Todd & Todd
[2014] FamCA 101
FAMILY COURT OF AUSTRALIA
| TODD & TODD | [2014] FamCA 101 |
| FAMILY LAW – PROPERTY SETTLEMENT – Final Orders – consideration of Stanford & Stanford (2012) 247 CLR 108 – just and equitable to alter the interests of the parties – parties seeking large number of “add-backs” – wife alleged husband gambled significant and substantial monies – husband failed to comply with disclosure obligations FAMILY LAW – PROPERTY SETTLEMENT – Superannuation – Final Orders – Splitting Order |
| Family Law Act 1975 (Cth) ss 4, 75(2), 79(2), 79(4), 90MT, 90 MZA, 90MU Family Law (Superannuation) Regulations 2001 (Cth) reg 13, 14F Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 7A.03, 7A.06, 1.03 |
| Bevan & Bevan [2013] FamCAFC 116 Bevan & Bevan [2014] FamCAFC 19 Bonnici & Bonnici (1992) FLC 92-272 Chorn & Hopkins [2004] FamCA 633 Coghlan & Coghlan (2005) FLC 93-222 Crampton & Crampton (2006) FLC 93-269 La Costa & La Costa [2007] FamCA 1176; (2008) Fam LR 412 Hickey & Hickey and Attorney General for the Commonwealth of Australia (2003) FLC 93-143 Livesey & Jenkins (1985) 1 All ER 106 M & M [1998] FamCA 42 Martin & Crawley [2012] FamCA 1032 Pierce & Pierce (1999) FLC 92-844 Stanford & Stanford (2012) 247 CLR 108 Tate & Tate (2000) FLC 93-047 Truman & Truman [2013] FamCA 765 Watson & Ling [2013] FamCA 57 Weir & Weir (1993) FLC 92-338 Wunderwald & Wunderwald (1992) FLC 92-315 |
| APPLICANT: | Ms Todd |
| RESPONDENT: | Mr Todd |
| FILE NUMBER: | DGC | 3252 | of | 2007 |
| DATE DELIVERED: | 27 February 2014 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 13 & 14 August 2013, 30 September 2013, 1 & 3 October 2013 and 6 November 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Wheeler |
| SOLICITOR FOR THE APPLICANT: | Barbayannis Lawyers |
| COUNSEL FOR THE RESPONDENT: | Respondent Husband In Person |
| SOLICITOR FOR THE RESPONDENT: |
Orders
That in full and final settlement of any claim that either party may have or hereafter have against the other for settlement of property:-
(1)(a)That unless specified in these orders and except for the purpose of enforcing the payment of any money due under these or any subsequent orders:-
(i)Each party be solely entitled to the exclusion of the other to all property (including choses in action and superannuation entitlements not the subject of Order (3) hereof) in the possession of such party as at this date;
(ii)Any monies standing to the credit of the parties to either party in any bank account in their name is to remain the property of that party;
(iii)Any insurance policy or policies to become the sole property of the owner named therein;
(iv)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(v)Any joint tenancy of the parties in any real or personal property is expressly severed.
(b)That each party shall be liable for their own separate debts and obligations to the exclusion and exoneration of the other party;
(c)That the husband and wife do all things necessary and sign all such documents as may be required to enable the transfer of the balance of funds remaining invested for and on behalf of the husband and the wife by Maria Barbayannis and Co in the Laiki Bank Australia, in her Trust Account or with any other banking institution to be transferred and paid to the wife free from any claim, interest or entitlement of the husband.
That the flagging order made 20 September 2012 be discharged.
That pursuant to Section 90 MT (1) (a) of the Family Law Act 1975 (Cth) whenever a splittable payment is payable in respect of the superannuation interest of Mr Todd in the AMP Superannuation Fund Membership number …15:-
(a)Ms Todd is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001 (Cth) using a base amount in the sum of $54,109 at the operative time; and
(b)The trustee make corresponding reduction in the entitlements the husband would have had in the said AMP Superannuation Fund but for these orders.
That the operative time for the purpose of these orders is four (4) working days from the date of these orders.
That the Trustee of the AMP Superannuation Fund do all such acts and things and sign all such documents as may be necessary so that the Trustee, in accordance with the obligations set out under the Family Law Act 1975 (Cth) and that the Family Law (Superannuation) Regulations 2001 (Cth) can calculate the entitlement of and make payment to the wife in accordance with Order 3 of these orders.
That upon receipt by the wife of a payment split notice when issued by the Trustee pursuant to Regulation 7A.03 of the Superannuation Industry (Supervision) Regulations 1994 (Cth), the wife may exercise her election pursuant to Regulation 7A.06 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) to request the Trustee to rollover or transfer the transferable benefits as defined by Regulation 1.03 (1) to another fund of the wife’s choosing.
That following the action taken by the Trustee of the AMP Superannuation Fund as contemplated in Regulation 14F (2) (b), the provisions of Regulation 14 of the Family Law (Superannuation) Regulations 2001 (Cth) will make any splittable payments, following the action by the Trustee, non splittable.
That until the happening of any of:-
(a)The establishment of a separate account in the name of the wife in the AMP Superannuation and Benefits Scheme; or
(b)The transfer or rolling over into another superannuation fund of the payment split created by Order 3 hereof; or
(c)The wife satisfies a condition of release and is paid the payment split which is created by Order 3 hereof; or
(d)The wife executes a waiver of rights within the meaning of Section 90 MZA of the Family Law Act 1975 (Cth) in relation to the payment split created by Order 3 hereof, the husband be and is hereby restrained by himself, his servants or agents from executing a binding death benefit, nomination in favour of the person or from doing any such act or thing which would render any part of his interest in the AMP Superannuation Fund a non splittable payment within the meaning of Regulation 13 of the Family Law (Superannuation) Regulations 2001 (Cth).
That until the operative time of these Orders is made, the husband be restrained by himself, his servants or agents from making application for withdrawal of any funds from his interest in the AMP Superannuation Fund.
That all matters be removed from the Active Pending List of Cases.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Todd & Todd has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: DGC 3252 of 2007
| Ms Todd |
Applicant
And
| Mr Todd |
Respondent
REASONS FOR JUDGMENT
introduction
By Amended Initiating Application for final orders filed in the Family Court of Australia on 27 March 2011, Ms Todd (“the wife”) seeks orders for property settlement following a period of cohabitation with Mr Todd (“the husband”) spanning about 27 years. The parties do not appear to have lived together prior to their marriage.
The short history of the matter is as follows:-
… .4.52 Date of birth of husband
… .10.53 Date of birth of wife
… .2.75 Date of marriage
… .7.82 Date of birth of D
… .7.85 Date of birth of B
… .5.87 Date of birth of C
Dec 2002 The parties separate
… .9.2010 Date of Divorce Order
As at the date of separation the children were aged 20, 17 and 15 years respectively.
The wife is unemployed and it is suggested that her health is poor. Notwithstanding some failed attempts to start up a computer related business, the trading entities have not traded and it is the uncontested position of the wife that the venture was unsuccessful and any interest that the wife may hold is of no value.
The husband has an education industry qualification and notwithstanding his involvement in the family business, he is now unemployed. Save and except for the property interests that are held by each of the parties, their employment prospects are poor and neither of them have an entitlement to any significant financial resource in the foreseeable future.
There is a substantial dispute between the parties. The husband filed an Amended Response on 10 September 2009. Thereafter, save and except a Financial Statement filed on 9 August 2013, the husband has filed no other documents and as I will set out shortly, has not participated in the proceedings save for his attendance at trial.
The wife was represented by both solicitor and counsel. Helpfully, at the commencement of the proceedings the wife’s counsel provided the following documents:-
(1)Practice Direction document (orders sought).
(2)Summary of Argument.
At the commencement of the proceedings there was some uncertainty as to how matters would proceed. It was the position of the wife that the proceedings should take place on “an undefended basis” for the following reasons:-
·Lack of compliance by the husband with Court orders, in particular the order of 8 April 2013;
·The absence of any application by the husband for an extension of time to file documents;
·The lack of any explanation for his late filing of an affidavit purportedly sworn in 2009 and filed without leave;
·The failure to comply with a request for answers to specific questions; and
·That the husband failed to provide discovery and/or disclosure contrary to the Rules of Court, various requests of the wife and orders of the Court.
It was contemplated by the wife that there were two courses open to the Court. The first would be to further adjourn the proceedings to enable the husband to comply, but also to make discovery of what the wife apprehended would amount to “a vast array of documents previously undisclosed or undiscovered that are relevant to the proceedings” with a substantial order of costs against the husband for the wife’s costs thrown away by the husband seeking to participate in the proceedings at the last possible moment. The second was that the matter proceed undefended.
Whilst it is an over simplification of her case, the significant contention of the wife is that the husband has had access to substantial funds and property from various sources (as was initially represented by the wife), to total funds in the sum of $4,378,275. The treatment of some or all of those monies retained and/or utilised by the husband was the principal focus of the case presented on behalf of the wife.
Put simply, if the monies retained by the husband were reinstated to the separate interests of the parties the husband would have received property of almost two thirds of the total property available for distribution (including the notional “add back” property) and that therefore the interests that remain to the husband namely, his interest in a property situate at F Street, Suburb E in the State of Victoria (“the F Street property”) together with his superannuation entitlement of $670,000 should be transferred to the wife by way of a splittable payment.
The wife therefore seeks to retain not only property held by her or in which she holds an interest, but also the property of the husband and his superannuation entitlement.
It is conceded by the wife that in all the circumstances it would be just and equitable pursuant to Section 79(2) to make an order in respect of the alteration of the property interests of the parties pursuant to Section 79 (4) of the Family Law Act 1975 (Cth) (“the Act”).
The husband did not present or promote a view, and save as to his Response document filed 10 September 2009 (which was not relied upon for the purposes of the proceedings), the only assistance provided by the husband was in respect of a “written submissions” document presented to the Court at the conclusion of the evidence.
PROCEDURAL HISTORY
The Court record reflects that the proceedings commenced with the wife filing an Application seeking final orders on 7 August 2007. An initial Response was filed by the husband on 14 November 2007, at the same time the husband filed a Financial Statement.
On 8 April 2010 the following orders were made by Registrar Sikiotis:-
1.That all Applications be struck out with the right of reinstatement without loss of priority upon the solicitors certifying in writing that the case is ready to proceed.
2.That any such Application to reinstate the matter after 1 October 2010 must be by way of an Application in a Case supported by an Affidavit.
Other than a Divorce Application, the next activity reflected on the Court record is a filing of an Application in a Case by the wife on 6 September 2012 seeking orders pursuant to Section 90MU (1) (a) (“a flagging order”), with a consequential order pursuant to Section 90MU (1) (b) of the Act.
Flagging orders were made by consent by Registrar Sikiotis on 20 September 2012. The wife was represented by Barbayannis Lawyers and the husband represented by Kourkoulis and Associates.
On 19 February 2013 orders were made by Cronin J preparing the matter for a first day trial listing on 8 April 2013. The following procedural orders were made:-
3. That notwithstanding Applications/Responses have already been filed:-
(a)By 4pm on 22 March 2013, the applicant file and serve on all other parties an Amended Application setting out with precision the orders to be sought at trial; and
(b)By 4pm on 5 April 2013, the respondent file and serve on all other parties an Amended Response setting out with precision the orders to be sought at trial.
4.If discovery and disclosure has not been completed, each party by 4pm on 22 March 2013 provide to the other party a list of all documents required for inspection and within seven (7) days thereafter, subject to any objection on the grounds of privilege, such document be made available for and be inspected by the other party.
On 8 April 2013 Cronin J, upon hearing from the solicitors for each of the applicant and respondent, made orders listing the matter for a final hearing before his Honour not before 13 August 2013 and made trial direction orders in respect of the filing of affidavit material setting out the evidence in chief upon which the parties intend to rely.
The matter came before me for hearing on 13 August 2013. The wife appeared and was represented by counsel. The husband appeared in person. The Court record reflects that the husband had not complied with the trial preparation orders, had not provided discovery and had not provided answers in response to a request for answers to specific questions filed by the wife on 2 May 2013.
The wife had complied with all trial directions.
The husband’s position was somewhat uncertain. I enquired of the husband why he had not filed a trial affidavit, given discovery or provided answers as requested. Notwithstanding that the husband’s solicitors appeared before Cronin J on 9 August 2013, they advised the Court that they were no longer able to represent the husband. As part of the discussions with the husband, he submitted that notwithstanding his solicitors remained on record until relatively recently, in reality they had not undertaken any substantive work for him from a period of about three or four weeks after the trial was listed in April 2013. The husband suggested that there were financial issues in dispute between he and his former solicitors and on the basis that he was then unrepresented, a question arose as to how the proceedings would be conducted. Counsel for the wife submitted that the matter should proceed on an “undefended” basis. The husband was uncertain as to the ramifications of that outcome and accordingly, I explained to him that for the matter to proceed undefended it would effectively mean that he would not partake in the proceedings and that the only evidence that would be considered would be that of the wife. I advised the husband and the wife’s counsel that my preferred approach, if I did not grant an application for the adjournment of the proceedings, was to allow the husband limited right of appearance in that he would be permitted to make opening remarks, cross examine the wife and her witnesses and I would receive submissions from him at the conclusion of the proceedings. He would not be able to present evidence either orally or by affidavit.
The matter was stood down to enable the husband to consider his position. The husband understood that if the matter was adjourned there was likely to be an application for costs of the wife thrown away and the husband would be required to file affidavit material containing his evidence in chief, make discovery and provide answers to the questions asked by the wife.
On the matter being called back on, the husband acknowledged that he understood the various options:-
·An adjournment of the proceedings
·The matter proceeding by way of an undefended hearing
·The matter proceeding with the husband having a limited right of involvement.
Ultimately, the husband withdrew any application for an adjournment and was content for the matter to proceed on the basis that he have an opportunity to make remarks by way of final submissions and to cross examine the wife and her witnesses but not present his own evidence.
ORDERS SOUGHT
By Amended Application for final orders filed 27 May 2013 (the document bears an incorrect date stamp), the wife seeks orders that can be summarised as follows:-
1.That by way of a superannuation splitting order, she seeks an amount to be allocated to her from the interest held by the husband in the AMP Superannuation Fund as would be represented by 100 per cent of the current balance.
2.That the wife receive the entirety of the balance of funds remaining invested for and on behalf of the parties in the Laiki Bank.
3.That the husband transfer his interest in the property situate at F Street, Suburb E (“the Suburb E property”) with the intent that the wife refinance the mortgage but if unable to do so, then the Suburb E property is to be sold and the net proceeds to be paid to the wife.
4.That thereafter, each party retain such other realty and personalty as shall be in their respective possession and control free from claim by the other.
By Amended Response filed 10 September 2013, the husband sought orders which with some significant uncertainty can be summarised as follows:-
1.That each party retain their separate interest in real property free from claim of the other.
2.That an unspecified amount be treated as an “add back” representing monies retained by the parties since the date of separation and that that sum together with their interest in superannuation or other investments and monies held in the Laiki Bank be divided equally.
3.That various taxation liabilities and outstanding legal costs in respect of an Australian Taxation Office prosecution be paid from the monies held on account of the parties before any division.
4.That any money received from proceedings for professional negligence against G Law Firm be distributed equally with the parties contributing equally towards the costs of the proceedings.
DOCUMENTS RELIED UPON
WIFE
Amended Application filed 27 May 2013
Trial Affidavit of wife filed 28 May 2013
Financial Statement of wife filed 28 May 2013
Affidavit of Dr H filed 21 August 2009
Affidavit of Mr J filed 8 May 2009
Request for answers to specific questions filed by wife 2 May 2013
HUSBAND
As noted, the husband filed an Amended Response on 9 August 2013 and a Financial Statement also filed on the same date.
BACKGROUND
The parties met in Suburb K in February 1975. There are three children of the marriage namely D born in July 1982, B born in July 1985 and C born in May 1987. The parties separated in December 2002. At that time the children were aged 20, 17 and 15 respectively. The children remained living with the wife and it appears that they had little contact with the husband.
Whilst there is some vague suggestion by the husband that the wife sought to poison and interfere with the relationship between the children and their father, I accept that post separation the husband had made little effort to engage with the children.
Importantly, the wife was entirely responsible for the care of the children post separation without direct financial contribution or assistance from the husband, although it is conceded by the wife that she was in possession of substantial matrimonial funds which were used by her for day to day expenses and the general exigencies of life.
The wife is 60 years of age and the husband 61 years of age. In 1986 the parties established a distribution business known as “Business W”. The parties continued to operate the business throughout the marriage. The business structure was relatively complex and involved an inter-relationship of various corporate and trust entities. Before its demise the business was highly successful for a number of years and provided a generous and substantial lifestyle. The parties bought and sold various residential premises. Ultimately the business was placed into voluntary administration and then liquidation.
It is clear that the parties still harbour considerable resentment towards the other in attributing blame for the business failure. The declining financial circumstances of the parties was further exacerbated by subsequent litigation directed against the parties former solicitors alleging professional negligence.
A significant issue at trial was the extent to which each of the parties had access to matrimonial funds. Whilst there is some uncertainty, the husband contends the following amounts were received by the wife:-
·Removed from Company L 400,000
·Company L monies received from M Firm 200,000
·Bank of Cyprus 229,000
·CBA Company L 291,421
·Balance from liquidators account 1,000,000
·Other Monies 80,000
·Super Funds removed 1,395,000
·Withdrawal from Bank of Sydney 5,308,634
TOTAL $8,904,055
Not surprisingly, the wife denies having had access to the above total sum. Whilst it is conceded by the wife that she had substantial funds upon which she drew for her general living expenses, that sum would fall a long way short of the amount as alleged by the husband.
The wife alleges that the husband had the benefit of the following amounts which should be brought back to account:-
·Partial property settlement 150,000
·Term deposit of husband 51,536
·Monies released to husband in 2005 250,000
·Monies withdrawn by husband from AMP Superannuation 41,500
·Surrender value of Finium Insurance 9,000
·Sale of shares by husband (some held by the self-managed
Superannuation Fund) 913,608
·Money released to husband to purchase and renovate
in N Street, Suburb O 340,000
·Shares in the husband’s name sold between 12 November
2002 to 11 April 20013 144,336
·Monies spent by husband on gambling 695,042 – 844,204
In January 2005 the wife purchased a property at P Street, Suburb Q (“the Suburb Q property”) in the name of a company of which the wife is the sole director and shareholder namely, “Company R”, in the sum of $795,000 and following the purchase that property underwent significant renovations in the sum of $300,000. The property has now been valued at $1,260,000.
In 2006 the former matrimonial home was sold and the net proceeds of sale being $1,460,000 were deposited in the Laiki Bank and invested on behalf of the parties.
The husband then purchased the Suburb E property which currently has a value of $825,000 but with an underlying mortgage of $720,000.
In 2011 the wife received $300,000 by way of an inheritance. The wife has spent $180,000 post separation on the now adult children and in respect of payments on the Suburb Q property. The balance of $120,000 (now $90,000) remains invested in the Bank of Sydney for and on behalf of the wife.
The wife alleges that her health is not good. She has skeletal difficulties which she attributes to physical abuse and domestic violence endured by her from the husband and also, she alleges that she has sexually transmitted diseases contracted from the husband arising out of his extra-marital relationships. She asserts that she has both the wart virus and hepatitis B virus which will remain with her for the rest of her life.
PROPERTY INTERESTS OF EACH OF THE PARTIES
At the commencement of the trial the wife set out the current assets as follows:-
WIFE
Net value of P Street, Suburb Q
456,000
Shares
32,000
Car
13,000
Inheritance
105,000
One half of joint funds held
185,000
TOTAL
791,000
S Superannuation Fund
683,000
HUSBAND
Value of F Street, Suburb E
105,000
Car
15,000
Grange wine collection
140,000
One half of joint funds held on behalf of parties
185,000
TOTAL
445,000
Term Deposit Account Number …03
51,536
AMP Superannuation
670,000
There appears to be general agreement as to the value of the known assets of each of the parties save and except that whilst the wife brings to account the Grange wine collection, in circumstances where there was no formal valuation evidence presented save as to the wife’s estimate and assertion, I also note that no item of property representing furniture and effects in and around the former matrimonial home as at the date of separation and remaining with the wife, have been brought to account. There was no evidence presented to the Court as the value of furniture and effects in possession of the wife (but also in the possession of the husband), but notwithstanding the concession that the majority of the household effects remained in the former matrimonial home at separation, I am reluctant to attribute a value to these items simply on the assertion of each of the parties. Whilst I am entitled to adopt a robust approach, nonetheless without any assistance being provided I am reluctant to embark upon an exercise that would be little more than guess work on my part.
Accordingly, when I come to consider the assets of the parties I will not include an amount to be contributed to the Grange wine collection (if it currently exists), nor any amount in respect of furniture and effects of the parties.
The further resolution of the interests of the property held by each of the parties will require consideration to be given to the wife’s remaining inheritance monies in the sum of $90,000 and the argument of each of the parties as to the manner in which the alleged “add-backs” are to be treated.
DISCOVERY AND DISCLOSURE
At the commencement of the proceedings the wife’s counsel was critical of the husband for what amounts to his refusal to provide discovery, not only in terms of his general obligation but also in circumstances where Court orders required discovery to be made, and his refusal to answer a request for answers to specific questions filed 2 May 2013 which were finally provided on 12 August 2013 (Exhibit 3).
A consideration of that document would suggest that the questions asked were both targeted and properly relevant. The questions are directed towards the husband’s current financial circumstances in terms of any employment and income, his banking details and the manner in which his mortgage is being paid and from what source, credit card statements, information as to the assertion of the husband that he has a current taxation liability and documents that generally go to various financial transactions of the husband in an attempt to trace monies received by the husband and the accounts into which those sums have been placed. The refusal by the husband to answer those questions in a timely fashion is a significant matter.
Counsel for the wife referred me to the often quoted decision in Weir & Weir (1993) FLC 92-338 where the Full Court said at page 79,593:-
Once it has been established that there has been a deliberate non-disclosure,…the Court should not be unduly cautious about making findings in favour of the innocent party…the Courts jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets.
In Tate & Tate (2000) FLC 93-047 the Full Court said at paragraph 51:-
The law in Australia on this point is the same as in England. In Oriolo & Oriolo (1985) FLC 91-653 (a decision of Emery, Fogarty and Murray JJ), the Full Court held at 80,256:-
“We consider that there is a clear obligation on a party to proceedings in this Court to make a full and frank disclosure of all relevant financial circumstances”. As was said by Lord Brandon before the House of Lords in Livesey v Jenkins (1985) 1 All ER 106 at page 114:-
“I stated earlier that, unless a Court is provided with correct, complete and up to date information on the matter to which, under Section 25 (1), it is required to have regard, it cannot lawfully or property exercise its discretion in the manner ordained by that sub-section. It follows necessarily from this that each party concerned in claims for financial division and property adjustment (or other forms of ancillary relief not material in the present case) owes a duty to the Court to make full and frank disclosure of all material facts to the other party and to the Court. This principle of full and frank disclosure in proceedings of this kind has long been recognised and enforced as a matter of practice. The legal basis of that principle, and the jurisdiction for it are to be found in the statutory provisions to which I have referred.”
Accordingly, I consider that I am entitled to draw an adverse inference against the husband if there is some evidence or material upon which an inference can be based.
There is no doubt that the husband has been deliberate in his disregard for the proceedings. The husband’s own admission highlights that from a date shortly after the matter was listed for trial by Cronin J, the husband understood his solicitors would not be undertaking the appropriate trial preparation including discovery and answering the requests for answers to specific questions. Notwithstanding the husband’s clear knowledge of same, he chose to disregard his obligations in circumstances where the information being sought by the wife was highly relevant to the proceedings. Indeed, the lack of documents has to a very large degree made the proceedings significantly more complex than was necessarily the case.
LEGAL PRINCIPLES TO BE APPLIED
Section 79 of the Act provides:-
(1)In property settlement proceedings, the Court may make such orders 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; or
(b)…
(c)An order for a settlement of property in substitution for any interests in the properties; and
(d)An order requiring:-
(i)Either or both of the parties to the marriage,…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…;
(ii)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 the order.
(4)In considering what order (if any) should be made under this Section in property settlement proceedings, the Court shall take into account:-
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property that the parties of the marriage or either of them, or otherwise in relation to any of the last mentioned property, whether or not that last mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last mentioned property, whether or not the last mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party of the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in sub-section 75 (2) so far as they are relevant; and
(f)any other orders made under this Act affecting a party to the marriage or a child to the marriage; and
(g)any child support under the Child Support (Assessment) Act1989 (Cth) that a party to the marriage has provided, is to be provide or might be liable to provide in the future for a child of the marriage.
“Property” is defined in Section 4 of the Act as meaning property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.
Prior to the consideration of Section 79 (2) of the Act by the High Court in Stanford v Stanford (2012) 247 CLR 108, “the preferred approach” is best encapsulated in the approach adopted and endorsed by the Full Court in Hickey & Hickeyand Attorney General for the Commonwealth of Australia (2003) FLC 93-143 where the Court supported what has been commonly referred to as “a four step approach”:-
39.The Case Law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of Section 79. That approached involved inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties as at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of Section 79 (4) (a), (b) and (c) and determine the contribution based entitlement of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant factors referred to in Sections 79 (4) (d), (e), (f) and (g) (the other factors) including, because of Section 79 (4) (e), the matters referred to in Section 75 (2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established as step 2. Fourthly, the Court should consider the effect of those findings and determination and resolve what orders is just and equitable in all of the circumstances of the case; Lee Steere & Lee Steere (1985) FLC 91-626; Ferraro & Ferraro (1993) FLC 92-335; Davut & Raif (1994) FLC 92-503…
It is notable that in Hickey (supra) there was not a close examination of Section 79 (2) in terms of whether it was just and equitable to make any order. The position in respect of the proceedings before me is different. The wife applies for orders under Section 79 for adjustment of property under the Act. It is the wife’s contention that it would be just and equitable that the wife should receive all of the remaining assets. That would require at least a transfer of the husband’s interest in his property and also a transfer of 100 per cent of the husband’s splittable interest in his superannuation entitlement. In the written submissions document prepared by the wife’s counsel, her contention is:-
·Firstly, it is both just and equitable to alter the existing legal interests the parties presently have in property including superannuation interests; the parties having separated; and their “existing legal interests” being a shadow of what was required by each of them or them jointly during the marriage and post the marriage using funds acquired during the marriage.
·The existing legal interests as they stand do not provide a just and equitable distribution of property between them having regard to their respective contributions to property that is now theirs or in the past was theirs jointly or legally held by either of them in accordance with Section 79 (2) and Section 79 (4) of the Family Law Act 1975.
·Secondly, but for the disposal or removal of funds and other property by the husband the wife would have and could have asserted such funds and other property were part of the existing legal interests of the parties at trial. Due to her significant contributions to those funds and other property it would be unjust and inequitable not to make an order in relation to those interests by adjusting against the current interest, now, in the main not available or at least unable to be identified by the wife save for the sum of $51,536 in account number …03 in the name of “[AB]”. The husband is sole signatory to this account.
The husband does not approach the matter with clarity. There are no submissions directed to the proper consideration of Section 79 (2) or the implications for this case arising out of the considerations discussed in Stanford (supra) and Bevan & Bevan [2013] FamCAFC 116. Despite the status of the Further Amended Response of the husband filed 9 August 2013, in order to give effect to the orders sought by the husband in that document I am being asked by the husband to make orders pursuant to Section 79 of the Act following a determination that upon a separate consideration of Section 79 (2) of the Act it would be just and equitable to do so. Accordingly, it could be said that the parties are at lease at idem that Section 79 (2) of the Act is satisfied and that it would be just and equitable to embark upon an exercise that would see an adjustment of property.
In Stanford (supra) the majority held:-
35.It will be recalled that 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 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 Section 79 is sought, it is necessary to satisfy the Court that, in all the circumstances, it is just and equitable to make the order.
36.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.
Importantly, the Court found:-
Whether it is just and equitable to make the order is not to be answered by assuming that the party’s rights to all interest in marital property are or should be different from those that then exist.
It is therefore not a matter of assumption that a party to a marriage has a right to an interest in property by reference to matters arising under Section 79 (4). A party cannot pull themselves up by their own boot straps by asserting a contribution under Section 79 (4) and therefore using that position to satisfy the obligation created by Section 79 (2).
It was further held by the High Court that:-
To conclude that making an order is just and equitable only because of and by reference to various matters in Section 79 (4), without a separate consideration of Section 79 (2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
Whilst clearly the Court has a significant obligation to consider the justice and equity of making any order that adjusts the property rights of parties, I do not consider that Stanford goes so far as to suggest there can be no regard to the matters that might fall for consideration under Section 79 (4). It is the very nature of the suite of contributions made by parties to a marriage which in and of themselves have the ability to create equitable interests in the property of each of them.
The High Court in Stanford sought to define its likely application to cases in the following manner:-
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as a result of the choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and the wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired, is also brought to an end. Hence it will be just and equitable that the Court make a property settlement order. What order, if any, should be determined by applying Section 79 (4).
In Bevan (supra) the majority of the Full Court said (in relation to the previously quoted paragraph in Stanford):-
70.In our experience the circumstances described in the paragraph above encapsulates the vast majority of cases. Hence the reminder in Stanford of the pivotal role of Section 79 (2) is unlikely to have any impact in most cases, although it will serve as a reminder to trial judges that the precondition to making any order is a finding that it is just and equitable to do so.
In paragraph 73 the Full Court in Bevan stated that the decision of Stanford can be reduced to “three fundamental propositions”:-
1. A Court needs to consider the existing property interests of the parties and to identify those interests, (by reference to common law and equity);
2.The direction must be exercised in accordance with legal principles and not in respect of any assumption that the parties interests should be different from those determined by common law equity; and
3.Section 79 (2) cannot be conflated by reference only to matters in Section 79 (4).
As to the inter-relationship of Section 79 (4) and Section 79 (2) the consideration by the Full Court as to the expression “just and equitable” is informative:-
84.Just as the expression “just and equitable” does not admit of exhaustive definition, it is not possible to catalogue the “range of competing considerations” that may be taken into account in determining whether it is just and equitable to make an order altering property interests. However, in our view, it would be a fundamental misunderstanding to read Stanford as suggesting that the matters referred to in Section 79 (4) should be ignored in coming to that decision. Indeed, such a reading would ignore the plain words of Section 79 (4) which makes clear that in considering “what order if any” to make, the Court must take into account the mattes referred to in that sub-section (emphasis added).
The Full Court at paragraph 88 gave favourable consideration to the analysis of Martin Bartfeld QC in his paper entitled “Stanford & Stanford; lots of questions; very few answers” by reference to the following extract:-
49.There is scope for taking into account the factors under Section 79 (4) in the exercise of the Section 79 (2) discretion. This can be accomplished, it is submitted by treating the two contribution factors and the factors under Section 75 (2) as having two simultaneous characteristics:-
(a)a discretionary characteristic, which is used to identify those matters which are relevant to enliven the exercise of the discretion. Plus the fact that a party has made substantial contributions, over a long period of time, which are not reflected in their asset holdings but are reflected in the other parties assets may found a basis for finding that it is just and equitable for an order to be made; and
(b)an evaluative characteristic, which is used to measure the weight or to quantify the effect of a particular contribution.
50.The problem of conflation can easily be overcome by clearly identifying the use to which a factor is being put.
Accordingly, it is a case where the parties consent to Section 79 (2) threshold “being satisfied” would not be enough. I must give proper and separate regard to the legal and equitable interests of each of the parties.
This raises of course the continued applicability of the “four step approach” as determined by the Full Court in Hickey (supra).
In Martin & Crawley [2012] FamCA 1032 Coleman J held at paragraph 93:-
As is not in doubt, the Court may not make an order altering interests in property unless it is satisfied that “in all the circumstances it is just and equitable to make the order” (Section 79 (2)).
Since the decision of Hickey the justice and equity of the proposed orders for alteration of property interests has been considered after and largely in light of the Court’s conclusion with respect of Section 79 (4) and Section 75 (2) of the Act. The recent decision of the High Court in Stanford raises doubts as to whether the four step approach remains permissible, and if it does, how the requirement of Section 79 (2) are to be addressed.
In Watson v Ling [2013] FamCA 57 Murphy J was of the opinion that the four step approach may well provide a level of rigor that could lead to error, therefore the process needed further consideration:-
As a result of those matters, the Court’s approach to Section 79 – Section 90SM might be less compartmentalised than what a strict or unthinking adherence to four steps might otherwise reveal. The task is essentially holistic; it is just and equitable in the particular circumstances of the particular relationship of marriage under consideration to make an order and, if so, its terms must similarly meet that criteria. Of course, holistic though the approach is, it must be referenced to what the Act requires and care must be taken to ensure that the Court’s reasons make that clear.
A useful consideration in summary of the matter can be found in the paper prepared by Professor Patrick Parkinson namely – “Family Property Law and the Three Fundamental Propositions in Stanford v Stanford (2012) 3 Fam L Rev 80”:-
It is submitted that the better course would now be to abandon the idea that there is a mandatory fourth step to determine whether the provisional division of property reached by reference to the statutory consideration is just and equitable. The statute does not require that a provisional decision reached after consideration of the statutory factors should be tested against some broader measure of justice and equity. It is sufficient that the orders are appropriate (Section 79 (1)).
A return to the language of the statues should therefore require:-
(a)That the Court is satisfied of the ultimate question – that it is necessary to alter the legal and equitable interests – before making an order under Section 79;
(b)That in completing its work the Court gives attention to what order is appropriate in the light of its findings on the Section 79 (4) and Section 75 (2) factors, and how the proposed division is to be implemented, in particular by reference to Section 79 (4) (d). This subsection required the Court to consider the effect of the proposed order on the earning capacity of a party. That section is otherwise at risk of being ignored if it is not considered as one of the steps in the reasoning process.
LEGAL AND EQUITABLE INTERESTS OF THE PARTIES
The duration of cohabitation is 27 years. During the course of the marriage the parties held various employment which generated income, but significantly it was their involvement in the business known as “Business W”. At paragraph 15 of the wife’s trial affidavit, she says:-
That during the course of our marriage which was 27 years I was the major contributor both financially and non-financially. First of all, whilst working full time [in the education industry], I was the primary homemaker and parent for our three children. Secondly, in respect of our business “[Business W]”, I worked very hard with the husband to establish the business in 1986. The funds to purchase “[Business W]” were derived from a bank loan and a compensation payment which are received as a result of a neck injury whereby I broke six vertebra in my neck. Initially, the sum of $35,000 which I received as a result of my neck injury was invested in the purchase of a property in [T] Street, [Suburb A]. That property was sold in 1982 and the proceeds derived therefrom were applied towards payment out of the mortgage of our first matrimonial home at [U Street, Suburb V]. In essence the funds which I received from my neck injury, were the springboard which enabled us to purchase the “[Business W]” business….
The business was for many years highly successful. The wife acknowledges that the business turned over $150,000,000 per annum, had facilities in various states, employed 150 staff and was considered a major Australian Company.
I find that the parties worked hard in the business venture at least initially.
It is the wife’s position that the demise of the business can be traced back to the husband losing interest and dissipating significant funds during the final 10 years of the marriage. The wife alleges that the dissipation of funds is as a result of the husband being a “professional gambler”. The husband is also alleged to have formed numerous relationships and spent significant funds of money in furthering those extra-marital interests.
Nonetheless, the financial affairs of the parties were intermingled over what is clearly a long marriage. Even on the wife’s case there still exists a substantial pool of property held by each of the husband and the wife. The issue is not the current assets but rather the allegation by each of the parties that significant sums of money have been spent by each of them in the period leading up to separation and between the date of separation and the date of trial. In short, the pool of property would be significantly enhanced if those monies had not been spent as each of the parties alleged against the other.
At the date of separation the wife alleges that the former matrimonial home was in need of substantial renovation. Following separation the wife contends that she renovated that property to a total cost of $250,000. That property was ultimately sold for $1,460,000. Whilst the wife asserts that it was as a result of her renovations conducted post-separation which enhanced the sale, there was no evidence to support that contention. What is important is that from the net proceeds of sale of the former matrimonial home situate at I Street, Suburb Y (“the former matrimonial home”) were invested on behalf of the parties by deposit in the Laiki Bank.
The wife acknowledges that matrimonial funds were used to purchase her current property being P Street, Suburb Q (“the Suburb Q property”). That property was then the subject of substantial renovation to a sum of about $300,000.
Similarly, the husband purchased the Suburb E property with matrimonial funds.
It appears that the money held in the Laiki Bank on behalf of the parties following the sale of the former matrimonial home were ultimately used to reinstate monies withdrawn from the self-managed superannuation fund for the parties by the husband. The sum of $1,395,000 was required to be reinstated and the husband nominated AMP for his superannuation and the wife S Super Fund.
It is demonstrable that the property and assets held by each of the parties is as a result of matrimonial property initially held by the parties. Their interests in that property were both joint and several.
The term “just and equitable” in Section 79 (2) is not an exhaustive definition. I consider that it would be unconscionable to suggest that each of the parties did not hold a significant and substantial equitable interest in the property of the other. The parties consider that to be the case by the manner in which they present in their orders sought. The wife considers that the husband should transfer his entire interest in his property, monies held by him and his superannuation entitlement to the wife, whereas the husband does not contend quite such a dramatic order but nonetheless, seeks substantial provision. The husband also seeks that monies currently invested on behalf of the parties should be divided equally at least in terms of a conceptual outcome. The orders being sought by the husband and the wife are distorted by the manner in which they consider substantial monies should be “added back” into the property of each of them to the other’s detriment.
I make the finding that against the backdrop of a long marriage and in circumstances where the parties have made a mutual commitment to each other as providing the marital canvas upon which the financial picture is represented by the property interests of each of them is painted.
Paragraph 88 of the judgment of the Full Court in Bevan lends support for the above contention.
I am satisfied that by separate regard to Section 79 (2) of the Act, it is just and equitable that I make an order that will adjust the property interests of the parties. For completeness, I come to this decision independently of what might be considered the inherent or tacit consent of the parties that there should be an adjustment of property interests.
ADD-BACKS
As already considered, Murphy J in Watson v Ling placed significant importance on the termination of the legal and equitable interests of each of the parties. The flow on effect has an implication in respect of the concept “add-backs”.
The position following Stanford is that the concept of an add-back being a notional item of property to the interests held by either of the parties, will have limited compass in the future.
In Watson v Ling Murphy J at paragraph 33-34 said:-
First, consistent with existing authority, it can be recognised pursuant to Section 75 (2) (o) (c), for example Omacini & Omacini [2005] FamCA 195, Brown & Green (1999) FLC 92-873 and Sereni [1998] FamCA 143. Secondly, it might be contended that it might be recognised within the assessment of contribution. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). It might be argued that the “non-dissipating party” can be seen to have made disproportionately greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, for the other party’s unilateral dissipation, those existing and legal equitable interests would have been greater or of a greater value.
The assessment of the circumstances under discussion is, ultimately, a matter of discretion. Equally however, authority dictates that it will be the exception rather than the rule that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party.
In Truman & Truman [2013] FamCA 765 Fowler J had to consider the treatment of legal fees incurred by each of the parties. Both the husband and the wife had already paid approximately $200,000 in legal fees and the wife owed her solicitors and accountants over $350,000 in fees. At paragraph 54 his Honour said:-
This Court does not follow the practice of adding back and dividing non- existent assets. There is no warrant for doing so in the Act. That once fashionable practice was one which assisted in pointing perhaps a way to a just solution; however, there exists plenty of opportunity for the Court to come to a just and equitable assessment as to the source and application of funds in its consideration of contributions under Section 79 (4) and matters referred to in Section 75 (2) and also in particular 75 (2) (o).
In La Costa & La Costa [2007] FamCA 1176, the Full Court considered the treatment of add-backs to the asset pool in Chorn & Hopkins [2004] FamCA 633 and cited with approval the remarks of the Full Court in M & M [1998] FamCA 42:-
2.10It is well settled that save in exceptional circumstances a trial judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under Section 79 (Wells v Wells (1997) FLC 90-285; Wardman vHudson (1978) FLC 90-466; in the marriage of Geyl 7 Fam LR 219. However, the particular justice of the case may make it appropriate to notionally add-back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. Kowaliw v Kowaliw (1981) FLC 91-092…additionally, because of the requirement for each party to bear their own costs, it is generally appropriate to add back to the pool of assets notionally any legal costs that have been spent on the litigation and to deal with the costs as a separate issue at the end of the litigation (see Farnell (1996) FLC 92-681)
Following Stanford, I consider that whilst it is still open to a Court to consider that the appropriate way forward is to add property back to the interests of each of the parties, such an outcome would be rarer and may well be restricted to those circumstances where there is a realistic possibility that the property might be retrieved. That is not the case here. The argument mounted against the husband is best summarised in the discussion contained in the written submissions of the wife as set out hereunder:-
1.At least 400K removed from Company L as set out above 400,000
2.250K capital payment Company BB 250,000
3.Super Funds removed 1,395,000
4.Funds for restaurant sold and unaccounted for 340,000
5.Share sales at least 263,608
6.Gambling funds 884,204
TOTAL$3,532,812
If the Court is not persuaded re the above and arguably there should be a robust finding against the husband; then it is submitted that the following is without question:-
1.The funds the wife can show the husband removed from
Company L144,266
2.Super Funds removed 1,395,000
3.Restaurant funds as above 340,000
4.Share sales at least 263,308
TOTAL$2,142,874
The extent of money utilised by the husband and the wife is at best uncertain and at worst not capable of determination with any precision. The extent of the evidence is to be found in paragraph 33 (a) to (m) of the wife’s Trial Affidavit and, evidence given under cross-examination.
In his written submissions the husband challenges the accuracy or the relevance of paragraphs 33 (b), (j) and (m). In relation to the last two items there is effectively no supporting evidence and the contentions of the wife are vague, uncertain and would represent an ambit claim.
The husband accepts that he received the following payments:-
Payment to husband in 2005 (para 33 (a)) 250,000
Payment to husband for café renovations (para 33 (d))disputed 180,000
Money for further café renovations (para 33 (k) 5,000
Funds to husband for flat (para 33 (e)) 30,000
TOTAL 465,000
In addition, whilst it is alleged in para 33 (g) that the husband received $400,000 from Company L account between 1 July 2001 to 10 December 2004, I consider that the only evidence in that regard is as to the nine cheques totalling $144,266 as set out in para. 33 (f).
The husband denies receiving $250,000 from the sale of the business by Company BB as alleged in para. 33 (l). There is no evidence that the husband received this sum.
The allegation in respect of para. 33 (h) namely, that the husband withdrew $100,000 in late 2002 from the Company L account, is allegedly supported by Exhibit 24 which is the Bank of Melbourne cheque plus account statements for the period 28 June 2002 to 28 September 2006. By reference to those statements there is not an entry in respect of a single withdrawal by cheque to support the sum of $100,000. There are however withdrawals of significant sums and in particular, on 11 November 2002 there was a withdrawal by cheque number …10 of $70,000 and on 20 November 2002 there was a withdrawal by cheque number …86 of $30,000. Without more, I am not able to be satisfied on balance that the husband withdrew the monies as alleged.
The wife alleges that the husband acted inappropriately with the funds and shares that comprised the self-managed superannuation account to the extent that the husband removed $1,395,000 from the said fund. This was the subject of considerable dispute and negotiation with the Australian Taxation Office and it is not controversial that significant costs, fees and charges were generated for and on behalf of the parties by way of professional fees paid to their commercial lawyer and accountants. Ultimately agreement was reached with the Australian Taxation Office that the amount that should have been in the self-managed superannuation fund should be reinstated. The conduct of the husband was the subject of proceedings on 20 September 2012 at which time a costs order was made against the husband in relation to the withdrawal of funds from the said superannuation fund.
Money from the sale of the former matrimonial home was used to reinstate the non-compliant fund and to replace it with superannuation to be held by each of the parties namely, the wife as to S Superannuation in the sum of $683,000 and the husband in relation to AMP Superannuation in the sum of $670,000. I accept the wife’s evidence in respect of the allegation that the husband removed monies from the superannuation fund. It is further alleged that the husband sold shares to the value of $263,608. This is not the subject of agreement but is referred to at paragraph 37 of the wife’s Trial Affidavit. The wife was not cross examined in relation to this allegation.
Whilst it is not sought to be treated as an “add-back” significant evidence was called on behalf of the wife in relation to the assertion that over an extended period of time (from at least several years prior to separation) the husband was a “professional gambler” and that at the high water mark may well have dissipated $884,204 in gambling.
Whilst the husband does not concede the sum as alleged by the wife he does concede to a significant aggregate sum being spent on gambling pursuits but averaged out over the years he says the amount is modest.
The issue of gambling was a significant matter for the wife. Evidence was called from Mr J who filed an Affidavit on 7 May 2009 which annexes a report dated 2 December 2008. Exhibit XH20 is a joint experts’ report of Mr J and Mr Z dated 9 September 2009.
Mr J practices as a chartered accountant and he was retained by the wife to provide an opinion as to the extent of funds expended by the husband in gambling activities and the effect that the gambling activities had on the matrimonial pool. He was provided with various reports from the Crown Casino for the period 1999 through to 2007 and this was further supplemented by further summaries from the Crown Casino tendered into evidence as Exhibit 13.
The summary of Mr J is at 9.3 of his report namely:-
I have determined that the husband dissipated the family pool by an amount of $414,134 or $619, 667 as a result of gambling activities undertaken during the period 1999 through to 2007. The lower figure brings to account the possibility that $205,543 represented funds that were taken off the table.
Mr J was cross examined by the husband and I am satisfied that there was a general concession by the witness that the exercise was one fraught with inaccuracy. It would appear that this was recognised by counsel for the wife who at the commencement of the proceedings did not seek that the sum hitherto claimed as monies expended by the husband on gambling would be brought back to account as an “add-back”. Even by reference to the summary in Exhibit 30, the amount is between $380,479 and $586,019.
There was no medical evidence that the husband should be considered as a pathological gambler. The issue as to whether gambling losses (if able to be properly quantified) should be brought back to account as an “add back” was considered by the Court in Crampton & Crampton (2006) FLC 93-269.
At paragraph 52 the Full Court said:-
The essential question was whether overall the evidence about gambling losses, including the wife’s secretiveness, demonstrated conduct which should result in her bearing the entirety or some other proportion of the losses. The trial judge accepted evidence which established:-
·The pathological nature of the wife’s gambling
·Her rational belief that she would recover her losses
·The estrangement in her relationship with the husband from as early as 1995
·That the wife suffered an illness symptoms which included “an inability to understand what one is doing” preoccupation with worry and inability to concentrate.
53.We consider that in these circumstances it was open to the trial judge to make the finding that he did, namely that the wife’s conduct was not such as would see her bear the gambling losses.
The difficulty that I have is that I am not able to establish with any certainty the extent of monies gambled by the husband. The wife describes the husband as a professional gambler. The husband admits that he did gamble and it is reasonable to draw the conclusion that he gambled frequently. Whilst the aggregate of monies likely to have been spent by the husband was significant, when spread out over a large number of years the husband’s final submission is that the amount expended by him on gambling was modest.
Clearly, I am not being asked to treat the husband’s gambling activities by way of an “add back” argument and for the reasons already given it would not be possible to do so. I am however persuaded that significant and substantial monies were spent by the husband on gambling activities not only before separation but also after separation. Even the most superficial consideration of the activities from the Crown Casino in Exhibit 13 provides the following summary of monies expended by the husband on gambling activities (but not necessarily taking into account any winnings):-
1997 $93,180
2008 $46,200
2009 $63,700
2010 $124,325
2011 $74,300
2012 $21,880
2013 $ 700
I consider it unreasonable that to a significant degree the property of the parties has been diminished by the husband’s gambling activities in circumstances where their financial position would have been counter-intuitive to the husband expending significant sums of money on those activities. It is a matter that I will bring to account.
Accordingly, whilst it may to some extent have been offset by monies retained by the wife, nonetheless I find that the husband had the benefit of significant funds post-separation and in circumstances where some of the monies allegedly spent by him are not admitted, but where they are there is no evidence as to how they were expended, I consider that it would not be appropriate to proceed by way of an “add back”. I do not consider this case to be exceptional and the evidence is uncertain and tempered by a period of at least 11 years post-separation during which it is alleged that the husband (and the wife) utilised funds available to the parties. Accordingly, the use of monies by the husband post-separation will be considered by reference to Section 75 (2) (o) of the Act.
The position in respect of the wife is even more uncertain.
As discussed, there remains substantial uncertainty as to the extent of funds available to the wife. The wife acknowledges monies received by her in paragraph 20 of her affidavit:-
·$30,000 by way of compensation in or about 2003.
·$50,000 in relation to insurance settlement for damaged jewellery.
·$200,000 from Company L for living costs.
·By Court Order a distribution of $150,000 (to each of the parties; and
·Inheritance from the estate of the wife’s grandparents in the sum of $300,000.
The wife further acknowledges that there were additional funds utilised by her. At the very least substantial renovations to the Suburb Q property were undertaken at a cost of $300,000. The wife drew down on her mortgage by a further $200,000 and whilst it is a matter of submission only by the husband, by reference to the financial statements of the wife, the husband attempts to capitalise out the aggregate of her weekly expenditure from 2003 to 2013 inclusive in the total sum of $1,852,435.
In addition, the husband asserts that the wife’s mortgage initially $4,637 per calendar month then increasing to $6,102 would add a further $620,442 to the total.
The husband attempts to summarise a range of other expenses in terms of school fees for the children, various other purchases, the purchase of the Suburb Q property and the subsequent renovations, payments to the husband and significant payments to the liquidator in order to attempt to establish the extent of monies available to the wife in the total sum of $5,991, 887.
The calculation by the husband is distorted by the inclusion of monies that ultimately found their way to the liquidator. Significantly, mortgage and other items of personal expenditure have potentially been doubled up in the calculation.
In any event, the husband undertook only limited cross-examination of the wife in respect of those matters save as to issues arising out of an account in the name of the wife with the Bank of Sydney being account number …44.
Whilst I do not find that the husband has established with any accuracy the total sum utilised by the wife, nonetheless it is likely to be substantial.
The husband cross examined the wife in respect of her term deposit with the Bank of Sydney account number …44. The genesis of this account is a term deposit account with the same bank, being account number …43. The details of that account show a deposit on 9 August 2002 of $3,005,451.54. Noting interest of $12,379.99, the balance of that account namely $3,017,831.53 was the subject of early redemption on 9 September 2002. I do not consider that it is controversial that those monies were transferred (with other funds) into term deposit account number …44. On 9 September 2002 the sum of $3,217,540.06 was deposited. Thereafter, the monies were dispersed over time with the most notable debit of $2,400,000 by way of early redemption on 13 August 2003. On that date the account contained no further funds. It is likely that a figure of about $2,000,000 was paid to the liquidator and whilst it is difficult thereafter to track and trace the movement of money, I am satisfied that all of the accounts represented by Exhibit XH25 were under the control of the wife and in circumstances where the husband could not and did not operate those accounts. It is not clear the manner in which those substantial funds were ultimately utilised by the wife but I accept her evidence that funds were used generally on her house, general living expenses and for the benefit of the children in circumstances where the husband was not providing any additional financial support.
It is certainly the case that other than money received from her mother to cover certain expenses, the wife supported herself and the children from the property of the parties remaining at separation, as did the husband. The best that can be extracted from the evidence is a finding that the extent to which each of the parties have utilised money as and from the date of separation is really a question of the magnitude of scale rather than there being a level of certainty as to the amounts utilised.
I am persuaded however that the use of those monies by the husband has been more extensive than the wife and monies utilised by her are more likely to be reflected in the domestic and household expenses, the exigencies of life and to the extent that renovations were undertaken on her property, reflected her property.
In summary, whilst I do not intend to adopt the approach of the parties seeking that there be an “add back” in respect of their various contentions, the issue will be reflected by reference to Section 75 (2) (o) of the Act.
LIABILITIES OF HUSBAND
The husband filed a Financial Statement on 9 August 2013 being a document that was signed by him on 5 April 2013. There is no explanation to account for the significant delay in filing. It is unlikely to be accurate and could not be tested.
It is not immediately apparent from the husband’s submissions as to whether he seeks to bring to account the significant liabilities totalling $1,232,516 as set out in his Financial Statement. It is noted however that of that sum at least $720,000 can be attributed to the mortgage in respect of the husband’s interest in the Suburb E property.
The balance of the liabilities involve an alleged taxation assessment of $298,934 and the miscellaneous other expenses that would appear to have been accrued of recent date and arising out of the husband’s use of credit cards, the payment of rates and outgoings, mortgage arrears and other personal expenses.
Significantly therefore, the credit card liabilities and his alleged outstanding taxation debt represent the overwhelming liabilities save and except for his mortgage.
The husband has not filed any affidavit material and I am satisfied that issues in respect of his alleged liabilities, and in particular the manner in which they have accumulated and accrued, were appropriate areas of investigation of the wife. The husband has steadfastly refused to make discovery and provide documents as requested. It would have been difficult, if not almost impossible, for the wife to have undertaken the necessary investigation and consideration in the absence of cooperation by the husband.
I do not propose to bring to account any of the liabilities as might be alleged by the husband. It is impossible to know whether they still exist and importantly, whether the husband is possessed of assets not the subject of disclosure which might be available to satisfy whatever debts and liabilities the husband may have. It is a particularly unfortunate consequence for the husband but in the absence of any evidence presented by him and against a background of his trenchant and inexplicable refusal to provide discovery and disclosure, I am not able to assess the relevance, the impact or indeed the veracity of the husband’s claims in this regard. I do not propose to bring to account any liabilities in respect of the husband.
LEGAL FEES
As at the date of the wife’s trial affidavit she had costs outstanding to Barbayannis Lawyers, of $143,000. The costs would have significantly increased since that date to take into account the balance of the proceedings including the trial. Other than a brief reference to outstanding costs of $80,000 in the husband’s Financial Statement, I have not been provided with any other information by him.
At paragraph 72 of the wife’s trial affidavit she submits that a significant component of her legal costs have arisen because of the behaviour of the husband, his misuse of the funds in the self-managed superannuation fund and the extent to which the wife’s fees were exacerbated by the husband’s non-compliance. Whilst I note the allegations by the wife in this regard, the trial did not focus on those matters and at this stage I am not able to quantify the extent to which, if any, the wife has incurred legal fees over and above that which might be categorised as the reasonable costs of litigation.
The wife has paid $5,000 towards her legal fees with the balance outstanding. I have no information with respect of the husband’s payment of legal fees, if any, but I note that there is an outstanding order against the husband made by Registrar Sikiotis of $3,100 which I will bring to account.
In summary, I do not propose to further consider at this stage the issue of the respective legal fees of each of the parties. In any event, I am not asked to do so by the wife.
SUPERANNUATION OF THE PARTIES
The wife has an entitlement as a member of S Superannuation in the sum of $683,000 (as at 27 May 2013) and the husband has an entitlement with AMP Superannuation of $670,000 (as at 5 April 2013).
There were no submissions made in respect of how the Court should treat the superannuation entitlements of each of the parties if I decline to make the orders as sought by the wife for a superannuation split to her of 100 per cent of the husband’s entitlement. No evidence was led as to the method and manner by which contributions to their separate superannuation funds have been made, save that the substantive entitlement in respect of each of the parties arises in circumstances where the self-managed superannuation fund of the parties was deemed non-compliant and following significant negotiations with the Australian Taxation Office, agreement was reached that the monies removed from the said fund rendering it non-compliant could be replaced by the creation of separate superannuation interests.
I am not asked to consider superannuation separately or to apply different considerations in respect of any finding as to contribution pursuant to Section 79 (4) (a) – (c) and then factors relevant to Section 75 (2) of the Act.
The presentation by the wife is that the superannuation entitlements of the parties should not be treated separately but rather, should be treated “as if they were assets” and simply included in a global approach to the respective interests of the parties in their separate and joint property.
Taking into account the age of the parties and noting that they have effectively satisfied a condition of release (see Wunderwald & Wunderwald (1992) FLC 92-315) and that neither party seeks a separate order in respect of superannuation, I consider it appropriate to depart from the approach promoted by the Full Court in Hickey & Hickey (2002) FLC 93-143 and Coghlan & Coghlan (2005) FLC 93-222 namely, that a consideration should be given as to whether superannuation should be dealt with separately from property as defined in Section 4 (1) of the Act.
WIFE’S INHERITANCE
The wife gave evidence that in 2011 she received $300,000 (as did her sister) from the estate of her grandparents. Those monies have been used in part by the wife and the evidence is that there remains about $90,000 less a liability that she has to her partner.
There is no circumstance where it could be said that the husband contributed in any way to the inheritance. No evidence was presented on the topic and given the parties separated almost 10 years prior to the wife receiving the inheritance I consider that it should not form part of her property for the purposes of determining the asset pool, but it is a matter that will be brought to account as a Section 75 (2) factor, see Bonnici & Bonnici (1992) FLC 92-272.
JOINT LIST OF PARTIES ASSETS AND LIABILITIES
WIFE
Net value of P Street, Suburb Q
456,000
Shares
32,000
Car
13,000
One half of joint funds held
185,000
S Superannuation
683,000
TOTAL
$1,369,000
HUSBAND
Value of F Street, Suburb E
105,000
Car
15,000
One half of joint funds held on behalf of parties
185,000
Term Deposit Account Number …03
51,536
AMP Superannuation
670,000
TOTAL
$1,026,536
COMBINED TOTAL
$2,395,536
CONTRIBUTIONS
Section 79 (4) (a) – Financial Contributions
This is a long marriage spanning 27 years. There are three children now aged 31, 27 and 25 years. There is no direct evidence and there were no submissions made as to the extent that one party or the other may have held assets and property of value at the commencement of cohabitation. It is appropriate to consider the period up to the commencement of cohabitation or marriage, the period during marriage and then the period post-separation in order to assess the weight that should be given to the financial contributions of the parties pursuant to Section 79 (4) (a).
Demonstrably, it is the period during the course of the marriage and post-separation that requires the most consideration.
The wife asserts that she was the major contributor, firstly employed in the education industry working on a full time basis and then her significant effort with the business in attempting to establish and manage “Business W” in or about 1986.
Additionally, the wife refers to a compensation payment she received of $35,000 which was used to purchase a property in Suburb A, its subsequent sale in 1982 and the reduction of the mortgage on the first matrimonial home at Suburb V. That property was then used to assist in the purchase of the “Business W” business.
I consider that the parties worked co-operatively in the development and acquisition of the “Business W” business. Whilst the wife may have complaint in the later years of the marriage, for a significant period I consider that the parties had entered into a marital partnership with a view and goal of promoting the financial interests of the family and the accumulation and acquisition of assets. This is what occurred.
The “Business W” business was particularly successful and the wife asserts that it had a turnover of $150,000,000 per annum and operated in four States of Australia employing 150 staff and having a national business profile.
It is during the last years of the marriage that the wife submits the husband made little or no contribution to the business and to the family. The complaint by the wife is that:-
the husband has had access to a vast amount of matrimonial funds dissipated during the final ten years of our marriage as a direct result of the liquidation of assets (such as trucks) and the transfer of funds derived from such liquidation.
Whilst the husband does not accept the position adopted by the wife, there was no separate evidence from him other than what he was able to elicit in his cross examination of the wife.
The reason for the demise of the “Business W” business is by no means a settled contention. The wife would seek to attribute the responsibility to the husband whereas his cross examination of the wife really focused on external and extraneous issues in terms of financial climate and macro-economic factors not able to be controlled by the parties.
I am not able to find with any certainty that the demise of the business should be attributed to the poor management by the husband or by his excessive expenditure of matrimonial and business funds available to him.
That does not mean that the poor prognosis for the business and its viability was not exacerbated by the husband’s behaviour, but I suspect that the business demise may have had a level of inevitability about it.
I do find however that the funds available to the parties were significantly diminished by the husband’s spending including his propensity to gamble.
Post separation, the position is a little more straightforward. Neither of the parties made a significant or even identifiable financial contribution to the property of each of them. Whilst it is a matter of degree (and an issue to be considered under Section 79 (4) (e)) each of the parties accessed very large sums of money for their personal expenditure and the exigencies of life. I do not ignore the competing arguments of the parties that the purpose for which those monies were spent is relevant, but reasonable or otherwise, the net effect was to deplete the pool of property available for consideration.
I do note that the wife has used in a manner that is not clearly specified inheritance monies received from her grandparents’ estate and that from time to time her mother has provided some more modest financial assistance. Other than that, neither of the parties has generated any significant income which can be seen in any way as being reflected in the property of each of them. In relation to the insurance monies received by the wife prior to 1982, I consider that the significance of the payment has diminished over time taking into account the various contributions of the parties.
I am mindful of what fell from the Full Court in Pierce & Pierce (1999) FLC 92-844:-
In our opinion it is not so much a matter of erosion of contribution but a question of what weight should be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contribution by a party with all other relevant contributions both of the husband and the wife. In considering the weight to be attached to the initial contribution, in this case the husband, regard must be had to the use made by the parties of that contribution…
There is no principle that the length of the marriage leads to a likelihood that other contributions will outweigh or weigh equally with a particular contribution. It is a matter of assessing the contributions of all relevant kinds in each case to arrive at an outcome, which is both appropriate and just and equitable. In some cases particular contributions may be outweighed or equalled by other ones. In other cases particular contributions may be so disproportionate to other contributions as to merit special recognition.
In the circumstances of this case I consider that whilst the contribution may have been of assistance in the purchase of the Suburb A property, it cannot be said that there is a direct and traceable connection between the initial $35,000 and what was ultimately (before its demise) a substantial corporate enterprise. There is no evidence to suggest that the parties could not have raised the money elsewhere and as such I do not consider that the purchase of the “Business W” business was directly referable to the compensation monies. The compensation should not however be considered a windfall simply because the wife suffered an injury to her back. I do not ignore it but I give it little weight. I am uncertain as to the long term effect of that injury. The manner in which it is dealt with by the wife is to ask the Court to give consideration to what is effectively a snap shot in time.
Section 79 (4) (b)
There is little evidence as to any real non-financial contribution either made directly or indirectly in respect of property of the parties. If anything, the complaint is not the contribution that either party has made but rather the diminution that their separate actions have caused to the matrimonial property.
Section 79 (4) (c)
As at the date of separation the children were aged 20, 17 and 15 years respectively. Two children were at school and one was at university. The wife alleges that the husband had little to do with the family and that his lack of involvement and engagement with the children post-separation (together with his lack of financial support) is indicative of his lack of engagement with the family, certainly during the last 10 years or so of the marriage.
The wife alleges that the husband’s behaviour was contrary to any suggestion that he contributed as a homemaker and that in all the circumstances it was the wife who, in addition to her other activities in terms of fulltime work and attention to the “Business W” business, ran the household, cared for the children and performed the function as a homemaker without assistance from the husband.
Whilst I am not prepared to make the finding in absolute terms that the wife seeks, I am persuaded that taking all of the relevant contribution factors into account, significant weight must be given to the contributions of the wife outweighing those of the husband.
At this point it is appropriate to consider whether I should have regard to the Section 79 (4) (e ) (Section 75 (2)) matters before providing a global outcome or whether there is efficacy in the consideration of the weight to be attached to the separate contribution and Section 75 (2) considerations.
As discussed in paragraphs 62 – 71 hereof, I do not consider that there is necessarily any residual significance that should be attached to the “four step” approach to property settlement. I do consider though that in an appropriate case it is permissible to have regard and determine the weight to be given to the factors reflecting the respective contributions of the parties and the relevant Section 75 (2) issues.
In Bevan & Bevan [2014] FamCAFC 19 in his written submissions senior counsel for the husband in that case said:-
16.The adoption of the above [four step] approach is not intended to presuppose a positive answer to the question posed by Section 79 (2), nor to suggest that it is an approach appropriate in all proceedings. Rather, and provided that the fundamental proposition outlined by the High Court in Stanford (2012) 293 ALR 70… are not obscured, such approach is intended to and does no more than provide a principled, disciplined and structured means by which all of the matters arising for consideration pursuant to Section 79 can be conveniently and properly identified and assessed.
17.Further, and whilst not said critically nor in a matter which seeks to cavil with the decisions in this Appeal, no other approach to the determination emerges readily from either Stanford nor the decision in this Appeal. It is respectfully submitted that provided that the “fundamental propositions” articulated in Stanford are not obscured, and whilst not universally so as has always been recognised, the approach set out above continues to provide a proper, transparent, certain and structured approach to the presentation and determination of applications pursuant to Section 79.
At paragraph 19, in commenting on the written submissions the Full Court said:-
We have no issue with what senior counsel has said about the utility of the “four step” process, which we accept provides a convenient way to structure both submissions and judgments, provided the caveat mentioned is not overlooked.
Accordingly, and taking into account the relevant contribution factors, their respective contributions should be recognised as 55/45 per cent in favour of the wife.
Section 79 (4) (d)
Neither party is employed. The substance of the likely settlement will not see any substantial change in the property that each of the parties hold and whilst I am obliged to consider the effect of any proposed order on the earning capacity of the parties, in this case I do not consider that there will be any significant or substantial effect.
Section 75 (2) Factors
The parties have each attained the age of 60 years. The children are no longer dependent on the parties. Whilst each of the parties retains a limited capacity for employment, I note that each of them have undertaken certain activities designed to generate an income. Whilst the evidence is scant, it appears that their efforts have been largely unsuccessful hence the ongoing reliance upon matrimonial property for their continued financial existence.
A careful consideration of the factors represented in Section 75 (2) (a), (b), (d), (g), (n) and (p) would not in the ordinary course be suggestive of any adjustment in favour of one or other party. Other than Section 75 (2) (o) the balance of the provisions of Section 75 (2) have no application.
The issue of the treatment of monies spent by each of the parties, but in particular my findings in respect of the manner in which the husband has significantly diminished the property of the parties is a factor that needs to be given substantial weight under Section 75 (2) (o) of the Act.
I do not propose to repeat the history nor my findings in terms of the allegations of each of the parties against the other but it is sufficient to note that the effect of the husband’s behaviour is that it has been wilful and with significant disregard to the effect that it had on the property of the parties.
I propose for the above reasons to provide a further allowance of 12 per cent to the wife in respect of the property division.
CONCLUSION
Accordingly, the rights of the parties in respect of matrimonial property held jointly and severely should be adjusted to reflect 67 per cent of the total (including superannuation) to the wife and 33 per cent to the husband.
Of a total pool of $2,395,536 the wife should retain $1,605,009.
If the wife retains the following:-
Equity in Suburb Q property 456,000
Wife’s shares 32,000
Wife’s car 13,000
Superannuation 683,000
Funds held on behalf of parties 370,000
TOTAL $1,554,000
She is therefore entitled to a further $51,009 by way of settlement sum from the husband. I propose to include the costs order made in the sum of $3,100 with a resultant total of $54,109.
The husband does not have the ready ability to pay out from available property the above sum. However, I propose to make orders by way of a superannuation split which would see from the husband’s splittable interest with AMP Super an amount of $54,109 transferred from his entitlement to the superannuation interests of the wife with S Super.
I am satisfied that procedural fairness has been afforded to the trustees of the husband’s superannuation fund by reference to correspondence attached to the wife’s trial affidavit.
Orders will be made as set out at the commencement of these reasons.
I certify that the preceding one hundred and seventy nine (179) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 27 February 2014.
Associate:
Date: 27 February 2014.
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