Stoddard and Stoddard
[2007] FMCAfam 735
•21 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| STODDARD & STODDARD | [2007] FMCAfam 735 |
| FAMILY LAW – Binding financial agreement – validity where certificate of advice under Property (Relationships) Act1984 (NSW) – effect of failure to disclose material facts on the binding financial agreement – agreement set aside – alteration of property interests and contribution. |
| Family Law Act 1975, ss.90C, 90DA, 90E, 90F, 90G, 90K Property (Relationships) Act1984 (NSW), s.47(1)(d) |
| Black and Black [2006] FamCA 972 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Green and Kuriatek (1982) FLC 91-259 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Ju and Ju (PAF464 of 2005, 29 March 2006) Norbis v Norbis (1986) 161 CLR 513 Pierce and Pierce (1998) FLC 92-844 Rogic and Rogic [2007] FamCA Williams & Williams [2007] FamCA 313 |
| Applicant: | MR STODDARD |
| Respondent: | MS STODDARD |
| File Number: | SYM 184 of 2005 |
| Judgment of: | Altobelli FM |
| Hearing dates: | 29 & 30 May 2007 |
| Date of Last Submission: | 30 May 2007 |
| Delivered at: | Wollongong |
| Delivered on: | 21 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Ms Cleary |
| Solicitors for the Applicant: | Kennedy and Cooke |
| Counsel for the Respondent: | Mr Maurice |
| Solicitors for the Respondent: | DGB Lawyers |
ORDERS
Pursuant to s.90K of the Family Law Act1975 I set aside the Financial Agreement dated 19 January 2004 entered into between the husband and wife to these proceedings.
The husband and the wife are each entitled to be the sole legal and beneficial owner of all property including superannuation currently in their possession and/or control free from any interest of the other.
All other applications are dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Stoddard & Stoddard is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 184 of 2005
| MR STODDARD |
Applicant
And
| MS STODDARD |
Respondent
REASONS FOR JUDGMENT
Introduction
This case is mainly about an agreement that the husband and wife entered into at a time when their marriage was experiencing serious difficulty. The simple effect of that agreement is that should they separate on a final basis they would each keep what they have. They did separate. The marriage did end. The husband now says that the agreement that they both signed after getting independent legal advice is not legally binding but, even if it is, it should be set aside. The wife says that the agreement should be upheld and enforced. If the husband is right, then I should make an order for property settlement, based on the contributions they each made, provided that order is just and equitable. If the wife is right, I should do nothing other than dismiss the husband’s application.
Issues
The issues raised by this case are conveniently expressed as three questions:
a)Is the agreement dated 19 January 2004 between the husband and the wife a ‘financial agreement’ for the purposes of s.90G of the Family Law Act 1975 (‘the Act’)?
b)If the agreement is a financial agreement, should it nonetheless be set aside under s.90K of the Act?
c)If it is not an agreement under s.90G, or if it is but nonetheless should be set aside under s.90K, what just and equitable order for property settlement should I make?
Background
Mr Stoddard is the applicant in this case. He is 52 and is a teacher. Ms Stoddard, now known as Ms Yarrow, is the respondent. She is 53 and is a nurse. They met in 1998 and married later in 1998. They had both been married before. They each had children, though all but one had grown up. Significantly, in this case, they each had property. The wife had property at K in New South Wales. The husband had property in N in New South Wales. They first separated in November 2003, but were then sometimes together and sometimes apart over the next few months. By February 2004, however, they both agree that their separation was final.
During the relatively short period that they knew each other or were married they were participants in several legal and financial transactions. For example in September 1998, before they married, they entered into a Pre Nuptial Agreement. The wife’s father died and she received an inheritance. She suffered from depression which resulted in her inability to work for periods. She sold her property at K and purchased at V. She borrowed money to build at V, and the husband says he helped with this. She sold V and purchased at C. She again borrowed to build a house there, and the husband says he also helped with this. Throughout this time he says he was working as a casual teacher, as well as working on the properties. They agreed to buy at H in Queensland, but this did not eventuate as the marriage ended. They lost the deposit paid on this property. The husband sold his property at N They entered into the agreement that is the main focus of this case.
Is the agreement a ‘financial agreement’?
The wife’s argument about the agreement is very simple – she says there is nothing wrong with it, and it should be upheld and enforced.
The husband’s main argument is that the agreement does not comply with s.90G of the Act because of defects in the certificate of independent legal advice.
The husband’s next argument is that because there is no declaration for the purposes of s.90DA of the Act, the agreement has no force or effect.
The success of both arguments depends on interpreting the two sections referred to above, and applying them to the agreement entered into between the husband and the wife.
For the present purposes, s.90G(1)(b) is set out below:
s. 90G (1) A financial agreement is binding on the parties to the agreement if, and only if:
(b) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i) the effect of the agreement on the rights of that party;
(ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement;
The certificate that was attached to the agreement was in the following terms:
CERTIFICATE FOR THE PURPOSES OF SECTION 47(1)(D) OF THE PROPERTY (RELATIONSHIPS) ACT, 1984
I, LEONIE THERESE LOCKHART
Of 83 Plunkett St,
Solicitor, hereby certify that, in relation to an agreement in writing proposed to be entered into between MS STODDARD
and MR STODDARD (hereinafter called “the parties”)
I:
a)Advised MS STODDARD (hereinafter called “my client”), independently of the other party and before the time at which my client signed the agreement, as to the following matters:-
i)The effect of the agreement on the rights of the parties to apply for an order under Part 3 of the Property (Relationships) Act, 1984;
ii)Whether or not, at that time, it was to the advantage, financially or otherwise, of my client to enter into the agreement;
iii)Whether or not, at that time, it was prudent for my client to enter into the agreement;
iv)Whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable;
b)Furnished her with this Certificate prior to her signing the Agreement.
Dated this 17th Day of December 2003.
Leonie Lockhart
Solicitor
There is a similar certificate referring to the husband, provided by his solicitor Peter Cooke, and dated 16 January 2003. It was agreed that “2003” was a typographical error, and should have read “2004”.
It is also apparent from the agreement itself that the solicitors who provided the certificates also witnessed the signatures of the husband and wife to the agreement itself.
On the face of the certificate it is evident that it was intended for another purpose i.e. s.47(1)(d) of the Property (Relationships) Act 1984 (NSW). This legislation establishes a scheme of private agreements for de facto couples under NSW law. The husband argues that as a matter of form it plainly fails to meet the requirements of s.90G of the Family Law Act– indeed it is not even under the Act itself.
The wife responds, however, by pointing to the recitals in the agreement itself and, in effect, asserting that in substance it complies with s.90G, even if not in form. The recital in question is recital C which states:
C. Each of the parties has received independent legal advice prior to entering into this agreement in relation to their respective rights and obligations under the Family Law Act, Part VIII and each have given due consideration to the following matters:
a. the effect of the agreement on the right of that party;
b. whether or not, at the time when the advice was provided, it was to the advantage of, financially or otherwise, of the party to make the agreement;
c. whether or not at that time it was prudent for that party to make the agreement;
d. whether or not, at that time in the light of such circumstances as were, at that time, reasonably foreseeable, the provision of the agreement were fair and reasonable.
The recital is an obvious attempt to comply with s.90G(1)(b) as it was at the time the agreement was entered into. The section has, in fact, been amended since then, but that is irrelevant in the present context. The only problem with the certificate is that it refers to the wrong legislation. In all other respects, it covers the matters required in s.90G(1)(b).
If form triumphs over substance, the certificate is defective and s.90G has not been complied with.
If, however, substance triumphs over form, s.90G has been complied with.
I am satisfied from the evidence given by both the husband and the wife that when they met with their respective solicitors to discuss the proposed agreement, they received advice that complied with s.90G(1)(b). I have no doubt that they each knew what they were doing. For both of them this was the second time they had signed a legal agreement relating to financial aspects of their marriage. I note that the husband had ample opportunity to lead evidence to the effect that he had not received the needed advice. He did not do so.
Counsel for both parties provided me with helpful, comprehensive submissions about the relevant law. For the husband it was argued that the decision of Collier J in Ju and Ju (PAF464 of 2005, 29 March 2006) should be followed. In that case Collier J adopted a strict approach to the interpretation of s.90G(1). As the section states “if and only if”, this requires a level of compliance above and beyond substantial compliance. For the wife, however, the decision of Benjamin J in Black and Black [2006] FamCA 972 should be followed. In that case Benjamin J focused on the words “to the effect that” in s.90G(1)(b), thus favouring a less strict interpretation that, in effect, upholds the substantive agreement of the parties, notwithstanding technical defects. In Rogic and Rogic [2007] FamCA (1 May 2007) Stevenson J preferred the approach adopted by Benjamin J.
I prefer and adopt the interpretation of the legislation that upholds the substantive agreement of the parties notwithstanding the technical defects. I therefore prefer the approach adopted in Black and Black[1] and Rogic and Rogic[2].
[1] [2006] FamCA 972
[2] [2007] FamCA (1 May 2007)
The interpretation adopted by Collier J in Ju and Ju[3] focuses on the words “if, and only if” in the opening part of s. 90G(1). However, I interpret those words to govern the five following paragraphs i.e (a)- (e). Thus s.90G(1) prescribes that a financial agreement is only binding if each of the requirements referred to in those paragraphs are satisfied. It follows that the absence of any one of those matters is fatal to the effectiveness of the agreement. When one turns specifically to paragraph (b), the legislature has mandated the requirement for a certificate of independent legal advice containing a statement “to the effect that” certain things have happened. If I were to follow the interpretation adopted by Collier J I would be, on the facts of this case, ignoring the clear words within paragraph (b) of s.90G(1) itself. A common sense, purposive interpretation of the section must prevail. This cures the possible technical defects with the certificate to this agreement, whether the defect arises because of the reference to the incorrect legislation, or whether it arises because the certificate covers matters now repealed, but formerly in s.90G(1)(b) (iii) and (iv).
[3] (PAF464 of 2005, 29 March 2006)
Indeed, careful consideration of the last point demonstrates how a purposive interpretation of the legislation must prevail. It would be nonsensical to assert that following the 14 January 2004 amendments that deleted sub paragraphs (iii) and (iv) all certificates then in existence needed to be re-signed in the new form minus those sub paragraphs. The evidence in this case is that the wife signed the agreement on 17 December 2003, the husband on 16 January 2004, and the agreement itself bears the date 19 January 2004. In all likelihood, all of these took place with total ignorance about the amendments in question. The husband and the wife in this case entered into a contractual agreement under Part VIIIA of the Act in good faith, and after receiving the benefit of independent legal advice. The purpose of the legislation was to facilitate these parties doing precisely what they did. I regard the requirements of s.90G(1) to be satisfied in substance, and that is all that is required by the section.
The husband’s next argument is based on s 90DA of the Act, that was inserted into the legislation after the agreement was entered into:
90DA Need for separation declaration for certain provisions of financial agreement to take effect
(1) A financial agreement between 2 people, to the extent to which it deals with:
(a)how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of them at the time when the agreement is made, or at a later time and before the termination of the marriage by divorce, is to be dealt with; or
(b)the maintenance of either of them after the termination of the marriage by divorce;
is of no force or effect until a separation declaration is made.
(2) A separation declaration is a written declaration that complies with subsections (3) and (4).
(3) The declaration must be signed by at least one of the parties to the financial agreement.
(4) The declaration must state that:
(a)the parties have separated and are living separately and apart at the declaration time; and
(b)in the opinion of the parties making the declaration, there is no reasonable likelihood of cohabitation being resumed.
(5) In this section:
declaration time means the time when the declaration was signed by a party to the financial agreement (or last signed by a party to the agreement, if both parties to the agreement have signed).
separated has the same meaning as in section 48 (as affected by section 49).
The wife signed a document entitled ‘separation declaration for purposes of s.90DA’ on 29 May 2007. It is exhibit W1. It states as follows:
I MS YARROW Registered Nurse declare as follows:
1. I refer to the Financial Agreement made between Mr Stoddard (“the husband”) and me under sec 90C dated 19 January 2004.
2. I declare for the purposes of sec 90DA of the Family Law Act 1975 that the husband and I separated finally a few weeks after we signed the said Financial Agreement.
3. A decree Nisi of dissolution of marriage was pronounced on the Family court at Wollonglong on 18 May 2005.
4. We have separated and are living separately and apart at the time of my signing this declaration.
5. In my opinion there is no reasonable likelihood of cohabitation being resumed
6. Before being told by my lawyers today I was unaware that the husband was now asserting that our Financial Agreement was not enforceable due to the absence of a separation declaration.
The certificate complies with s.90DA(3) and (4). It is, therefore, a certificate under s.90DA(2). There is no requirement for the certificate to be signed by both parties, or for it to be signed at a particular time. The only requirement is that until it is signed the agreement “is of no force or effect.” The issue of the enforceability and effectiveness of the agreement is an issue I am deciding in the course of these proceedings. Thus, in theory, the separation declaration could have been provided at any time before I made orders and provided reasons.
I find therefore, the agreement is a financial agreement under s.90G of the Act.
Should the agreement be set aside?
The husband’s argument to the effect that the agreement should be set aside is based on a number of factual assertions. They can be summarised as follows:
(i)The husband and the wife had resumed cohabitation at the time the agreement was signed and, possibly at times there after; and/or
(ii)The agreement does not reflect the true financial position of the parties; and/or
(iii)The agreement could not be carried out in accordance with its own terms.
There was a faint argument by the husband to the effect that ss.90E and 90F were not complied with, thus leading to the agreement being set aside. I dismiss that argument. No evidence was led in relation to it. In any event no maintenance order was pressed at the hearing so s.90F(1) could not apply.
The power and the grounds to set aside the agreement is contained in s 90K(1):
90KCircumstances in which court may set aside a financial agreement or termination agreement
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(a) the agreement was obtained by fraud (including non‑disclosure of a material matter); or
(aa) either party to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii) with reckless disregard of the interests of a creditor or creditors of the party; or
(b) the agreement is void, voidable or unenforceable; or
(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e) in respect of the making of a financial agreement—a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f) a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g) the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
I find that the husband and the wife had in fact resumed cohabitation either at the time they each signed it, or shortly thereafter, before their final separation in February 2004. This fact, however, does not provide a ground for setting aside the agreement. Indeed the agreement expressly acknowledges in paragraph 6 that should they reconcile the agreement will continue to be in force pursuant to s.90C of the Act. The relationship between the parties was in a state of flux at the time it was entered into. At least part of the purpose of the document was to provide reassurance to one of them, and possibly both, should they reconcile. The attempted reconciliation, therefore, provides no basis for setting aside the agreement.
The argument that the agreement does not reflect the true financial position of the parties can be based on paragraph (a) of s.90K(1) i.e. fraud including non-disclosure or paragraph (b) i.e. voidness, voidability or unenforceability arising from some form of misrepresentation or mistake. The factual basis of this claim must arise from the transactions between the parties relating to the H property, and the wife’s withdrawals from the mortgage account. There is also an argument that the wife failed to disclose her inheritance from her late father’s estate.
The agreement expressly refers to the H property. In paragraph 3 the parties acknowledge that they have equal shares in a property at H to which they have recently signed contracts to purchase. Paragraph 5 acknowledges that this property will be owned in equal shares; they will each be responsible for half the debt which shall be secured against the property; and they will each pay half the repayments. The agreement clearly contemplates the completion of a purchase contract that they had entered into.
On 18 September 2003 they had in fact signed a contract to purchase H. The purchase price was $250,000 and a deposit of $12,500 was paid by way of a deposit bond. This meant there was no financial outlay for the deposit in the first instance. I will deal with the financing of the purchase in due course. The contract became Exhibit W4. The husband and the wife were represented by the same solicitors – Corser Sheldon Gordon – in this transaction. The document looks incomplete. It is probably a copy of various pages extracted from the contract itself. The document does not tell me when the purchase should have been completed. I accept the wife’s evidence that on 5 February 2004 she paid the deposit of $12,500.00 out of her St George bank account. This must have been to “honour”, in effect, the deposit paid by deposit bond. The wife’s evidence is that the purchase had already fallen through by 5 February 2004. I accept that evidence. I do not know precisely when the purchase fell through.
The agreement between the parties is dated 19 January 2004. It is possible that the Property H purchase had already fallen through by then, but it is not probable. If it had fallen through, I infer that both parties would have known about this. As the husband signed as late as 16 January 2004 I consider it likely that the Property H purchase was still pending at that time. Accordingly, as at the date of the agreement, it correctly reflected the intended financial position of the parties as regards the purchase of that property.
The fact that the purchase was not consummated does not, of itself, invalidate the agreement. It could not be said, for example, that the agreement was frustrated. The modern test for determining whether a contract has been frustrated involves considering whether a contractual obligation has become incapable of being performed without default of either party: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. In this case the likely reason why the purchase was not completed was the breakdown of their relationship – in other words it was their own default.
Mistake is a contractual concept related to frustration. It would apply, for example, if at the time of the agreement both parties assumed that the Property H purchase was going to be consummated but it had, prior to signing the agreement, already been terminated. I don’t think that is likely in this case, but even if it were the case, I find that the mistake would not vitiate the agreement. The terms of the agreement are quite clear. I have already found that both parties knew what they were doing. The mistake affected them equally. It was not a mistake that affects the fundamental nature of the agreement between them.
I therefore find that the fact that the Property H purchase was not completed does not establish, of itself, a ground to set aside the agreement. Specifically it did not make the agreement void, voidable or unenforceable for the purposes of s.90K(1)(b). Moreover, it did not make the agreement impracticable to be carried out for the purposes of s.90K(1)(c).
This does not exhaust the husband’s argument that the agreement did not reflect their true financial position. He argues that aspects of the financing of the Property H purchase, and specifically the wife’s use of monies borrowed for this purpose, provide further grounds for setting aside the agreement.
The relevant date must be the date at which the agreement was either signed by the husband, or was dated. Nothing turns on the difference in this case. Events after that date are not relevant.
A number of relevant transactions occurred on the parties St George Bank loan account in the period between 31 October 2003 and the date of the agreement. I accept the husband’s evidence that he did not become aware of these transactions until several months after the agreement was signed. The wife’s own evidence about these transactions can be summarised as follows:
31 October 2003 she withdrew $50,000.00 from the loan account.
10 November 2003 she returned $50,000.00 to the loan account.
18 November 2003 she withdrew $25,000.00 from the loan account.
19 November she withdrew $58,934.00 from the loan account.
The wife did not dispute the assertion that the husband did not know about these transactions. Her evidence as to the reason for these withdrawals include: “I was concerned that the money may be dissipated or lost” (paragraph 42, affidavit filed 9 May 2007); “to protect my position” (paragraph 43 of her affidavit); “I was concerned that the Applicant…would use the funds inappropriately.” (paragraph 43 of her affidavit); “I could not trust him, I drew it out to mind it, to protect him” (cross examination 30 May 2007); “It was for my protection, so he could not spend it as I was the guarantor for that money” (cross examination 30 May 2007). She also asserts that she was suffering from depression (paragraph 41 of her affidavit).
The wife gives evidence at paragraph 44 of her affidavit about repaying some of the money, and at paragraph 45 about off-setting the balance she retained against money she asserts the husband owed to her. All of the alleged repayments occur after the agreement was signed.
The effect of the withdrawals by the wife on the loan account was to increase the amount owing to St George Bank. Thus, when the husband settled on the sale of his Property N he received less than would otherwise have been the case. Indeed he received only $50,000.00. The reduction of the liability had the corresponding effect of reducing the amount secured over the wife’s property at C. This is reflected in the evidence of the husband, that I accept, to the effect that when in February he discovered that he had only received $50,000.00 the wife said to him “The bank must have put the money into the C loan.” The wife clearly knew that this was the case.
What this evidence means is that by the time the agreement was signed by the husband he did not know that the wife had drawn-down $83,934.00 on the loan account thus increasing the debt secured against the N Property and in effect decreasing the wife’s exposure to that debt. The husband argues that the situation amounts to either fraud (the non-disclosure of a material matter) or misrepresentation leading to voidness, voidability or unenforceability. I accept this submission. The draw-down by the wife was in the nature of a pre-emptive strike that, viewed in its totality and with the benefit of hindsight, was designed to not only reassure the wife but put her in a position of advantage over the husband. It does not matter that paragraph 5(c) of the agreement records an agreement that they would each pay half the debt in relation to the proposed purchase. At the time of signing the agreement the wife had manipulated the borrowings so that she was liable for less and he was liable for more.
I accept the definition of fraud as submitted on behalf of the wife. Her counsel referred me to the Full Court’s decision in Green and Kuriatek (1982) FLC 91-259 at 77,456. The essence of fraud is a false statement of fact made by one party to another knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false, with the intent that it should be acted on by the other party and which was in fact so acted on. It is possible though, that in the context of s.90K(1)(a) fraud has a broader meaning in that it may be constituted by non-disclosure of a material matter. Thus whereas fraud at common law may require a representation, under s.90K(1)(a) fraud may be constituted by omission i.e. non-disclosure of a material matter. In any event, if a representation is needed, I find that there are two representations made by the wife in the deed that are false. The first representation is in paragraph one, to the effect that the C property “has been purchased wholly with funds brought to the relationship by the wife”. This representation is false because the effect of the wife’s actions was effectively to use joint funds to increase the equity in her property. The second representation is in paragraph five which records the agreement to share the H debt equally. This is also false because the effect of the wife’s actions was to shift a greater burden of the debt on the husband. I have no hesitation in finding that the wife’s actions amounted to ‘non-disclosure of a material matter’.
My findings also lead to the conclusion that there has been a misrepresentation entitling the husband to have the contract voided, or set aside, under s.90K(1)(b).
I therefore set aside the agreement under s.90K(1). There is no need for me to consider other aspects of the husband’s argument in relation to the validity of the agreement. I have considered s.90K(6). There is no reason not to set aside the agreement having regard to the matters set out therein. The result is that Part VIII of the Act now applies to the determination of the dispute between the parties.
What just and equitable order for property settlement should I make?
The applicable approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution made by the wife in bringing property into the marriage. In this regard, I need to consider the decision of the Full Court in Pierce and Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce and Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 27, 29 and 32:
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) …28.…said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
In this case there are a number of questions that need to be answered.
a)What assets and liabilities did the parties have at cohabitation?
b)What assets and liabilities did the parties have at separation?
c)What are the current assets and liabilities of the parties?
d)How should contribution be assessed in this case?
Assets and Liabilities at Cohabitation
The husband and wife cohabited on marriage which took place in 1998. Earlier that month they had entered into a prenuptial agreement. I find that it is the most reliable record of the financial positions of the parties on marriage. That position can be summarised as follows:
Wife: K Property $285,000
Less mortgage to St George ($105,000)
Net equity of wife $180,000
Piano $5,000
House Contents $25,000
Sale Proceeds (Boundary Alteration) $13,500
Net Assets $233,500
I have excluded in this summary what was described in the agreement as “an expectancy from her father’s estate.”
Husband: Equity in N Property $20,000
4WD Vehicle $10,000
Superannuation $13,000
House Contents $30,000
Net Assets $73,000
The wife was in a stronger position financially at the time of cohabitation.
When their respective assets are combined, she brought in about 75 percent and he 25 percent.
Assets and Liabilities at Separation
I find that the final separation took place in February 2004. The financial agreement the parties had signed over the two preceding months records their assets, but not their liabilities. Looking at the evidence in its entirety this is the picture that is created of their assets and liabilities.
The wife owned her home at Property C. She had purchased this as vacant land for $92,000.00 in November 2001, and constructed a home on it into which she moved in January 2004. The value of it at this time is not known. The wife’s own evidence is that in May 2003 she borrowed $120,000.00 from St George to build the home. She also mortgaged the property again to St George in October 2003 at the same time as the husband refinanced his N Property. The evidence indicates that this was a joint borrowing for $380,000.00 secured over both properties. It was described as a Portfolio Loan with two accounts. One account had a limit of $200,000.00 and was secured against the husband’s property. The second account had a limit of $180,000.00 and was secured against the wife’s property. Whilst this records how the parties may have viewed their borrowing, there is no doubt that the loan and its securities were fully cross-collaterised and their respective properties were available to the bank in the event of default. The purpose of the borrowing was to raise funds to complete the purchase of the H property.
The sum of $380,000.00 was raised as a result of these transactions. I accept the wife’s evidence that just under $93,000.00 was used to discharge the husband’s loan to IMB secure on his N Property. Indeed St George could not have taken its security over the N Property unless this had taken place. It must also be the case, however, that part of the loan was used to refinance the wife’s existing loan to St George. I do not have evidence about what this loan balance was at the time of refinancing. As the refinancing took place five to six months later, it is unlikely that the loan had reduced considerably below $120,000.00, so I will adopt that figure. This means that the parties had available to them $167,000.00 in order to complete the purchase of H, the purchase price of which was $250,000.00. As discussed at paragraph 39 above, the wife drew out almost $84,000.00 of this fund in November 2003. She had the benefit of this money. I am unable to determine from the evidence whether it was used to reduce the liability on the account secured against her property, or whether she kept it in a credit account.
By February 2004 the husband’s N Property had sold for $232,500.00. His equity in the property must have been in the vicinity of the sale price, less expenses of the sale, less about $93,000.00 being the amount attributable to his mortgage at the time of refinance in October. Allowing $5,000.00 for the sale expenses, this leaves an equity of $134,500.00. The evidence indicates that he only received about $50,000.00. The difference here is explained by reference to the amount drawn out of the loan account by the wife. The bank statements produced by the wife indicate that on settlement all of the monies paid to St George were used to pay out the C Property sub-account.
The wife’s evidence is that in November 2005 she sold the C property for $500,000.00, and purchased the property she now owns at Property N for $275,000.00. Her evidence about these transactions is contained in paragraphs 52 and 53 of her affidavit. There are aspects of this evidence that are unsatisfactory.
For example, she asserts that on sale of the C Property, $313,263.58 was paid to the St George Bank and only $165,365.13 was applied towards the purchase of Property N. However, as at the time of separation her liability to St George could not have been greater than $180,000.00 and, indeed, was potentially less. She gives no explanation for this. Her liability increased from a maximum of $180,000.00 in February 2004 to $313,263.00 the following year. Even if I accept her evidence that after separation she paid her husband $50,000.00, it does not explain thus significant increase in liability. The discrepancy is important. At paragraph 52 the wife asserts that the $165,365.00 she received on sale of Property C was $100,000.00 less than when she entered the relationship with the husband. An important part of her case was that she was worse off as a result of the relationship. It was incumbent on her to establish this and the reason for it, and the absence of an explanation about the St George loan does not help her case.
The loan from St George of $380,000.00 was not drawn down in full. It established, in effect, a credit facility available to the parties. I find that $93,000.00 was used to pay out the IMB mortgage over the husband’s N Property. I find that $120,000.00 was used to reduce the wife’s mortgage over Property C. This was done unilaterally by the wife. By the time the marriage had ended, therefore, the husband’s financial position was, in effect:
·Net sale proceeds from N Property $50,000.00
·Superannuation entitlements – value unknown.
·Mitsubishi EO vehicle – value unknown.
Conversely, for the wife, her financial position was, in effect:
·C property, value unknown, liability not exceeding $40,000.00.
·Savings – amount unknown.
·Superannuation entitlement – value not known.
·Motor vehicle, piano and personalty – value not known.
This is hardly a satisfactory basis from which to undertake a property settlement exercise. The evidence was not satisfactory. The parties to litigation bear the onus of establishing to the satisfaction of the Court what their financial position was.
Assets and Liabilities at Time of Hearing
Their respective positions can be summarised as follows:
Wife: Property N, $275,000
(Mortgage to St George) ($150,000)
Equity $125,000
Savings $7,000
Motor Vehicle $5,000
Home Contents $3,000
Total non-superannuation assets $140,000
Superannuation $45,000
Total of all assets $185,000
Husband: Property B, $100,000
(Mortgage TCH) ($96,000)
Equity $4,000
Savings $5,400
Motor Vehicle $20,000
Campervan $12,000
Contents $10,000
Total non-superannuation assets $51,400
Superannuation $64,400
Total of all assets $115,800
I have consciously excluded the wife’s interest in the estate of her late father. I treat it as a resource available to her. There was no argument that the husband had contributed to this in any way.
It is clear that the husband’s financial position deteriorated after separation. I accept his evidence that what monies he had at separation or received afterwards were all spent on travel and living expenses. I find that he had the $50,000.00 from the sale proceeds of N Property, together with $49,505.00 paid to him by the wife. I discuss this evidence below. He also purchased a campervan and a saxophone.
There was no challenge to the veracity of the wife’s evidence as to her current financial position. This is significant when one has regard to one of her main arguments in this case – that she was considerably worse off financially at the end of the relationship as compared to its commencement. Indeed her case was presented on the basis that she was $100,000 worse off at separation. Extrapolating that to her current position, compared to the date of cohabitation she is now $50,000.00 worse off. Despite the absence of any challenge to the veracity of her financial position both at separation and at present, I am sceptical. For the reasons set out at paragraph 57 above, she has not provided evidence about the St George loans relation to her properties at C and N.
At least part of the difference in financial positions between separation and the time of hearing is attributable to transactions entered into after separation between the parties. I will deal with that here. I find that the wife paid to the husband $49,505.00 after separation. Her evidence is that she regarded it as a repayment of the monies she felt she owed the husband as a result of her drawings on the loan account. She regarded the balance, about $34,429.00 as being the amount he still owed her as a result of monies she provided to the husband during the marriage. I deal with this below.
How Should Contribution Be Assessed in This Case?
For the reasons set out at paragraphs 49 – 50 of these reasons, there can be no doubt that the wife’s financial contribution at cohabitation was significantly greater than the husbands.
During the marriage I find that the wife’s financial contribution was also greater. The evidence indicates that even though she was not working all of the time, because of illness, she was still earning more than the husband was earning as a casual teacher.
I find that it was the wife’s money that was used for the following purposes:
a)The deposit on Property H of $12,500.00
b)A payment of $5,000.00 to the husband on 5 February 1999
c)A payment of $5,000.00 to the husband on 19 July 1999
d)The purchase of a Mitsubish Pajero for the use of the husband for $24,000.00, later traded in for $15,000.00
e)Payment of the husband’s Citibank debt of $6,354.00
f)Payment of the husband’s Teacher’s Credit Union debt of $3,961.00
g)The purchase of a Mitsubishi Eo motor vehicle for the husband for a net payment of $15,000.00
h)Payment to the husband of $2,300.00 on 8 December 2002.
I do not accept the wife’s evidence about other payments. I observed her closely in cross-examination. She was quite unresponsive at times, creating the impression of evasiveness. She gave oral evidence about cash payments not referred to in her affidavit. The cross-examination of the wife about her pre-emptive strike on the loan account created the impression of a manipulative woman who, feeling quite insecure in the relationship, schemed to protect herself whilst deceiving the husband. There was the occasional spasm of conscience that led her to firstly repay the money drawn-down (but then re-draw it) and then repay part of it to the husband after separation. She steadfastly refused to make sensible and reasonable concessions during cross-examination about contributions made by the husband. In view of all these matters I do not accept her evidence about payments made that are not corroborated in some other way.
The findings I make about the husband’s contributions during the marriage can be summarised as follows:
a)Even though he was earning less than the wife, I am satisfied his income during the marriage was used primarily for the benefit of the family. I find that some part of the husband’s income was used for conservation and improvement of the wife’s properties during the marriage.
b)There were times when the wife’s depressive illness meant she could not work. He cared for her during these periods.
c)The husband worked on the wife’s properties at K, V and C. This work included landscaping, cleaning, and various activities that may be generally described as building and associated activities. He was not primarily responsible for this work. He was sometimes assisted by others, and many times others assisted him.
Assessing the contribution made by each of them at the end of their marriage is the real issue. It must take into account payments subsequently made to the husband. It is not possible to be scientific or precise. Assessing different forms of contribution is often based on impression. It is helpful, but not determinative, to look at the value to the parties of the contributions they each made. Without the provision of financial assistance to the husband by the wife, there are times when he would have had great difficulty paying his debts. He would not have the Mitsubishi Eo he now has. Without the care and support provided by the husband to the wife during her illnesses, she would have had to rely on others, or may not have recovered as quickly as she did. If he had not provided some little funds, and his own considerable labour, she would have had to pay for someone else to do these tasks, or suffer the risk that the properties were sold for less than they did. Assessing diverse contributions made by parties who, at the time they were made, never intended that a stranger to them would have to assess their relative weight, requires more common sense than it does scientific or arithmetical skills. During the marriage, and taking into account payments made after separation, I find that contributions as between the husband and the wife were equal.
My finding about equal contribution, viewed through the lens of how the parties themselves valued these contributions, is supported by the fact that the wife felt she was morally obliged to pay to the husband $49,505.00 of the $83,934.00 she withdrew from the loan account. The only remaining issue is the balance, i.e. $34.429.00. In essence the wife says that the metaphorical “books” were balanced when she paid the $49,505.00. The husband says that a further payment should be made to him in the sum of $100,000.00.
I find that no further payment should be made to him. The overwhelmingly greater initial financial contributions of the wife at cohabitation, and the equalisation of contribution during cohabitation together with the further payment to him of $49,505.00 after separation, all lead to a result that it is just and equitable for each to now keep what they have. Each of them had superannuation entitlements that increased during the period of cohabitation. Each of them retains an earning capacity that is unaffected by the marriage. Each of them seem to retain relatively moderate assets. Compared to the husband’s asset position at cohabitation he is slightly better off. Compared to the wife’s asset position at cohabitation, she claims to be in a worse position, but I have my reservations about this. Notwithstanding this, I find it is just and equitable to leave the husband and the wife where they are today financially.
Conclusion
The husband and the wife entered into a financial agreement that complies with s.90G of the Act. As a result of the wife’s non-disclosure I set that agreement aside. As a result of payment of $49,505.00 made by the wife to the husband after separation, I find that no order for property settlement needs to be made other than declarations that each keep what they now have.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Deputy Associate: Monique Robb
Date: 21 September 2007
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