “notionally added”; it being conceded, effectively, that such amount was sourced from the parties’ property interests.

25.In his affidavit evidence, the husband had actually disclosed to spending some of the parties’ capital that existed at separation (or that was generated by such capital) on his legal fees. He even adduced evidence of some amounts so spent. The difficulty is that the amounts that he detailed in evidence did not total $55,856 but rather a lesser figure than that. Under cross-examination in the trial, the husband rejected the proposition that all the amount of $70,443 he had spent on legal fees had come from money sourced from or generated by the parties’ property interests. He said that some of that amount had been paid from money he had put aside from income he had earned in F City in the last year or so that he had put aside to pay tax that is payable (although not yet assessed and required to be paid) to the F City tax authority. In his Financial Statement filed 31 January 2014, the husband deposed to earning an average of $1,500 per week with $396 of that being money he would have to pay in tax.

26.Although he had not fully disclosed in his evidence all of the detail that I consider he was obliged to about this factual issue of paid legal costs, I do not consider it unreasonable to accept his evidence that he was putting some of that income aside for tax and that he had to draw on that to pay his solicitors for work in these proceedings. The concession made by his counsel on his behalf as to the sum of $55,856, when the actual evidence before the Court detailed an amount less than that had clearly come from the parties’ capital, along with the fact that the husband was, in my view, a witness who was genuinely trying to give honest evidence, gives me cause for confidence to accept that the concession reflects the true position. Accordingly, I accept that of the $70,443 paid in legal fees by the husband between separation and the trial, $55,856 was sourced from the parties’ capital such that it is entirely appropriate to “notionally add” it to the property and superannuation interests being considered when appropriate adjustment orders are being determined and to treat it as part of the husband’s property already had by him when property adjustment orders are being determined.

27.For his part, the husband argued, through counsel, that the balance of the money spent on legal fees by the wife, namely, $17,604, should also be found to have been sourced from the capital of the parties and, consequently, “notionally added” to the property and superannuation interests and, like the other $10,000, treated as part of the wife’s property already received by her.

28.The wife opposed that course, pointing to evidence that she gave that she paid her legal fees as she could from income that she earned. However, the husband asserted and the wife accepted that she had withdrawn the equivalent of AUD $16,000 from a joint account of the parties held in a Country Q bank over a period after separation and that she had spent it. Under cross-examination she asserted she had spent that on living expenses but conceded that her living expenses included her legal fees.

29.As I indicated during the oral submissions of counsel for the wife, I do not accept that the principles applying in the determination of “notionally adding back” money spent on legal fees sourced from the parties’ capital can simply be overcome by saying that capital has been disposed of by paying for living expenses whilst at the same time legal fees are paid for from income. In the circumstances, I consider that the sum of $16,000 should be added to the other $10,000 already conceded for the wife such that the amount of $26,000 is “notionally added” to the property and superannuation interests being considered in the process of determining appropriate adjustment orders, and treated as property already received by the wife.

What of the money said by the wife to have been spent by the husband from capital and “unaccounted for”?

30.In the jointly prepared balance sheet, the wife’s legal representatives included a figure of $106,000 (in addition to the $77,000 that they included for money the husband was said to have spent on legal fees that counsel for the wife argued should be “notionally added”) that was described as “monies withdrawn by the husband from the joint or company accounts since December 2009”.

31.In his trial affidavit the husband had deposed to post-separation expenditure from an R Bank account in Australia in his name. He attached a schedule he had prepared detailing $141,989 in credits to that account and $132,479 in debits from that account between February 2010 and June 2013. The schedule reflected all of those debits variously categorised, mostly as payments on the mortgage debt in respect of the O City property, and other expenses associated with the O City property and an amount of $12,550 in payments to his former solicitors. The husband also attached copies of pages of statements of that R bank account showing the corresponding debits and credits.

32.In his cross-examination of the husband, counsel for the wife probed the husband about this issue and showed to him a bundle of copies of pages of statements issued by the S bank on an account in the name of the husband and the parties’ investment company for the period September 2009 (around separation) until July 2012. Counsel asked the husband about the withdrawals from that account that are reflected on those statements and the husband repeatedly asserted that there was no failure to account in these proceedings for any of those withdrawals and that he had done so. That bundle of statements was made exhibit 11 in the trial.

33.In his oral submissions, counsel for the wife urged the Court to accept that about $144,000 in total in withdrawals from that S Bank account over the years is not accounted for and forms the basis of the submission that an amount should be “notionally added” to the property and superannuation interests of the parties and considered as property already received by the husband.

34.With respect, I do not accept that submission. As I have stated, adding back capital disposed of by a party post-separation is generally an exceptional thing to do in the discretionary process and requires the Court to be satisfied that the use of that capital or property has been anything but reasonable in the context of parties getting on with their everyday lives. Examination of the statements on the S Bank account reveals debits described as “URGENT TFR”, which I interpret to mean “urgent transfer”, that correspond very closely, both in date of entry and amount entered, to credits recorded in the pages of the R Bank account that the husband has attached to his trial affidavit that are described as “Proceeds of Overseas Inward Transfer”, the expenditure of which he has, as I have already observed, mostly accounted for as expenditure that I regard as reasonable, or at least already taken into account, such as that amount spent on legal fees. I am not persuaded that this further amount of $106,000 or any other amount should now be “notionally added” as submitted for the wife in respect of “unaccounted for” expenditure.

Should any amount be “notionally added back” having regard to the damage to and sale of the parties’ boat?

35.For the husband it was vociferously submitted that an amount of $87,000 should be “notionally added” to the value of the parties’ property and superannuation interests and treated as property already received by the wife having regard to the circumstances surrounding damage to and the sale of their boat.  

36.Counsel for the husband submitted that the wife “has caused significant damage to the parties’ [boat] by disconnecting the power supply to the vessel (thereby leading to the bilge pumps ceasing to pump out water), and then sold that asset at an undervalue”.  The submission is that the parties had to pay an excess of almost $25,000 from joint resources to have the boat repaired that should be “notionally added back” and that the boat was then sold by the wife for $80,000 when it was said to be worth $142,000, such that a further $62,000 should be “notionally added back”.

37.Counsel for the husband relied on the third category of case for legitimate “add back” acknowledged by the Full Court in Omacini,[7] namely, in the circumstances outlined in Kowaliw.[8] In that decision, in an extremely well-known passage, Baker J said:

[7] (2005) FLC 93-218.

[8] (1981) FLC 91-092 at p 76,644.

As a statement of general principle, I am firmly of the view that financial losses incurred by the parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:

(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or

(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.

Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under s 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.

38.Counsel for the husband submitted that the evidence established that the wife had acted recklessly with the boat by disconnecting the power supply to the vessel and also when selling it under value. Counsel submitted that the amount of $87,000 should be “notionally added back” and treated as the wife’s property or that her reckless behaviour be considered as a “negative” contribution and taken into account when assessing and weighing contributions or, as Baker J recognised could be done, that the facts should be taken into account as a relevant matter pursuant to s 75(2)(o) of the FLA.

39.With respect, I do not accept any of the alternative submissions and will not act in any of those alternative ways. The evidence just does not persuade me that it is the appropriate thing to do.

40.There was no dispute that the boat was at all relevant times moored at the O City property occupied from March 2010 by the wife and one of the adult children. It also seems clear that there is agreement that there is a bilge pump system in the boat designed to protect against the ingress of water into the engine room, set to come on automatically when the water rises above a certain level. The pump is electrically operated and relies upon the on-board battery bank for power. The batteries are kept charged by the on-board charging system which relies upon a shore power connection when moored. The husband deposed in his trial affidavit to having received an email from the wife in February 2012 that she would no longer run the boat on shore power because he had not paid the electricity bill. He attached her email. In it she said, amongst other things, the following:

As I have had to pay the electricity and cannot afford another bill which you refuse to pay any of, the boat will no longer be run on shore electricity. So that makes it about two weeks that it has not had any run to it because of the floods.

41.The husband attached is email response. It said:

What is wrong with you? Are you losing the plot here?

I’ve been sick. It’s 7.00 am and I have to get out to [F City] this morning so don’t really have the time to deal with this right now. I hope you haven’t ‘paid’ the electricity bill as I told you in my last note that it had been paid (to which you replied and asked about the rates as I recall). Get a grip.

42.He said nothing to her about the need to keep the electricity connected to the boat, or about the bilge pumps or anything of his expectations of her in connection with the maintenance and upkeep of the boat.  Neither did he depose in his affidavit to any such conversation with her at any time or as to his knowledge of her understanding of the maintenance requirements of the boat or any communication to her at any point post-separation of his expectations of her in respect of maintaining the boat.

43.The wife gave affidavit evidence that in April 2012 she went to T Town for an event and during the weekend whilst there she received a telephone call from their daughter telling her that the boat was sinking. The wife said that she asked her daughter to get the two adult sons, who were at home, to deal with the boat. She said that when she returned home she observed that water had been bailed out of the boat but that it was dangerously close to sinking. She said that she called the husband but that he abused her and she hung up on him. The next day she made a call and arrangements were made for someone to attend to pump the water out. The husband had, in the meantime, also arranged for the water to be pumped out. The boat was then towed to a ship yard for repairs. The engines had been flooded. The wife said that recent storms had resulted in a lot of water entering the boat. She said “it was found that the bilge pump was not working properly and I had written to [the husband] about that.” She said that she had done the best she could to maintain the boat and that the husband had taken no steps to have it properly maintained since he had left the property. She said that “some parts of the boat were simply too heavy for [her] to lift and [she] was unable to maintain it as I am not mechanical and do not know as much [as the husband] about maintaining such a large vessel.”

44.Under cross-examination the wife agreed that she knew that if the bilge pumps stopped running there was a risk that the vessel would take on water, that they were operated by batteries when the vessel is out on open water, and that the batteries were recharged by running the engines or by electricity connected from the house when the boat is moored. She also said that she did run the engines from time to time. She agreed that when the boat was berthed at the house there was a power line to connect the boat to shore power and that one of the purposes of that was to ensure that the batteries were recharged and that if they were not recharged there was a risk of the boat taking on water at its berth.

45.The wife also agreed that she did turn the power line to the boat off at some point in time subsequent to the email exchange referred to in paragraphs 40 and 41 above, but said that was done during a “terrible storm” that occurred and that she did that for safety reasons. When she was asked whether she turned the power to the boat back on after that she said that she did. She was asked if she knew if there was any water in the boat at any time and her response was that she did not know that there was water in the engine room as she is not physically capable of lifting the seat at the back of the boat to access the engine room. It was suggested to her that from what she knows about the bilge pumps and the power line that it must be clear to her that the power was off for a significant period of time, to which she responded “not at all… there are many bilge pumps not just one bilge pump”.   She said she did not know that there was any need to look down into the engine room and that she could not lift it in any event. She said she did not think there was any need to ask her sons to go and check in the engine room at any time prior to the time when the boat was discovered to have taken on a lot of water. When asked if she accepted that the bilge pumps “mustn’t have been working” for the boat to have taken on the water she responded “I presume so”. However, when asked if she accepted that “if the power line was connected the bilge pumps would have been working”, she responded as follows:

not necessarily, one of the bilge pumps did not work in the dining room. And it was a very simple task of lifting up a little cover, I did let my ex-husband know and he chose to ignore it. It was actually not functioning and I told him on many occasions, but the other bilge pump I could not get down to. I did the best I could with this boat. I looked after it for three years while he was gone and it was not my boat, it was not my thing.

46.She was asked who turned off the power to the boat and she again said that she had done that during a storm for safety but again stressed that she had turned it back on after the storms. Counsel actually put to the wife that she had turned the power off when she thought the husband had not paid the electricity bill to which she responded “that is so incorrect”. It was further put to her that she just had not turned it back on again, quite deliberately. The wife responded “no, I did not do that.” I understood that to be a denial of the proposition put to her.

47.I simply cannot be satisfied having read, heard and considered all of that evidence that the flooding of the engine room in 2013 was due to the bilge pumps not operating because the batteries were flat, not having been kept charged by connection to onshore power. The wife said she was aware of one bilge pump not working and that she had told her husband and he ignored that information. That evidence was not challenged or refuted by counsel for the husband. There was no expert evidence actually adduced as to the exact cause of the flooding or the actual reason for the failure of one or more of the bilge pumps to operate. Whilst the email exchange certainly gives rise to an inference that the wife might actually have disconnected the shore based power line to the boat for a time, I do not consider, on the balance of probabilities, I can safely find that she deliberately left it disconnected for 18 months, aware of the potential consequences of doing so.  On the evidence, it might just as likely have been flooding due to the failure of the bilge pump that she said she had given the husband notice of that he had ignored that caused the damage to the boat. I cannot determine the cause of the failure of that pump.

48.In the circumstances, I am not satisfied that the wife had any greater duty or obligation than did the husband to ensure that damage such as happened to the boat did not occur. I do not consider that the $25,000 of the parties’ capital that was spent on repairing the boat should be “notionally added back” and treated as the wife’s property.

49.As to the sale of the boat, the evidence is that the parties obtained a valuation of the boat in June 2013 at $85,000. That valuation, which is exhibit 1 in the trial, referred to evidence of significant damage to engines and problems with water entry. No doubt, that is because it was after the near-sinking in April 2013.

50.On October 25 2013, on the wife’s application the Court ordered that the husband make a number of payments to the wife by way of maintenance and partial property settlement and that he cause the mortgage payments on the O City property to continue to be paid as they fell due. He did not comply with any of those orders and told the wife that he could not. On 19 November, 2013, the wife was appointed trustee for sale of jet skis, a motor car, a trailer and the motor boat with the proceeds of sale ordered to be used to meet certain expenses towards satisfaction of the earlier Orders for payment by the husband of maintenance and various other expenses. Although the husband was represented on 19 November, 2013 when the order appointing the wife was made, the husband was not there at the hearing (being in F City at the time) and did not actively oppose the appointment of the wife.

51.I also observe that on 7 November 2013, the husband’s first solicitors had filed an Amended Response that the husband had signed in which he himself had sought orders for the sale of those same items of personal property and sought orders that they be sold at an agreed price or, failing agreement, in accordance with the values that were ascribed to each item in the document. The boat had a price of $85,000 ascribed to it in that document.

52.The wife, as trustee, engaged brokers to sell the boat. On 28 November 2013, an offer to purchase the boat for $80,000 subject to satisfactory out of water survey, satisfactory engine report and satisfactory test run was put to her and on 29 November 2013, she accepted that offer. The date on which the purchaser lost the benefit of the conditions was 10 December 2013. 

53.The husband gave evidence that he contacted the wife after he learned that she had accepted the offer to sell the boat for $80,000 and told her that he was not happy with her selling it for that amount. He told her he believed that with the damage having been repaired that it was worth more than that. During cross-examination by counsel for the husband, the wife agreed that the husband had told her after he learned that she was selling it for $80,000 that he would seek damages or compensation in the trial for what he asserted was his loss on this sale. The husband did not take any steps in the proceedings to prevent the sale going ahead and in his evidence, without being able to refer to any terms or conditions of the contract for the sale of the boat already entered into, the husband asserted that the wife could have and should have terminated the contract for sale.  I do not accept that she could have done that though without potential legal consequences in so far as the purchaser’s rights were concerned.

54.As I have said, the contract had special conditions to the benefit of the purchaser who could have terminated it if the survey, the engine report or the test run were not to his satisfaction. There was no evidence before me in the trial that lets me conclude that the wife could have terminated the contract at the time the husband informed her of his concerns about the price she had accepted and there was no evidence before me at the trial that causes me to find that the wife acted so unreasonably in respect of the sale of the boat at $80,000 on 29 November 2013 that a “notional adding back” of some amount is justified in this case. An additional difficulty confronting the husband’s argument that $62,000 should be “notionally added back” is that I did not allow him to adduce evidence as to value in the form of another unilaterally obtained updated valuation report by the single expert valuer who had earlier been retained by the parties to value the items of personal property, including the boat. The unilaterally obtained valuation report had been obtained without the wife’s consent on a date after that specified in the contract for sale of the boat as the date by which the contract was to become unconditional. Without expert opinion evidence as to the boat’s actual value at the date of the contract compared with the price accepted by the wife in that contract, the argument that $62,000 was unreasonably lost to the parties cannot be sustained in any event. It is not safe now to determine that $62,000 was actually lost to the parties by the sale at $80,000 and it would, in my view, be unreasonable to make the wife unilaterally bear any such loss in the circumstances.

The total of the property and superannuation interests of the parties and amounts “notionally added back”

55.Accordingly, to the net total of $692,916 already agreed between the parties as set out in the table above, the following will be added:

(i)$20,000        the amount already received as partial property by the wife “notionally added”;

(ii)$925,000       the value of the O City property;

(iii)$55,856         the amount paid by the husband in legal fees from property of the parties “notionally added”; and

(iv)$26,000         the amount paid by the wife in legal fees from property of the parties “notionally added”.

The total amount of net property, superannuation interests and amounts “notionally added back” by me is, therefore, $1,719,772.

56.Each of the parties’ counsel confirmed during the course of the trial that they considered it appropriate for the Court to determine the property adjustment orders to make by assessing the contributions of the parties and translating that to a notional percentage division of the global value of the net property, superannuation interests and the amounts “notionally added back” before then considering the matters required to be considered by s 79(4)(d) to (g) in so far as they are relevant and determining if a further percentage adjustment to the notional percentage division already arrived is necessary to ensure orders are just and equitable.

Consideration and assessment of the parties’ contributions

57.The parties were married for around 30 years. They raised three children, they moved around the world and they acquired interests in property now worth just in excess of AUD$1.7 million.

58.For the wife, it was submitted that the quantitative contributions assessment to time of trial would determine that their contributions overall, across all spheres being considered, were equal. For the husband, it was submitted that the Court would give extra weight to the fact that he inherited 75,000 British Pounds (the equivalent of AUD$216,172) from his mother’s estate in 2001, only eight years before the end of the marriage, such that the quantitative assessment of overall contributions could not be equal.

59.I am satisfied that both parties were young and had little when they married. Each contributed in the various spheres of their marriage, including as to generation of income for the use of the family and as to homemaking and parenting, to the best of their capacities, without any legitimate criticism being made by the other against the quality of those contributions.

60.The wife’s evidence was that she also received an inheritance of 2,000 British Pounds from her grandmother’s estate in 1987 and used that money to have a new kitchen built in their home. I accept that evidence. The wife also gave evidence that she received another 7,000 British Pounds by way of a damages award or settlement for personal injuries she suffered in 1994. She said that money was used to buy a family car. I accept that evidence and regard these as additional matters of contribution on the part of the wife that must be included in the weighing up process.

61.On the other hand, the inheritance by the husband of 75,000 pounds in 2001 is far closer to the end of the marriage and is a significantly greater figure. It must, in my view, be given greater weight than those contributions of the wife that I have just referred to.

62.Counsel for the wife had the husband concede that his mother and the wife had a great relationship whilst his mother was alive, that the wife (who is a trained nurse) spent a few weeks caring for his sick mother in the last few weeks of her life, and that the couple did assist his mother financially at times when she needed some financial assistance. Counsel referred to that evidence in support of his submission at the end of the trial that the wife had made some contributions towards the receipt of the inheritance by the husband that should be taken into account.

63.It was not disputed though that the husband himself had inherited the money from his mother, not both of the parties. Further, the husband gave unchallenged evidence that he had inherited one-third of his mother’s estate and that each of his two sisters had also received one-third of the estate. Clearly, the husband’s mother left him no more than what she considered to be an equitable share of her estate having regard to the sibship of three children. I consider it entirely appropriate, therefore, to attribute the contribution of the 75,000 Pounds to the husband whilst at the same time having regard to the contributions that the husband conceded the wife made in respect of his receipt of that inheritance.

64.In his oral submissions, counsel for the husband asserted that the contribution of the inheritance by the husband would be given appropriate weight via a notional percentage division of 53/47 in the husband’s favour. Having regard to the smaller contributions of inherited funds and a damages award made earlier in the marriage by the wife, I do not consider that to be inappropriate.

65.Counsel for the husband pressed the alternative consideration of the circumstances surrounding the damage to the boat and its sale as negative contributions by the wife that would be appropriately reflected by a further adjustment in the husband’s favour at this step of the process. For all the same reasons I gave for rejecting the argument that a notional amount should be added to the property and superannuation interests I respectfully reject this submission without needing to consider the question of whether or not there is such a thing as a “negative contribution” to consider at this step in any case.

66.Finally, I turn to consider a matter I raised with counsel during oral submissions. The evidence was that the wife has occupied the O City property since the husband moved out in March 2010. He had occupied it without the wife being there for three to four months after their separation. The parties’ capital existing at separation was the source of the funds for the payment of the mortgage repayments and other outlays associated with the property until the middle of 2013 and then, pursuant to subsequent orders of this Court, beyond that time to the time of the trial. Accordingly, I am satisfied that the husband made contributions to the welfare of the wife well beyond separation in this way, unmatched, in my view, by the wife’s contributions in cleaning and maintaining the property.

67.Furthermore though, the evidence at trial also clearly established that after the husband went back to live in F City in March 2010, he utilised the parties’ capital to support himself until November 2011, at which point in time he obtained employment. There is no evidence as to the exact amount of that capital that he used to support himself for all of that time, but I am quite satisfied that in his use of that capital the wife has also made contribution to his welfare.

68.In these circumstances, I am quite satisfied that the husband’s contributions in the period after separation and the wife’s contributions in the same period should attract equal weight in the overall contributions assessment.

69.Accordingly, adopting the submission of counsel for the husband as to the weighting to be given to the husband’s inheritance, I notionally divide the global value of $1,719,772 as to 53 per cent to the husband and 47 per cent to the wife having regard to all of their contributions.

What of the other relevant matters?

70.The husband is 60 years of age and is in good health, although he said he has been treated for Diverticulitis, a bowel complaint. He also said he now requires some dental work. He continues to live and work in F City, living in a small rental apartment. He has a female partner, though little evidence was given about any financial circumstances of their relationship.

71.The husband has been working as a financial consultant for one firm since October 2011. He recently signed a contract of employment with a new employer and his income is commission based. He deposed in his trial affidavit to earning an average of the equivalent of AU$1,140 per week during the three months from October 2013 to January 2014 by way of commission in his previous position. In his Financial Statement filed in January this year he said his gross weekly income was $1,500 out of which just under $400 in tax would be owed. Accordingly, I find that his income (or his earning capacity, at least) is the equivalent of about AUD$57,000 per year. I simply cannot find that he earns more than that just on the basis of the wife’s assertions of belief that he does.

72.The wife is now 59 years of age and continues to work as at a private O City college. She earns about $47,000 per year before tax. She asserts having back problems originating from the back injury she suffered early in the marriage whilst working as a health care professional that will likely affect her mobility as she gets older. I accept that evidence, but she adduced no expert medical opinion that assists the Court any further in respect of this issue.

73.The wife wants to retain the O City home. Currently, the parties’ 30 year old son lives there with her rent free despite earning about $100,000 per annum. There is some prospect he may buy a share in the property from her, thus giving her some more readily accessible capital or an ability to discharge the mortgage. It is a fairly big home. It may be that she could sell it and move to a smaller, less valuable home, thus freeing up some more capital for her use. In any event, she currently also has international “home stay” students stay in the home for $215 per week but has said she makes little income from that after paying for their food and their share of utilities. I accept that is probably correct.

74.The husband has a Country M pension that has been given a capital value and included in the total of property and superannuation interests. The wife has a small amount of accumulated superannuation that is also included. Little regard can be given to the income that these interests will generate without unfairly double counting them.

75.The husband seeks to keep the parties’ shareholdings in their investment company. That company owns a few investment properties that generate a small amount of net income for the company. That will be the husband’s in the future if he retains all the shares. In the year ended February 2012 the net income was 7,000 British Pounds. I am satisfied that is a matter of relevance.

76.Counsel for the wife also submitted that the 30 year marriage and the fact that the wife put her career on hold to (a) facilitate the family’s travel to different countries to advance the husband’s career, and (b) to provide parenting for their three children, is a relevant consideration pursuant to s 75(2)(k) at this step of the process. I accept that this is correct when considering doing justice and equity between the parties, most particularly when the other party has an income and/or earning capacity far greater than the spouse who made the sacrifice. In this case, the husband’s income in the future, I am satisfied, is likely to be greater than the wife’s income. However, on the evidence before me at trial, I do not consider the husband’s income is likely to be substantially greater than the wife’s, such as requires substantial further adjustment to do justice and equity between them.

77.Again, I do not consider any circumstance surrounding the damage to and sale of the boat should be taken into account at this step of the process.

78.In dollar terms, 5 per cent of the total value of the property, superannuation interests and amounts “notionally added” amounts to approximately $86,000. I am satisfied for all of the matters that I have discussed, that an adjustment of that order in favour of the wife will ensure orders that are appropriate as well as just and equitable are made. That results in a division of the net property and superannuation interests and amounts “notionally added” expressed in percentage terms as 52 per cent in favour of the wife and as 48 per cent in favour of the husband.

What property adjustment orders should now be made?

79.Using a total value of $1,719,772, the wife should retain $894,281 worth of net property, superannuation interests and amounts “notionally added back” and the husband should retain $825,490 worth.

80.The husband wants to retain the shares in L Pty Ltd worth $511,000, the shareholdings in E Pty Ltd worth $4,684, the funds in his bank accounts being $38,893, the funds in joint bank accounts being $5,276, his H Bank shares in the UK worth $952, his J Pty Ltd shares worth $7,046, the capitalised value of his P pension being $250,006 and the amount of $55,856 of “property” already received by him that he spent on legal fees in these proceedings. Accordingly, the husband would, with orders that provide for him to retain all of these “interests”, be retaining $873,713 worth of “interests”. Accordingly, to achieve a 52 per cent/48 per cent adjustment, the husband needs to be ordered to pay the wife the sum of $48,223 as well.

81.The wife shall keep the O City home at $925,000, the mortgage debt secured over that property of ($210,622), the $43,559 I already ordered her to receive being the funds in her solicitors’ trust account, the Motor vehicle worth $22,500, her H Bank shares at $952, her G Pty Ltd at $170, her accumulated superannuation interest at $18,500, the other $20,000 already received by her, and the $26,000 of “property” already received by her that she spent on legal fees in these proceedings. In addition, she will receive the sum of $48,223 from the husband. That equals $894,282.

82.I will give effect to this determination by the Orders set out at the commencement of these reasons. I am satisfied they are appropriate and just and equitable.

I certify that the preceding eighty-two (82) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 17 April 2014.

Associate:

Date:  17 April 2014