Tuck and Dunst & Anor
[2015] FamCA 318
•30 April 2015
FAMILY COURT OF AUSTRALIA
| TUCK & DUNST AND ANOR | [2015] FamCA 318 |
| FAMILY LAW – PROPERTY –– where the husband has made significant financial contributions to the welfare of the children post separation – where the husband has made substantial financial contributions post separation to the former matrimonial home –– where the husband drew significant funds from a line of credit post separation – whether such funds ought to be added back - where the wife executed a mortgage over her interest in the former matrimonial home as security for legal costs – whether the mortgage should be set aside – where the wife’s future earning capacity is negligible – where the wife seeks spousal maintenance. |
| Family Law Act 1975 (Cth) s74, 75, 79, 79A, 81, 90AE, 106B. Family Law Rules 2004 (Cth) |
| Baglio & Baglio [2013] FamCA 105 Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116 Brandt & Brandt (1997) FLC 92-758 Brown & Brown (2007) FLC 93-316 Cerini & Cerini [1998] FamCA 143 Harper & Harper [2013] FamCA 528 Kouper & Kouper (No 3) [2009] FamCA 1080 Lovine & Connor and Anor (2012) FLC 93-515 M & M [1998] FamCA 42 Mallett & Mallett (1984) 156 CLR 605 Mitchell & Mitchell (1995) FLC 92-601 Norbis & Norbis (1986) 161 CLR 513 Omacini & Omacini (2005) FLC 93-218; (2005) 33 FamLR 134 Stanford & Stanford (2012) 247 CLR 108 Steinbrenner & Steinbrenner [2008] FamCAFC 193 Watson & Ling (2013) FLC 93-527; [2013] FamCA 57 |
| APPLICANT: | Mr Tuck |
| FIRST RESPONDENT: | Ms Dunst who appeared by her guardian the Public Trustee in the property proceedings |
| SECOND RESPONDENT: | Cassandra Pullos Lawyers Pty Ltd |
| FILE NUMBER: | BRC | 3538 | of | 2009 |
| DATE DELIVERED: | 30 April 2015 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Hogan J |
| HEARING DATE: | 20, 21, 22, 23 & 25 May 2013 and 5 July 2013 |
REPRESENTATION
| APPLICANT: | In person |
| COUNSEL FOR THE FIRST RESPONDENT: | Ms Carmody |
| SOLICITOR FOR THE FIRST RESPONDENT: | Mr Hallam of Carne Reidy Herd Lawyers and now from M + K Lawyers |
| SOLICITOR FOR THE SECOND RESPONDENT: | Ms Pullos of Cassandra Pullos Lawyers |
Orders
BY WAY OF FINAL ORDER IT IS ORDERED THAT:
Within 90 days of the date of this Order, the husband pay:
(a)the sum of $61,707.21 by bank cheque drawn in favour of Cassandra Pullos Lawyers Pty Ltd on behalf of the wife to discharge the wife’s indebtedness to that entity; and
(b)the sum of $33,859.66 to the wife via deposit into the trust account of her solicitors, M + K Lawyers.
Contemporaneously with the payments made pursuant to Clause (1), the wife shall do all acts and things necessary, including signing all necessary documents, so as to transfer and assign to the husband all of her right, title and interest in and to the real property situated at B Street, C Town in the State of Queensland more particularly described as Lot … on Registered Plan …, County of D, Parish of E, Title Reference … (the C Town property).
Contemporaneously with the payment made pursuant to Clause (1)(a), the second respondent shall do all things as may be necessary to release the mortgage held by it over the C Town property.
Contemporaneously with the transfer made pursuant to Clause (2), the husband shall refinance the outstanding liability currently owing to the Commonwealth Bank of Australia and secured over the C Town property into his sole name and shall indemnify the wife and keep her indemnified against all liabilities relating to the C Town property.
In the event the husband does not to comply with Clause (1) of this Order, the operation of Clauses (2), (3) and (4) shall be stayed and the husband and wife shall do all acts and things and sign all documents necessary to forthwith:
(a)engage a real estate agent as agreed between the parties, and failing agreement as nominated by the Real Estate Institute of Queensland (nominated real estate agent); and
(b)list the C Town property for sale with the nominated real estate agent by private treaty at a price agreed between the parties or failing agreement, at a price determined by the nominated real estate agent.
In the event that the C Town property is not sold by private treaty within three (3) months of being placed on the market for sale (or such further time as may be agreed upon between the parties in writing), the parties shall do all acts and things necessary for the sale of the said property by auction and, in particular:
(a)the auctioneer used for the sale shall be as agreed between the husband and wife in writing and, failing agreement, as nominated by the nominated real estate agent; and
(b)the parties shall execute all documents requested by the auctioneer to affect the C Town property for sale by auction; and
(c)the parties shall request the auctioneer to recommend a reserve price to be placed on the C Town property for the purpose of the auction and shall accept such reasonable recommended reserve price; and
(d)the parties shall pay to the auctioneer any sums reasonably requested for advertising expenses in relation to the auction of the C Town property, with such costs to be borne at first instance by the husband but to be shared equally by the parties following the settlement of the sale of the C Town property; and
(e)the parties shall execute any contract of sale and shall cooperate in any way with the auctioneer in relation to the auction of the C Town property, including by making a key available to allow inspection of the property at all times as reasonably requested by the auctioneer.
Upon the sale of the C Town property, the husband and wife shall do all acts and things and sign all documents necessary to disperse the sale proceeds of the property in the following manner and priority:
(a)to discharge the loan to the Commonwealth Bank of Australia, being the Viridian Line of Credit secured over the property; and
(b)in payment of costs, commissions, expenses of sale, including any auction costs and reasonable legal fees associated with the sale of the property; and
(c) by payment of $61,707.21 to Cassandra Pullos Lawyers Pty Ltd; and
(d)by payment to the wife of the money necessary to ensure that she receive 30 per cent of the nett property of the parties (as found and explained in the Reasons for Judgment delivered on 30 April 2015, subject to the substitution of the actual sale price received for the C Town property for the figure of $450,000.00 attributed to that property) after taking into account the payment to Cassandra Pullos Lawyers Pty Ltd on her behalf referred to in Clause (7)(c) above, her ownership of chattels valued at $9,000.00 and her entitlement to superannuation valued at $14,000.00; and
(e) by payment of the balance to the husband.
Pending the transfer or sale of the C Town property:
(a)the husband is entitled to exclusive occupation of the C Town property; and
(b)the husband shall pay and be liable for all mortgage repayments and outgoings in relation to the C Town property; and
(c)both the husband and wife are restrained from redrawing against any mortgage secured against the C Town property or from further encumbering that property.
The wife shall retain as her absolute property and the husband shall relinquish and/or transfer all his right, title and interest in the following property to the wife:
(a) the funds held in all bank accounts in the wife’s sole name; and
(b) the wife’s interest in the HESTA Superannuation Fund; and
(c) her motor vehicle; and
(d) all other property currently within her possession.
The husband shall retain as his absolute property and the wife shall relinquish and/or transfer all her right, title and interest in the following property to the husband:
(a) the funds held in all bank accounts in the husband sole name; and
(b) all shareholdings or equities held in the husband sole name; and
(c)his interest in both the Tuck Superannuation Fund and the HESTA Superannuation Fund; and
(d)all of the property currently within his possession.
Forthwith upon compliance with Clauses (1), (2), (3) and (4) or, if the C Town property is to be sold, Clause (6) of this Order, the parties in their capacity as trustees of the Tuck Superannuation Fund shall do all acts and things and sign all documents (including amending the trust deed to ensure that the provisions of this Order are given effect) necessary to cause:
(a) the wife to retire as a trustee of the Tuck Superannuation Fund; and
(b) the husband to retire as trustee of the Tuck Superannuation Fund; and
(c)the appointment of a corporate entity of the husband’s choice (the new corporate trustee) as trustee of the Tuck Superannuation Fund; and
(d)the husband and wife to transfer and vest in the new corporate trustee, the trust fund of the Tuck Superannuation Fund; and
(e)the wife to be excluded from the definition of “dependent”, “spouse”, and “member” under the trust deed and to be excluded from future, actual or contingent rights to any benefit under the Tuck Superannuation Fund.
Unless otherwise specified in this Order, the wife retain liability for and indemnify the husband in relation to all other liabilities in the wife’s name or attaching to any item of property she is to retain or receive pursuant to this Order.
Unless otherwise specified in this Order, the husband retain liability for and indemnify the wife in relation to all other liabilities in the husband’s name or attaching to any item of property he is to retain or receive pursuant to this Order, with this to specifically include any liability to his mother.
The parties do all acts and things necessary, including the signing of all necessary documents, to give full force and effect to the provisions of this Order and, in the event that either party refuses or neglects to comply with any provision of this Order within 14 days of a written request to do so by the other party, then a Registrar of the Family Court of Australia is appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute all documents in the name of that party and do all acts and things necessary to give validity and operation to this Order.
The husband pay the wife’s costs of and incidental to the application to re-open, fixed in the amount of $4,800.31 and such payment shall be made to the trust account of the wife’s solicitors M+K Lawyers by no later than the earlier of 4.00 pm on 30 June 2015 or the payment to the wife pursuant to Clause (1).
In the event the second respondent seeks an order that the husband pay the costs of and incidental to the proceedings determined by this Order, that party:
(a)shall file and serve on the other brief written submissions in support of such application for costs within fourteen (14) days of today; and
(b)the party from whom costs are sought shall file and serve any brief written submissions in answer to the submissions filed and served within a further fourteen (14) days thereafter; and
(c)the first party shall file and serve any brief further written submissions, strictly in reply to the submissions filed and served pursuant to Order 16(b), within seven (7) days of service,
and any such application for costs shall be considered in Chambers.
In the event the husband seeks an order that the second respondent pay the costs of and incidental to the proceedings determined by this Order, that party:
(a)shall file and serve on the other brief written submissions in support of such application for costs within fourteen (14) days of today; and
(b)the party from whom costs are sought shall file and serve any brief written submissions in answer to the submissions filed and served within a further fourteen (14) days thereafter; and
(c)the first party shall file and serve any brief further written submissions, strictly in reply to the submissions filed and served pursuant to Order 17(b), within seven (7) days of service,
and any such application for costs shall be considered in Chambers.
All extant Applications are dismissed.
The parties have liberty to apply in relation to the interpretation of the terms of this Order.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tuck & Dunst and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC3538 of 2009
| Mr Tuck |
Applicant
And
| Ms Dunst |
First Respondent
And
| Cassandra Pullos Lawyers Pty Ltd |
Second Respondent
REASONS FOR JUDGMENT
The 52 year old husband, a health professional, was born in 1962. The 48 year old wife, also a health professional – who has not worked as such since about 2008 due to the mental health issues briefly outlined in the Reasons for Judgment delivered 3 October 2014 – was born in 1967.
The parties first commenced their relationship in about January 1992. They separated in about mid July 1993. Their first child was born in 1994. They reconciled on an on-again/off-again basis in the period from about mid July 1993 until they commenced cohabitation in mid-January 2002. They married in 2002. They separated in about early February 2009, although reconciliation was attempted until about April 2009.
Thus, their cohabitation spanned about seven years over a period of about 17 years and they have now been separated for about six years.
They have three children:
a)F, born in 1994; and
b)G, born in 2003; and
c)H, born in 2004.
All of the children have lived with, and have been supported by, the husband from about mid-October 2009. Since that time, they have spent very little time with their mother.
The parties’ voluntary separation has meant that they no longer enjoy the common use of property and superannuation in which their existing legal and equitable interests were acquired – at least in part - during their cohabitation. Such separation has also brought to an end any “assumption that any adjustment to those interests could be effected consensually as needed or desired”.[1]
[1] Stanford and Stanford (2012) 247 CLR 108, [42].
This is particularly relevant given that the parties acquired the former matrimonial home at C Town[2] (the C Town property) – in which the husband and children remain living - as tenants in common: the wife is the registered owner of 99 per cent of the property and the husband the registered owner of 1 per cent of the property.
[2]B Street, C Town, being real property described as Lot … on Registered Plan …, County of D, Parish of E, Title Reference ...
In the circumstances, I consider it just and equitable[3] that, pursuant to s 79(1) of the Family Law Act (1975), orders altering the interests in property owned by the parties are made.[4]
[3] Within the meaning of s 79(2) of the Family Law Act 1975 (Cth).
[4] Ibid at [42].
The parties are in conflict as to the terms of the orders which are appropriate to reflect properly those matters, including those already briefly mentioned, which, by s 79(4) of the Act, must be considered.
The competing proposals
The husband contends that orders which would see him receive property and superannuation interests with a combined value representing 80 per cent of the total value of the property and superannuation interests of the parties are just and equitable.
In particular, he proposes the wife transfer all her right, title and interest in and to the C Town property to him on the proviso he discharge the current mortgage (held by the Commonwealth Bank of Australia as security for a Line of Credit facility previously utilised by the parties) and refinance the indebtedness it secures into his name alone. He also proposes that the wife’s ‘involvement’ in the Tuck Super Fund is finalised. There is no dispute between the husband and wife that this is necessary as part of the statutory requirement to finally determine their financial relationship and avoid further proceedings between them.[5]
[5] s. 81 of the Act.
The wife contends that orders which would see her receive property and superannuation interests with a combined value representing 70 per cent of the total value of the property and superannuation interests of the parties are just and equitable[6] in the particular circumstances of this case.
[6] See: Exhibit 16 – proposed Draft Orders submitted on behalf of the wife on 24 May 2013.
The property of the parties and related issues
The property of the parties and its asserted value as suggested by each of them is as outlined below.
| Item | Ownership | Description | Wife Value[7] | Husband Value |
| ASSETS | ||||
| 1. | Wife – 99/100 | B Street, C Town | $445,500.00 | $445,000.00[8] |
| 2. | Husband – 1/100 | B Street, C Town | $4,500.00 | $4,500.00 |
| 3. | Husband | Motor vehicle 1… | $3,500.00 | $3,500.00[9] |
| 4. | Husband | Furniture and chattels | $10,000.00 | $10,000.00 |
| 5. | Husband | CBA cash at bank | $6,821.00 | $6,821.00 |
| 6. | Husband | CBA cash at bank | $636.00 | $636.00 |
| 7. | Husband | Tricom | $1,054.17 | $1,054.17 |
| 8. | Husband | Shares in Credit Corp Group | $7,775.00 | NIL |
| 9. | Husband | Securities | “possibly $1.6M” | NIL |
| 10. | Wife | Motor vehicle 2 | $1,000.00 | $1,000.00 |
| 11. | Wife | CBA Bank Account | $3,000.00 | $3,000.00 |
| 12. | Wife | Engagement ring | $5,000.00 | $5,000.00 |
| TOTAL ASSETS | $2,088,786.17 | $481,011.17 | ||
| LIABILITIES | ||||
| 13. | Husband | CBA loan secured over C Town property | $356,000.00 | $356,000.00 |
| 14. | Husband | Loan from Ms J Tuck · Initial loan · asserted capitalised unpaid interest | NIL – obtained post separation for legal expenses | $150,800.00 $26,000.00 |
| 15. | Husband | Credit card and unpaid bills | $500.00 | $500.00 |
| 16. | Wife | Amount owing to Second Respondent | NIL – obtained post separation for legal expenses | $61,707.21 |
| TOTAL LIABILITIES | $356,500.00 | $595,007.21 | ||
| SUPERANNUATION | ||||
| 17. | Husband | Tuck Superannuation Fund | $114,333.00 | $114,333.00 |
| 18. | Husband | HESTA Superannuation Fund | $142,378.73[10] | $142,378.73 |
| 19. | Wife | HESTA Superannuation Fund | $14,000.00 | |
| TOTAL SUPER | $257,711.73 | $270,711.73 | ||
| TOTAL ASSETS NET | $1,988,997.80 | $156,215.69 | ||
[7] Exhibit 11
[8]Husband’s Balance Sheet filed 5 September 2012; Affidavit of Mr I filed 6 September 2012.
[9] As at about January 2011 – see Husband’s affidavit filed 11 January 2011.
[10]Value as per Order made 5 July 2013 following wife’s successful application for leave to adduce further evidence.
Item 8: Shares in Credit Corp Group
There is some independent evidence before me to suggest that, at some stage, the husband traded in shares in the Credit Corp Group and that, at some time, these may have formed part of the share portfolio which provided security for his margin lending facility. However, there is no independent evidence before me to indicate that such equities remain owned by the husband. Additionally, in correspondence directed to the wife (Annexure ‘JS56’ to the husband’s affidavit filed 13 August 2009) the husband outlined that “CCP” had suffered a significant down turn throughout the global financial crisis. The fact that this assertion was made by the husband so long ago means that the wife has had every opportunity to gather evidence to establish a contrary position. However, her affidavit material contains no such evidence.
In the absence of independent evidence and any particular evidence from the wife – as opposed to more assertions about the existence of such property - I accept the husband’s evidence that these securities are no longer in existence.
Item 9: Securities
I am not persuaded on the evidence before me that it has been established that the husband is currently the owner of securities valued at ‘about $1,600,000.00’.
I accept that in about May 2007, when the husband applied to increase the credit limit of the Viridian Loan Facility secured over the C Town property and in respect of which the wife was the guarantor, he provided the Commonwealth Bank of Australia with the information that he had a share portfolio then valued at about $1,600,000.00. I also accept that, prior to the global financial crisis, the husband engaged in highly leveraged securities which was, for a time, successful and provided financial support for the family.
In the absence of evidence to the contrary, I accept:
a)the husband’s explanation for the circumstances in which and the means by which the bank included the information that he had a share portfolio then valued at about $1,600,000.00 in the “Guarantor Search Request – Borrower Financial Information” statement provided to the wife after he applied to increase the Line of Credit limit in November 2008; and
b)the husband’s evidence that this information was then inaccurate and had been carried through by the bank in error and on the basis of an incorrect assumption that nothing had changed between May 2007 and November 2008; and
c)the husband’s evidence to the effect that the share portfolio was, as at November 2008, in fact valued at about $400.00 because it had been sold off significantly as a consequence of the impact of the global financial crisis on the leveraged security investments he had owned.
Item 13: Monies lent by Ms J Tuck to the husband to meet legal costs and other living expenses
The husband seeks that money lent to him by his mother, an unsecured creditor, be regarded as a matrimonial liability for the purpose of calculating the value of the nett property pool amenable for distribution between the parties.
The wife does not take specific issue with the husband’s assertion that he borrowed monies from his mother: she simply submits that as such funds were borrowed after separation and used by the husband to pay his legal expenses, any amounts said to be owing by him to his mother should not be regarded as matrimonial liabilities but, rather, be taken into account – if at all – when consideration is given to the parties’ respective financial positions.[11]
[11] s 75(2) of the Act.
I consider that the evidence establishes that:
a)in February 2009 (only about a week after separation) the husband drew on the Line of Credit secured by the C Town property to repay the capital of a $100,000.00 investment loan previously provided by Ms J Tuck (his mother) and, in April 2009, repaid all outstanding interest;[12] and
b)at 1 April 2009, the husband had no remaining loans with, and no unpaid interest owing to, Ms J Tuck; and
c)after 1 April 2009 (that is, after separation), he borrowed money from Ms J Tuck on various occasions for his legal and other expenses.[13]
[12] Affidavit of Nancy Noreen Tuck filed 14 May 2013.
[13] Affidavit of Nancy Noreen Tuck filed 14 May 2013.
As the husband’s indebtedness to Ms J Tuck was incurred after separation and in order to assist him to meet his litigation and other expenses, I am not persuaded that such indebtedness should properly be taken into account in determining the value of the property of the parties. The existence of this indebtedness and other issues associated with it are, of course, relevant when the parties’ respective financial circumstances ae considered pursuant to s 75(2) of the Act.
Item 16: The wife’s unpaid and owing legal expenses/ monies asserted to be loans owing by the wife to the second respondent
I do not accept the husband’s contention that the monies owing to the second respondent pursuant to accounts rendered by it to the wife following the provision by it of legal services should be regarded as a ‘loan’. The monies owing are clearly debts incurred after separation and in association with the provision of legal services. In the manner consistent with that in which I have determined to deal with the husband’s borrowings from his mother, I intend to take the wife’s debt to the second respondent of $61,707.21 (being the total amount of unpaid accounts and interest accrued on the same) into account during the consideration of the relevant s 75(2) factors.
How should money withdrawn by the husband from the Commonwealth Bank of Australia Viridian Line of Credit facility secured over the C Town property after separation be dealt with?
The evidence establishes that:
a)as at 13 October 2008, the amount owing to the Commonwealth Bank of Australia pursuant to the Line of Credit facility secured over the C Town property and guaranteed by the wife was $72,538.28;[14] and
b)as at about 18 November 2008, the amount owing to the bank pursuant to the Line of Credit facility was $85,138.28; [15] and
c)in the period from 3 February 2009 until 28 May 2009, the husband drew $248,909.65 from the Line of Credit; and
d)as at 28 May 2009, the balance owing to the bank pursuant to the Line of Credit stood at $354,000.00, an amount which meant that, at best, only about $3,000.00 remained available to the parties from that facility.
[14] Annexure ‘KMD1’, affidavit of wife filed 11 August 2009.
[15] Husband’s affidavit filed 23 July 2010, Annexure “JST-95”.
The husband’s evidence[16] about post-separation withdrawals on the Line of Credit secured over the C Town property can be summarised as follows:
a)on 10 February 2009 (four days after the parties separated) - he repaid his mother the sum of $100,000.00 previously lent by her using funds withdrawn from the Line of Credit secured against the C Town property;
b)on 13 May 2009 he drew $56,909.65 from the Line of Credit secured against the C Town property and paid this to the Australian Taxation Office for his 2008 tax liabilities – which included tax assessed on capital gains made during that financial year;
c)on 26 May 2009 he withdrew $75,000.00 from the Line of Credit secured against the C Town property and paid it toward legal costs and disbursements, including paying monies into trust in anticipation of future legal costs and disbursements;
d)the balance of the money withdrawn from the Line of Credit secured against the C Town property – about $17,000.00 – was used to pay family expenses and legal costs.
[16] Husband’s affidavit filed 13 August 2009, paragraph 42 at page 18 of 22.
I may have had some scepticism about the husband’s evidence surrounding the issue of his payment of $100,000.00 to his mother, given that, whilst he included an assertion of indebtedness to his mother in an amount totalling $180,000.00 in a ‘Position Statement’ he created dated 21 May 2007, he did not reveal the existence of the same to the Commonwealth Bank of Australia during discussion which led to the preparation of the “Guarantor Search request – Borrower Financial Information Statements dated 3 July 2007 and 14 November 2008 and that the November 2008 “Guarantor Search request – Borrower Financial Information Statement” does not include any reference to any borrowings from, or debt to, Ms J Tuck.
However, as neither the husband nor his mother were challenged about their evidence about the manner in which he had previously borrowed money from her and repaid the same (together with interest calculated on it) I accept that the husband’s payment to his mother of $100,000.00 immediately after separation amounted to a repayment to her of funds previously lent to him.
In the absence of evidence contradicting that given by the husband and Ms J Tuck, I accept their evidence about the manner in which the husband had previously borrowed funds from his mother. In a like manner, I also accept that the husband used drawing from the Line of Credit to meet his 2008 financial year taxation liability in the manner he outlines.
The consequence of an acceptance of the husband’s account persuades me to conclude that, as the funds used to meet these liabilities were obtained by borrowing against the C Town property, the wife contributed to the same.
I consider that the husband’s use of funds drawn against the Line of Credit to meet living expenses means that the wife contributed to the same. It is impossible on the evidence to determine which amounts from the $17,000.00 referred to in paragraph 25(d) were spent on living expenses and which on meeting the husband’s legal costs.
As it was open to the husband to lead evidence to establish this with particularity, I have determined that it is appropriate to regard the $17,000.00 as funds provided by both parties jointly to the support of the husband and the children after separation.
The situation in respect of the $75,000.00 drawn by the husband from the Line of Credit after separation differs. These funds were clearly applied to meet his own legal expenses. They represent about 60.23 per cent of the value of the existing nett non-superannuation property available for consideration in these proceedings and 18.97 per cent of the value of the total property (inclusive of entitlements to superannuation) available for consideration in these proceedings. Whilst I am not persuaded, for reason which follow, to notionally add-back this sum, I intend to take it into account during a consideration of the relevant s 75(2) considerations.
The notional adding back of property no longer in existence has always been considered to be the exception rather than the rule.[17] Whilst delivered before Stanford, in Lovine & Connor and Anor (2012) FLC 93-515[18] the Full Court said, at [101]–[103]:
101. The judicial act here was the determination of just and equitable property Orders in the exercise of the discretionary jurisdiction conferred by s 79. Within the exercise of that overall discretion, when an issue of financial conduct conveniently described generically as a notional add-back arises, it is not determined by the application of fixed legal rules. Guidelines have been formulated over time in a number of well-known authorities concerning issues surrounding notional add-backs (see, for example, Omacini & Omacini (2005) FLC 93-218; DJM & JLM (1998) FLC 92-816; Townsend & Townsend (1995) FLC 92-569; Kowaliw & Kowaliw (1981) FLC 91-092; Browne & Green (1999) FLC 92-873; Chorn & Hopkins (2004) FLC 93-204; Cerini & Cerini [1998] FamCA 143; Polonius & York (supra)).
102. Undoubtedly such guidelines promote uniformity of approach and diminish the risks of inconsistency and capricious and arbitrary adjudication, but as the High Court made clear in Norbis & Norbis (1986) FLC 91-712 (“Norbis”), such guidelines do not constitute binding rules of law. Mason and Deane JJ said in Norbis at 75,166:
The nature of the issues which arise under s 79 is such that there is either little or no scope for giving guidance in the form of binding rules of law.
103. Understood in this context, disposition of an issue concerning a potential notional add-back does not involve the application of a fixed rule to the facts on which its operation depends. Rather, the exercise is one of discretion within a discretion. That is, a discretion as to the manner in which the issue of notional add-back is to be treated within the overarching discretion of determining just and equitable orders under s 79.
[17]M&M [1998] FamCA 42; Cerini & Cerini [1998] FamCA 143, [46]; Omacini & Omacini (2005) 33 Fam LR 134, [39]; Kouper & Kouper (No 3) [2009] FamCA 1080, [107].
[18] Delivered 24 October 2012 – pre Stanford
In Watson & Ling [2013] FamCA 57[19], delivered after Stanford, Murphy J, sitting at first instance, said as follows:
[29]Where, but for the disposal of money or other property by one party, legal or equitable interests in it would have been part of those existing at trial, it may be possible to assert, in the particular circumstances of a case, that the money or property is nevertheless to be considered as part of the existing legal or equitable interests of the disposing party (sham transactions and circumstances where it can be established that the property is held, for example, on trust by another for the disposing party are examples). The investigation of issues of that type might be seen to be part of the establishment of the existing legal and equitable interests at trial – a task which the majority of the High Court in Stanford (at [37]) said should be the first step in considering, pursuant to s 79(2) (cf s 90SM(3)), whether it is just and equitable to make an order.
[30] In many other cases, for example those which come within the convenient rubrics of “waste” (see Kowaliw & Kowaliw (1981) FLC 91-092) or “premature distribution” (see, for example, Townsend), legal and equitable title to the money or property will have passed. It could not be said that the money or property is part of the “existing legal or equitable interests” of a party or the parties. The notion that such money or property should be treated as a “notional asset” or “notional property” appears to run contrary to the thrust of the decision in Stanford: at issue is the consideration of two separate questions, the first of which is whether existing legal or equitable interests should be altered.
[31]Yet, of course, unilateral actions of the type described might very well be a consideration – indeed, in an appropriate case, an important consideration – in deciding if any order should be made altering the existing interests of a party or parties.
[32]Where the Court has determined that it is just and equitable to make an order pursuant to s 79(2) or s 90SM(3) and there is clear evidence that one party has engaged in conduct and, but for that conduct, the legal and equitable interests of a party or the parties (or the value of those interests) would have be significantly greater, justice and equity may require recognition of the unfairness inherent in those circumstances in the terms of the orders to be made.
[33]How might that be recognised? First, consistent with existing authority, it can be recognised pursuant to s 75(2)(o) (cf s 90SF(3)(r)) (see, for example, Omacini & Omacini (2005) FLC 93-218, Browne & Green (1999) FLC 92-873 and Cerini). Secondly, it might be contended that it might be recognised within the assessment of contributions. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). Nevertheless, it might be argued that the “non-dissipating party” can be seen to have made a disproportionally greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, but for the other party’s unilateral dissipation, those existing legal and equitable interests would have been greater or had a greater value.
[34]The assessment of the circumstance under discussion is, ultimately, a matter of discretion (see, for example, Cerini at [46] and Townsend at 81,654). Equally, however, authority dictates that it will be “the exception rather than the rule” (Cerini at [46]) 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. It may be that aspects of the erstwhile treatment of legal fees pre-Stanford (see, for example, Chorn & Hopkins (2004) FLC 93-204) will require further consideration in an appropriate case.
[35]Importantly, of course, as has been emphasised in many authorities including those cited above, not every dissipation by a party can be seen to involve an affront to justice and equity; again the circumstances of the individual relationship must be assessed.
[19] Delivered 12 February 2013.
In Bevan & Bevan [2103] FamCAFC 116 the plurality[20] said, at [79]:
We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
[20] Bryant CJ & Thackray J; delivered 8 August 2013.
In addition, Finn J said, at [160]:
These reminders that the jurisdiction under s 79 is a jurisdiction to alter individual interests in title to property and that there is no community of property in this country, might also call into some question the current practices in relation to the treatment of property which is no longer in existence but which one party has had the use of (the so-called “add backs”), and perhaps also of the unsecured liabilities of one or both parties. It may well be that these matters should more strictly be considered in making findings under s 79(4)(e)(i.e. s75(2)), or in an extreme case, when considering the question under s 79(2) as to whether it is just and equitable to make any order under s 79. But these questions do not arise in the present case, and are thus for another day.
Unsurprisingly given the view he expressed in Watson (supra), in Baglio & Baglio[21] Murphy J, in discussing the parties’ agreement that money spent on legal fees should be “added back” to the pool, said at [186]:
In my view, the role of “add backs” or, more specifically, the concept of “notional property” in property proceedings may need to be revisited in light of Stanford. The emphasis on the predominance of existing legal and equitable interests raises concerns over the place of “notional” assets or a “notional pool” as a means of dealing with a finding of inequity or injustice arising from the use by one party of property or funds which, but for that use, would have been part of the legal and equitable interests of the parties at trial. In that respect, I repeat here what I said in Watson & Ling [2013] FamCA 57 at [27] – [35].
[21] [2013] FamCA 105, delivered 27 February 2013.
In Harper & Harper [2013] FamCA 528 (delivered 19 July 2013) Macmillan J stated at [63] and [64]:
The clear statement of principle in Stanford is that in order for the Court to determine whether it is just and equitable to make orders pursuant to s 79, it must first identify the existing legal and equitable interests of the parties in the property. As Murphy J said in Watson & Ling at paragraph 30, the concept of “‘notional property’ appears to run contrary to the thrust of the decision in Stanford”. Whilst justice and equity might require recognition of either the unfairness of the conduct of one of the parties, which arguably would apply to both the Kowaliw type situations or where there has been a premature distribution of property, as noted by Murphy J, that conduct could be taken into account pursuant to s 75(2)(o).
It is not yet clear how add backs will be approached as a result of Stanford. …It is quite possible that as a result of the decision in Stanford there will be little place for add backs in the assessment the Court must make of the parties’ legal and equitable interests. At the very least the decision in Stanford is likely to emphasise once again the exceptional nature of add backs.
I consider that the “overarching discretion” of determining just and equitable orders between the parties can best be met by declining to add-back notionally the funds drawn down by the husband from the Line of Credit after separation and the funds received by the wife pursuant to previous Court Order. For the reasons already expressed, consideration of the use of those funds will occur when I undertake an assessment of the various contributions made by the parties during the marriage and after separation and also when assessing the relevant s 75(2) considerations.
The consequence of the findings about the matters discussed above is that the value of the property of the parties (inclusive of superannuation interests) as at the date of trial is as follows:
Item Ownership Description Value ASSETS 1. Wife – 99 per cent B Street, C Town $445,500.00 2. Husband – 1 per cent B Street, C Town $4,500.00 3. Husband Motor vehicle 1 $3,500.00[22] 4. Husband Furniture and chattels $10,000.00 5. Husband CBA cash at bank $6,821.00 6. Husband CBA cash at bank $636.00 7. Husband Tricom $1,054.17 8. Husband Shares in Credit Corp Group NIL 9. Husband Securities NIL 10. Wife Motor vehicle 2 $1,000.00 11. Wife CBA Bank Account $3,000.00 12. Wife Engagement ring $5,000.00 TOTAL ASSETS $481,011.17 LIABILITIES 13. Husband CBA loan secured over C Town property $356,000.00 14. Husband Credit card and unpaid bills $500.00 TOTAL LIABILITIES $356,500.00 SUPERANNUATION 15. Husband Tuck Superannuation Fund $114,333.00 16. Husband HESTA Superannuation Fund $142,378.73 17. Wife HESTA Superannuation Fund $14,000.00 TOTAL SUPER $270,711.73 TOTAL NET ASSETS $124,511.17 [22] As at about January 2011 – see Husband’s affidavit filed 11 January 2011.
In considering the relevant matters mandated by s 79 of the Act, it must be remembered that:
a)“community of ownership arising from marriage has no place in the common law”[23]; and
b)that there is no presumption of equality of contribution between parties to a marriage, irrespective of the length of their union;[24] and
c)the exercise of the discretion conferred must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity.[25]
[23]Stanford and Stanford (2012) 247 CLR 108, [39] citing Hepworth v Hepworth (1963) 110 CLR 309, 317 per Windeyer J.
[24] Mallet v Mallet (1984) 156 CLR 605.
[25] Bevan & Bevan [2013] FamCAFC 116, [73].
Contributions
The wife does not know anything about the husband’s financial circumstances at the commencement of their relationship and then their subsequent marriage in February 2002. In the absence of evidence to the contrary, I accept the husband’s evidence about his financial circumstances when the parties resumed their relationship in about February 2002: namely that he owned real property at K Town and L Town (subject to mortgages held by a commercial lender), that these properties were sold in March 2002, September 2002 and April 2003[26] and that, after the sale of the last property in April 2003, he received net sale proceeds[27] of $240,000.00. I accept about $30,000.00 of this was spent on the parties’ wedding and honeymoon and that he then invested the balance – in an amount of $210,000.00 - in his name.[28] I also accept that, as at about February 2002, the husband had a superannuation entitlement valued at about $62,800.00, the motor vehicle currently owned by him and furniture and personal effects. I accept that the husband established the existing self-managed superannuation fund in about 2005/2006 with funds rolled over from his previous managed fund and that his entitlement to superannuation was then about $90,000.00 (after set-up fees).[29]
[26] Husband’s affidavit filed 11 January 2011, paragraph 26.
[27] From the sale of all three properties.
[28] Husband’s affidavit filed 11 January 2011, paragraph 29.
[29] Husband’s affidavit filed 13 August 2009, Annexure “JST-56”.
The husband’s evidence is that when the parties married in 2002, the wife owned only a car, personal effects and furniture. He says she had no substantial savings at bank or entitlement to superannuation, was indebted to Centrelink for an unspecified amount and owed a friend about $15,000.00. The wife’s evidence does not contain any assertions contrary to these.
The parties agree that the wife received an inheritance when her mother died. They do not agree about when this occurred. The wife says she and her two siblings inherited her late mother’s home in about 2000 and that, after she and the husband married in 2002, he advised her to propose that the house be sold because he could invest her share of its sale proceeds at a rate of return higher than she was receiving from it. She says that after the property was sold, she provided the husband with $100,000.00 from the $120,000.00 she received and used the balance to repay some debts and buy a television.
In contrast, the husband says the wife inherited about $119,000.00 in 2003 and used some of this to repay her debts to Centrelink and her friend, leaving about $94,000.00 which he invested for her in her name. The proceeds from this investment were applied toward the support of the family unit: for example, in the 2005 financial year the wife did not work as a nurse, but received a taxable income of $28,146.00 as a result of the investments and the funds were used to buy a motor vehicle.
There is no independent evidence – such as a Death Certificate - to establish the date of the wife’s mother’s death. Given the relatively small differences in the accounts provided by each party, I intend to proceed on the basis that, no later than 12 months after the parties married, the wife provided the husband with between $94,000.00 and $100,000.00 received by her from an inheritance and that he invested this sum on her behalf. I also accept the wife repaid whatever liabilities she had at the time of their marriage using most of the balance of the inherited monies.
I conclude that, at the time the parties married in 2002, the husband’s financial circumstances were significantly superior to those of the wife but she contributed between $94,000.00 and $100,000.00, which was applied in the manner outlined above, no later than a year later.
I accept that the husband made most of the financial contributions to the support of the family during the parties’ marriage. I also accept that the wife contributed financially via the application of investment returns received from the inherited funds she provided and her earnings as a nurse from late 2004 until about September 2008. By way of example, she earned $33,357.00 (gross) in the financial year ended 30 June 2008 by working a maximum of 16 hours on weekends. I consider it more likely than not that she applied the net income from her personal exertions toward the support of the family unit.
The C Town property was purchased by the parties on 11 September 2005 for $420,000.00. The wife says the parties borrowed money to assist in this purchase but she does not know the details of the amount borrowed. She also says that by sometime in about 2008, the parties had repaid the borrowed funds such that the C Town was then owned without encumbrance.
In the absence of evidence to the contrary, I accept that the C Town property was purchased as it was – 1 per cent to the husband and 99 per cent to the wife – as a form of family asset protection.
In the absence of evidence to the contrary, and given that the wife does not specifically dispute the husband’s assertion that she made no direct financial contribution to the acquisition, conservation or maintenance of the C Town property nor provide any particulars of any alleged direct financial contribution (of whatever nature) to the same, I accept the husband’s evidence that he provided the entirety of the funds used in the purchase of the C Town property and that he met the mortgage repayments. However, the absence of evidence from the husband about what this means in dollar terms and the amount he actually contributed to the purchase price (and the amount that was borrowed to meet the difference between this amount and the purchase price) makes more specific quantification of this aspect of his financial contribution impossible.
I accept that, during the parties’ marriage, the husband typically worked one to two 24 hour shifts per week at a local private hospital and applied the income he earned from this personal exertion to meet the family’s joint expenses. I also accept that he invested in equities and applied the proceeds from this activity to the support of the family unit. Of course, this contribution diminished significantly after the impact of the global financial crisis on the equity market, when the family unit suffered very significant financial losses.
I accept that these very heavy financial losses were incurred when the husband exited the securities market by about mid-January 2008. In the absence of evidence to the contrary, I accept the husband’s evidence of his estimate that the quantum of the losses was such that the parties’ net worth fell by about $550,000.00 between mid-October 2007 and the end of January 2008; on the same basis, I also accept that, by about mid-January 2008, the parties’ net worth was in the vicinity of about $500,000.00.
I accept that the wife contributed to the conservation of the C Town property by agreeing to become a guarantor of the Line of Credit established by the parties and secured against that property in about July 2008.
I accept that since separation the husband has continued to make all of the financial contributions to the conservation of the C Town property – he has paid the repayments associated with the Line of Credit (including those which are associated with his decision to draw funds and apply them to meet his legal expenses) and has met all of the costs associated with ownership of that property.
The husband also contributed to his entitlements to superannuation after separation. The evidence establishes that the husband’s entitlement to superannuation was in the following amounts at the times outlined in the table below:
August 2009[30]
July 2010[31]
September 2012[32]
Current
Hesta
$50,214.00
E$50,215.00
$65,000.00
$142,378.73
Tuck Superannuation Fund
$89,930.00
E$108,248.00
$114,333.00
$114,333.00
Total
$140,144.00
$158,463.00
$179,333.00
$256,711.73
[30] Husband's Financial Statement.
[31] Husband's Financial Statement.
[32] Husband's Financial Statement.
The mother’s significant mental illness has meant that she has been incapable of contribution to the financial, physical and emotional support of the children since at least October 2009 and that she has been unable to contribute to the costs associated with the continued ownership of the C Town property. Such burdens have been borne by the husband.
The husband asserts that he and the wife cared equally for the children during their marriage. He says this was possible because of the manner in which his work as a medical practitioner was structured – namely: that he worked nor more than two 24 hour shifts per week. This meant he was available to assist in the care of the children. The wife’s evidence is that, whilst he contributed to the children’s care when she was working (for example, on weekend mornings), she was the person primarily involved in their care during the marriage.
I conclude that the wife was totally responsible for meeting the parties’ oldest child’s needs in the period from her birth in 1994 until the parties reconciled and married in 2002. At best, the husband’s interaction with his oldest daughter during this period appears to have amounted to a recommencement of a relationship - he provides no particular detail of any particular contribution to her care during this period of time.
Given the husband’s evidence that he was engaged in employment outside the home for two 24 hour blocks per week and worked on investments and that the wife engaged in paid employment for 16 hours per week, I think it more likely than not that the wife was responsible for the majority of the children’s care during the parties’ marriage. I certainly accept, however, that the husband contributed to the care of the children during times when he was not engaged in paid employment or in activities associated with investment or leisure.
The children remained living with the wife from separation in February 2009 until October 2009. On 19 October 2009, the position changed dramatically when Wilson FM ordered that they live primarily with the husband. This situation has continued. Whilst orders provided for the children to spend supervised time with the wife, her ill-health has resulted in their time with her being sporadic and limited. The consequence is that the husband has been almost totally responsible for the children’s day to day care and financial support from at least 19 October 2009: given the wife’s significant illness, her direct financial contribution to the children’s support since separation has been limited to the compulsory deduction from her Government provided financial support.
In assessing the contributions made by the parties the Court embarks upon a process involving the exercise of a broad discretion in respect of which reasonable minds may differ. Whilst this process is neither an accounting or mathematical exercise,[33] it does involve a movement from “a qualitative evaluation of contributions to a quantitative reflection of such evaluation” – that is, a “leap” from words to figures.[34]
[33] See: Norbis v Norbis (1986) 161 CLR 513 at 522; Brandt and Brandt (1997) FLC 92-758.
[34]Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] per Coleman J.
I consider that, whilst the husband made the significant financial contributions to the acquisition, conservation and improvement of the property of the parties during cohabitation, the wife also made financial contributions via the contribution of her inheritance and the income earned by her from paid employment for a period of about four years. Additionally, she contributed to the repayment of money provided by Ms J Tuck to the husband (because this repayment was sourced from monies drawn by him after separation from the Line of Credit secured over the C Town property) and, as previously discussed, to the financial support of the family via those funds drawn by him after separation from this source.
I consider it more likely than not that the wife met the majority of the children’s care needs during the parties’ relationship. Since separation, though, the only conclusion available on the evidence before the court is that the husband’s contributions – of a financial and non-financial nature – have overwhelmingly outweighed the contributions made by the wife.
Taking into account all of the matters outlined above, I conclude that a quantification of contributions to trial as to 80 per cent to the husband and 20 per cent to the wife appropriately reflects my assessment and balancing of such contributions.
None of the orders proposed by either party will have any effect on the earning capacity of either party.
Relevant s 75(2) matters
The husband works at a privately operated hospital. His gross average weekly income is $3,741.00 – or about $194,532.00 per annum. He has worked there for about 17 years. He also has limited rights of private billing at the hospital: as at about September 2012, this enabled him to receive about $76.00/week gross (which is included in the figure above).
The husband works on average 37.5 hours per week by working three 24½ hour shifts per fortnight. He says he cannot and will not work more than this because he is the sole carer for the children and has been unable – despite previous requests- to obtain greater hour allocation from his employer. He does not say that he could not gain supplementary employment elsewhere as the children mature.
The husband has continued to support the parties’ oldest daughter financially during her attendance at University. He has met the costs of petrol and maintenance for a car she purchased.
The husband’s Financial Statement filed 6 September 2012 reveals a shortfall of income over expenditure. At that time, he paid about $480.00/week mortgage repayments and $187.00/week to his mother for monies lent by her to him.
The wife pays the husband about $11.00/week by way of child support. This amount is deducted from her government provided support. Save for this, the husband is totally responsible for meeting the expenses associated with the children’s support.
Given the likely prognosis for the wife’s future mental health, it is highly unlikely she will re-join the paid workforce in any capacity in the foreseeable future. In contrast, the husband remains securely employed at the same private hospital at which he has worked for more than a decade and there has available to him limited rights of private practice. It is the case that he will be called on to meet all of the children’s financial and other needs into the future without significant contribution from the wife as, given her illness, her direct financial contribution to the children’s support in the time since separation has been limited to the compulsory deduction from her Government provided financial support.
The evidence establishes that Ms J Tuck is the owner of not insubstantial property. Whilst there is no evidence before me as to its value, I know that she was 85 years of age at the time of the trial, that the husband has two siblings and that she has been able to support herself with the rents received from the properties. In addition, her financial position has been such that she has been able to lend not insignificant funds to the husband at various times.
There is no evidence before me in relation to the value of property owned by Ms J Tuck or the manner in which she intends to deal with such property after her death or the state of her health. At its highest, there could be no conclusion other than that the husband may continue to have a source from which he is able to obtain financial support – through the provision of lent funds – into the future.
The situation in respect of the $75,000.00 drawn by the husband from the Line of Credit after separation differs to that of the other draws discussed above. These funds were clearly applied to meet his own legal expenses. As noted earlier, this amount represents about 60.23 per cent of the value of the existing nett non-superannuation property available for consideration in these proceedings and 18.97 per cent of the value of the total property (inclusive of entitlements to superannuation) available for consideration in these proceedings.
The impact of the husband’s decision to draw $75,000.00 from the Line of Credit secured by the C Town property is manifold: first, it decreased the equity in that property and, consequently, the value of the property available to the parties in these proceedings; secondly, it had the consequence that funds in respect of which both parties are liable to the bank for repayment were applied solely to meet the husband’s legal expenses; thirdly, it increased the quantum of the periodic repayments to the bank the husband was required to make.
The impact of such a decision can clearly be seen by a consideration of the following: if the husband had determined not to draw $75,000.00 from the Line of Credit (but rather, for example, met his ongoing legal expenses from ongoing income earned by him after separation) the total value of the property of the parties would be $470,222.90 rather than $395,222.90; and 20 per cent of the property of the parties would be $94,044.58 rather than $56,044.58. This $38,000.00 difference is 9.61 per cent of the current value of the property of the parties.
Whilst the husband asserted that the wife had used $40,000.00 available to her in a bank account at the time of separation, there is no evidence to support such contention. The husband does not produce a bank statement to establish the existence of such funds nor is there any evidence upon which I could reach any conclusion as to the timeframe within which any such funds were used by the wife or the manner in which they were utilised (for example: were they used by her to contribute toward meeting the children’s needs in the period from February 2009 until October 2009?). In such a circumstance, I am not persuaded that it is more likely than not that the wife used $40,000.00 of jointly owned funds for her own self- support after separation.
The second respondent asserts that the wife owes it $61,707.21 as a result of the provision of legal fees. This matter is relevant, not only to a consideration of the wife’s financial position but also, pursuant to s 75(2)(ha) of the Act. Clearly, if an order is made in terms sought by the husband, the ability of the second respondent to recover the money asserted to be owed to it by the wife is likely to be significantly diminished.
My conclusions as to the respective contributions of the parties will result in a 60 per cent differential between the parties.
Given the matters considered pursuant to s 75(2) I am not satisfied that such an outcome would be just and equitable. Rather, having regard to the husband’s relatively significantly superior ongoing income earning capacity and security of employment, I am persuaded that an adjustment in favour of the wife is appropriate. I arrive at this conclusion taking into account, of course, the fact of the husband’s likely continued future responsibility for meeting all of the children’s needs. In arriving at this conclusion I have also taken into account that the husband’s current exercised earning capacity is measured by remuneration of $194,532.00 (gross) per annum. An adjustment of 10 per cent in favour of the wife, which I have concluded is appropriate to reflect the overwhelming disparity in the parties’ future income earning capacity, will result in her receipt of property valued at $39,522.29 more than if such adjustment was not made – an amount less than 20 per cent of one year’s annual gross income for the husband. The adjustment in favour of the wife would have been more significant but for her earlier receipt of lump sum funds as a consequence of previous Orders and the husband’s indebtedness to Ms J Tuck which, in part at least, arose consequent on the same.
Justice and equity of the proposed orders
The consequence of the conclusions outlined above is that, having regard to the various contributions made by the parties, the significant financial contributions made by the husband after separation and to the support and care of the children, the direct financial contributions made by the wife to the support of the family after separation as a consequence of the husband’s determination to draw funds against the Line of Credit and apply them to meeting family expenses and his legal expenses (in an amount of $17,000.00), the impact upon the value of the property of the parties at trial of the husband’s determination to draw $75,000.00 from the Line of Credit secured over the C Town property and apply it to meet his own legal expenses, the vast difference in the parties’ future financial capacity and the likelihood for the husband of the continued lack of contribution by the wife to the financial and other support of the children, it is appropriate that the property of the parties be distributed between them such that the husband receives property valued at 70 per cent of the total value of the property of the parties and the wife receives property valued at 30 per cent of the total value of the property of the parties.
In order to give effect to such conclusion, it is necessary that orders be made to ensure that, on the assumption the husband can refinance the debt over the C Town property and retain it, the wife receive property valued at $118,566.87. She has an entitlement to superannuation valued at $14,000.00 and the other property in her possession valued in total at $9,000.00. Given that I have concluded that it is appropriate that she transfer her interest in the C Town property to the husband – so that he and the children can continue to live there - upon him refinancing the existing debt secured over it into his name alone, it is necessary that the husband pay her the sum of $95,566.87. If the husband is unable to refinance the debt over the C Town property, it will have to be sold and alternate orders will be made to deal with such a possibility.
In order to maximise the prospect that the husband is able to refinance the C Town property such that its sale will not be required, I intend to provide him with three months within which to make the payment to the wife.
In arriving at this conclusion I am very cognisant that if the C Town property is sold for the price of its current (2012) valuation, the husband is unlikely to receive any significant funds after the necessary payment is made to the wife. However, he continues in secure and well paid employment and I have concluded that the reality of the wife’s financial position and her likely inability to earn income into the future is such that justice and equity requires that she be provided whatever funds can be made available now rather than receive her entitlement by way of superannuation split.
For the reasons outlined above, I am satisfied in all the circumstances of this case that it is just and equitable and appropriate that orders be made adjusting the existing interests of the parties in property and superannuation interests to give effect to this determination.
Claim for Spousal Maintenance
The wife seeks an order requiring the husband to pay to her the sum of $867.00 per month (say, $200.00/week) by way of spousal maintenance. The husband opposes the making of any such order.
The husband is liable to maintain the wife to the extent that he is reasonably able to do so if and only if she is unable to support herself adequately by reason of age, or physical or mental incapacity for appropriate gainful employment or for any other adequate reason.[35] If satisfied that the wife is unable to support herself adequately by reason of age, or physical or mental incapacity for appropriate gainful employment or for any other adequate reason, the Court may make such order as it considers proper for the provision of maintenance to the wife.[36] In exercising jurisdiction under s 74 of the Act, the Court shall take into account only the matters referred to in s 75(2) of the Act.[37]
[35] s 72(1) of the Act.
[36] s 74(1) of the Act.
[37] s 75(1) of the Act.
Is the wife unable to support herself adequately?
As outlined above, the wife will receive a payment of $95,566.87 from the husband within three months or such amount as is necessary to see her receive 30 per cent of the value of the property of the parties if the C Town property is sold. Whilst she has a debt to the second respondent – asserted to be in the amount of $61,707.21 – payment of this will still see her in receipt of some limited funds which can be applied to her own support. She has not worked for remuneration since 2008. As noted, her significant mental illness persuades me that it is highly unlikely she will be able to work for remuneration in the foreseeable future. In these circumstances, I am persuaded that, at this point in time, the wife is unable to support herself adequately by reason of mental incapacity for appropriate gainful employment.
What is the quantification of the wife’s need for adequate support?
Given my conclusion that, at present, the wife is unable to support herself, she is entitled to be maintained “adequately”: namely, at a standard of living which is “reasonable in the circumstances”[38], not a subsistence level of support[39] and which is not to be determined according to any fixed or absolute standard.
[38] Nutting & Nutting (1978) FLC 90-410; Stein & Stein (2000) 25 Fam LR 727, 729.
[39]See also: Mitchell and Mitchell (1995) FLC 92-601 and Brown & Brown (2007) FLC 93-316 at p.81,455.
Whilst she is receives a Disability Pension in an amount of about $400.00 per week such entitlement must be disregarded.[40] The amount of $200.00 per week sought by the wife could not be regarded as anything other than a modest amount which would assist her to be maintained at a reasonable standard of living in the circumstances of her asserted living expenses[41], which are themselves very reasonable.
[40] s 75(3) of the Act.
[41] See: Wife’s Financial Statement filed 14 May 2013
To what extent is the husband reasonably able to maintain the wife?
As a consequence of the property settlement orders which will be made, the husband will have to obtain further borrowings – he will have to refinance the C Town property if he wishes to remain living there.
The husband’s Financial Statement reveals an excess of income over expenditure in an amount of $46.00 per week. If he is able to refinance the debt secured over the C Town property, he will have to meet periodic repayments in an increased amount and one which may well diminish his capacity to pay periodic spouse maintenance.
On the evidence before me, I am not persuaded that it is more likely than not that the husband will have a capacity to pay periodic spouse maintenance to the wife once effect is given to the property settlement orders.
The legal fees owing to the Second Respondent by the Wife and secured by mortgage over the C Town property and the Husband’s application to set aside this mortgage
The husband’s application, made in reliance on s 106B or s 90AE of the Act, to set aside and/or declare null and void a mortgage entered into between the wife and the second respondent – her former solicitor – to secure the wife’s payment of legal fees must now be considered in the context of the property settlement orders which will be made. This mortgage was lodged over the wife’s interest in the C Town property on 22 June 2009 (the second mortgage).
Those property settlement orders which are appropriate and which are just and equitable in the circumstances will provide the wife with the capacity to discharge her liability to the second respondent in the amount sworn to in affidavit material relied upon by the second respondent.
The orders to be made will allow for a contemporaneous payment of the money payable to the wife, the payment on her behalf of the debt outstanding to the second respondent and the discharge of the mortgage held by the second respondent over the C Town property. In that context, the existence of the mortgage will not defeat the husband’s entitlement to appropriate property settlement orders.
Uncontentious matters
The C Town property was bought by the husband and wife on 11 September 2005. It is owned by them as tenants in common: the wife as to a 99 per cent interest and the husband as to a 1 per cent interest. On the evidence before the Court, it is valued at $450,000.00.
The Commonwealth Bank of Australia holds a mortgage[42] over both parties’ interest in the C Town property. The mortgage secures a Line of Credit obtained by the husband and wife on 13 October 2008. The amount drawn against it as at about that date was $72,538.28. As at about 14 November 2008, the amount drawn was about $85,138.28 and, on evidence, the Line of Credit facility has now been drawn upon in the amount of $356,000.00.
[42] Lodged on 26 October 2005
Proceedings in the court between the husband and wife commenced on 23 April 2009 when the husband filed an Initiating Application seeking parenting orders. The second respondent filed the wife’s Initiating Application seeking property settlement orders on 11 August 2009.
At the time the second respondent lodged the second mortgage:
a)proceedings for property settlement orders had not commenced; and
b)no caveat had been registered by the husband over the wife’s interest in the C Town property; and
c)no application seeking injunctive relief to prevent the wife dealing with the property had been filed or threatened to be filed by the husband; and
d)no undertaking had been sought from the wife not to deal with her interest in the C Town property; and
e)no undertaking had been proffered by the wife not to deal with her interest in the C Town property; and
f)the prospect of the same being lodged by the second respondent over the C Town property had not been raised with the husband.
As noted above, the parties separated in February 2009.
How did the second mortgage come about?
The second respondent was retained by the wife to act for her in ‘property, parenting and ancillary matters’ against the husband from no later than February 2009.[43] This engagement ended on 21 September 2009, when the second respondent filed a Notice of Withdrawal as Lawyer.
[43] Paragraph 2, affidavit of Cassandra Jane Pullos filed 31 July 2012.
On 29 May 2009, the husband’s then solicitors received correspondence from the second respondent advising that they held instructions to act on the wife’s behalf. Further correspondence passed between the respective legal representatives in the period from the end of May 2009 until 22 June 2009, when the second respondent lodged the second mortgage.
The wife executed a Costs Agreement with the second respondent. Whilst the Costs Agreement itself is undated, the Acknowledgment of Disclosure Notice and the Authority pursuant to the Trust Accounts Act 1973 (Qld) are both dated 3 June 2009.
On 16 June 2009, the wife signed the second mortgage. It appears she did so after receiving independent legal advice from Frampton Lawyers.[44] That firm provided the second respondent with the second mortgage.[45]
[44]The Independent Solicitor’s Certificate dated 16 June 2009 notes that Mr Frampton had been provided with an undated and unsigned Costs Agreement, a Form 2 mortgage and a Registered Memorandum registered under dealing 710934930.
[45]By correspondence dated 16 June 2009, enclosing the documents specified in paragraph 9 of Ms Pullos’ affidavit filed 19 November 2010.
The second mortgage refers to the wife’s interest (99/100 share in fee simple) as the interest being mortgaged. The debt or liability secured is described as “all monies owing pursuant to any written Costs Agreements (including any variation thereto) entered into by the Mortgagor [the wife] and the Mortgagee [the second respondent]”.[46]
[46] Annexure “JST-64”, affidavit of husband filed 11 January 2011.
By Clause 3.01 of Registered Memorandum No.710934930, the wife represented and warranted to the second respondent that, except as set out in the mortgage or disclosed in writing to the second respondent prior to the execution of the mortgage, she had an absolute and indefeasible title to the mortgaged property and that it and her title were free from any encumbrance or trust.
Whilst in no way concluding that the wife intended to misstate the position, it seems to me that the evidence establishes that the wife held at least some of her interest in the C Town property on trust for the husband as a consequence of his provision of funds for its purchase.
Whilst a Guarantor Search Request - Borrower Financial Information document, dated 18 November 2008 (some three months before separation), which had been prepared by the bank and provided to the wife[47] contains information that the husband owned 50 per cent of the C Town property, it also contains the assertion that he owned ‘shares Comsec’ valued at $1,600,000.00 – a matter strenuously denied by the husband and explained as a bank error and about which I have already expressed conclusions above. Given that, on the husband’s case, this document contains such a significant error, I consider that I cannot proceed on the basis that it accurately outlines the extent of any equitable interest held by the husband in the C Town property.
[47] As the guarantor of the Line of Credit secured over the C Town property.
Given the paucity of evidence about the extent of the husband’s direct financial contribution to the purchase price – such that I am unable to discern what amount of the $450,000.00 the parties paid for it was provided by the husband and what amount was obtained by joint borrowings – I consider that I am unable to make any further findings about the extent to which the legal interest held by the wife was imprinted with the husband’s equitable interest.
The second respondent conducted a Title Search of the C Town property on 19 February 2009. Obviously, this established the manner in which the property was owned and the existence of the bank mortgage.
There was no challenge to Ms Pullos’ evidence that the second respondent agreed to accept the second mortgage as security for fees owing and likely to be owed by the wife - and costs likely to be incurred by the second respondent in continuing to act on her behalf - in reliance on the fact of the wife’s legal interest in the C Town property and the matters outlined in paragraph 101 (a) – e).
Discussion of the parties’ submissions in light of the property orders to be made in the property settlement proceedings between the husband and the wife
Ms Pullos submits, on behalf of the second respondent, that if the second mortgage is set aside, there is no prospect the second respondent will recover the debt outstanding to it in the amount of $61,707.21 (being $53,593.17 plus interest). In the context of the property settlement orders which will be made, and which will require the payment of a sum greater than this amount to the wife, I do not accept such submission.
The husband first raised his intention to seek to set aside the second mortgage aside with the Court[48] on 12 November 2009. I accept that, on 13 November 2009, his then legal representatives forwarded correspondence to the second respondent. This correspondence[49] conveyed that:
a)the husband had not consented to the second respondent lodging the second mortgage over the C Town property; and
b)the husband had contributed all of the funds for the acquisition of the C Town property; and
c)it was contended that the second mortgage was an instrument or disposition likely to defeat an anticipated order in the proceedings (namely, the husband’s proposed orders which would see him receive property valued at 80 per cent of the value of the net property of the parties) and, consequently, it should be set aside pursuant to s 106B of the Act; and
d)the husband sought that the second respondent release the second mortgage; and
e)if the second respondent did not release its mortgage, the husband intended to commence proceedings seeking this and would rely on the contents of the correspondence as the basis for an application for costs if he was ultimately successful.
[48] Before Wilson F.M.
[49] Annexure “JST-65”, affidavit of husband filed 11 January 2011.
On 26 November 2009, the second respondent replied[50] to inform the husband that:
a)it did not intend to release the mortgage registered over the wife’s 99 per cent interest in the C Town property as it had done work for “our previous client” for which it was entitled to be paid; and
b)it had no intention of withdrawing the security taken for payment of the fees; and
c)if he pursued an application to set the mortgage aside, costs would be sought on an indemnity basis.
[50] Annexure “JST-67”, affidavit of husband filed 11 January 2011.
In proceedings under s 79 of the Act, the court may make an order that directs a third party to do a thing in relation to the property of a party to the marriage or alters the rights, liabilities or property interests of a third party in relation to the marriage.[51]
[51] s 90AE(2)(b) of the Act.
The second respondent submitted that the court would not accede to the husband’s application (based on s 90AE of the Act) to direct the second respondent to release the second mortgage because it could not be satisfied – as it must be pursuant to s 90AE(3)(b) of the Act – that it is not foreseeable at the time the order is made that to make the order would result in the debt not being paid in full. Additionally, it was submitted that the wife’s financial circumstances are such that if the mortgage was set aside, she would not be in a position to pay the debt she owes the second respondent because, other than calling on the equity available in the C Town property, she does not have the capacity to pay the debt.
I do not accept that submission in the circumstances where, as here, an order is to be made which will provide the wife with the capacity to pay the second respondent the amount asserted by it as the quantum of the debt owing by the wife to it. No application to re-open the matter to revise the quantum of the debt was made by the second respondent.
I consider that an order directing the second respondent to release the second mortgage once it receives payment of the debt owing to it by the wife - by way of direct payment by the husband to it of part of the funds payable to the wife pursuant to property settlement order - is an order that is reasonably necessary or reasonably appropriate and adapted to affect a division of property between the parties to the marriage. I arrive at this conclusion because such an order will enable the husband to refinance the debt over the C Town property and will facilitate the wife’s transfer of her interest in it to him.
Given that the property settlement orders to be made will provide the wife with the capacity to extinguish her debt to the second respondent - in the amount particularised by the second respondent - I consider that it is not foreseeable that to make an order directing the second respondent to release the second mortgage upon receipt of funds on behalf of the wife would result in the debt not being paid in full.
It is clear that the second respondent has been afforded procedural fairness in relation to the making of the order. I am also satisfied, for the reasons I have enunciated, that it is just and equitable to make the order in the terms I have outlined.
To the extent that is possible on the evidence before me, I have taken into account those matters mentioned in s 90AE(4) of the Act.
In the circumstances as outlined above, I am not persuaded to accede to the husband’s application on the basis of s 106B of the Act. I am not persuaded that the wife signed the mortgage to defeat an existing or anticipated property settlement order. I consider it more likely than not that her intention was simply to ensure that she had legal representation. I am also not persuaded that the signing of the mortgage and its lodgement is likely to defeat any property settlement order and note that, given that the equity in the C Town property after taking into account the existence of the bank mortgage is in an amount of about $94,000.00, the husband’s entitlement as determined by me will be met from other existing property.
Costs
Section 117(1) of the Act provides that each party to proceedings under the Act shall bear his or her own costs. However, if the Court is satisfied there are circumstances which justify it, the Court may make such order as to costs as it considers just.[52] In considering what order, if any, as to cost should be made, the Court must have regard to the matters set out in s 117(2A) of the Act.
[52] Section 117(2) Family Law Act (1975) (Cth).
The property received by the husband is relatively modest. If he retains the C Town property, he will do so with increased debt. If the C Town property is sold for the 2012 valuation it is unlikely he will receive anything but limited funds. He will continue to hold all of his entitlements to superannuation but these are not currently available to him. It cannot be forgotten, of course, that he retains significant earning capacity – which may be utilised to earn more than he presently does, particularly as the children grow older and become more and more independent.
In contrast, the wife’s financial position is dire. She has previously been an inpatient, both voluntarily and involuntarily, in various mental health facilities over the last five years or so. There is nothing in the evidence to suggest her medical position is likely to improve. As I have already noted, I am confident in concluding that the prospect of her re-joining the paid workforce are incredibly modest, particularly given her training and qualification as a nurse and her previous asserted and complained about difficulties with the overuse of, and/or addiction to, prescription medication. I am confident therefore in concluding that her capacity to earn income from paid employment is currently non-existent.
No party was in receipt of Legal Aid. No party filed an offer pursuant to either s. 117(2A)(f) of the Act or Rule 10.01 of the Rules. There is no evidence that any party complied with Rule 10.06.
As a consequence of previous orders and agreement the husband has been responsible for meeting the costs of expert reports obtained for use during the parenting proceedings. The evidence appears to me to establish that these reports jointly cost about $14,960.00. A previous order – made 21 September 2009 – reserved the determination of responsibility for the costs associated with obtaining a report from Dr M (an amount of $9,460.00) to the trial.
Having regard to the parties’ respective financial circumstances, I am not persuaded that it is proper[53] to make an order that the wife be responsible for any part of the costs of the reports paid by the husband and obtained for use in the parenting aspect of the proceedings between the parties
[53] s 117 of the Act.
The husband seeks an order that the wife and the second respondent pay his costs of and incidental to the proceedings. In part at least, he relies on the wife’s asserted conduct during the entirety of the proceedings: he asserts that the wife’s conduct in denying forging documents and in maintaining allegations of sex abuse resulted in him spending otherwise unnecessary legal expenses in an amount of about $140,000.00.
It must be remembered that the parties have previously received the benefit of a Costs Certificate issued by the Full Court. Whilst there is evidence that significant costs were paid to the wife as a result of this certificate, there is no particular evidence as to the quantum of the funds provided to the husband. I do not know, therefore, what amount of his legal expenses have already been paid as a consequence of the order awarding a costs certificate. Additionally, I note that, during the parenting proceedings, the wife did not pursue allegations of sexual abuse: rather, the case proceeded with an acceptance of the children’s primary living arrangements. I am not persuaded that the wife’s conduct in the proceedings is such as to justify the making of an order for costs against her. I am not persuaded that the circumstances – as outlined above – justify the making of an order requiring the wife to pay the husband’s costs of the proceedings.
The wife seeks the husband pay her costs of the successful application for leave to re-open the evidence to provide the Court with evidence about the husband’s entitlement to superannuation with HESTA. The consequence of that application was that the court was informed that the husband’s entitlement in this fund is valued at $142,378.73 rather than the $97,417.00 agreed at the hearing.[54] This difference is particularly significant given the modest value of the property of the parties. The wife seeks that an order for costs be made on an indemnity basis, relying on an assertion that it was within the husband’s power to ensure that he complied with his ongoing obligation for full and frank disclosure. Additionally, reliance is placed upon the quantum of the increase in the husband’s entitlement to superannuation as provided for on the reopening. It is clear the wife was successful in this application. It could not be said that the information about the value of the husband’s entitlement to superannuation was inconsequential. The amount sought on an indemnity basis is $4,800.31.
[54] Exhibit 11
I accept the submissions outlined at pages 4 and 5 of the written submissions (dated 5 July 2013) provided on behalf of the wife. I am satisfied in the circumstances of this case that the information ultimately obtained on behalf of the wife about the current value of the husband’s entitlement to superannuation at the hearing was information which could reasonably have been thought to have been within his possession or control. Additionally, given the husband’s propensity to prepare a summary outlining the party’s financial situation on a seemingly regular basis during the course of the marriage, I consider it more likely than not that he was well aware of the value of his entitlement to superannuation. In the event that I am wrong in arriving at this conclusion, I conclude that he should have been well aware of the current value of his entitlement to superannuation.
After taking into account the matters outlined on page 5 of the 5 July 2013 submissions – which I accept - I am persuaded that the circumstances justify the making of an order that the husband pay the wife’s costs of the application to re-open and that it is just that he do so in the amount of $4,800.31.
In the event that the second respondent persists with the application that the husband pay its costs of and incidental to that part of the proceedings in which it was involved, the second respondent will be afforded the opportunity to make submissions in writing in support of such application and it will be considered in Chambers. A similar opportunity will be afforded to the husband in relation to any costs sought against the second respondent.
I certify that the preceding one hundred and thirty six (136) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hogan delivered on 30 April 2015.
Associate:
Date: 30 April 2015
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