TOBIAS & TOBIAS

[2020] FCCA 1657

FEDERAL CIRCUIT COURT OF AUSTRALIA

TOBIAS & TOBIAS [2020] FCCA 1657

Catchwords:
FAMILY LAW – Property – justice and equity – no substantive property to be divided between the parties – parties effect informal property settlement – wife lends husband money – money lost – husband owes considerable debts – creditors circling - status of wife’s loan agreement considered.

INJUNCTIONS – Proper basis for injunction relief sought by husband not made out.
COSTS – No justifying circumstances found in favour of either party to award costs.

Legislation:

Family Law Act 1975, ss.4, 4AB,79(1), 79(2), 79(4), 114, 117, 117(2A)

Bankruptcy Act 1966 (Cth), Pt.X

Cases cited:

Stanford v Stanford [2012] HCA 52

Merritt & Merritt [2009] FamCAFC 154

NHC & RCH [2004] FamCA 633

Black & Kellner (1992) FLC 92-287

Weir & Weir (1993) FLC 92-338

R v Watson; Ex Parte Armstrong (1976) 136 CLR 248

Sieling & Sieling (1979) FLC 90-627

Waugh & Waugh [2000] FamCA 1183

Penfold v Penfold (1980) 144 CLR 311

Applicant: MS TOBIAS

Respondent: MR TOBIAS

File Number: BRC 9218 of 2016

Judgment of: Judge Purdon-Sully

Hearing dates: 13 August 2018 and 27 January 2019

Date of Last Submission: 27 May 2019

Delivered at: Brisbane

Delivered on: 23 June 2020

REPRESENTATION

Counsel for the Applicant: Mr Simon Priestley

Solicitors for the Applicant: Conroy Stewart Spagnolo Conroy

Counsel for the Respondent: Ms Sarah Minnery on 13 August 2018

Solicitors for the Respondent: Conroy Stewart Spagnolo Conroy ceased acting on 17 January 2019

The Respondent: Self-acted from 17 January 2019

ORDERS

(1)That the Amended Application filed on 30 July 2018 and the Further Further Amended Response filed on 1 June 2017 be dismissed.

(2)That there be no order as to costs.

IT IS NOTED that publication of this judgment under the pseudonym Tobias & Tobias is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRC 9218 of 2016

MS TOBIAS

Applicant

And

MR TOBIAS

Respondent

REASONS FOR JUDGMENT

Introduction

1.These are property proceedings pursuant to Part VIII of the Family Law Act 1975 (“the Act”).

2.The proceedings were commenced by Initiating Application filed by the wife on 14 September 2016 as amended on 30 July 2018.

3.The applicant wife seeks orders detailed in [1] to [3] of Minute of Order sought in Outline of Case filed 30 July 2018.

4.If I made those orders then the husband would pay to the wife $1M and in the alternative the husband would pay to the wife the sum of $140,000 forthwith, a further $140,000 on or before 12 August 2019 and from 13 August 2019 in the sum of $500 per week for a period of 3 years together with costs. 

5.The husband seeks orders in a Minute of Order handed to the court at the commencement of the trial on 13 August 2018.

6.If I made those orders then:

a)A loan agreement between the husband and wife in mid 2011 would be set aside.

b)As an alternative to that order a declaration would be made pursuant to s.79 of the Act that the amount owing under the loan agreement is nil.

c)As an alternative to that declaration:

i)Pursuant to s.79 of the Act the loan agreement be discharged.

ii)Each party would retain the property in their care or control;

iii)Pursuant to s.114 of the Act the wife be restrained by injunction from filing any document or taking any step to cause the making of a Sequestration Order against the husband.

7.The parties have agreed to a further order sought by the husband that the passport of their youngest child Mr C born in 2001 would be delivered to his lawyer’s offices.

8.Following the trial the wife filed submissions on 18 February 2019.  The husband who self-acted sought a number of extensions to the filing of his submissions, which were filed on 27 May 2019.

9.I apologise to the parties for the delay in the delivery of this decision.

Result

10.For the reasons which will follow the applications of both parties should be dismissed with no order made as to costs.

Statutory provisions

11.Section 79(1) of the Act provides that:

(1)    In property settlement proceedings, the court may make such order as it considers appropriate:

(a)    in the case of proceedings with respect to the property of the parties to the marriage or either of them—altering the interests of the parties to the marriage in the property; or

(b)    in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage—altering the interests of the bankruptcy trustee in the vested bankruptcy property;

including:

(c)     an order for a settlement of property in substitution for any interest in the property; and

(d)    an order requiring:

(i)     either or both of the parties to the marriage; or

(ii)    the relevant bankruptcy trustee (if any);

to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.

12.Section 79(2) provides that:

The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make an order.

13.The relevant legal principles with respect to an adjustment of property interests under s.79 of the Act were discussed by the High Court in Stanford v Stanford [2012] HCA 52.

14.Relevantly the High Court (French, CJ, Hayne, Heydon, Kiefel and Bell JJ) said at [35] – [40]:

35.  It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated.  In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.

37.    The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition.  It is not possible to chart its metes and bounds. And while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.

37.    First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.  So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added).  The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.

38.    Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion.  In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs "as [the judge] thinks fit", in any question between husband and wife as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion".  And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:

"The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down".

39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.

40. Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

The issues

15.The predominant issue in this case is whether there is any property that might be the subject of a property adjustment order.  The issue arises in the context of what the wife asserts is a failure on behalf of the husband to make full and frank financial disclosure of his financial circumstances. 

16.The other matter for immediate attention is what to do, if anything, about a loan agreement entered into by each party in mid 2011.  The husband says the agreement should be set aside or alternatively declared as discharged.  The wife says that she should retain the benefit of the loan agreement. 

17.Finally, it must be determined whether there ought to be an order for costs of the proceedings against the husband on an indemnity basis or otherwise.

18.It is helpful to set out a brief summary of the parties’ relationship.  The fortune amassed in the early years was likely depleted from unfortunate investments and a high standard and cost of living.  In the later years, even on the wife’s evidence, it becomes prominent that the husband’s financial position drastically declined. 

Relevant background

19.The husband is 66.  He was born in 1954. He resides at Suburb D.  His occupation is company director of five small companies.

20.The wife is 53.  She was born in 1966.  She resides at Suburb E.  She is unemployed. In 2017 she enrolled in the second year of a Bachelor’s degree at F University.

21.The parties commenced a relationship in 1991 on the evidence of the wife and 1994 on the evidence of the husband. They commenced cohabitation in 1994 or 1995. They married in 1999.  They separated on a final basis in 2015.

22.Their relationship accordingly had a duration of between 21 to 24 years.

23.The wife has not re-partnered.  The husband re-married in 2016.

24.There are four children of the marriage, Mr G born in 1995, Ms H born in 1997, Mr J born in 2000 and Mr C born in 2001.  The three youngest children reside with the husband.  At trial the youngest two were attending the E High School.

25.The parties met when they were both employed by Employer K.  The wife was then a professional and the husband a professional.

26.In 1995 the parties relocated to the United Kingdom because the husband had secured a position as an executive of a subsidiary company of Employer K.  The parties’ first two children were born after they relocated to the United Kingdom.  The wife ceased full-time work in 1995.

27.In early 1999 they returned to Australia after the husband secured a position in Perth as an executive of Employer K. 

28.In around late 2000 the husband moved to Sydney.  He had been appointed an executive of Employer K.  The Perth property sold in early 2001 and the wife and children joined the husband in Sydney.  In mid 2001 they purchased a property at Suburb B.

29.The wife was responsible for organising the renovations and sale of the Perth property prior to sale.  She was also responsible for the logistics and efforts involved in moving herself and the young children between each location.

30.Between 2002 and 2008 the wife arranged for significant renovations to the Suburb B property.  The total costs were $2,500,000 and on the husband’s evidence increased the value of the property.

31.During the relationship the husband’s income was substantial.  He says he earned around $650,000 per annum inclusive of bonuses.  He worked 80 hour weeks to earn his income.

32.On the wife’s evidence, from 2006 the husband began depositing $35,000 per month into the wife’s bank account for the wife to use for all aspects of running the household including, she says, the mortgage repayments for the Suburb B property.  She says she did not have access to information regarding, or accounts into which the husband’s income was paid.

33.On the husband’s evidence he was at one point paying $37,000 a month on the mortgages over Suburb B and a beach property: that is $444,000 annually from before tax dollars acknowledging that the beach property was negatively geared.  

34.In my view whether the husband was paying the mortgages or the wife was paying them from the “allowance” given to her by the husband is neither here nor there.  The source of the mortgage repayments was the same either way.  On the wife’s evidence she generated no income.  She could not do so because she was a full-time parent and homemaker. 

35.The husband earned a lot of money by way of his personal earnings.  Some years were better than others.  There was a lot of debt.  Much of his income went to repaying the debt.

36.The amount of the mortgage repayments was significant.  As the husband said in cross-examination, even in the good times, the mortgage repayments constituted a very large proportion of his earnings.

37.In 2007 the parties purchased a property at Suburb L, Sydney.  On the wife’s evidence the purchase price was $2,100,000 of which $1,680,000 was a loan secured by mortgage.  On the husband’s evidence it was $2,500,000 of which $1,800,000 was a loan secured by mortgage.  I accept the wife’s evidence.  Copies of the transfer form and the mortgage form are annexed to her affidavit.  It was sold in 2009 for $1,800,000.

38.During 2006 and 2007 the parties purchased a boat and some other substantial assets each of which was sold because of the global financial crisis.  The wife asserts that she does not believe the losses to which the husband deposes because the husband has failed to disclose documents pertaining to the sales.

39.In his affidavit filed on 3 August 2018 the husband affirms that in or about August 2008 the parties separated on a final basis.  In cross- examination on the second day of trial he gave evidence that the parties separated in August 2008 but experienced various and sporadic periods of reconnection and finally separated in about 2015.

40.He says on the day of separation in August 2008 (although he cannot recall the particular day) the wife physically assaulted him.  He explains that he arrived home after a hospital admission and surgery on his prostate when the wife allegedly pushed him off a chair and kicked him in the stomach.  He says he returned to hospital after this incident.  When he returned home he “packed some clothes and personal items” and then “left the house and did not return”. 

41.His evidence about further cohabitation is inconsistent.  At [11] of his affidavit he says that after the incident he secured rental accommodation in Suburb M, Sydney and ever since has maintained separate accommodation from the wife.  At [25] of the same affidavit he says “I agreed to move back into the home for periods of time to care for the children and provide some respite for them from Ms Tobias’ mood and anger”.  He does caveat that cohabitation with this sentiment: “We did not share a room and did not share any domestic tasks like washing each other’s clothes or cooking for each other” ([26]).  He says they were living “as a separated couple under one roof”.

42.I will accept that the parties separated on a final basis in 2015.  However, the circumstances of their relationship between 2009 and 2015 are pertinent to the point.

43.The wife’s evidence is that the husband would be absent from the family home for weeks at a time.  She gave the following evidence:

a)In January 2009 she sought legal advice and she says commenced “divorce proceedings”.  I am not sure what she means by that.  If she indeed sought a divorce order then she must have been prepared to swear or affirm that there had been an irretrievable breakdown of the parties’ marriage evidenced by 12 months of separation. 

b)The husband was involved in an “affair” with his now wife since 2008.  

c)“In 2010 Mr Tobias took a role as an executive of Employer N and was working in Perth.  I did not know this, at the time I thought Mr Tobias continued to live and work in Sydney.” 

d)“Most of 2010 he was absent and I had no idea that he was living in Perth”.

e)In 2010 she commenced “divorce and property action again with a lawyer in Sydney”.  The reason she discontinued that application, she says, is because the husband said to her “if you continue I will stop working and simply disappear overseas”.  She was concerned for the wellbeing of her four children under the age of 15 years.

f)In 2011 the husband arranged for a “property settlement” to be drafted which would see her receiving the proceeds of sale for the Suburb B property and the furniture and the husband would retain his superannuation.

g)When she was asked to provide a loan to the husband, on her evidence, she made repeated demands to sign the “property settlement” agreement.

h)Another application for divorce was filed in 2014 and later discontinued.

44.In mid 2009 the husband ceased his employment at Employer K.  He received a payment of around $400,000 comprising mainly accrued leave entitlements.  This money was used by the parties, together with some savings, to pay debts to the ANZ bank and the Australian Tax Office and to purchase a new car for the wife in the sum of $130,000.

45.Around mid-2009, the husband established a self-managed superannuation fund.  At its inception he says it held around $1,200,000.  Due to taxation liabilities arising from a misunderstood “complex company share scheme” the husband’s SMSF was wound up to pay the debt.  The balance of the funds from the SMSF were later invested into a later business venture.

46.Subsequent to his resignation at Employer K, the husband took up a position at Employer O as an executive based in Perth.

47.The parties sold the Suburb B property in early 2011 for $4,500,000 and received net sale proceeds of $1,800,000. 

48.They moved to Brisbane and secured rental accommodation.  During the work week the husband lived in City P.  The wife was responsible for making the arrangements for the relocation.

49.In early 2011 the parties discussed a property settlement between themselves.  In cross-examination the wife clarified the terms of the agreement, notwithstanding that she was in the dark about the parties’ financial position:

a)the wife would retain the sale proceeds of the yet-to-be-sold Suburb B property and the household contents;

b)the husband would retain his superannuation;

c)the wife would loan the husband $500,000 for the purchase of a company, Q Pty Ltd, and perhaps a second, R Pty Ltd.

50.In mid 2011 the husband entered into a loan agreement with the wife for the sum of $1,320,000.  His evidence is that she was interested in being involved in the Q Pty Ltd venture. 

51.The wife was cross-examined extensively about the circumstances surrounding, and the reason for her signing, the loan agreement.  In cross-examination she said that she had three reasons for lending the husband money:

a)she believed the parties were going to “get back together”;

b)she needed a source of income for her family; and

c)she “hated to see him beg”.

52.When pressed on those points she said that the husband had threatened to disappear and leave her and the children with nothing.  When asked why she believed him, she agreed with the proposition that she “allowed him to push the emotional buttons that he has previously pushed over a long period of time, knowing what [her] reaction would be”.

53.When further pressed, the wife said that in addition to the loan agreement the husband would pay $21,000 per month to support the family.

54.The husband asserts that monies he paid into the wife’s bank account of $21,000 per month between mid 2010 and late 2012 were loan repayments.  Between early 2013 and mid 2015 the payments he made into the wife’s bank account, howsoever categorised, were $15,000 per month.  Finally, between mid 2015 and late 2015 the payments reduced to $10,000 per month.  The total of those payments is $1,235,000.  He says he has not made a further payment since late 2015.  The wife says the payments ceased in mid 2015.

55.He argues that if those payments were anything other than loan repayments, then they would have attracted income tax.  I do not accept the submission.  He also argues that amounts paid to the wife prior to the execution of the loan agreement should constitute repayments.

56.I do not accept the submission that the payments were “loan repayments”.  I accept that he had been depositing money into the wife’s account from as early as 2006.  That is the time, it seems to me, that the wife’s involvement in, or more accurately knowledge of, the husband’s financial affairs declined.  That she complains of having no knowledge of or documentation pertaining to his financial affairs at the time corroborates her evidence about the monthly “allowance”.  Furthermore, there is evidence that the reduction in payments correlated with events such as a child finishing school.  I find that the husband made deposits into the wife’s account as financial support for her and their children.  That is a matter which ultimately goes to his contributions.

57.The wife asserts that the husband later loaned further monies from her and required her to incur taxation liabilities.

58.In 2011 the husband purchased Q Pty Ltd and R Pty Ltd, companies which operated a business located in Town S, Queensland.  In cross-examination the husband accepted that he purchased the companies for $2,700,000 sometime after mid 2011.

59.He funded the purchase of the companies by the loan from the wife of $1,320,000 and a loan from ANZ of about $1,700,000.  The sum of those amounts is plainly more than $2,700,000.

60.In cross-examination the husband said he used $1,200,000 of the loan from the wife and about $1,500,000 of the loan from ANZ for the purchase and the other $200,000 was used to purchase machinery.  He said he injected $400,000 cash into the company for working capital.  He conceded that he never provided a bank statement to the wife substantiating the cash payment of $400,000.

61.The loan from the wife is referred to as $1,520,000 in his affidavit and $1,200,000 in cross-examination.  On the actual loan agreement, annexed to his trial affidavit, it is $1,320,000.  I accept the documentary evidence that the original loan was $1,320,000.  Neither party gave consistent evidence about the exact amount originally loaned – the husband having given inconsistent evidence ($1,200,000 or $1,500,000) and the wife having accepted different amounts in cross-examination. 

62.Both parties’ evidence is that the wife loaned the husband further monies after mid 2011.  It was not clear how the other $120,000 was used, but I am satisfied that it was invested into the Q and R Pty Ltd venture in one way or another.

63.The further monies loaned were applied to the ongoing operation of the companies.  I will address those further loans later in these reasons.

64.The loan from the ANZ bank used to fund the purchase of Q and R Pty Ltd was $1,693,750.  Annexed to the wife’s affidavit as “14” is a letter from ANZ bank addressed to the husband offering to the client, Q Pty Ltd, chattel mortgage facilities totalling $1,693,750 and an overdraft facility of $50,000.  Neither party contended this document is inaccurate.

65.Counsel for the wife submits that I should not accept the husband’s evidence about the $400,000 cash injection because it was not contained in his affidavit,[1] but it plainly was (see [82] of the husband’s affidavit filed on 3 August, 2018).

[1] See [36](e) of the wife’s submissions filed on 18 February, 2019

66.The wife says that in mid 2011 the husband requested of her a further loan in the sum of $100,000.  She annexes to her affidavit an email supporting her evidence.  I accept it.

67.In late 2011 the husband again requested for further advances, totalling $170,000.  The wife annexes to her affidavit a letter from the ANZ bank to the wife requesting her confirmation for two transactions.  Although the documentary evidence here does not corroborate her evidence that she loaned the further money, I accept her evidence that she did.  It accords fully with the way in which the parties conducted their financial arrangements regarding the Q and R Pty Ltd enterprise.

68.The wife says that around this time, the husband caused her to incur “tax bills”, one for $48,000 and one for $114,000.  She says she signed the tax bills under duress by the husband.  Her evidence about these tax bills is not very convincing.  It tends to accentuate how little the wife understood the parties’ then financial circumstances and the schemes, trusts and other arrangements orchestrated by the husband at the time.  I am satisfied that she incurred the tax liabilities – so much is evident from the notices of assessment annexed to her affidavit.  Assuming responsibility for a liability of the parties is something which attracts weight in a contributions based assessment.

69.She says she paid the tax bills by instalments from the “allowance” that she received from the husband.  

70.In 2012 the parties and their children holidayed to Country T.  Tragically, while aboard, the cruise ship sank.  The wife brought a claim against the cruise ship and each of the parties and the children, except for Ms H, received compensation.  Ms H’s claim is yet to be settled because her claim is complex.

71.The husband required a quick settlement so that the wife’s credit card debts incurred from payments for the holiday could be paid.  The wife complains that the husband had promised he would pay for the holiday but reneged.

72.The wife commenced full-time employment in early 2013 with Employer U as a professional on a 12 month contract.  Between 2015 and 2017 she carried on a business known as “V”.  It did not work out.  She says it resulted in $57,000 of debt.

73.She says despite her historical experience and her qualifications, she is unable to secure gainful employment due to a 22 year career gap and a poor job market. 

74.In 2015 the wife worked as a non-executive board member for a not-for-profit organisation called “W” approximately 20 hours per week.

75.In cross-examination she was asked if she had applied for a job in the past six months (i.e. February to August 2018).  She had not, she says, because she is a “full time university student”.

76.The wife finally pursued an application for divorce in 2015.  After she refused to discontinue that application, her “allowance” payments ceased.  That is somewhat consistent with the husband’s evidence that he did not make any further payments after 2015.

77.In 2016 the children commenced living with the husband.  The wife says it was because she had no income to support them or herself or secure accommodation. 

78.Sometime after 2015 Q Pty Ltd went into liquidation.  The investments into the company were lost on the failed enterprise.  The details of the investment in and resulting loss from this enterprise is the subject of much contention in these proceedings.  The husband’s case is that the Q and R Pty Ltd excursion cost him (and the wife) all of their money and he has incurred several million dollars in liabilities which to date remain unpaid.  He is responsible for the liabilities because as company director he was required to guarantee loans and other liabilities to his creditors.

79.He does not enumerate in his affidavit how much money was invested in Q and R Pty Ltd.  He does not enumerate in his affidavit how much money was lost in Q and R Pty Ltd.  In cross-examination he said that he was informed by one of his (or the company’s) creditors in early to mid-2018 that the liquidation cost about $800,000.  He did not provide that information to the wife.  He said she would have received a copy of the report in which the information was provided because she is a creditor.  He said he did not disclose it to the wife because it was second-hand information that he could not even verify.

80.I accept that the wife would have received a copy of the report to creditors.  But it does not matter.  Whether or not the husband should have disclosed the information is dependent upon whether he received anything to disclose.  I accept his argument that information falling from a conversation with a creditor is not something that he was required to disclose. 

81.On 14 October 2016 the husband sent an email to the wife informing her that as a result of court documents being sent to a company of which he was a director, his contract was not going to be “rolled over”.

82.In cross-examination the wife gave evidence that around 2016 the wife’s solicitors sent a letter to the boards of the companies of which the husband was a director enquiring about the husband’s income.  She said in evidence that the reason for the enquiries was because the husband had not disclosed his income.  She accepted that as a result of the letter, the board of one company became aware of these proceedings and the husband’s position was consequently terminated, that is, presumably, his contract was not renewed after its expiration.  The wife says she was not aware of the letters until after they had been sent.  A call was made for the letters.  Counsel for the wife conceded that they did not have the letters.

83.On 1 October 2017 the husband appointed controlling trustees to propose an agreement under Part X of the Bankruptcy Act 1966 (Cth) with all of his creditors, including the wife. As a result of that appointment the husband’s assets fell under the control of the trustees and the trustees were required to investigate his financial affairs. A report was produced pursuant to the investigation and a copy sent to each creditor, including the wife.

84.Exhibit 5 in these proceedings is a copy of the report to creditors prepared by X Partners in relation to a Part X proposal.  It records that the husband disclosed two debts owed to him by the two Q and R Pty Ltd entities: $774,903.25 by Q Pty Ltd and $428,104.76 by R Pty Ltd.

85.He was asked why he has not previously disclosed in these proceedings that he had paid anything other than the $400,000 payment.  His answer was “because they were different situations”.  I am not sure what that means.  The highest his affidavit evidence goes is that he spent and lost all of the parties’ money on the Q and R Pty Ltd enterprise.

86.To pass, the proposal required at least 50% of creditors to vote in favour of it and at least 75% of the total value of creditors to vote in favour of it.  The proposal was defeated by ANZ and the wife.  The wife clearly had the controlling vote.

87.The wife voted against the resolution.  On the husband’s evidence she stood to receive $80,000 had the Part X agreement been approved.  In cross-examination she said it was less than that. 

88.Exhibit 6 in these proceedings is a list of creditors who voted in the Part X proposal.  It is appropriate to reproduce Exhibit 6.  For convenience I have removed the columns “Claimed Amount ($)”, “Admitted ($)” and “Abstain ($)”.

Creditor's votes in relation to the proposed PIA	Creditors who voted at meeting
Creditor	Amount Admitted to Vote For ($)	For ($)	Against ($)
Y School	-	-
Australia and New Zealand Banking Group Ltd	67,411.69	-	67,411.69
Z Discretionary Trust	-	-
AA Pty Ltd	138,790.84	-
BB Pty Ltd	94,815.16	-
Deputy Commissioner of Taxation	49,500.00	-
CC Accounting Group	-	-
Mr DD	16,500.00	16,500.00
EE Company	250,000.00	250,000.00
FF Pty Ltd	6,863.88	6,863.88
GG Pty Ltd	75,126.69	-
HH Pty Ltd	-	-
JJ Pty Ltd	43,928.11	-
KK Pty Ltd	-	-
LL Group	552,265.25	552,265.25
Ms Tobias	1,951,636.19	1,951,636.19
Total	$3,246,837.81	$825,629.13	$2,019,047.88
Number of Creditors	4	2
Percentage of Creditors	29.02%	70.98%

89.The husband paid to his controlling trustees, X Partners, the sum of $150,000 for the Part X proposal.  In cross-examination he explained that the people or companies who funded his Part X proposal were “all high-net-worth rich people who I’ve made plenty of money from in the past”.  He didn’t raise any of the funds himself.

90.At the time of filing his affidavit on 3 August 2018 the husband deposed to having the following income and positions:

a)Mr MM (formerly NN Company): $50,000 per annum.  The company pays PAYG tax on behalf of the husband.  He attends monthly board meetings.

b)OO Pty Ltd: $44,000 per annum.  The payments are made to PP Pty Ltd.  He attends monthly board meetings.

c)QQ Pty Ltd: $40,000 per annum.  The company pays PAYG tax on behalf of the husband.  He attends monthly board meetings.

d)RR Pty Ltd: $70,000 per annum.  The company pays PAYG tax on behalf of the husband.  He attends monthly board meetings.

e)SS Pty Ltd: $30,000 per annum.  The payments are made to PP Pty Ltd.  He does “ad hoc consulting for them”. 

f)TT Company: $35,000.  The payments are made to PP Pty Ltd.  He attends monthly board meetings.

91.In cross-examination he confirmed that he is a director of five companies.  He is not a director of, and does not do work in any capacity as a director for SS Pty Ltd.

92.The husband is a shareholder of PP Pty Ltd.  His present wife is the sole director of that company but does not receive remuneration.  The husband is the only person who receives and who has ever received distributions from the company.  The company only has one asset being a bank account into which payments are made by its clients.  The company engages other entities for payment for the services that the husband provides to those other entities. 

93.The wife deposes to several and various things that the husband has said to her during the course of the marriage.  Her affidavit is replete with examples such as:

17. In 1996 I raised my desire to return to work.  Mr Tobias “stated to me “Ms Tobias, that is not going to happen, your role is to be a homemaker and raise our children and support me in my career.  That was the end of this discussion.

94.There are also other statements which simply detract from the relevant material and which are attacks at the husband’s character.  If some of her evidence about these things were accepted, they would probably constitute family violence as that phrase is defined in s.4AB of the Family Law Act 1975 (Cth). However I need not determine the point. The wife has not advanced a case, and in my view she has not demonstrated, that the husband’s conduct had a significant adverse impact on her contributions or that it made her contributions significantly more arduous than they ought to have been. The evidence to which I refer is unhelpful and is, in my view, immaterial in determining a property adjustment order, if any, that is just and equitable.

The property of the parties to the marriage or either of them

95.As the High Court pointed out in Stanford, the first step is to identify the existing legal and equitable interests of the parties in property. 

96.The weight of the evidence suggests that during the relationship the parties earned and spent a great deal of money.  They led a lavish lifestyle prior to the global financial crisis.  They incurred significant liabilities serviced by the husband’s ability to earn a high income at the time and receive bonuses.

97.The wife sets out an asset table in her affidavit filed on 16 July 2018.  That table, combined with what is in her Financial Statement filed 30 July 2018 illustrates the following:

Assets	Wife	Husband
ANZ accounts x 2	$135
Household contents	$2,000
Car – Motor Vehicle 1	$8,000
Car – Motor Vehicle 2	$16,000
Loan agreement	$1,984,791 + $405,980 interest
OO Pty Ltd Shares	$16,000 estimate
PP Pty Ltd	Undisclosed
QQ Pty Ltd shares sold	$30,000
Legal fees paid (add back)	$60,633.30
Monies paid to X Partners	$97,000
UU Group	Undisclosed
Total	$1,844,504.00	$219,633.30
Superannuation
Super Fund VV	$50,000 estimate (she now says $53,211)
Tobias Superannuation	Undisclosed
Super Fund WW	$1,200
Super Fund XX	$2,500
Total	$50,000	$3,700
Liabilities
YY Credit	$56,403
Amex, ZZ Bank	$75,305
AAA Bank	$7,635
HECS	$18,344
Legal fees owing	$12,000
Total	$169,687

98.She has not provided an updated balance sheet.

99.The husband sets out his assets and liabilities in his affidavit filed on 3 August 2018.  He also deposes to his financial circumstances in his Financial Statement.  Some of the information was clarified in cross-examination.  It appears to be the husband’s case, as corrected in cross- examination, that he has the following property and liabilities.

Assets and Superannuation – Husband
Westpac Bank Account	$10[2]
BBB Bank Account	$8,000 – $10,000[3]
Home contents	$5,000[4]
Motor Vehicle 2	$22,000
Shares – OO Pty Ltd	$39,000[5]
Super Fund XX	$4,500
Super Fund WW	$12,000 – $15,000[6]
RR Pty Ltd Fund	$300
Total assets	E$90,810 plus
Liabilities
Share loan (OO Pty Ltd)	$22,000
Personal loan from Mr DD	$30,000 – may not need to be repaid [7]
Personal loan to Ms CCC	$30,000 – may not need to be repaid[8]
American Express Australia Limited	$150,000
Y School	$8,000
Australia and New Zealand Banking Group Ltd	$32,001
DDD Bank	$46,000
Z Discretionary Trust	$177,033
EEE Company	$26,700
FFF Bank	$74,000
Commonwealth Bank of Australia	$18,600
Deputy Commissioner of Taxation	$49,500
GGG Company	$26,203
CC Accounting Group	$300
HHH Company	$984,557
Mr JJJ	$72,500 – may not need to be repaid[9]
KKK Group	$3,420
HH Pty Ltd	$1,298,822
JJ Pty Ltd	$20,457
KK Pty Ltd	$500,000
LLL Company	$19,013
MMM Company	$254,281
NNN Group	$79,312
Total liabilities	(3,922,699)
Net assets including superannuation	E(3,831,889)

[2]T2 P75 L37

[3] T2 P75 L44

[4] Insured value

[5] $22,000 in ...

[6]T2 P78 L25

[7]T2 P79 L34

[8]T2 P79 L34

[9] T2 P79 L8

100.In his material the husband sets out a number of other creditors against whom he attributes $1 of liability.  As I understand it, this means there is a line of credit that he may use.  I have excluded those details because they are speculative or, if my understanding is incorrect, they are otherwise of nominal value.

101.In cross-examination the husband updated the approximate balances of his bank accounts. He also explained the circumstances surrounding the OO Pty Ltd shares, to some extent. His evidence was that they cannot be sold save for certain circumstances dependent upon the company’s financial position. The transcript relevantly provides (T2 P76 L32-34):

All right.  So there’s 39,000, but you say you can’t cash those in if you needed money?---No, no. Only at certain events you can do that.  They’re like employee shares of sorts.  They have lots of - - -

102.Notwithstanding his apparent financial and business prowess, and notwithstanding the position in which he finds himself apparently on the verge of bankruptcy, he says that he has never inquired about when he can liquidate those shares.

103.The husband said that the information about the liabilities in the above table were sourced from documentation and conversations with the trustee in the lead up to the Part X process and some, such as the American Express debt, from memory.

104.The husband listed the loan from his brother in his statement of affairs for the Part X agreement as $16,500.  In cross-examination he explained that $16,500 was all that could be proven for the purpose of the Part X.  He says the other $8,500 was cash dealings and he maintains that a total of $25,000 is still owed.

105.The loan from his current wife does not appear on the statement of affairs.  In cross-examination he said it was the subject of discussion with the trustee at the time and he was advised to remove her as a creditor for the purpose of the Part X because she is his wife.

106.The debt to American Express is curious.  In cross-examination the husband said he has not received a statement with that entity since 2015.  He said that it was contacted pursuant to the Part X but no response would have been received.  He cannot produce a document to substantiate that debt.  He says he does not have any document in his possession and the figure of $150,000 is simply a recollection from 2015.  Given his very poor memory in almost every other circumstance, I find this evidence difficult to accept.

107.In respect of his superannuation, which at one point was around $1,400,000, the husband explained that $400,000 was invested in Q and R Pty Ltd, $400,000 - $500,000 was used to pay a taxation liability and the remainder was “part of the wash-up of the [global financial crisis]”.

108.In cross-examination the husband said that the DDD Bank debt deposed in his affidavit is probably the FF Pty Ltd debt contained in the creditor’s list associated with the Part X.  He has no proof of that at all.  He has no supporting documentation and he has not made any enquiries to confirm the debt.

109.In cross-examination the husband explained that the ANZ bank asserts that he has a debt to it of over $200,000 constituted by two lots of $30,000 credit card debts and about $150,000 of liabilities arising from the guarantees given for the loan to purchase Q and R Pty Ltd.  He said the ANZ bank sold the Q and R Pty Ltd assets that it had secured under the loan agreement for less than it is owed.  He said he has received letters of demand for payment of the outstanding amount ($150,000 odd).  He said he did not become aware of this alleged debt until after the Part X debacle: between late 2017 and mid 2018.  He said that he will challenge that alleged debt because it was not something that was disclosed by ANZ during the Part X discussions.  All of this does not appear in his affidavit, and as with all uncorroborated evidence, the wife submits I should disregard it.

110.Further to the ANZ debt, the husband said in cross-examination that he has not made any payments to the ANZ bank.  The figure of $32,001 in his affidavit is in direct contradiction to other evidence such as the statement of creditors.  His explanation for this was that he would have had “a different reference point” when drafting his affidavit.  He said he does not know why the amounts are different.

111.The loan to the husband by the wife is an asset currently in the hands of the wife.  I have found that it has not been repaid.  It has not been otherwise discharged.    

112.The wife was an attendee at the husband’s Part X meeting. The money owing under the loan agreement is property for the purpose of s.4 of the Family Law Act 1975 (Cth) because it is property to which the wife is entitled. It must follow that the husband’s indebtedness to the wife is a liability currently at his feet. In identifying the property of the parties to the marriage or either of them it is important to take into account that liability (see Merritt & Merritt [2009] FamCAFC 154 at [27]-[28]).

113.The original loan document states the amount of the loan was $1,320,000. 

114.In cross-examination the husband accepted that there were further funds advanced to him by the wife by way of loan, however they were not particularised.

115.In her affidavit filed on 16 July 2018 the wife sets out the debts she says are owing to her by the husband (at [153]) (faithfully reproduced):

Table of Loans
1	OOO Company Agreement dated mid 2011 (attached and signed)	$1,320,000.00
2	Additional loans borrowed, an agreed as subject to the OOO Company agreement dated mid 2011 (attached)	$100,000.00
3	Additional loans borrowed , and agreed as subject to the OOO Company agreement dated mid 2011	$1,790,000.00
4	My personal Tax Debts transferred to Ms Tobias mid 2010	$47,594.75
5	My personal Tax Debts transferred to Ms Tobias mid 2011	$113,909.35
Total – excluding agreed interest rate at 10% compounded	$1,836,504.10

116.There is plainly an error in the table.  Unfortunately, the error relates to the specific amounts of the later loans.  That is very unhelpful because there is very little evidence to inform the court of the present amount of the loan (or the amounts of the loans).

117.As best I can tell from the evidence, the wife loaned the husband $1,320,000 in mid 2011, $100,000 in mid 2011 and $170,000 in late  2011.  That is a total of $1,590,000. 

118.In my view, the tax debts, which she says are in total a little over $160,000, should not be conflated with the loan agreement.  The evidence about the tax debts falls short of establishing that the parties reached an agreement about repayment or otherwise.  The wife’s evidence was not compelling.  At [112] of her affidavit she attempts to explain how she paid the debt to the ATO:

… I was left to make arrangements with the Tax office and paid a gross amount to them of what from where and then paid $2,000.00 per month out of the $20,000.00 per month that Mr Tobias paid me at that time for the rent and the kids school fees.  I was completely breaking the budget each month.

(emphasis added)

119.The emphasised portion of that text appears to omit information.  It is plainly a drafting error.  However, I cannot be satisfied what the missing information is and whether or not that information is available or known to the wife.  In any event, having regard to the circumstances surrounding the assignment or otherwise of the tax debts described by the wife in her material, I am not satisfied that there was any consideration in respect to that assignment or otherwise and thus ought not be held in the same category as the loan agreements.  I am not otherwise satisfied that the tax bills should be considered debts owing by the husband to the wife.

120.The husband says the loan is effectively discharged.  That is, he says it has a value of $0.  He says he has paid back the loan.  However as I have already found, that is not the case.

121.The wife says the loan is $1,984,791 (see her Financial Statement filed on 30 July 2018).  Precisely, she categorises it as an investment, and a second investment of $405,980.  She details the ownership of the latter as “Ms Tobias incl interest”.  I am not sure what that means. 

122.As part of the Part X proposal the wife was “admitted to vote for” $1,951,636.19.  She claimed for a greater amount than that but conceded to a lesser amount for the purpose of voting on the Part X proposal.  The amount that she claimed was $2,361,219.20.  I take into account that the loan was at least $1,951,636.19 at the time of the proposal because it is the amount the husband’s trustees accepted.  On the husband’s own evidence the trustees conducted investigations to determine the husband’s creditors and the amounts owing thereto.  It is much more likely than not that the debt owing to the wife by the husband was greater than that for which she was admitted.  The report to creditors (Exhibit 6) discusses the wife’s claim.  Relevantly it provides:

Of particular note is the claim lodged by Ms Tobias, the Bankrupt’s ex-wife, in the amount of $2,361,219.20.  The Debtor has advised he is not indebted to Ms Tobias and disputes the basis of her claim.  Ms Tobias has lodged a claim in the Administration and advised she maintains the debt is owed by the Debtor.

Given the dispute, we have sought documentation and information from both parties to allow us to consider and adjudicate on the claim.  We will assess the claim of Ms Tobias and determine what amount it ought to be admitted for, if any.

123.The amount for which the wife was admitted to vote was $1,951,636.19.  One would think that the amount the wife was admitted to vote for in the Part X proposal would include interest.  Unfortunately there is no evidence to support the proposition.

124.The amount for which the wife was admitted to vote is very close to that which the wife claims in her Financial Statement: $1,984,791.  The discrepancy has not been explained.  It might be the interest that has compounded and accrued since the husband’s previous trustees concluded their report.  However, her evidence is that the $1,984,791 is exclusive of interest.  In my view the evidence is insufficient to support a finding for the value of the loan.  It is probably around $1,951,636.19, however if that does not include interest, the true value of the loan would be far greater.  

125.The wife argues that the court should notionally add-back money that the husband has spent on legal fees. The husband says that his legal fees were paid with income he earned post-separation. In cross-examination he affirmed his position (see T2 P32 L6-8). If the fees were paid out of his income derived post-separation, then it ought not be added back (NHC & RCH [2004] FamCA 633 at [58]).

126.In light of the fact that there was likely no existing property from which the husband could have funded his legal fees, I accept that the money he has spent on legal fees was from his post-separation income.  It is not appropriate to take into account those funds as an asset in his hands.

127.The wife’s case is that the husband is hiding assets.  It was submitted on behalf of the wife that the court should take the financial position of the parties as at 2009 as a “minimum baseline”.  That minimum position is some $5,600,000.  The wife concedes that $2,700,000 was lost by the husband in the Q Pty Ltd investment.  However, she says, the other $2,900,000 is unaccounted for.

128.She says that because the parties’ financial position was as it was in 2009, and because the husband has been earning the income that he has earned since then, he must have a far greater amount of assets than that for which he contends.  The grounds for her argument, it seems, is that the husband has failed to prove where that $2,900,000 has gone and thus it must exist.  As noted she also raises the significant income the husband has derived over the past decade. 

129.The husband’s case is that he has disclosed that which he has been asked and about which he is capable.  He says there is nothing left and he cannot disclose that which does not exist.  His investment in the Q Pty Ltd enterprise consumed his property.  He argues that documents produced pursuant to about 30 subpoenas issued to various persons did not support the wife’s assertions.

130.There are some letters in evidence from the wife’s solicitors to the husband’s solicitors requesting particular documents.  There are some letters in evidence from the husband’s solicitors to the wife’s solicitors providing relevant documents and information based on instructions.  

131.In cross-examination the husband accepted that he could have obtained the documents sought by the wife, or at least directed her to the accountants or others that would be able to provide the requested documents.  He accepted that he could have obtained the documents necessary to prove how he spent or lost the parties’ money and where he spent or lost it.  He accepted that he has not done that.

132.I accept that the husband was not a credible witness.  He was not forthcoming with his answers and was, at times, evasive.  I accept that his disclosure was inadequate and that his memory issues as asserted about his financial affairs were difficult to accept for someone who is drawing an income from advising a number of public companies on business matters. 

133.However, the wife was not an impressive witness either, albeit to a lesser degree than the husband.  At times she was evasive by attempting to answer questions that she wished had been asked, instead of answering the questions that she was asked.  Some examples appear at pages 48, 49, 53 and 54 of the transcript of 13 August 2018.  There are many more.

134.In my view, it cannot be said that because the husband did not produce every document and every skerrick of evidence to prove how he whittled away $2,900,000 or so, he should be found to still be in possession of about half of it.  The husband was on the boards of, or advised, a number of different companies to derive his income.  He sought a separate business venture.  The Q Pty Ltd enterprise plainly demanded significant investment.  He purchased a company and invested a tremendous amount of money into that company over a number of years.  It failed.  The company was liquidated and he remained with no money and debt.  The husband has since brought a Part X proposal to try to settle his excessive debts.  The evidence does not support a finding that, despite the husband’s failure to adequately disclose and his evidence and his credibility generally, he is in possession of between $2,000,000 and $3,000,000 of assets. 

135.Counsel for the wife submitted that due to the husband’s deliberate non-disclosure and his credibility, the court should not be unduly cautious about findings in favour of the wife.  She relies on cases such as Black & Kellner (1992) FLC 92-287 and Weir & Weir (1993) FLC 92-338.[10]

[10] See also written submissions filed 18 February 2019 at [26(t)]

136.The problem with that argument in this case is that the wife has failed to adduce any evidence about what property the husband currently has.  The process she has undertaken is to start from the parties’ financial position as at 2009 and have the husband prove where every dollar has gone since. 

137.The wife, or her solicitors, caused to be issued in surplus of 30 subpoenas in this case in order to uncover that which the husband was allegedly unwilling to divulge.  That exercise did not suggest hidden assets.  For example, the wife provided no explanation for how the husband would have certain documentation (for example, superannuation documentation) which the relevant subpoenaed entities were unable to produce.

138.Whilst not in and of itself determinative of the matter, this is not the case where the husband comes to court living a lifestyle that suggests the trappings of and/or accumulation of wealth.  He self-acted at trial after being unable to continue with his lawyers.  He owes a great deal of money.  He was involved in a Part X arrangement.  These are inconvenient facts the wife has chosen to largely ignore.  

139.The power under s.79 of the Family Law Act 1975 (Cth) is to adjust the interests of the parties in their property. I am unable to make a finding in favour of the wife because she has not identified the property that she submits ought be adjusted. She has simply contended that the starting point ought to be from 2009.

140.As observed in R v Watson; Ex Parte Armstrong (1976) 136 CLR 248 at [257] (per Barwick CJ, Gibbs, Stephen and Mason JJ) with respect to proceedings for maintenance and property settlement and cited with approval in Stanford at [38]

“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as ‘palm tree justice’. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down.”

141.By reference to the principles which the Act lays down as authoritatively considered, the wife’s case fails because she cannot demonstrate by reference to the existing legal and equitable interests of the parties in property that the court can be satisfied that it is just and equitable to make a property adjustment order. 

142.There are many items of property in the balance sheets above (particularly that contended for by the wife) which I am able to find exist.  They include money in bank accounts, cars, shares, home contents and superannuation.  They are each of very modest value. 

143.I have been unable to make a finding about the precise value of the loan agreement.

144.The value of the identifiable assets however are dwarfed by the overwhelming liabilities about which I am satisfied exist having regard to, and relying on the amounts in, the report to creditors produced by the husband’s former trustees.

145.The “pool” is a negative one.  I am not satisfied that based on the evidence before me that I can identify all of the property in which the parties have existing legal or equitable interests.

Contributions at the commencement of the marriage

146.Neither party had assets of any significant value at the commencement of cohabitation.  The wife deposes to having $10,000 cash and no debt.  She attributes the husband’s initial financial contribution as being “superannuation, money, $150,000k of debt and an incomplete house”.  She says more about the incomplete house in her affidavit, but it is not relevant to these proceedings.  The husband does not give evidence about the parties’ respective positions at the commencement of their relationship.  There is no adequate evidence upon which I can make a positive finding as to the husband’s initial contributions.

Section 79(4)(a) Financial contributions made directly or indirectly

147.During the marriage both parties derived income from employment. It is undisputed however that the husband made the overwhelming majority of the financial contributions during the marriage, prior to and after separation.

148.The husband earned a high income which was paid into a joint account to be used by the parties to fund their living costs including the costs of the children.

149.The assets accumulated during the relationship were largely sourced from the husband’s earnings.

Section 79(4)(b) Contributions other than financial contributions made directly or indirectly by or on behalf of the parties

150.The wife was responsible for managing the renovations at the parties Suburb B home in Sydney funded from the husband’s income. It is not disputed that the renovation work greatly increased the value of the home resulting in a sale of $4.9M in about 2011.  There is also evidence that she organised the renovations “necessary” to sell the Perth house in 2000.  The husband accepts that she undertook these responsibilities.

Section 79(4)(c) Contributions made by the parties to the welfare of the family, including in the capacity of homemaker

151.It is unchallenged that the wife made the overwhelming majority of parenting and homemaker contributions during the marriage and initially after separation.  The husband’s work commitments were such that he was not as available as the wife to care for the children.  The husband concedes that the wife was responsible for homemaker and parenting duties.  He says “majority”, but I prefer the inference to be drawn from the evidence of the wife – up until 2016 she was responsible for just shy all of it.

152.Since early 2016 the husband has provided the homemaker and parenting contributions for the three younger children, Ms H, Mr J and Mr C who live with him and spend no or little time with their mother.  In any event, in cross-examination the wife conceded that they spend no overnight time with her because she does not have the accommodation for them.

Conclusion on contributions

153.The husband contributed significantly financially and the wife contributed significantly in a homemaker and parenting capacity.  She organised the renovations of real property and the day to day affairs of the household.  The husband has since taken over the care of the children, two of whom were under the age of 18 years at trial.  On a contributions based assessment I find that the parties contributed equally to the acquisition, conservation and improvement of their property. 

Section 79(4)(d) The effect of any proposed order upon the earning capacity of either party to the marriage

154.The orders sought by the husband do not impact on either party’s earning capacity. 

155.The orders sought by the wife leave the wife to seek enforcement of the orders there being no evidence that there are property assets or available cash funds from which the husband could meet the terms of the order. 

156.However the wife is not the husband’s only creditor and it is likely he will end up a bankrupt either as a result of his own renewed application for a Part X or on application by one of his creditors.

157.It leaves the husband vulnerable to bankruptcy proceedings not only on behalf of the wife.  He evidences no capacity to meet his liabilities which on his filed evidence exceed $5M.

158.If the husband was made bankrupt he would be unable to continue to work as a company director/board advisor which may impact on his ability to derive income to support himself and any children who remained living with him and required support. However the Court is unable to conclude it would mean the husband could not obtain employment appropriate to his skill-set or experience.

Section 79(4)(e) The matters referred to in subsection 75(2) so far as they are relevant

Age and state of health of the parties

159.The parties enjoy good health. There is an age differential of 12 years which favours the wife.

160.The husband deposes to some health issues. He adduces no medical evidence to suggest that his health issues have impacted his ability to work.

Income, property and financial resources of the parties and capacity for appropriate gainful employment

161.The husband has experience in business, his fortunes having suffered in recent times.  He has the capacity to earn an income as a company director, subject to what I have said about his potential bankruptcy.  At the time he swore his Financial Statement he earnt $5,173 per week or just under $270,000 per annum from this line of work.  His Financial Statement filed 16 July 2018 reveals a surplus of income over expenditure of $686 per week.

162.Of the income received by him all but $30,000 per annum is received from employment that involves his attendance at board meetings.

163.At trial he was working for six public companies earning about $180,000 to $210,000 net of costs such as travel, but excluding tax.

164.What surplus income he has over expenditure as disclosed in his Financial Statement has likely been spent on legal fees. In his written submissions filed on 17 May 2019 he says he currently owes his former solicitors $5,500.  In cross-examination he explained that he makes payments to his creditors (of which total about $5,000,000) and his lawyers using his surplus income.  He often requires the financial assistance of his wife for day to day living expenses so that he can pay off his creditors, or as he puts it, to “stave off bankruptcy”.

165.He has settled with one of his creditors that required him in addition to a small capital payment to pay them $750 a month for the next two years.  He has paid another creditor $20,000.  He has a judgment against him in favour of PPP Company in the sum of $100,000.  That has not been paid.

166.Whilst he hopes to have this matter finalised and to propose another Part X there is no evidence to suggest the creditors are any more likely to agree to an arrangement given that the earlier Part X proposal had been rejected.  Contrary to the evidence of the husband at [136] of his trial affidavit that all of the creditors were prepared to support his Part X proposal other than the wife, that was not the case.

167.The court does not accept that the husband’s earning capacity is solely dependent on his capacity to work as a company director/board advisor, where inherent in that is an acceptance that he has some business skill-set as has been noted.

168.The wife has previously worked as a professional.  She holds the following professional qualifications:

a)Masters;

b)Masters;

c)Undergraduate Degree.

She has obtained several awards for previous study that she has undertaken.  She is currently studying a Bachelor degree at the F University.  At the time of trial, she was due to graduate by around the end of this year. 

169.She supports herself by way of AUS Study and casual employment with a company (see T2 P82 L14). Her total income is $360 per week or $18,720 annually.

170.She has been fortunate to have the assistance of her brother in these proceedings. She has not paid money on legal fees (T1 P32 L28).

171.Her Financial Statement filed 30 July 2018 discloses a deficit in her income over expenditure of $24 a week.  She has no capacity to meet her liabilities, which on her filed material are about $170,000.

172.The court accepts however that the wife must have had access to funds from some source as her most recent affidavit was witnessed by a Legal Officer at the Australian Embassy in Country T. That source was not disclosed.

173.I have earlier referred to the liabilities of the husband.

Whether either party has the care of a child of the marriage who has not attained the age of 18 years, child support and cohabitation of either party with another person

174.The husband provides for the financial needs of the parties’ children.  Each of the parties’ children are now over the age of 18 years.  The husband disclosed the income of his children at Part E of his Financial Statement.

175.Other than commitments to support themselves and the children the parties have no responsibilities to support any other person.

176.The husband has remarried.  He does not disclose any income received by his wife or any expenses paid by her on his behalf or any evidence with respect to their financial situation.  She is not referred to in his trial affidavit other than firstly, as one of a number of funding sources to settle his outstanding debts as part of his Part X proposal, her contribution being $10,500 and secondly, that she is a director of his company PP Pty Ltd for which she receives no payment.

177.However on his more recent evidence in his affidavit filed by leave on 17 January 2019 his wife is now living permanently in South Australia and what financial support she was providing has ceased. In cross-examination he said she has moved to live in Adelaide to secure employment so that there is a stream of income in the event that he becomes a bankrupt.  Somewhat inconsistently he then said that they do not share any expenses.

Other matters

178.In cross-examination the husband said there have been several attempts by creditors to bankrupt him.  The first was EEE Company.  He said, it “..took it right up to bankruptcy, and I had to deal with them”.  There was also the ANZ Bank and DDD Bank, with which he also settled.  He said he paid them by borrowing money from his current wife and his brother, and by “not paying the ATO on time”.  He says there have been process servers looking for him, inferring there are more proceedings coming.

179.Counsel for the wife submitted that the “improper actions of the husband warrant” an adjustment under s.75(2)(o).  If “improper actions” refers to the husband’s conduct during the proceeding, I do not accept it appropriate to consider such a factor.  That is something appropriately dealt with in an application for costs to which I shall come shortly. 

180.If Counsel’s submission refers to the financial decisions and losses by the husband, I am not inclined to consider those actions “improper”.  This is because, firstly, the parties experienced times of separation (although with a level of complexity) when the husband ceased discussing or providing the wife with information about his financial affairs, including information about his income, employment or even location.  Secondly, to the extent that the husband lost the parties’ fortune, he did so in the genuine pursuit of business.  It was something in which the wife was involved.  She funded the venture by way of the loan.  She viewed it prudent to do so.  Had he been successful she would have sought to share in the rewards. 

181.In my view, there is no conduct of the husband that justifies consideration under s.75(2)(o).

Other matters raised in written submissions

182.Counsel for the wife submitted that in the event the court does not find that the husband has significant assets, then the wife should retain the benefit of the loan agreement.  It is submitted that regard ought be had to:

a)the nexus between the creation of the loan agreement and the promised property settlement which did not eventuate;

b)the purpose for the money loaned was not communicated to the wife at the time the loan was given; and

c)the husband took a risk for which the wife should not be held responsible, particularly in circumstances where “the loan agreement was allegedly to protect her” and she did not consent to or participate in the venture.

183.The husband submitted that the funds for the loan were sourced from the sale of the Suburb B property for which he received nothing.  He submits that the wife should not be the beneficiary of the loan (as an asset) and the proceeds of sale of the Suburb B property.  The argument has merit.  The proceeds of sale of the Suburb B property is in effect reconstituted by the loan (as an asset).  If the loan is not set aside, or not reduced, and no property adjustment order is otherwise made, then the wife will stand beneficiary of the parties’ only significant asset.

184.I have previously discussed the status of the loan.  It is property of the parties or either of them.  It is also a liability of equal value. 

185.In submission the husband proposes a number of ways in which he could pay the wife.  He submits:

a)He could afford to pay her $1,750 per month after tax.  He does not say until when.

b)He could pay the wife “a share of any windfall investment outcomes possible in the future to the extent that the financial liabilities have been settled or extinguished first and that 25% of the free (after costs and tax) wealth created.  The husband, in some years out may be gifted shares in an environmental project that could have considerable wealth generation.  Presently this venture has no value and the husband is yet to be granted shares.”

c)He could bequeath to the wife 33% of his estate.

186.As the husband says, his second proposal is difficult to order and difficult to forecast.  The latter is also inappropriate.

187.Annexed to his affidavit filed by leave on 17 January 2019 is an offer to the wife that he pay to her $1,750 per month.  As noted, he does not say for how long this would continue.  He adopted this offer and the alternate proposal annexed to the affidavit as the orders that he seeks.   In cross- examination he said he has a capacity to pay her $1,500 per month as soon as a Part X agreement is reached.  Notwithstanding that this proposal appears on all faces to be a proposal for an order for spouse maintenance, the husband assured me in cross-examination that he intended it to be an order for property settlement.

188.The issue with the husband’s proposal, setting aside for the moment that it carries the implied concession that an order in favour of the wife is just and equitable, is that there is very little evidence that supports the husband’s capacity to fund a $1,500 monthly payment to the wife.  On his evidence his wife has financially assisted him from time to time because he has had to assign the surplus of his income to his many, many liabilities.

189.The husband says he does not seek a spouse maintenance order. Nor does the wife. The power under s.79 is to alter the interests of the parties to the marriage in the property. The husband’s proposal deals with future income, not property for the purposes of s.79(1)(a).

Conclusion

190.I am unable to conclude that it is just and equitable to make an order altering the interests of the parties in their property in this case.  For reasons that I have given, I am not satisfied that I can identify the property of the parties such that any order that might be fashioned could not be just and equitable.

191.The wife has not established according to the requisite standard that there are assets that could fund the payment sought by her.

192.The husband is older than the wife.  He submits he has health issues which reduce his ability to work.  Based on the evidence before me I do not accept the argument.  On his own submission he has the ability to derive an income in the years to come sufficient to meet an order that he pay the wife $1,750 per month.  Much of the husband’s future income however will be used to pay his liabilities.  I accept the husband’s submission that the wife will be able to secure some gainful employment.  She says she has been unable to because of the two-decade gap in her career.  She has casual employment with a company while she is studying.  That is limited, although whether it is because of her study commitments or because of some other reason is unknown on the evidence.

193.If I do not make a property adjustment order at all, the husband will stand to retain all of his liabilities, including the loan agreement.  The evidence is that the wife is not liable for any of those liabilities.  Both parties will have little assets and the income earning capacity that they do.

194.The husband asserts that I should set aside the loan agreement because if I do not, he might become bankrupt on application by the wife and he will lose his ability to generate an income.  However, he said himself in cross-examination that any number of his creditors could bankrupt him because he does not have the capacity to pay his debts.

195.The parties did not effect a property settlement when they separated.  Against her better judgment and notwithstanding her training in finance the wife lent the husband virtually all of the money she had and did so without any legal protection, security or otherwise. It is a clear inference on the evidence she did so by reason of the benefits she viewed as likely accruing to her as a consequence, based on the parties’ earlier history.  I so find.

196.Even if she had had the benefit of a property adjustment order at the time that she advanced the husband the loan, the evidence suggests that she would likely have been in the same position in which she is now.

197.Having concluded that it is not just and equitable to make a property adjustment order no order should be made in respect of the loan agreement.

198.The husband has failed to make out a proper basis by reference to principle or authority for the making of an injunction pursuant to s.114 of the Act namely that the wife be restrained from filing any document or taking any step to cause the making of a Sequestration Order against the husband.

199.The power to grant injunctions is a discretionary power not to be exercised lightly (Sieling & Sieling (1979) FLC 90-627 at 78,264). The relevant legal principles were discussed in Waugh & Waugh [2000] FamCA 1183.

200.In my discretion I am unable to conclude that the injunction sought is necessary where I have concluded that it is not just and equitable to make a property adjustment order.

Costs

201.The wife seeks that the husband pay her costs pursuant to s.117 of the Act on an indemnity basis. It was submitted on her behalf that such an order is appropriate because of the husband’s failure to meet his disclosure obligations.

202.The husband seeks that the wife pay his costs on an indemnity basis.

203.The relevant statutory provision with respect to costs is found in s.117 of the Act. The legal principles with respect to costs was discussed in Penfold v Penfold (1980) 144 CLR 311.

204.Having regard to the matters I am required to consider under s.117(2A) of the Act there are no justifying circumstances for either order, even on the standard basis.

205.There has been no finding by the court that the husband has hidden assets.  I am not satisfied that his failure to disclose some documents, which on the wife’s case he was obliged to disclose, has resulted in the wife incurring costs such as to suggest that the usual rule that each party bear their own costs should not apply.  The wife was unable to accept that their current financial position could be as it is given their historical standard of living and assets.  For that reason she set out to uncover what she believed must be the remnants of their previous wealth. 

206.However, the husband offered an explanation – he lost it all. 

207.Given my findings about the parties’ property and liabilities, I cannot properly make an order for costs on the basis that the husband failed to disclose things which I have not found to exist.

208.The husband’s case for costs appears to be that he has spent a lot of money in the proceedings.  He submitted that “the wife’s contempt for the husband” and “her sense of retribution” has cost him to the point that he could no longer afford legal representation.  His argument for costs is misconceived.  There are no justifying circumstances for a making of a costs order against the wife. 

Orders

209.Save for the agreement with respect to their son’s passport all applications before the court should be dismissed with no orders as to costs.

I certify that the preceding two hundred and nine (209) paragraphs are a true copy of the reasons for judgment of Judge Purdon-Sully

Associate:

Date: 23 June 2020