Ursino & Baratos - [2023] FedCFamC2F 933

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Ursino & Baratos [2023] FedCFamC2F 933

File number: MLC 1616 of 2019

Judgment of: JUDGE FORBES

Date of judgment: 28 July 2023

Catchwords: FAMILY LAW – application seeking alteration of property interests – effect of business failure on asset pool – whether unsecured creditors of liquidated business are liabilities of the marriage –whether loan to husband for business counted as a liability of the marriage – where wife alleges loan and security against matrimonial property is a sham – where paucity of evidence precludes findings on numerous issues - whether orders necessary to adjust property interests to achieve just and equitable outcome

Legislation: Family Law Act 1975 (Cth) s 75 and 79

Cases cited:
Bevan & Bevan [2013] FamCAFC 116

Chapman & Chapman [2014] FamCAFC 91

Dickons & Dickons [2012] FamCAFC 154

G & G (1984) FLC 91-582

Giunti and Giunti (1986) FLC 91-759

Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143

In the Marriage of Briese (1986) FLC 91-713

In the Marriage of R A Black & J Kellner (1992) 15 Fam LR 343

Stanford & Stanford [2012] HCA 52

Weir & Weir (1993) FLC 92-338

Division: Division 2 Family Law

Number of paragraphs: 195

Date of last submission: 8 August 2022

Date of hearing: 23– 25, 28 March 2022, 27 June 2022

Place: Melbourne

Counsel for the Applicant: Ms Frederico

Solicitor for the Applicant: Hughes Legal

Counsel for the Respondent: Mr McInnis

Solicitor for the Respondent: White & Mason Lawyers
ORDERS

MLC 1616 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:
MS URSINO

Applicant

AND:
MR BARATOS

Respondent

ORDER MADE BY:

JUDGE FORBES

DATE OF ORDER:

28 JULY 2023

THE COURT ORDERS THAT:
Pursuant to section 79 of the Family Law Act 1975 (Cth) (the Act)
Real property and encumbrances
1.As against the Respondent Husband, the Applicant Wife be entitled to the entire right, title and beneficial interest in the property at B Street, Suburb C, and be solely liable for the liability outstanding to the National Australia Bank (the NAB) for Home Loan ending in …54 secured against the Suburb C property.
2.As against the Respondent Husband, the Applicant Wife be entitled to the entire right, title and beneficial interest in the property at D Street, Suburb E.
3.As against the Applicant Wife, the Respondent Husband be entitled to the entire right, title and beneficial interest in the property at F Street, Suburb G and be solely liable for any liabilities secured against that property.
4.Within 14 days of these orders, the Wife take all steps and do all things necessary at her expense to withdraw any caveat which asserts any ongoing beneficial interest in the Suburb G property.

Other property
5.As against the Applicant Wife, the Respondent Husband shall retain the entire beneficial interest in Baratos Pty Ltd as trustee for the Baratos Trust, including H Company.
6.The funds held in the trust account of Hughes Lawyers shall be released to the Applicant Wife.
7.The Respondent Husband shall otherwise retain, for his sole and exclusive use, enjoyment and benefit all other items of property (both real and personal and including choses-in-action and financial resources) in his name, possession and /or control including:
(a)any monies in bank accounts in his sole name;
(b)any superannuation entitlements in his name;
(c)any shares or investments in his name; and
(d)any personal effects and chattels in his possession.

8.The Applicant Wife shall otherwise retain, for her sole and exclusive use, enjoyment and benefit all other items of property (both real and personal and including choses-in-action and financial resources) in her name, possession and /or control including:
(a)any monies in bank accounts in her sole name;
(b)any superannuation entitlements in her name;
(c)any shares or investments in her name; and
(d)any personal effects and chattels in her possession, save for the gun safe and its contents

9.The gun safe and its contents referred to in the preceding order shall be made available by the Applicant Wife for collection by the Respondent Husband within 7 days of these orders.

Liabilities
10.Unless otherwise specified in these orders and save for the purpose of enforcing and monies due under these orders;
(a)each party shall otherwise assume sole responsibility for any loan or liability in that party’s sole name;
(b)each party forgoes any future claims they may have to any superannuation benefits belonging to or earned by the other;
(c)each party be responsible for any debts, including credit card debts, in that party’s name and each will indemnify the other in respect of those liabilities except as otherwise provided in these orders; and
(d)each party shall 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.

Indemnities
11.For the avoidance of doubt, the Respondent Husband indemnity the Applicant Wife with respect to:
(a)any liability of the parties purported to be owing to Mr J; and
(b)any liabilities of or arising from Baratos Pty Ltd as trustee for the Baratos Trust, including H Pty Ltd.

Other
12.All extant applications are otherwise dismissed.
13.Any application by a party for costs shall be made by filing an Application in a Proceeding within 28 days of the making of these orders pursuant to Rule 12.13(3) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)

Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
TABLE OF CONTENTS
Orders
Introduction
The parties
Background
Final Property Hearing
Material Relied Upon
Parties’ Competing Proposals
Wife
Husband

The Course of Proceedings and Evidence at Trial
Applicable Legal Principles
Identifying Parties’ Legal and Equitable Interests
Matters Which Have Been Agreed
Issues Relating to Disclosure and Evidence
Mr J Loan
Personal Guarantees to Creditors of K Company
Cross-collateralised Debt
Unsecured Debts of K Company
Parties’ Indebtedness to the Australian Taxation Office
Loan from Mr L
Motor Vehicle 1 and Firearms

Conclusion in Relation to the Asset Pool
Superannuation
Contributions
Initial Contributions
Contributions During the Relationship
Financial
Non-Financial
_Toc101947826Conclusion on Contributions
Future Needs
What Order is Just and Equitable?
Conclusion
JUDGE FORBES
INTRODUCTION

By an originating application filed on 18 February 2019, the applicant wife (Ms Ursino) seeks orders for the adjustment of property interests pursuant to section 79 of the Family Law Act 1975 (Cth) (the Act).
For the reasons which are explained in this judgment, this matter proved to be complex and challenging. The parties were poles apart in their valuations and composition of the matrimonial asset pool and there were many contested factual issues - some of which were ultimately abandoned. Disclosure and credit issues loomed large. Counsel for the husband at one stage described the case as a "moving feast" and regrettably the Court has been left to deal with a number of matters on vague and imperfect evidence.
Having regard to the evidence that was before the Court, I have determined that it is just and equitable to make orders in terms similar to those sought by the applicant wife. The substantive effect of the orders is that the property of the parties, as I have determined it to be, will be divided approximately 60% to the wife and 40% to the husband.
I have decided that a just and equitable outcome in practical terms, which reflects that division, can be achieved if the parties retain the real estate assets registered in his or her name and remain liable for the encumbrances which attach to those properties. Each party will retain their superannuation balance. Save for one item, each party will keep their personal property and chattels and remain liable for their personal debts.
My reasons for so determining are set out below.
The parties
The wife, Ms Ursino, is currently 47 years old and the husband, Mr Baratos, is currently 48 years of age.
The parties married in 2010.
There are two children of the marriage, X who is currently 11 years old (born in 2012) and Y who is 9 years of age (born in 2014).
The husband has one adult daughter from a previous marriage, Ms M, who is currently 22 years of age (born in 2001).
The parties separated on a final basis on 25 January 2018.
Following separation the wife and children have continued to reside in the matrimonial home at Suburb G, an encumbered property registered in the name of the husband.
The wife currently works part time as a health care worker, earning approximately $1,000 per fortnight. She also receives rental income of $740 per week derived from leasing properties in Suburb E and Suburb C, both of which are registered in her name.
The husband works as a company director in a business which specialises in trades supplies. He earns approximately $5,700 per fortnight. In his trial affidavit, he deposed to having worked in the trade since aged 15.
A previous business operated by the husband, K Company, in which the wife and husband had beneficial interests through trust arrangements, entered administration and was then liquidated after the parties separated.
Orders finalising parenting issues between the parties were made by consent in November 2020.
BACKGROUND
Unless otherwise stated, the following matters were uncontroversial, uncontested or established on the documentary evidence.
In 2003, prior to the parties commencing cohabitation, the husband purchased the property at D Street, Suburb E, Victoria. The wife contends that the property was encumbered at the commencement of the relationship, however, no evidence was ever put to the Court concerning the value of the property at the time of purchase or at the time the parties’ relationship was established, nor was there any evidence about the value of the husband's equity in the property at those times.
Evidence regarding the establishment of the parties’ relationship and the commencement of cohabitation was ambiguous.
It is the wife's case that the parties commenced cohabitation in or around 2008. In the husband's outline of case, he alleges that cohabitation only commenced when the parties married in 2010, although when cross-examined he conceded that the wife spent several nights per week with him for at least two years before that. At paragraph [6] of the husband's final written submissions, he conceded the parties commenced their relationship on or about 2007.
The husband deposes that he built two additional units at the Suburb E property, with the three buildings on the land then becoming 1, 2 and 3 D Street, Suburb E. The wife contends that the parties built the two additional units together between 2008 and 2009. The units were transferred into the wife's name in or about 2009.
In his affidavit the husband deposed that the additional units were built in 2006. However, the husband's final written submissions departed from that evidence. There he stated that the parties "… had acquired a property at [D Street, Suburb E] and intended that it be subdivided […] which occurred in early 2009", effectively conceding (consistent with the wife's evidence) that the development of the Suburb E property began after the commencement of the relationship.
In or around late 2010, the husband purchased the property at F Street, Suburb G, Victoria (the Suburb G property). The husband deposed that he initially intended to develop the property into two townhouses with the assistance of a close associate. However, those plans did not eventuate and in early 2011, the husband became the sole registered owner of the property. The Suburb G property became the matrimonial home of the parties and was subsequently renovated.
During the relationship the husband owned and controlled various entities engaged in trades supplies work. In or around 2012, the husband registered the company N Pty Ltd. He was the sole director and shareholder of the company.
In early 2012, the husband registered a company called K Company with the intention to provide trade supplies outside of Australia.
The wife worked with the husband and in these businesses and was involved in sales and administration. She continued to work until the birth of her first child.
In 2012, the parties' son X was born.
On or about early 2014, the husband's business was restructured. K Company was incorporated as the trustee for a unit trust known as the K Company Trust. The husband and wife were initially appointed as joint directors of K Company.
At or about the same time, two other companies were established as part of the restructure. Baratos Pty Ltd was incorporated as trustee for the Baratos Trust. The husband was the sole director and shareholder. Ursino Pty Ltd was incorporated as trustee for the Ursino Trust. The wife was the sole director and shareholder of that company. Each of these companies, Baratos Investments and Ursino Investments, became unit holders in and beneficiaries of the K Company Trust.
A week later, in early 2014, the wife resigned as a director of K Company.
There was evidence that the unit entitlements in the K Company Trust were initially split 51/49 between Baratos Investments and Ursino Investments, in favour of Ursino Investments. However, in circumstances which were never made clear, the K Company Trust deed was later amended so that the units were split 70/30 in favour of the wife's company, Ursino Investments, and accounting profits were distributed accordingly.
In 2014, the parties' daughter, Y was born.
In late 2014, the husband deregistered the two companies, N Pty Ltd and K Company.
In 2014, the parties purchased two investment properties off the plan, being 1 and 2 B Street, Suburb C. These properties were funded by finance from the National Australia Bank (the NAB) and were registered in the wife's name.
The K Company business was partly funded by business finance from the NAB. The husband gave evidence that the business was successful and grew very quickly, with many projects forecast. Although the business appears to have been very profitable, its continued growth required substantial funding.
The husband alleges that in or around 2016, after not being successful in securing further finance from the NAB, he approached an employee of K Company, Mr J, to secure private finance in order to expand the business. It is the husband's case that Mr J agreed to lend him $550,000 for the business expansion. The husband says that he and Mr J agreed to the terms of this loan on an informal "hand shake" basis. Inter alia, the husband says they agreed that if the loan was not repaid within two years then a formal loan agreement would be entered into that would provide Mr J with the security of a second mortgage over the Suburb G property. It is the husband's case that the wife knew about and acquiesced in this this arrangement, including the mortgaging of the Suburb G property if the parties were to default on the full repayment.
The wife denies the existence of this informal loan agreement with Mr J, contending that it is a sham. She said she knew nothing of it at the time. She contends that the alleged informal loan and the subsequent lodgement of a second mortgage on the matrimonial home are a device of the husband to fabricate a false liability in order to reduce the matrimonial asset pool. The dispute regarding the Mr J loan is separately discussed later in these reasons.
On 25 January 2018, the parties separated on a final basis.
Around the time of separation, the wife made reports to Victoria Police alleging that the husband had forged her signature on a NAB guarantee document in late 2015. The guarantee was for approximately $940,000.
The wife engaged with lawyers regarding the parenting and property issues relating to the parties' separation. On 28 March 2018, the wife, by her solicitor, lodged a caveat on the Suburb G property to protect her claimed equitable interest in the matrimonial home.
The husband contends that on 20 August 2018, due to the default in repayments of the informal loan, a Loan Agreement and Mortgage Form was executed between himself and Mr J, which provided a second mortgage to Mr J over the Suburb G property. A second mortgage in favour of Mr J was subsequently registered.
The wife argues that the Loan Agreement is not a bona fide document and that it is part of a post-separation sham. She also contends that the second mortgage was granted in full knowledge of her caveat and equitable interest in the Suburb G property. This issue is also discussed later in these reasons.
These family law proceedings were commenced by the wife on 18 February 2019. In her originating application she sought orders regarding both parenting and property matters.
At all times since separation the wife and children have continued to reside in the matrimonial home at Suburb G.
In early 2019, the property at 1 D Street, Suburb E was sold for over $600,000. Settlement occurred in early 2019. There were no profits or surplus monies available after debts were discharged and costs paid in relation to this property.
On or around early 2019, K Company entered administration with an external Administrator and controllership.
In early 2019, after the Administrator failed to resolve the creditor position, K Company was placed into liquidation. The husband deposes in his trial affidavit that the liquidation is now complete and that after the payment of employee entitlements and other necessary payments, there will be no distribution to unsecured creditors.
The property at 2 B Street, Suburb C was sold for nearly $400,000 and settled in mid-2020. The net proceeds of this sale, after costs, was approximately $19,400. This money remains held on trust in the Hughes Legal Pty Ltd trust account (the wife's solicitors' trust account).
1 D Street, Suburb E was also sold and settled in mid-2020. The property was sold for $480,000. The net proceeds after costs was approximately $4,500.00, an amount which is also held in the wife's solicitors' trust account. A total of approximately $24,000 is held in the wife's solicitor trust account.
The parties still retain 2 D Street, Suburb E (the Suburb E property) and the property at 1 B Street, Suburb C (the Suburb C property). These properties are registered in the wife’s name and she derives rental income from both units.
For the purposes of these proceedings, the parties agreed that the values of the remaining properties are as follows:
(1)the Suburb G property $1,000,000;
(2)the Suburb E property $495,000; and
(3)the Suburb C property $430,000.
Subsequent to the parties’ separation and the liquidation of the K Company business, the husband has established or has a substantial interest in a new business known as H Pty Ltd. He currently derives an income from that business, and his interest in the business has been valued at $91,000.

The parenting matters were settled by consent on 4 November 2020 and the children currently live with the wife, and spend 4 nights a fortnight and half of all school holidays with the husband.
FINAL PROPERTY HEARING
The final hearing commenced on 23 March 2022.
Both parties were legally represented in this proceeding. Ms Frederico of counsel represented the applicant wife, Ms Ursino, and Mr McInnis of counsel represented the husband, Mr Baratos.
For various reasons the hearing was disjointed and as I stated earlier, something of a moving feast. Notwithstanding the parties had agreed on the valuation of their real estate assets, they held vastly different opinions regarding other elements of the asset pool, including the liabilities. The husband contended that there were no net assets of the marriage as the parties' liabilities exceeded their assets by some millions of dollars due to the failure of the K Company business.
Material relied upon
The wife relied upon the following documents in support of her application for final orders:
(1)Trial Affidavit of Ms Ursino sworn on 2 March 2022;
(2)Financial Statement of Ms Ursino sworn on 2 March 2022;
(3)Affidavit of Mr Q sworn 7 March 2022;
(4)Reply Affidavit of Ms Ursino sworn on 21 March 2022; and
(5)Outline of Case filed on 21 March 2022.
In his opening, the husband said he relied upon the following documents in support of his response to the wife's application:
(1)Affidavit of Mr J sworn on 11 March 2022;
(2)Trial Affidavit of Mr Baratos sworn on 16 March 2022;
(3)Financial Statement of Mr Baratos sworn on 16 March 2022;
(4)Outline of Case filed on 21 March 2022; and
(5)Further Affidavit of Mr Baratos sworn on 22 March 2022
Parties' competing proposals
The parties both advanced positions in their respective Outlines of Case. It is not necessary to set those out because as the case progressed and the parties’ positions shifted as the evidence unfolded (or in respect of some matters failed to materialise).
The parties’ positions were explained in their respective final written submissions as follows:
Wife
In essence, the wife submits that it would be just and equitable for there be no orders adjusting property as between the parties, such that each party retain property in their name and any attached liability. The result of this proposal would leave the wife as the registered owner of the Suburb E and Suburb C properties and responsible for any liabilities (if any) secured by those properties. The husband would keep the matrimonial home at Suburb G and he would remain liable for any encumbrances on that property. The parties would otherwise keep any other personal property in their possession, save for a gun safe and its contents which would be returned to the husband, and each would bear any liabilities for which they are responsible (eg credit card debt). The wife submits that her proposal will effectively result in an overall split of the parties' property interests 60/40 in her favour, which is just and equitable after taking into account relevant s 75(2) factors.
In her final written submissions, the wife also contended for an alternative proposal which would see her keep the Suburb C property and attached mortgage liability and the husband would retain the Suburb G property and assume the mortgage liability. Under this alternative proposal the unencumbered Suburb E unit would be sold and the net proceeds of sale split 80/20 in favour of the wife. The parties would keep their personal property and debts. The wife again submitted that the net effect of this proposal would result in an overall 60/40 split in her favour.
Husband
During the fifth and final day of hearing, the husband made an open offer to the wife. The husband's final written submissions sought orders substantially in the terms of the open offer made in Court.
The essence of the husband's proposal is that all remaining real estate in the asset pool (Suburb G, Suburb E and Suburb C) would be sold and, after discharging all liabilities, including the loan from Mr J, the net proceeds of sale would be distributed to the parties 70/30 in favour of the wife.
The husband also sought orders that he be entitled to the beneficial interest of Baratos Pty Ltd as trustee for the Baratos Trust including the H Pty Ltd business. He proposed that the parties keep all personal property in their possession, save for the return to him of two firearm safes and the contents thereof. The husband otherwise sought orders that the funds held in the wife's solicitor's trust account be split 70/30 in his favour.
The course of proceedings and evidence at trial
The wife, the husband, the wife's tax accountant Mr Q and the husband's former employee Mr J each gave evidence during the trial. They each swore to the truth of their filed affidavits and adopted those affidavits as their evidence in chief. They were each cross-examined.
It is not incumbent on the Court to rehearse or refer to every piece of evidence that the parties relied upon or to make findings in relation to every contested fact. Throughout these reasons I will refer to the parties' evidence only as necessary to resolve relevant disputed issues.
Nonetheless, I have read each of the documents the parties seek to rely on in these proceedings and have taken into account the submissions and evidence. Findings of this Court are made on the balance of probabilities having regard to the nature of the subject matter of the proceeding as well as the gravity of the alleged matters.
Before turning to the issues at the core of this case, I consider it important to make some observations about the course of these proceedings and the state of the evidence adduced in support of the parties' positions. These might contextualise some of the difficulties the Court has encountered in deciding this case.
The matter was listed for final hearing on 23 March 2022 on the parties’ estimate of three days. At the commencement of trial, there was no agreed balance sheet, the parties' respective positions were millions of dollars apart and there were numerous asset pool issues in dispute. There were also serious allegations of fraud and material non-disclosure, legal issues about the proper characterisation of business-related liabilities as well as the usual issues regarding contributions and future needs.
By the conclusion of day two of the final hearing, the wife's evidentiary case was completed and the husband's case had been opened and cross-examination of the husband had commenced.
On the third day of trial, it became clear that the evidence would not be completed within the allotted time after issues emerged regarding the state of the evidence, including the late production of documents relating to the company and unit trust structure, a summary spreadsheet of alleged guarantees and additional bank statements. There were also escalating arguments between counsel about calls for a miscellany of other documents. I suggested that the parties attend upon a mediation with a judicial registrar that afternoon. Both parties agreed and I otherwise ordered that the matter be adjourned to the following week if not resolved.
After an unsuccessful mediation, a Registrar made orders returning the matter to me on the 28 March 2022. The Judicial Registrar also noted that the parties intended to jointly seek an adjournment of the trial in order to issue a subpoena to the NAB to obtain documents which clarified the extent of the debts that they and any corporate entities they had an interest in owed to the NAB.
On 28 March 2022, at the request of the parties, I adjourned the proceeding part-heard to 27 June 2022. The Court also granted leave to the parties to serve subpoenas on the NAB and the Australian Taxation Office (ATO) in order to seek the documents they said would be relevant to these proceedings.
The matter returned to me on 27 June 2022, a day which had been set aside to complete the evidence. At the commencement of the hearing that day, counsel for the wife informed the Court that the adjournment had been successful in so far as the parties had been able to establish the extent of their indebtedness to the NAB. Counsel informed the Court that this was likely to result in a reformatting of balance sheets. Counsel then informed the Court that the "[Mr J] loan" was the only remaining live issue between the parties and the following exchange occurred between the bar and bench to clarify this matter:
His Honour:     I see. Are you envisaging that really the [Mr J] issue is the only live issue between the parties?
Ms Frederico:   Correct, your Honour.
His Honour:     Does resolution of that matter in favour of your client take the asset pool into a net position?
Ms Frederico:   It would, yes. It's a substantial outstanding loan ability. …
His Honour:     About $1 million, or its 950-something.
Ms Frederico:   They're now saying-yes, it was 915 on the-yes. So that's a significant chunk of the pie, so to speak.
His Honour:     Alright. So do I take it then that if that is the issue which remains outstanding between the parties, that the parties are agreed about other elements of the balance sheet?
Ms Frederico:   That's correct, your Honour. (underlining added)
Counsel for the husband did not demur from the statement advanced on behalf of the wife.
Immediately following the above exchange, counsel for the husband read an open settlement offer before the Court (the details of which I mentioned earlier). Relevantly the husband's counsel informed the Court that the debt owing to Mr J was $786,000, not the $915,000 stated in the husband's balance sheet.
The rest of the day on 27 June 2022 involved completing the cross-examination of Mr Baratos and receiving evidence from Mr J, who was also cross-examined.
After the evidence was concluded in June, I afforded the parties an opportunity to put in detailed written submissions and make oral addresses to the Court in August. Through my chambers I sent a note to the parties providing specific guidance as to the matters which should be addressed.
Despite the Court being told on the last day of hearing that the asset pool issues had been agreed between the parties, save for the Mr J loan, the wife's final written submissions identified seven remaining areas of major dispute. These matters are discussed later.
In their final written submissions and addresses, the parties also effectively conceded that the evidence in relation to a number of matters was inadequate, so much so that the Court should ignore two significant issues, namely:
(1)the cross-collateralisation of business loans from the NAB secured against properties owned by the parties; and
(2)the parties' respective indebtedness to the ATO.
The abandonment of these matters due to the paucity of evidence was somewhat symptomatic of other deficiencies in this case. I would have to say more broadly that much of the evidence presented in this case was vague, confusing or appeared incomplete. On numerous occasions during the course of these proceedings the Court expressed concerns, even disquiet, about the state of the evidence, about what was agreed and not agreed between them and the lack of clarity about what issues would ultimately require determination.
The court book and supplementary court book contained hundreds of pages of bank statements, financial documents and other material which was either not referred to or the relevance of which was never adequately explained. It was also somewhat astounding that documents relating to critical matters (such as the alleged cross-collateralisation of loans) were either not produced or had not been sought prior to trial (necessitating the adjournment for service of subpoenas) and that other key documents (such as a signed loan agreement between the husband and Mr J) only emerged during the trial without adequate explanation.
The oral evidence from the witnesses also failed to properly illuminate important issues. Save for wife's tax accountant Mr Q, who I regarded as an objective and helpful witness (albeit on the topic of the wife’s potential tax liability which the parties ultimately abandoned), I found that each of the other witnesses in this case were guarded in their testimony. Each of the wife, the husband and Mr J, to different degrees, were inclined to give general rather than specific responses when questioned, had poor or selective recall of past events, gave inconsistent evidence and seemed unfamiliar with or vague about financial and business-related transactions. I was left with the overall impression that witnesses gave evidence which was partisan to their preferred narrative and that each knew more about the marital financial situation than they were prepared to let on.
In final submissions the husband's counsel accepted that the Court had been left to grapple with very imperfect evidence from both sides. That said, the Court must do the best it can to determine the application in accordance with the statutory scheme having regard to the evidence presented to it. I now turn to the relevant considerations.
APPLICABLE LEGAL PRINCIPLES
Prior to making any order under s 79, the Court must first be satisfied that in all of the circumstances it is just and equitable to make an order altering the parties' property interests.
When considering whether it is just and equitable to make an order, the Court must identify the existing legal and equitable interests of the parties in the property[1].
[1] Stanford & Stanford (2012) 247 CLR 108 (‘Stanford’)
The Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 identified a preferred four-step process for dealing with property matters under the Act, being:
(1)to identify the pool of assets and liabilities generally, and usually at the time of hearing;
(2)to assess the relative contributions of both parties of a financial, non-financial, direct and indirect nature as specified by s 79(4) of the Act;
(3)to consider whether there should be any further adjustment having regard to the matters contained in section 79(4)(d)-(g) which includes any relevant factors in section 75(2) of the Act; and
(4)finally, to determine whether the order the Court proposes to make is just and equitable to both parties[2].
[2] Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143, [39] (Nicholson CJ, Ellis and O’Ryan JJ)
In undertaking the first step outlined above, the Court must act with reasonable precision in both identifying and valuing the property pool. However, in the subsequent steps, the Court is not required to assess contributions with mathematical precision[3].
[3] G & G (1984) FLC 91-582 (Nygh J)
This approach was approved in Bevan & Bevan [2013] FamCAFC 116, where the Full Court of the Family Court of Australia considered the High Court's decision in Stanford & Stanford [2012] HCA 52 (‘Stanford’).
Stanford requires the following matters to be determined in applications brought under section 79 of the Act:
(a)whether the parties have separated;
(b)the assets and liabilities of each party;
(c)the contributions of each party;
(d)the future needs of each party;
(e)bearing in mind all of the foregoing matters, whether it is just and equitable to make any orders altering the interests of the parties in their property; and
(f)what orders, if any, are just and equitable in all the circumstances of the case.
Stanford does not require these matters to be addressed in any particular order as they merely illuminate the path to the ultimate result[4]. In most cases, it would seem rational to consider them in the order set out above. It does not seem to me to be possible to determine whether it is just and equitable to make an order altering the parties' interests in their property without first determining the other matters mentioned above.
[4] Bevan v Bevan [2013] FamCAFC 116 at [71] per Bryant CJ and Thackray J
IDENTIFYING PARTIES' LEGAL AND EQUITABLE INTERESTS
There was no joint balance sheet tendered by the parties. In each outline of case, the parties produced a balance sheet which listed the assets and liabilities that they contend should form part of the matrimonial pool. The composition of the pools was vastly different.
For the purposes of identifying what appeared to be in dispute (at least initially), the following consolidated table sets out the various items derived from the competing balance sheets:

ASSETS Ownership Value Wife Value Husband Value agreed / to be determined

Suburb C property Wife $430,000 $430,000 Agreed

Suburb E property Wife $495,000 $495,000 Agreed

Suburb G property Husband $1,000,000 $1,000,000 Agreed

Motor Vehicle 2 Husband $12,000 $12,000 Agreed

Motor Vehicle 3 Husband $47,000 $47,000 (subject to Finance Company Agreement) Value agreed

Motor Vehicle 4 Husband $3,000 $3,000 Agreed

Motor Vehicle 5 Husband E$120,000 Not included

Motor Vehicle 6 Husband E$42,863 Not included

Motor Vehicle 7 Husband E15,000 Not included

Motor Vehicle 8 Husband $3,000 Not included

Motor Vehicle 9 Husband E$20,000 Not included

Motor Vehicle 10 Husband Not known Not included

Motor Vehicle 11 Husband Not known Not included

Motor Vehicle 12 Husband $76,712 Not included

Tool 1 Husband E$302,115 Not included

Tool 2 Husband E$11,187 Not included

Tool 3 Husband E$1,500 Not included

Baratos Pty Ltd t/a “H Pty Ltd” Husband $91,000 $91,000 Agreed

Companies and trusts Nil

Wife Household contents Wife $5,000 $10,000 Not agreed

Husband Household contents Husband $5,000 $3,000 Not agreed

Funds held in Hughes Legal Pty Ltd trust account on behalf of Wife Wife $24,335 $24,335 Agreed

Firearms Husband $26,000 Not included

Motor Vehicle 1 Husband E$36,500 (add back) Not included

Wife’s funds held in bank accounts Wife $207 Not known

Husband’s cash at ANZ – Baratos Pty Ltd Husband Not included $2,699

Husband’s cash at NAB Husband Not included $1,023

TOTAL NON-SUPERANNUATION ASSETS $2,737,419 $2,114,057

LIABILITIES Ownership Value Wife Value Husband Value agreed / to be determined

NAB Home Loan, Suburb G property Joint $526,023 $526,023 Agreed

NAB Home Loan secured across Suburb C property Joint $105,071 $97,000 (subject to g’tee)

Suburb E property Joint Nil Subject to g’tee

Various credit card debts (NAB Credit Card and AMEX Credit Card) Husband $6,588 $6,588 ($5,388 and $1,200 respectively) Agreed

Husband’s ATO Debt Husband $117,000 $117,000 Agreed

Wife’s estimated ATO Debt Wife E$400,000 E$300,000 Not agreed

Credit card debt Wife $19,272 Not included

NAB debt (K Company) secured against all properties Joint Not included $936,769

Personal guarantee with respect to K Company by the Husband Husband Not included $530,000

K Company unsecured creditors Joint Not included $2,681,576

Husband’s Finance Company Loan Husband $57,000 $57,000 Agreed

Mr J Loan (second mortgage over the Suburb G property) Joint Not included $915,000

K Company ATO debt Husband Not included $371,000

Mr L loan Husband Not included $25,000

Child support arrears Husband Not included $6,273

White and Mason legal fees Husband Not included $250,000

TOTAL LIABILITIES $1,231,409 $6,819,229

TOTAL NETT NON-SUPERANNUATION ASSETS $1,506,010 -$4,705,172

SUPERANNUATION ASSETS

Super Fund 1 Husband $26,588 $26,588

Super Fund 2 Wife $32,000 $25,566

TOTAL JOINT SUPERANNUATION ASSETS $58,588 $52,154

The upshot of the above is that the wife claims that there is a net equity in the asset pool of just over approximately $1m. The husband contends that the matrimonial pool is in a negative asset position with net liabilities of approximately $4m. The husband's position is that there are no assets to be distributed and that all properties should be sold and applied to meet the outstanding debts. The difference between the parties is nearly $6m.
Matters which have been agreed
When the parties came back after the adjournment they informed the Court that a number of matters did not have to be determined and that they had agreed on other balance sheet items. The Court was informed by both of them that the only material difference was whether the Mr J loan was a liability of the marriage. As mentioned, I discussed this with parties and assumed that they would reformulate the balance sheet to reflect their agreement.
When it came to the parties submitting their final submissions, the wife's submission did include a reformulated balance sheet, but the husband's did not. Unhelpfully, the husband’s counsel said he relied on his outline of case and the submissions did not engage with the asset pool items in any detail.
Moreover, contrary to what was indicated to the Court on the final day of evidence, the wife's final written submissions identified six remaining outstanding issues in addition to the Mr J loan, namely:
(1)whether findings needed to be made in relation to the alleged loan from the NAB to K Company that was secured by way of guarantee of the parties;
(2)whether any personal guarantee given by the husband with respect to K Company should be counted as a liability to the marital asset pool;
(3)whether the various ATO liabilities of the parties should be included in the asset pool;
(4)whether the unsecured debts of K Company should be treated as liabilities of the marriage;
(5)whether the proceeds of sale of the husband's Motor Vehicle 1 and rifles should be ‘added back’ to the asset pool; and
(6)whether the loan from Mr L should be included within the asset pool.
Notwithstanding the parties having been informed on numerous occasions throughout the trial, that they were required to inform the Court precisely as to what was and what was not agreed between them, the situation remains very unclear.
Based on the above balance sheet, it appears that the parties agree on values for the following assets in the pool:
·Suburb C property;
·Suburb E property;
·Suburb G property;
·Motor Vehicle 2;
·Motor Vehicle 4;
·Funds held in Hughes Legal Pty Ltd trust account on behalf of Wife; and
·Baratos Pty Ltd t/a “H Pty Ltd”.
It is also evident that the husband and wife agree or substantially agree on the following liabilities of the marriage:
·NAB Home Loan over Suburb G property;
·The mortgage on the Suburb C unit;
·Husband's various credit card debts; and
·Husband's Finance Company loan.
There are also minor differences in the estimated superannuation balances, although they are substantially similar.
Issues relating to disclosure and evidence
Before embarking on an exploration of each of the contested issues, and further to my earlier comments about the evidence in this case, it is also appropriate to make some observations about the obligation parties in family law proceedings have to make a 'full and frank disclosure' of all relevant financial circumstances. This issue arises because each party has raised against the other allegations that the other party has failed to make proper disclosure of their respective financial circumstances.
The Federal Circuit and Family Court of Australia Rules 2021 and the predecessor Federal Circuit Court Rules 2001 (the Rules) require parties to make full and frank disclosure of all relevant financial circumstances in financial proceedings[5]. Apart from requiring each party in financial proceedings to file a Financial Statement, the Rules also require the timely production and supply of relevant documentation. If one party fails to comply with that obligation, it would theoretically be “open to that party to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require”[6].
[5] Rule 6.06 of the Federal Circuit and Family Court of Australia Rules 2021 and Rule 24.03 of the predecessor rules
[6] Guinti and Giunti (1986) 11 Fam LR 160 at 165; [1986] FLC 91-759 at 75,555
As to the central importance of financial disclosure in proceedings of this kind, Smithers J in In the Marriage of Briese (1986) FLC 91-713 stated:
"I believe that the conclusion of the House of Lords in the case of Livesey v Jenkins is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of discretion. This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required. In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred."[7]
[7] In the Marriage of Briese (1986) FLC 91-713 at 75,181
The importance of the obligation for parties to make full and frank disclosure of financial information cannot be overstated. It is fundamental to the task the Court is called upon to undertake in cases seeking an adjustment of property interests under s 79 of the Act.
The task of doing justice and equity between the parties by the exercise of discretion is made all the more difficult and might even be undermined or frustrated[8] if one or other of the parties deliberately or recklessly misleads the Court or the other party about their financial interests and resources. Disclosure is an ongoing positive obligation which should weigh heavily on the conscience of parties between whom justice and equity is to be done. Disclosure must be full and it must be frank. No moral licence excuses a party from their duty to the Court.
[8] See e.g. In the Marriage of R A Black & J Kellner (1992) 15 Fam LR 343
Where it is established that there has been deliberate or reckless non-disclosure, the Court should not be unduly cautious in making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this kind[9].
[9] Weir & Weir (1993) FLC 92-338; (1992) 16 Fam LR 154
Suffice to say I have borne these principles in mind in my consideration of the contested issues in this case and in the exercise of my discretion.
Whether the Mr J loan should be regarded as a liability of the asset pool
The Court's assessment of the Mr J loan is the centrepiece disputed issue in these proceedings. In short, the husband submits that the Mr J loan should be treated as a liability of the marriage whereas the wife contends the informal loan agreement and subsequent formal loan, now purportedly secured by way of second mortgage over the Suburb G property, should not.
It is the husband's case that in or around 2016, K Company employee Mr J, agreed to lend the business an amount of $550,000 to help fund its growth. Mr J had known the husband for just three years and worked for him as a tradesman. In his affidavit Mr J deposed that he had discussions with the husband and wife concerning the terms of this loan, discussing, inter alia, that the loan "was only for a couple of years"[10] and that in lieu of the full amount being repaid, it was agreed that Mr J would take out a second mortgage on the Suburb G property. The wife denies knowledge of these discussions or the alleged loan.
[10] Affidavit of Mr J sworn on 11 March 2022 at paragraph [5]
The husband contends that the amount agreed in the informal "hand shake" agreement was deposited in two tranches. There is evidence of a $500,000 deposit in August 2016[11] and a $50,000 deposit in October 2016[12] made into the husband and wife's joint NAB account. However, under cross-examination the husband conceded that nothing in those bank statement entries identified the deposits as a loan advanced by Mr J. The wife denied knowledge of these deposits despite them being into the parties' joint bank account and said she did not become aware of them until after the proceedings commenced and bank statements were produced.
[11] Court Book at page [703]
[12] Court Book at page [489]
The husband confirmed that over the course of the following two months he made a number of withdrawals from the parties' joint bank account, each of which was recorded as "loan to [Baratos]" or similar, namely:
·August            $100,000;
·August            $150,000;
·September      $50,000;
·September      $150,000;
·October          $33,000; and
·November      $16,000.
The evidence of both the husband and Mr J was that the money was a loan to the business and that it was unsecured. At [4] of his affidavit, Mr J swore that he agreed to lend money to the business and that he was prepared to do so because he knew what work the business had in the pipeline and that he was confident about it.
Mr J gave evidence that he put up his house to get a loan for the husband[13], claiming that he took the money out as a house loan against his own property[14]. He said that he never asked the husband why he did not approach a bank for finance. Mr J conceded that at the time of the “loan” there was no documentation and that he simply took the respondent husband “at his word”, identifying it as a ‘handshake deal with a mate’
[13] Transcript of Hearing on 27 June 2022 at page [64]
[14] Transcript of Hearing on 27 June 2022 at page [70]
Under cross-examination, the husband also maintained that the $550,000 deposited by Mr J was a loan for the business. However, he gave no clear explanation as to why the money was not advanced directly to K Company and why it was paid into the parties' joint bank account. There is no evidence before the Court as to where the funds went after they were withdrawn by the husband.
Mr J also claimed that he had subsequently been paid upwards of $100,000, perhaps $140,000 in interest on the loan. He said this interest had been paid by K Company.
The husband alleged that due to the default in repayments for the informal loan, in August 2018, a formal Loan Agreement and Mortgage Form was executed between himself and Mr J. There was no evidence prior to these documents that Mr J had ever demanded payment. The formal loan agreement provided for Mr J to take a second mortgage over the Suburb G property. In his evidence the husband relied on an undated copy of the Loan Agreement which was signed only by the husband[15].
[15] Court Book at page [463]
Despite the ongoing obligation on parties in family law proceedings to provide full and frank disclosure, it was only on the final day of trial that counsel for the husband produced an executed copy of the formal loan agreement between Mr J and Mr Baratos signed by both parties. The revelation of this document came as a complete surprise to the applicant's counsel and to the Court. No such document had been included in the court book, despite it having been compiled and filed by both parties. The wife's counsel quite properly reminded the Court that she had opened her case, several month earlier, on the basis that the purported loan agreement had not been signed by both parties and that opposing counsel had never sought to correct her or inform the Court that her premise was mistaken. Counsel for the husband told the Court that he assumed that Ms Frederico had a copy of this document, but the basis for that assumption was never adequately explained.
These proceedings have been on foot for more than two years. The Mr J loan has been a central contentious issue all along. Indeed, at the commencement of the final day, counsel for the applicant informed the Court, without interruption from the husband's counsel, that the Mr J loan was the remaining asset pool issue between the parties. But only then and shortly before Mr J was to give evidence, was the applicant informed that an executed loan agreement existed and that it would be tendered into evidence.
The wife contends that the purported Mr J loan and the second mortgage registered on the former matrimonial home are a post-separation sham. She claims that the loan agreement and subsequent mortgage which purports to secure the loan are both confections on the part of the husband and Mr J made with the intention of defeating or diminishing her claim in the proceeding.
In her final written submission, the wife asserts several reasons why the Mr J loan should not be treated as a liability of the marriage, including:
(a)the husband's failure to produce independent evidence as to the source of the loaned funds and how the money was applied by Mr Baratos;
(b)the signed Loan Agreement and Mortgage Form should not be regarded as a bona fide document, as it was only presented on the final day of trial and not at an earlier stage in the proceeding, despite the husband being on notice to do so;
(c)it would be "inherently improbable" that an employee would loan their employer $550,000 unsecured and without any documentation, given the relatively short employment relationship between them;
(d)the timing of the execution of the Loan Agreement and Mortgage Form was suspicious, given it was only seven months following the parties' separation; and
(e)there has been no attempt by the husband to pay the loan amount and no attempt from Mr J to enforce the loan agreement.
In essence, the wife remains dubious as to the authenticity of the Loan Agreement and Mortgage Form, and contends that the alleged loan is an attempt by the husband to exaggerate the indebtedness of the parties in order to defeat or diminish the wife's entitlements. Though the wife cannot deny the registration of a second mortgage in favour of Mr J against the Suburb G home, she asserts that the husband should be solely liable for this encumbrance, because the husband granted the “interest” unilaterally and after being on notice of the wife’s caveat.
In my view, the “handshake between mates” informality of this arrangement tends against there being any terms or conditions agreed at the outset. The evidence leads to the conclusion that it was an informal unsecured advance and I am not persuaded that there was any agreement regarding security. I do not accept that a future second mortgage on the matrimonial property was ever part of the initial agreement. There may have been an intention for the money to be paid back within two years, but it was unsecured, intended for the business and there was no agreement for it to become secured after two years.
The evidence suggests that the proposal to get a mortgage arose later in time after the money had not been repaid and advice had been received by Mr J from a solicitor to “get a mortgage on his house”[16]. This security was affected after the wife had put the husband and Mr J on notice by way of caveat of her equitable interest in the matrimonial home.
[16] Transcript of Hearing on 27 June 2022 at page [72]
It seems to me that the 2018 loan agreement converted what was an unsecured loan to either the business or Mr Baratos personally into a secured arrangement against a matrimonial asset. I do not accept the evidence that the 2018 loan agreement merely documented the terms of the oral handshake in 2016. The better view is that loan agreement was in fact a new agreement, made post-separation and without knowledge of the wife, whereby the husband agreed to a second mortgage upon the matrimonial home, for which he is the sole registered owner. I do not accept the husband’s evidence that the wife knew about this or that it was discussed with her, as some months previously the wife had lodged the caveat to protect her equitable interest and prevent dealings in that home.
The monies advanced by Mr J in 2016 should properly be regarded as an unsecured loan to the failed business. At the time the loan was made, it was secured only by Mr J's belief in the good fortune of the business. Mr J worked in the business as an employee and says he lent money on the basis that it would be applied to the business. The husband gave evidence that he applied the money to the business, although there is no documentary evidence to support this. The documentary evidence only shows that the funds were withdrawn and marked as “loans to [Baratos]”. Counsel for the husband conceded that was the end of the money trail.
The agreement of the husband to give Mr J a second mortgage security occurred post separation and in the knowledge of the wife's equitable interest in the matrimonial home. I accept the wife's submission that the 2018 arrangement between Mr Baratos and Mr J was intended to diminish the wife's claims in this proceeding.
In my view, in the circumstances, it is not just and equitable to hold the wife liable for any part of the so-called Mr J loan and it should not be regarded as a liability of the marriage.
Whether personal guarantees given by the husband to creditors of K Company should be treated as liabilities of the asset pool
The husband asserts that he gave personal guarantees to various creditors of K Company totalling $530,000. The husband contended that liabilities of the failed company are liabilities of the marriage to the extent that they are supported by personal guarantees of the directors.
The wife submits that this purported debt should be ignored because the husband was unable to provide any evidence of the alleged guarantees and there was no mention of the guarantees within the First Report to Creditors complied by the administrators of K Company[17].
[17] Court Book at page [299], “First Report to Creditors K Company in its own right as trustee for K Company Trust (Administrator appointed)”
At trial, the husband gave evidence that he had “signed” guarantees as a director of the company. In response to that evidence, counsel for the wife called for production of the documents, a call which I consider was entirely appropriate having regard to the husband’s claim that company liabilities should be included on the matrimonial balance sheet. Suffice to say, there was no response to the call for production by the end of the proceeding and there is no evidence before the Court of any such signed guarantees in favour of any supplier or creditor.
Furthermore, there is no evidence that any supplier or creditor has taken steps to enforce any such alleged guarantee, nor is there any reference to the existence of such guarantees in the liquidator’s report.
Due to the paucity of evidence before the Court, I do not accept that the alleged guarantees have been given by the husband or that any asserted liability arising therefrom should be regarded as a matrimonial liability.
Whether the debts that have been cross-collateralised against assets of the parties should be treated as liabilities of the marriage
Much was said during the course of the proceeding about business and other debts being cross-collateralised against the various real estate assets of the parties. However, at the end of the day, there was almost nothing in the way of documentation to evidence the nature and quantum of that alleged cross-collateralisation, nor evidence of any steps taken by the NAB to enforce the security.
The principal reason why this proceeding was adjourned mid-trial was to enable the parties at their request to subpoena bank statements and various documents from the NAB in relation to these issues. All of this ultimately came to nothing.

There was some evidence, albeit very vague, that the wife had been in negotiations with the NAB about being released from some debt, but this evidence was ambiguous and did not inform the issue generally. There was certainly insufficient evidence on which the Court could make any findings about the cross-collateralisation of debts or the amounts involved. Counsel for the husband described it as a “piece of string”.
It was unsurprising that the parties, in their final submissions, consigned the issue of cross‑collateralisation to the proverbial too-hard basket. The common position adopted by them was that it was a matter for the bank to take steps to enforce security and for each of the parties to deal with the issue in the future, should it ever arise.
Whether the unsecured debts of K Company should be treated as liabilities of the asset pool
The husband includes the unsecured creditors of the former business K Company as a liability on his balance sheet. He claims that nearly $2.7 million should be recorded as a liability of the marriage. This claim is misconceived.
K Company was placed into administration and was unable to continue trading. It was then placed into liquidation. The final liquidators report states that insufficient funds will be recovered for there to be any distribution to unsecured creditors in the final winding up[18].
[18] Court Book at page [1264]
Unsecured creditors of the company are not creditors of the parties, in the absence of enforceable guarantees against one or other or both of them. Notwithstanding the evidence of the respondent husband, the Court is not satisfied that such guarantees exist and therefore the unsecured creditors of K Company are not to be regarded as liabilities of the marriage.
Whether the parties' indebtedness to the ATO should be treated as liabilities of the asset pool
The balance sheets proposed by each of the parties identified their estimated indebtedness to the ATO. However, again there was almost no evidence on which the Court could confidently determine the matter, particularly as tax returns has not been filed by the wife for some years. There was an expectation during the proceeding that the tax position of the parties would become clearer, but this proved not to be the case.
The wife, and her current accountant who I considered to be a credible witness, both gave evidence that it was not possible to file tax returns without disclosure of relevant financial information from the company liquidators and the husband's accountant. The wife gave evidence that the ATO had made various demands of her but she had not been able to file tax returns due to the lack of that information. I accept the accountant's evidence that preparation of these returns has been frustrated by a lack of available financial information and a lack of clarity on the part of his client.
I accept that both parties probably do owe tax, but neither the parties nor the Court can quantify the liability. At the end of the hearing, the common position of the parties was that this issue was not one that could be decided by the Court on the available evidence. The respondent's counsel argued that the Court should not engage in speculation and stated that “the tax office will do what the tax office will do”[19].
[19] Transcript of Final Submissions on 8 August 2022 at page [25]
Whether the loan from Mr L should be included as a liability of the asset pool
In the balance sheet filed in the husband's outline of case, he asserts a $25,000 loan to Mr L should be regarded as a liability of the marriage[20]. This claim was not the subject of any evidence or submissions.
[20] Husband’s Outline of Case page [5] item 24
The wife submits that the Court should not take into account this purported debt due to the husband's inability to provide any evidence of the circumstances of this loan. Ultimately, due to there being no evidence put to the Court concerning this asserted liability, I agree with the wife and disregard this debt in formulating the balance sheet.
Whether the value of the Motor Vehicle 1 and firearms should be ‘added back’ to the asset pool
In the husband's financial statement, he disclosed that within the 12 months prior to or following separation, he had disposed of:
(1)Motor Vehicle 1 for $36,500; and
(2)firearms for a total of $3,000.
It is the wife's case that the values of Motor Vehicle 1 and firearms should be added back to the property pool. For this purpose the wife accepts the valuation of $36,500 for Motor Vehicle 1 and initially contended that the firearms should be valued at $26,000.
The husband said that he declared the disposal of Motor Vehicle 1 and a value of $36,500 in his financial statement[21] but said that Motor Vehicle 1 was never owned by him and that he never received any money for it. The husband contended that his interest in Motor Vehicle 1 actually had no tangible value. The husband's evidence is that Motor Vehicle 1 declared in his financial statement was actually owned by his best man. He said that the “disposal” referred to in the financial statement actually involved him giving Motor Vehicle 1 back to his friend.
[21] Husband’s Financial Statement at page [10]
The husband admitted that he helped pay for “maintenance and stuff”[22]. Later in his evidence, the husband said that Motor Vehicle 1 was in his name but that his friend had paid for it. Then the husband said that he and his friend bought Motor Vehicle 1 together as part of an agreement. He said that his wife knew that “we” bought Motor Vehicle 1. Under cross-examination the husband conceded that Motor Vehicle 1 had been in his possession and that he had an interest in it. He also said that he was the owner of Motor Vehicle 1 for the majority of the time.
[22] Transcript of Hearing on 27 June 2022 at page [37]
The husband's evidence about this issue was vague, involved a number of inconsistencies and was generally unconvincing. There was no evidence put before the Court regarding the ownership of the vehicle but it seems clear, on the husband's own evidence, that he had possession of it and significant use. He also conceded that it was in his name and that he was involved in its purchase. In my view, Motor Vehicle 1 should be considered to be an asset of the husband which was disposed of just prior to or after separation and therefore, the amount of $36,500 should be added back into the asset pool.
The evidence regarding the firearms was non-existent. It was not the subject of any submission by either party. I will accept the husband's disclosure of the sale and his valuation of $3,000. This amount will also be added back.
Conclusion in relation to the asset pool
Having regard to the above discussion and findings, I conclude that the composition of the matrimonial asset pool is as follows:

ASSETS

Description Owner Value

B Street, Suburb C W $430,000

D Street, Suburb E W $495,000

F Street Suburb G H $1,000,000

Funds held in Hughes Legal Pty Ltd trust account W $24,335

Household contents W $5,000

Funds in bank W $207

Household contents H $5,000

Motor Vehicle 4 H $3,000

Motor Vehicle 2 H $12,000

Motor Vehicle 3 H $47,000

Baratos Pty Ltd t/a “H Pty Ltd” H $91,000

Firearms (add back) H $3,000

Motor Vehicle 1 (add back) H $36,500

Cash at ANZ – Baratos Pty Ltd H $2,699

Cash at NAB H $1,023

TOTAL NON-SUPERANNUATION ASSETS $2,155,764

LIABILITIES Owner Value

NAB Home Loan, Suburb G H $526,023

NAB Home Loan secured across Suburb C property W $105,071

Various credit card debts (NAB Credit Card and AMEX Credit Card) H $6,588

Credit card debt W $19,272

Husband’s Finance Company Loan H $57,000

TOTAL LIABILITIES $713,954

TOTAL NETT NON-SUPERANNUATION ASSETS $1,441,810

SUPERANNUATION ASSETS

Super Fund 1 H $26,588

Super Fund 2 W $32,000

TOTAL JOINT SUPERANNUATION ASSETS $58,588
SUPERANNUATION

The parties' superannuation account balances appear to be roughly equivalent - with the wife having a nominal superannuation fund balance in the amount of $32,000 and the husband's in the amount of $26,588. The parties did not make submissions as to whether there should be a superannuation split and I do not consider it appropriate to do so.
CONTRIBUTIONS
Section 79 of the Act sets out the various considerations that a Court must take into account when considering what property settlement orders to make. The contributions to be considered cover three aspects of the parties' relationship: direct financial contributions to property, indirect contributions to property and contributions to family.
The task of assessing contributions is a holistic one involving the assessment of all contributions of all types across the whole of the cohabitation and, if relevant, before and after cohabitation[23]. The holistic consideration of contributions covers the period to the date of the hearing[24].
[23] Chapman & Chapman [2014] FamCAFC 91 at [101]
[24] Dickons & Dickons [2012] FamCAFC 154
Initial contributions
It is common ground that at the commencement of the relationship the husband owned a property in Suburb E, however, there is no evidence regarding the value of that property at the time nor evidence of the husband's equity in the property. This issue was raised with the husband's counsel during final addresses and it was conceded that there was no evidence before the Court which would allow determination of these matters.
There was evidence that the Suburb E property had been redeveloped and subdivided into units in approximately 2009. Under cross-examination, the husband conceded that the wife, who worked for him but to whom he was not yet married, did provide some assistance in relation to the redevelopment project, although he maintained that she did so as an employee.
In final written submissions, the husband ultimately conceded that the parties’ relationship commenced in 2007. The parties married in 2010. As mentioned, there was certainly evidence that the wife assisted in some aspects of the redevelopment and that the properties were transferred into her name, most likely for asset protection purposes. Although the husband says that the wife assisted with the redevelopment as part of her ordinary duties as an employee of his business, the transfer of the property into her name prior to their marriage suggests that their relationship was well-established and that they had, by that time, engaged in a joint enterprise. I accept the wife's evidence in this regard.
I accept that the husband's contribution of the property into the relationship may have provided a springboard from which the parties were able to subsequently accumulate assets and a degree of wealth in the marriage. That should be regarded as an important initial contribution, but in monetary terms it is not possible to adequately quantify it without evidence.
In any event, having regard to the length of the relationship and the parties' respective contributions as described elsewhere, the value of the husband's initial contribution assumes less significance over time.
Contributions during the relationship
Financial
It is not in dispute that the husband has been the principal financial contributor to the marriage. Most of the income into the family was derived from the husband's business, K Company, or predecessor businesses.
K Company income was notionally distributed from the business to the Baratos and Ursino trusts. There is some evidence about the proportions in which business profits were distributed (70/30 in favour of Ursino, at least in an accounting sense) but ultimately it appears that cash distributions found their way into the parties’ joint bank account or were expended on the parties’ lifestyle.
In his outline of case, the husband asserts that his trade skills were utilised to earn an income and provide leverage for the parties to engage in several business enterprises throughout the marriage. I accept that evidence and conclude that the husband was the controlling mind of those business activities. Although the wife was a majority shareholder in K Company via the Ursino Trust, she deposed in her trial affidavit to having very little involvement with matters relating to the company throughout the marriage, asserting that the husband was quick to anger if she were to ask about business related issues[25].
[25] Wife trial affidavit at paragraph [16]
The wife was paid a salary by K Company during the marriage. She worked for the husband's business early on but later was paid as a stay-at-home mother and she performed certain administrative assistance. This money too found its way into the joint account of the parties and should be regarded as a financial contribution by her.
During the relationship, the husband and wife purchased three other properties being the property in Suburb G and two units in Suburb C. Income during the relationship was derived from rental income from the units they own Suburb E and Suburb C. The precise amount of rental income from these properties over the period of the marriage was not the subject of any detailed evidence, but it appears that the income was applied to mortgage costs and that there was little net gain when these properties sold.
Non-financial
The wife was not employed in full-time work during the relationship following the birth of her first child in 2012. She submits that she was responsible for the welfare of the household and raising the two children aged 9 and 11, contending that this arrangement was agreed between the parties as it enabled the husband to focus on building the business. The husband did not disagree.
The wife also submits that she contributed to the husband's business by providing certain guarantees on loan from the NAB - but as discussed these guarantees cannot be established on the evidence. Having regard to the parties’ joint position that these guarantees (if they exist) should be ignored, it would be inconsistent for me to regard this as a contribution by the wife.
The wife also asserts that she was responsible for managing the parties' rental properties, insofar that she was responsible for paying insurance, rates, agent fees, body corporate fees and other expenses[26]. She was also supportive of the husband by helping him host business related social events in the home and enabling him to pursue and grow the business.
[26] Wife trial affidavit at paragraph [41]
Conclusion on contributions
Having regard to the length of the relationship and the fact that the parties purported to work for a common purpose, including the important task of raising a family and allowing the husband to focus on running a business, I am satisfied that the parties' contributions over that period should be regarded as equal.
Future needs
The Court must take into account the s 79(4)(d)-(f) considerations and each of the factors in subsection 75(2) as far as they are relevant to the particular circumstances of the case.
Pursuant to the final parenting orders the wife has primary care of the children, and they spend overnight time with the husband four nights every fortnight. The parties' two children are currently primary school aged (aged 9 and 11 respectively). There can be no doubt that they will require close supervision and care by their mother for some years to come as they progress through secondary school. The mother's childcare obligations certainly limit her ongoing capacity to work, although hopefully over time she will be able to develop a career as the children mature.
The husband and wife are a similar age and they both currently work. As mentioned earlier, the wife is currently employed part-time as a health care worker, earning approximately $500 per week, and the husband works full-time as a company director earning approximately $2,850 per week. In the husband's outline of case, he properly concedes that his earning capacity is higher than that of the wife.
The wife enjoys good health and expects to work into the future. In the husband's outline of case, he submits that he suffers from long term back pain that will impact his future employment in the trade (s 79(4)(d) of the Act). However, the husband did not provide the Court with any medical evidence that demonstrated the existence of this back pain, or the likely ongoing effect that it will have on his earning capacity.
Since November 2021, the wife had received child support payments from the husband in the amount of around $500 per week. Within the wife's final written submissions, she submitted that she has not lodged any taxation returns with the ATO since 2016 due to concerns around alleged distributions made to Ursino Pty Ltd. As a result, she has been ineligible to receive Centrelink payments, however, she anticipates that this will be remedied in the near future.
At trial, the husband gave unchallenged evidence that he pays school fees for the children and makes other contributions toward expenses incurred in respect of their sports and extracurricular activities. It also appears to be accepted that the husband provides funds from time to time to pay for other child related outgoings. I accept that evidence.
The wife gave evidence that during the marriage rental income from the parties' properties was applied to the mortgages on those properties. However, after separation, she said that rental income from their remaining properties was directed to her to ensure that she had financial support to bridge that which was not forthcoming from the husband.
During cross-examination, the wife was taken to task about her financial statement[27], which did not disclose the rental income she received from the Suburb C and Suburb E properties. She conceded that the rental income had been erroneously excluded but noted that it had been mentioned in a trial affidavit and that there was no intention to deceive. This was yet another example which undermined the Court’s confidence about disclosure in this case.
[27] Supplementary Court Book page [1498]
As to the quantum of rental, the wife's accountant said that in the 2020 financial year, she received gross rental income of $17,870 (net $11,248) in respect of the Suburb C property and gross income of $21,938 (net $3,531) in respect of the Suburb E property. I regard this rental income as a financial resource for the wife and it should be taken into account in assessing her overall needs.
The husband, through Baratos Investments, has a significant equity stake in the business H Pty Ltd. The husband's balance sheet values the interest of Baratos Investments equity in H Pty Ltd at $91,000. This estimate is supported by a valuation obtained by the husband's solicitors from valuer Mr R, which was completed in February 2022[28].
[28] Husband’s Affidavit of 16 March 2022, annexure B-2 at page [25]
According to the wife, the valuation of the husband's new business should be regarded as conservative. She submits that H Pty Ltd is in effect a rebirth of the former liquidated business with many of the same employees and customers. She also submits that the business has significant potential as a source of future income for the husband.
In my view, consistent with the submission of the applicant wife, $91,000 valuation placed on the husband's equity in the new business appears to be conservative. I accept that it is supported by an expert valuation, but it is a valuation which was made early in the life of the new business and in circumstances where the economy was still suffering the impacts of the COVID-19 pandemic.
I am satisfied on the limited evidence in this case that H Pty Ltd is a business which is similar to the once successful business operated by the husband, which at one stage during its life had a turnover of several million dollars per annum. Although the evidence about this new business is sparse, I am also satisfied that H Pty Ltd has a number of employees from the previous business (Mr J included) and that, subject to good management, it should prove to be very profitable over time.

I also note that the report of the valuer states that the husband's market annual remuneration for valuation purposes should be in the order of $165,000 per annum. For the purposes of determining the parties' respective future needs, I consider this estimate to be reasonable.
The husband also gave evidence that the value of vehicles in his possession total $62,000. This estimate is supported by a valuation undertaken by the S Company, who published their report in February 2022[29]. Under cross examination, the husband gave evidence that Motor Vehicle 5 and all other cars identified in the wife’s balance sheet were sold in 2019. He said that there was no equity in any of the vehicles because they were all under finance.
[29] Husband’s Affidavit of 16 March 2022, annexure B-2 at page 42
Having regard to all of those matters above, including the ages of the parties’ children and the disparity in future earning potential, in my opinion the future needs of the parties favours an adjustment of 10% in the wife's favour.
What order is just and equitable?
In Stanford, the High Court noted that “whether it is 'just and equitable' to make an order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist”[30].
[30] Stanford at [39]
Section 79 does not operate to create a presumption that property interests of parties should be altered. The Court must have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
Based on the net value of the asset pool, a 60/40 split of the net assets in the wife's favour would entitle her to $895,086. Taking into account the overall circumstances of this case I consider that to be just and equitable.
The next question which arises is what if any adjustments to the property interests of the parties is necessary to ensure that just and equitable division.
The respondent wife contends that equity can be achieved by making orders which do not interfere with the parties' registered ownership of real estate assets. I agree with that general approach, but I disagree that a mere declaration to that effect under s 78 is appropriate.
Taking into account the agreed valuations of properties, orders that each party “keep their own” will deliver to the wife a slightly lower outcome than 60% of the net asset pool. However, if a distribution was to be made after liquidating all real estate assets (as proposed by the husband) costs associated with the advertising and sale of properties and discharging of mortgages will invariably incur fees and charges which will diminish the overall amount available for distribution. For that reason the proposal advanced by the wife, although it delivers less than 60 % on agreed values, should in practical terms achieve a just and equitable outcome.
I have also had regard to the fact that the wife derives rental income her properties and consider that to be a factor which justifies the orders I have made. I am mindful however that the wife may need to sell one or both properties if she is required to vacate the matrimonial home and find other accommodation.
CONCLUSION
As I have mentioned previously, the Court must do the best it can with the evidence it has. Disclosure has been wanting and the evidence failed to illuminate a number of the issues which had to be decided.
The parties have spent a considerable amount on legal fees and ongoing litigation will not serve them well. These proceedings should be brought to an end and the parties should move forward to rebuild their lives and care for their children.
The orders I have made represent what I consider to be the appropriate outcome having regard to the legislative scheme.

I certify that the preceding one hundred and ninety-five (195) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes.
Associate:
Dated: 28 July 2023

File number:	MLC 1616 of 2019
Judgment of:	JUDGE FORBES
Date of judgment:	28 July 2023
Catchwords:	FAMILY LAW – application seeking alteration of property interests – effect of business failure on asset pool – whether unsecured creditors of liquidated business are liabilities of the marriage –whether loan to husband for business counted as a liability of the marriage – where wife alleges loan and security against matrimonial property is a sham – where paucity of evidence precludes findings on numerous issues - whether orders necessary to adjust property interests to achieve just and equitable outcome
Legislation:	Family Law Act 1975 (Cth) s 75 and 79
Cases cited:	Bevan & Bevan [2013] FamCAFC 116 Chapman & Chapman [2014] FamCAFC 91 Dickons & Dickons [2012] FamCAFC 154 G & G (1984) FLC 91-582 Giunti and Giunti (1986) FLC 91-759 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 In the Marriage of Briese (1986) FLC 91-713 In the Marriage of R A Black & J Kellner (1992) 15 Fam LR 343 Stanford & Stanford [2012] HCA 52 Weir & Weir (1993) FLC 92-338
Division:	Division 2 Family Law
Number of paragraphs:	195
Date of last submission:	8 August 2022
Date of hearing:	23– 25, 28 March 2022, 27 June 2022
Place:	Melbourne
Counsel for the Applicant:	Ms Frederico
Solicitor for the Applicant:	Hughes Legal
Counsel for the Respondent:	Mr McInnis
Solicitor for the Respondent:	White & Mason Lawyers

MLC 1616 of 2019
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:	MS URSINO Applicant
AND:	MR BARATOS Respondent

ORDER MADE BY:	JUDGE FORBES
DATE OF ORDER:	28 JULY 2023

ASSETS	Ownership		Value Wife		Value Husband	Value agreed / to be determined
Suburb C property	Wife		$430,000		$430,000	Agreed
Suburb E property	Wife		$495,000		$495,000	Agreed
Suburb G property	Husband		$1,000,000		$1,000,000	Agreed
Motor Vehicle 2	Husband		$12,000		$12,000	Agreed
Motor Vehicle 3	Husband		$47,000		$47,000 (subject to Finance Company Agreement)	Value agreed
Motor Vehicle 4	Husband		$3,000		$3,000	Agreed
Motor Vehicle 5	Husband		E$120,000		Not included
Motor Vehicle 6	Husband		E$42,863		Not included
Motor Vehicle 7	Husband		E15,000		Not included
Motor Vehicle 8	Husband		$3,000		Not included
Motor Vehicle 9	Husband		E$20,000		Not included
Motor Vehicle 10	Husband		Not known		Not included
Motor Vehicle 11	Husband		Not known		Not included
Motor Vehicle 12	Husband		$76,712		Not included
Tool 1	Husband		E$302,115		Not included
Tool 2	Husband		E$11,187		Not included
Tool 3	Husband		E$1,500		Not included
Baratos Pty Ltd t/a “H Pty Ltd”	Husband		$91,000		$91,000	Agreed
Companies and trusts	Nil
Wife Household contents	Wife		$5,000		$10,000	Not agreed
Husband Household contents	Husband		$5,000		$3,000	Not agreed
Funds held in Hughes Legal Pty Ltd trust account on behalf of Wife	Wife		$24,335		$24,335	Agreed
Firearms	Husband		$26,000		Not included
Motor Vehicle 1	Husband		E$36,500 (add back)		Not included
Wife’s funds held in bank accounts	Wife		$207		Not known
Husband’s cash at ANZ – Baratos Pty Ltd	Husband		Not included		$2,699
Husband’s cash at NAB	Husband		Not included		$1,023
TOTAL NON-SUPERANNUATION ASSETS		$2,737,419	$2,114,057
LIABILITIES		Ownership		Value Wife	Value Husband	Value agreed / to be determined
NAB Home Loan, Suburb G property		Joint		$526,023	$526,023	Agreed
NAB Home Loan secured across Suburb C property		Joint		$105,071	$97,000 (subject to g’tee)
Suburb E property		Joint		Nil	Subject to g’tee
Various credit card debts (NAB Credit Card and AMEX Credit Card)		Husband		$6,588	$6,588 ($5,388 and $1,200 respectively)	Agreed
Husband’s ATO Debt		Husband		$117,000	$117,000	Agreed
Wife’s estimated ATO Debt		Wife		E$400,000	E$300,000	Not agreed
Credit card debt		Wife		$19,272	Not included
NAB debt (K Company) secured against all properties		Joint		Not included	$936,769
Personal guarantee with respect to K Company by the Husband		Husband		Not included	$530,000
K Company unsecured creditors		Joint		Not included	$2,681,576
Husband’s Finance Company Loan		Husband		$57,000	$57,000	Agreed
Mr J Loan (second mortgage over the Suburb G property)		Joint		Not included	$915,000
K Company ATO debt		Husband		Not included	$371,000
Mr L loan		Husband		Not included	$25,000
Child support arrears		Husband		Not included	$6,273
White and Mason legal fees		Husband		Not included	$250,000
TOTAL LIABILITIES		$1,231,409	$6,819,229
TOTAL NETT NON-SUPERANNUATION ASSETS		$1,506,010	-$4,705,172
SUPERANNUATION ASSETS
Super Fund 1		Husband		$26,588	$26,588
Super Fund 2		Wife		$32,000	$25,566
TOTAL JOINT SUPERANNUATION ASSETS		$58,588	$52,154

ASSETS
Description	Owner	Value
B Street, Suburb C	W	$430,000
D Street, Suburb E	W	$495,000
F Street Suburb G	H	$1,000,000
Funds held in Hughes Legal Pty Ltd trust account	W	$24,335
Household contents	W	$5,000
Funds in bank	W	$207
Household contents	H	$5,000
Motor Vehicle 4	H	$3,000
Motor Vehicle 2	H	$12,000
Motor Vehicle 3	H	$47,000
Baratos Pty Ltd t/a “H Pty Ltd”	H	$91,000
Firearms (add back)	H	$3,000
Motor Vehicle 1 (add back)	H	$36,500
Cash at ANZ – Baratos Pty Ltd	H	$2,699
Cash at NAB	H	$1,023
TOTAL NON-SUPERANNUATION ASSETS	$2,155,764
LIABILITIES	Owner	Value
NAB Home Loan, Suburb G	H	$526,023
NAB Home Loan secured across Suburb C property	W	$105,071
Various credit card debts (NAB Credit Card and AMEX Credit Card)	H	$6,588
Credit card debt	W	$19,272
Husband’s Finance Company Loan	H	$57,000
TOTAL LIABILITIES	$713,954
TOTAL NETT NON-SUPERANNUATION ASSETS	$1,441,810
SUPERANNUATION ASSETS
Super Fund 1	H	$26,588
Super Fund 2	W	$32,000
TOTAL JOINT SUPERANNUATION ASSETS	$58,588