WAMSLEY & LOMBARD - [2020] FCCA 1725

FEDERAL CIRCUIT COURT OF AUSTRALIA

WAMSLEY & LOMBARD

[2020] FCCA 1725

Catchwords:
FAMILY LAW – Property – application by the de facto wife for alteration of property interests pursuant to s 90SM of the Family Law Act – whether the de facto wife made the application within two years after the end of the de facto relationship – where the de facto husband holds interest in a family real estate investments and shares – where both parties claim to have spent significant sums on and be indebted for legal fees – whether debts for legal fees should be ignored.

Legislation:

Family Law Act 1975 (Cth), ss.4AA, 44, 90SF(3), 90SM, 117(2A)

Cases cited:

Clarence v Crisp (2016) 55 FamLR 292, [2016] FamCAFC 157

Trevi v Trevi [2018] FLC 93-858; [2018] FamCAFC 173

NCH v RCH (2004) 186 FLR 240, [2004] FamCA 633

Finlayson v Finlayson (2002) 29 Fam LR 460; [2002] FamCA 898

Applicant:

MS WAMSLEY

Respondent:

MR LOMBARD

File Number:

DNC 394 of 2016

Judgment of:

Judge Young

Hearing dates:

5, 6 & 7 February 2020

Date of Last Submission:

6 March 2020

Delivered at:

Darwin

Delivered on:

26 June 2020

REPRESENTATION

Counsel for the Applicant:

Ms L Morgan

Solicitors for the Applicant:

KJ Legal

Counsel for the Respondent:

Mr M Hibble

Solicitors for the Respondent:

MBA Lawyers

ORDERS

Within 90 days of the date of these orders the respondent de facto husband (“the husband”) is to pay the applicant de facto wife (“the wife”) the sum of $96,665, after a set-off in the sum of $1,000 the wife is to pay for costs, and that such sum/cash payment will be paid to the applicant care of the Trust Account of her solicitor KJ Lawyers & Migration Consultants.
That in default of payment of all or some of the moneys ordered pursuant to Order 1 herein interest shall be charged and become payable on the amount owing at the rate prescribed by prescribed by Rule 22.01 of the Federal Circuit Court Rules 2001 (Cth) (presently at 6.75% p.a.).until such time as all payments are made in full to the wife by the husband.
That the Applicant retain for her sole use, benefit and enjoyment her right, title and interest in:
(a)The real property located at B Street, Suburb C, NT (otherwise known and identified as the property Lot ... Volume ... Folio ...) (“the B Street, Suburb C property”);
(b)Her motor vehicle;
(c)Her superannuation entitlement.
That the Respondent retain for his sole use, benefit and enjoyment his right, title and interest in:
(a)The real property located at D Street, Suburb E, NT (otherwise known and identified as the property Lot ... Volume ... Folio ...) (“the D Street, Suburb E property”);
(b)His motor vehicle;
(c)His interest in the family investment share portfolio and properties and family investment (however defined).
In accordance with section 90XT(1)(a) of the Family Law Act 1975 (“the Act”), whenever a splittable payment within the meaning of section 90XE of the Act becomes payable to or on behalf of the husband from his interest in the Super Fund F (member number ...) (“Super Fund F”), the wife is entitled to be paid (by the trustee) the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount of $30,000 and there is a corresponding reduction in the entitlement the husband would have had but for these Orders.
The operative time for Order 5 is fourteen business days after the service of the final orders on Super Fund F (allowing time for procedural fairness for the trustee to advise the parties and the Court should it object to the form of the orders).
This order binds the trustee of Super Fund F.

NOTATION:

A. The parties note that this Order, and payments made as a result, will be affected by the Superannuation Legislation Amendment (Family Law) Act 2004 which came into effect on 18 May 2004 and the Family Law (Superannuation) Regulations 2001 which together provide for a separate superannuation interest to be created for the non-member spouse and for consequential effects on payments.
AND IT IS FURTHER ORDERED:

That except and unless otherwise specified in these orders:
(a)Each party be solely entitled to the exclusion of the other to all other property (including real property) and chattels of whatsoever nature and kind in the possession and/or control of such party or in which the party has an interest as at the date of these orders and that for this purpose funds in bank accounts and shares are deemed to be in the possession of the person whose name appears on the bank's record thereof; insurance policies are deemed to be in the possession of the person who took out the policy; superannuation entitlements are deemed to be in the possession of the person who is named as the worker to whom the entitlement or benefit is payable, and chattels (including but not limited to motor bikes, cars, personal effects, jewellery and other items) are deemed to be in the possession of the person with the control of the said items as at the date of these orders.
(b)Each party is solely liable for and is to indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders or to which the party has in their possession, care and control including but not limited to the mortgages attached to any real property each party is to retain pursuant to orders 4 and 5 herein.
(c)Each party is solely liable for and is to indemnify the other against and with respect to all and any all and any personal or private loans, mortgages, lines of credit, credit card debt and all and any other debt whatsoever in their respective names or to which they are otherwise liable.
That the parties will execute all documents and do all acts and things necessary to give validity to and operation of these orders and if a party refuses or neglects to execute a document or to do any such thing or act:
(a)A Registrar of the Federal Circuit Court of Australia is appointed to execute such document or to do such act or thing in the name of the defaulting party under section 106A of the Family Law Act 1975 (Cth) and
(b)The defaulting party will pay all reasonable solicitor/client costs incurred by the non-defaulting party for the purpose of enforcing any order or part thereof and such costs will be paid on a party/party or indemnity basis.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 394 of 2016

MS WAMSLEY

Applicant

And

MR LOMBARD

Respondent

REASONS FOR JUDGMENT

(As Corrected)

This is an application for alteration of property interests pursuant to s 90SM of the Family Law Act (“the Act”). The respondent de facto husband (“the husband”) asserts that the application of the de facto wife (“the wife”) was not made within two years after the end of the de facto relationship and is, therefore, out of time pursuant to s 44(5) of the Act. If the application is out of time he opposes any extension of time on the ground of hardship put forward by the wife.

Background

The applicant is 44 years old. She formerly worked as a health care worker but now works for an organisation in Darwin. She is also undertaking studies. The respondent is a public servant. The parties have a daughter who is ten years old. She spends equal time with each of her parents.
The parties met in 2004 in Town G, a regional town in the Northern Territory. The applicant’s mother lived there and the applicant was employed as health care worker. The respondent was posted there as a public servant. The wife said the parties began living together at the end of 2005 when they moved into housing provided by the husband’s employer. According to the wife, at the beginning of the relationship she owned assets consisting of a Motor Vehicle 1 worth about $35,000 together with personal effects. She said she had a superannuation interest in an accumulation account worth $28,318. She said the husband had a motor vehicle worth about $10,000, personal effects and a superannuation interest worth about $20,000. In addition the husband co-owned four pieces of real estate in Queensland with other members of his family. He owned a 1/5 share of one of the properties and a 1/6 share in the other three properties. He also had a 1/6 interest in a share portfolio with other members of his family.
The husband did not, in broad terms, take issue with these claims although he mentioned a motorbike of indeterminate value. He said at the beginning of the relationship he owed family members $52,226 in respect of a business he had previously conducted and in respect of his motor vehicle. He said his superannuation interest was worth $32,500. The husband said the applicant moved into his work supplied accommodation with him “in or about mid-2006”. He said that “on or about 20 March 2006” he submitted a memorandum to his superior requesting that the wife be recognised as his de facto partner and sought permission for her to reside in the employer accommodation which was granted. The husband did not say expressly whether the wife had moved into the accommodation before permission was granted or after so. However, I note the wife’s initiating application filed 19 September 2016 in response to item 25, “Date parties commenced to live together”, said “May 2006”. I am satisfied that the parties began living together in May 2006.
In relation to credibility, I considered the parties were both mostly truthful but, as often occurs, each tailored aspects of their evidence in accordance with their perceived interests in the case. In general, I was unable to find that one party was more or less credible or reliable than the other although I have reservations in each case.
In 2007 the parties moved to Darwin. In that year they purchased a unit in B Street, Suburb C (“the B Street, Suburb C property”). The property was purchased jointly, according to the wife, for $428,000 with a deposit of $15,000 and the balance was borrowed. The parties resided in this unit. The wife continued in employment as a health care worker and the husband as a public servant.
In 2009 the parties moved to Town H, a remote town, after the husband obtained a promotion to a position as a manager. This was advantageous to the husband’s career, as were his other transfers. The wife apparently obtained some part-time work as a health care worker in Town J, a relatively nearby town, and, in addition, she and the wife of another colleague were given the cleaning contract for the employer.
Around this time the wife became pregnant and the parties’ daughter was born in 2010.
In 2011 the parties purchased a house at D Street, Suburb E (“the D Street, Suburb E property”), a Darwin suburb. According to the wife the property was purchased for $628,000. According to the husband the parties borrowed $413,308, secured by mortgage, and an additional $25,000 from the husband’s family which has since been repaid.
It appears both properties were tenanted although, according to the husband, the rental income was less than the mortgage repayments and the shortfall was made up from his income. The husband said that he made significant savings during the relationship, describing them as “my savings” and as money he “had retained separate from our joint finances”. Different figures were mentioned at different times: $60,000, $70,000 and $80,000, which possibly reflects the amounts at different times from March 2014 onward. The husband’s trial affidavit said that these savings were mostly derived from his tax refunds. He did not provide any more detail but I infer that a significant part of this money was likely to be derived from negatively gearing the jointly owned properties. The husband was at pains in his trial affidavit to assert that the parties kept, as he said, “our finances separate” and that he and the applicant “did not intermingle our finances”. He pointed to the fact that the parties maintained separate bank accounts into which their salaries were paid for most of their relationship until mid-2013 when they opened a joint account to which their salaries were paid and which was used to offset the home loans.
While the parties may have kept separate bank accounts before 2013, I do not accept the husband’s assertion that their finances were “separate” or not intermingled. It is clear that they purchased and owned property jointly, borrowed jointly and were jointly liable for repayment of the borrowings secured by mortgage. The money the husband described as “my savings” appears to have been significantly derived from negative gearing of jointly owned property. The husband’s description is artificial. No evidence was given of how the costs and benefits of the negative gearing were shared between the parties. It is also clear from the husband’s evidence that the parties lived on his income after the wife ceased work when she was pregnant and while the child was young. In other words, as with most marriages and de facto relationships, the relationship was a joint enterprise, with co-mingled financial and non-financial contributions. It is artificial and misleading to focus, as the husband does, on the fact that the parties maintained separate bank accounts for most of the relationship. Their most significant financial relationship, the joint ownership of real property, was not separate.
In 2011 the parties moved to another remote location at Town K where the husband was appointed to the position of manager of his employer. In 2014, according to the wife’s evidence, the husband was transferred back to the Town G employer and the parties lived there for the rest of their relationship.

When did the de facto relationship end?

The husband seeks the dismissal of the wife’s application for alteration of property interests filed on 19 September 2016 on the ground that it was not made within two years after the end of the de facto relationship as required by s 45(5) of the Act. He says that leave to apply after the end of the standard application period should be refused.
The husband argued that the parties “separated” in March 2014 and the wife’s application was, therefore, filed out of time.
The evidence of the parties about the end of their relationship is equivocal and, to a degree, contested. In the wife’s initiating application filed on 19 September 2016 opposite item 27, “Date of final separation”, she said “October 2014”. In her affidavit filed on the same date she said:
[22] In March 2014, Mr Lombard and I decided to separate. We continued to reside in the one home in Town G, co-parent X, retain joint finances, pooling our income and meeting our expenses. This arrangement continued until our employment contracts concluded and both of us returned to reside in Darwin.
[23] Whilst separated Mr Lombard and I continued to live under one roof and our finances remained joint as we agreed for both salaries to continue to be paid into an offset account against our combined real estate loans.
Later in the affidavit the wife said:
[64] Mr Lombard and I agreed to separate but remain living in one home in Town G to save money before we returned to Darwin. Mr Lombard and I saved approximately $108,000. This money was divided equally between Mr Lombard and I and as at 12 February 2015, I had $54,334 available to apply to the reduction of the B Street, Suburb C loan.
In her affidavit filed on 10 January 2018 the wife said:
[37] In March 2014, Mr Lombard and I agreed that our romantic relationship was over however, as previously deposed, we continued to reside under the same roof and pool our income to pay for joint expenses until in or around mid-January 2015 when Mr Lombard and I agreed to each relocate to Darwin and continue to share care of X.
[38] From March 2014 and until January 2015, Mr Lombard and I continued to live as a family in much the same way as we previously did, save that our relationship was platonic.
Later in the same affidavit the wife said:
[64] I had also commenced a romantic relationship with my current partner, Mr L, in 2014.
In her trial affidavit filed 8 November 2019 the wife said:
[35] From on or around March 2014, I realised that the relationship between Mr Lombard and myself was starting to deteriorate. We had [an] open discussion as to where we were heading as a couple. I realised that we [had] drifted apart and wanted different things in our life (sic).
[36] We mutually agreed to live separately after we moved to Darwin in January 2015. However, our decision to cease our romantic relationship occurred on or around October 2014.
The parties agreed that they returned to Darwin in January 2015.
The wife’s evidence in her affidavits filed on 19 September 2016 and 10 January 2018 about the end of the de facto relationship is consistent and to the same effect. Her evidence in her trial affidavit filed on 8 November 2019 is consistent with the earlier affidavits only in part. The wife’s claim that the parties decided to cease their “romantic relationship” in or around October 2014 is inconsistent with her earlier statements to the effect that in March 2014 the parties agreed to separate and from that time their relationship was “platonic”. I am satisfied the wife used this word to mean the sexual relationship of the parties had ceased in March 2014. I reject her evidence that the romantic or sexual relationship of the parties subsisted until October 2014.
The evidence of the husband was reasonably consistent throughout. In his affidavit filed on 1 November 2016 he said:
[37] In early 2014, we decided that the relationship was over and [the wife] expressed a desire to return to Darwin. We agreed to remain in Town G for the remainder of her tenure, and that we continue to reside together (sic) would be financially beneficial to us both when we return to Darwin in early 2015. We remained in Town G until mid-January 2015.
In his affidavit filed on 1 November 2018 the husband said:
[19] The Applicant and I separated in or about March 2014. Subsequent to separation, the Applicant and I discussed the division of the assets between us. It was conciliatory and amicable.
In the same affidavit the husband went on to describe how he transferred the sum of $70,000, in three amounts of $20,000 and one amount of $10,000, from his savings account to his father over a period of a few days from 28 April 2014 to 5 May 2014. The purpose of the transfer, according to the husband, was for his father “to invest on my behalf”. There was no evidence that the husband informed the wife of these transfers and, if so, it might be doubted to what degree the discussions between the parties was “conciliatory and amicable”. The wife said, and I accept, that she was not aware of the money or the transfers at the time.
After the parties ceased living together the respondent asked his father to transfer $70,000 back to him which was effected by seven transfers of $10,000 each between 12 and 18 March 2015.
I do not consider the husband’s account of these transactions to be satisfactory and I consider it likely that his motivation was to attempt to put these monies beyond the wife’s reach. Nevertheless, it is consistent with the husband acting on the intention of the parties to end their relationship.
In his affidavit filed on 1 November 2018 the husband also referred to an “informal property settlement” between the parties which he said “was effected on or about 27 February 2015 (being approximately three (3) months after the Applicant had commenced a relationship with Mr L)”. This evidence would place the commencement of the relationship between the wife and Mr L in 2014.
In his trial affidavit filed on 8 October 2019 the husband said:
[26] The Applicant and I continued to reside together in Town G under one roof from in or about March 2014 (when our de facto relationship came to an end), until in or about January 2015 – when we returned to Darwin. During that time, the Applicant and I lived together in the same household for convenience. Our relationship had been terminated and the Applicant re-partnered a short time later. Having had an opportunity to review the bank statements the Applicant has disclosed, and in particular her Netbank Saver Account (account number ending ...), I note that it shows that she purchased flights to Melbourne in about 2014 for the sum of $800 – which is where she travelled to spend time with her partner, Mr L. In the circumstances, I question the Applicant’s assertions that she commenced a relationship with Mr L in or about late 2014, and say that it may have been as early as in or about mid 2014.
[27] After separation, the Applicant and I were no longer in a loving committed relationship. The applicant and I were mere “flatmates”, who continued to reside for a common purpose to complete our respective contracts in Town H, and to provide for the care of X. Otherwise, the applicant and I lived completely independent and separate lives.
[28] The Applicant and I no longer socialised together and we no longer had sexual relations. This is acknowledged by the Applicant in her affidavit filed 10 January 2018 wherein she deposed that our relationship was “platonic”.
[29] The Applicant and I discussed with each other our respective work commitments so that we could make appropriate arrangements in respect of the care of X.
[30] X was our primary concern in relation to ensuring that there was one of us available to look after and care for her whilst the other one was at work and/or out socialising and/or attending to our own errands.
[31] Subsequent to separation, the Applicant socialised of her own accord and thereafter commenced a relationship with Mr L in about mid-2014 (I am unable to say if the Applicant was involved with Mr L prior to our separation as Mr L was an acquaintance).

The husband’s evidence, apart from the assertions about Mr L, is broadly consistent with that of the wife. The husband acknowledged that the parties agreed to continue to live together in a shared house and to continue to share the parenting of their child. He said nothing about whether household expenses were shared but, in the absence of any denial of the wife’s evidence, I find that they continued to share household expenses. That is consistent with the fact they maintained a joint bank account into which their salaries were paid. Although neither gave detailed evidence about the matter it was not disputed that they continued to service the joint borrowings from joint funds. Both agree that their sexual relationship had ceased. The husband asserted, and the wife did not deny, that they did not publicly present as a couple.
The husband’s trial affidavit asserted that the relationship between the wife and Mr L began as early as mid 2014. This is to be contrasted with his earlier affidavit that did not question that the relationship began in late 2014. The wife was not challenged in cross-examination on this and I accept the wife’s evidence that her relationship with Mr L began in late 2014.
The starting point for determination of when a de facto relationship ended is to determine whether, at the relevant time, it was in existence. A de facto relationship is defined in s 4AA of the Act as follows:
(1) A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b) the persons are not related by family (see subsection (6)); and
(c) having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
Paragraph (c) has effect subject to subsection (5).
Working out if persons have a relationship as a couple
(2) Those circumstances may include any or all of the following:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g) whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children;
(i) the reputation and public aspects of the relationship.
(3) No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.
(4) A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
The Full Court in Clarence v Crisp (2016) 55 FamLR 292, [2016] FamCAFC 157 emphasised the necessity for adherence to the statutory test:
[52] … the task of determining whether a relationship has ended at or before a particular date is precisely the same task that must be performed when determining whether a de facto relationship exists in the first place – i.e. by reference to the indicia laid down in the legislation…
[53] Framing the question in this way pays proper regard to the fact that the Act provides that “no particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship”, and ensures that regard is had to all of the circumstances; not just those which changed on the date the relationship allegedly came to an “end”.
In this case, given the language of s 44(5) which says a party to a de facto relationship may apply for an order “only if” the application is made within the period of two years after the end of the de facto relationship, I consider that the wife has the onus of establishing that she is entitled to so apply. Expressed differently, she must establish, having regard to the statutory indicia in s 4AA, that the de facto relationship between the parties still existed at 20 September 2014, two years before her application. It is not necessary to establish when the de facto relationship ended. Of course, later events or conduct of the parties may be relevant but only to the extent that light is cast on the necessary question.
In deciding whether, in relation to these parties, “having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis” the “circumstances” referred to and which must be considered are those set out in s 4AA(1)(c): Clarence v Crisp, [40].
I now turn to a consideration of the indicia in s 4AA(1). In this case the duration of the relationship of the parties was several years. They resided together in a single household for the entirety of the relationship. The parties did not have a sexual relationship after March 2014 but they did not cease living together until January 2015. Throughout the relationship, and until about January 2015, the parties shared the expense of their joint household, borrowed money and invested in property together and, until March 2014 at least, provided mutual financial support as, for example, when the wife was caring for the parties’ young child. After March 2014, the parties expressly agreed to continue to share a household, to continue to share household expenses, to continue to service joint borrowings for their investment properties and share the expenses of caring for their child. They maintained a joint bank account into which they paid their salaries. Their joint ownership of their investment properties in Darwin continued until early 2015. Their mutual commitment to a shared life ceased by agreement in March 2014 but, significantly, they agreed to defer ceasing living together as a family until 2015. Aspects of a shared life ceased, such as their sexual relationship, but other aspects such as living together and caring for their child continued. There was no real evidence of the reputation and public aspects of their relationship after March 2014 but the wife did not deny the husband’s assertion that they no longer presented as a couple. The wife commenced another sexual relationship in late 2014.
No particular finding in relation to any circumstance is to be regarded as necessary in deciding if there is a de facto relationship: s 4AA(3). The court is to have regard to such matters, and to attach such weight to any matter as may seem appropriate to the court in the circumstances of the case: s 4AA(4). There are no other matters that I consider relevant to the issue other than those I have described.
It can be seen that, in considering the circumstances referred to in s 4AA, some of the indicia of a de facto relationship were absent in September 2014 but some remained present. In particular, in March 2014, the parties’ sexual relationship ceased and they agreed to end their relationship. However, the parties also agreed to remain living together in the same house, sharing expenses, and to care for their daughter until 2015. The agreed to continue to service, through a joint account, their joint investments. I attach particular weight to these latter elements in the circumstances of this case. The parties deliberately decided to maintain some aspects of their lives together, including their financial interdependence and care of their child, until January 2015. The wife did not commence a new relationship until late 2014.
Taking all these circumstances into account I am satisfied that the de facto relationship of the parties continued to exist on 20 September 2014 and, accordingly, the wife’s application filed on 19 September 2016 was made within the period of 2 years after the end of the de facto relationship. To the extent that it is necessary to make a finding, I am satisfied that the relationship ended in October 2014.

The property pool

The parties agreed on many of the items in the property pool and their values. However, there was disagreement about the correct time for valuation and about particular items. The wife submitted that valuations should be those at the time of the informal division of some assets in 2015. However, I am satisfied that the valuations should be those at the time of trial, or as near as possible to the time of trial, in accordance with usual practice. The parties agreed, following professional valuation, on the valuations of the two items of real estate owned by them and the mortgage debt in respect of each. They also agreed on the value of the properties that the husband owns and his share holdings.
The values of the parties’ motor vehicles are those set out in their financial statements, which in the absence of expert evidence, I have treated as admissions against interest.
An item requiring particular notice is the value of the husband’s interest in a family real estate investment and shares. The husband is an owner of a 1/6 share of two properties in Queensland with his father and mother (who jointly own a 1/6 share) and four brothers and an owner of a 1/5 share in a third property with his mother and father and three of his brothers. A fourth property in which he owned a 1/6 share was sold in 2019 before trial. The husband sought advice from a tax accountant, Mr M, which resulted in some calculations in respect of the actual and potential capital gains tax (“CGT”) on these properties. The valuation of the husband’s interest in the properties, after allowance for his part ownership, was, according to Mr M’s calculation, $204,867 (this figure is based on an arithmetical error by Mr M - the correct figure is $196,500 as explained below).
Mr M was also given a list of the shares held in the family share portfolio in which the husband has a 1/6 interest. According to the husband’s father, this was constituted by a beneficial interest in what appeared to be a bare, oral trust, with the husband’s father and mother as legal owners and trustees. According to the letter of instructions, the husband’s interest was valued at $30,124 on 19 August 2019. At the time Mr M did his tax calculations on 4 October 2019 the husband’s interest in the shares were said to be worth $27,645. According to Mr M’s calculation the then listed value of the shares would indicate a capital loss of $5,568 across the husband’s interest in the portfolio if sold on the day of calculation. In fact the shares had not been sold by the time of trial and there was no evidence that they were to be sold or an actual CGT liability was to be incurred in the foreseeable future. In other words, the scenario was hypothetical. I consider that the actual value of the shares should be placed in the balance sheet. However, I accept that the asset has a contingent liability attached of the order indicated by Mr M.
As noted, one of the co-owned properties had been sold in 2019 and the husband had, according to Mr M’s calculations, a current (2019 year) tax liability for CGT of $12,043, that is, the additional amount of tax payable by the husband (I note the husband’s financial statement claims an unpaid tax liability of $14,443 for the 2019 year).
Mr M also went on to calculate the “notional” CGT liability in respect of the remaining properties and the husband’s shareholding. He assumed that the remaining properties and shares were to be sold in 2020 and that the husband’s taxable income from other sources (his employment) was $150,000 a year. He calculated, assuming these matters, that there would be an additional “notional” tax liability of $23,315.
The only difficulty with this, as with the calculation of “notional” CGT on the husband’s share interest, is that there was no evidence that the properties were to be sold in the near or foreseeable future and no evidence of the husband’s taxable income or likely taxable income at that speculative future time. In my view the assumptions on which these calculations are based were not established. In other words, it is simply speculative. I was not assisted by this material.
Another aspect to be noticed is the amount each party claims to have spent, and to be indebted for, on legal fees: $171,000 in the case of the wife and $200,000 in the case of the husband. In the case of the husband, as noted below, he also claimed to have spent $70,000 of savings from the time of the relationship on legal fees, suggesting that he has spent at least $270,000 on legal fees. The parties say they owe the money to their family or, in the case of the wife, her family, Mr L and her former solicitors. Notwithstanding the absence of any independent evidence of the claimed debts, neither party was challenged in cross-examination as to the existence of the debts and, in those circumstances, I will accept that they exist. Nevertheless, in my view, the amounts are disproportionate to the issues and the amount at stake in the trial.
The husband asserted that, because he owed money to his family in respect of his legal costs, his net asset position was negative. As I understood his submission he asserted that the debt had in effect off-set the value of his interest in the investments co-owned with his family. However, there was no evidence that his interest in the co-owned property had actually been encumbered or reduced. There was no evidence that the husband’s interest in the properties had been sold or transferred to the other co-owners. In those circumstances, while the debt might, in practical or informal terms, be secured, at least in part, by the husband’s interest in those properties the interest remains in existence and must be included in the pool. To the extent that the husband asserts that borrowings for legal costs have off-set matrimonial capital assets in existence at the time of the relationship this, in practical terms, is the same as saying that a matrimonial capital asset has been spent on legal costs. Ordinarily that would result in an add-back of the amount spent on legal fees: Trevi v Trevi [2018] FLC 93-858; [2018] FamCAFC 173, [31] – [42]. In my view the correct way to approach this is not to treat it as liquidating or reducing in value any matrimonial assets, which in any event remain in existence. The proper treatment of the parties’ indebtedness for legal costs is further discussed below.
However, an item that should result in an add-back is the husband’s savings accrued during the marriage and since spent on legal costs. In one part of his trial affidavit (paragraph 319) he referred to having received tax refunds totalling $72,186, including a refund of $4,507 for the 2015 year, covering only a part the period of the relationship. The husband also referred to transferring a total of $70,000 to his father between April and May 2014. Elsewhere in his extensive affidavit the husband refers to having retained savings of $60,000 from his tax returns. As noted above, he said this money was spent on legal fees (paragraph 301). The discrepancy in the amount of savings was not explained. Doing the best I can, I find the amount of savings in existence at the time of separation but subsequently spent by the husband on legal fees was $70,000. This amount will be an add-back.
The parties also equally divided the money in their savings account in about January 2015. There was no clear evidence about how the parties spent this money and I do not propose to take it into account. The wife also agreed that she had about $45,000 in savings at the time she applied for finance for the B Street, Suburb C property in 2015. It was not clear how this money was expended. I have decided, in the absence of evidence of how it was spent, not to treat it as an “add-back”. However, I take into account that the wife has had the benefit of this sum. This is further addressed below.
The real properties owned by the parties at B Street, Suburb C and D Street, Suburb E have been valued and associated mortgage liabilities have been agreed. The husband claimed in his trial affidavit that his equity in the investment properties owned with his family was worth $115,547. This was not challenged but for the reasons set out below I do not accept it.
As noted, one of the four investment properties the husband co-owned with his family was sold for $536,500 by the time of trial. According to the husband and his father, the entire sales proceeds were applied to reduce indebtedness in respect of the other properties. The husband’s father said that this reduced the indebtedness from $890,000 (elsewhere a figure of $895,716 was referred to by the husband and his father – the discrepancy was not explained) to $410,000. This is a reduction of $480,000, not $536,500. This shortfall was not explained. Sale agent commission and other costs of sale would not appear to completely account for the discrepancy.
As noted, the husband’s trial affidavit filed on 8 October 2019 claimed that the value of his interest in the remaining three properties was $115,547. This was said to be the gross value of his interest in the properties, $264,833, less $149,286, which the husband claimed was his 1/6 share of the indebtedness in respect of the properties. (The fact that he was a 1/5 owner of one of the properties was not addressed in relation to debt). Accepting the husband’s claim, this would imply that the total indebtedness was $895,716 ($149,286 x 6). However, this does not acknowledge that the indebtedness had been reduced with the sale proceeds of one property. According to the husband’s father, the indebtedness was, as noted, reduced to $410,000. If so, the husband’s 1/6 share of the debt would be $68,333 ($410,000 ÷ 6). This implies that the value of the husband’s interest in the remaining properties is $196,500 ($264,833 - $68,333).
The husband’s financial statement filed on 8 October 2019 claimed his net interest or equity in the family owned properties was $104,786. This calculation was subject to the same error. However, in addition the calculation contained a further arithmetic error about the value of the husband’s 1/5 share of one of the properties valued at $320,000 ($320,000 ÷ 5 = $64,000, not $53,333).
The figure I have adopted for the value of the husband’s net interest or equity in the family owned properties is $196,500.
The husband’s financial statement filed 8 October 2019 stated that he held $18,634 in a Bank N on 4 October 2019. This was not the subject of any other evidence. The husband’s final submissions said that this account stood at $4,146 “as at 7 October 2019”. The husband did not file an updated financial statement. The discrepancy was not explained or addressed. It was not mentioned in the balance sheet contained in the wife’s submissions. I propose to leave the amount as stated in the financial statement.
The parties did not attempt to provide an agreed balance sheet. They each referred to a balance sheet in their separate submissions but, apart from the items of real property, these often referred to different items and values. The parties, for the most part, did not attempt to resolve the inconsistencies in cross-examination. Accordingly, I have used the financial statements of the parties as the basis for determining the pool of assets, unless otherwise stated:

Description	Wife	Husband	Total
Assets
1	B Street, Suburb C	$510,000
2	D Street, Suburb E	$625,000
3	Wife’s car	$6,600
4	Husband’s car	$25,000
5	Husband’s trailer	$500
6	Husband’s equity in family investments	$196,500
7	Husband’s shares	$27,645
8	Wife’s savings	$2,004
9	Husband’s savings (Bank N account)	$18,634
10	Wife’s household contents	$15,000
11	Husband’s household contents	n/k
12	Husband’s cash at bank	$161
13	Add back for husband’s “savings/tax refunds” spent on legal fees	$70,000
Total assets	$533,604	$963,440	$1,497,044
Liabilities
1	B Street, Suburb C mortgage	$472,000
2	D Street, Suburb E mortgage	$530,000
3	Wife’s claimed debts in respect of legal fees	$171,000
4	Wife’s credit card debt	$9,269
Husband’s credit card debt	$3,208
5	Husband’s claimed debt in respect of legal fees	$200,000
6	Husband’s estimated estimate of unpaid tax liability for 2019 (substantially CGT liability from sale of O Street, Suburb P, Qld)	$14,443
Total Liabilities	$652,269	$747,651	$1,399,920
Net assets	($118,655)	$215,789	$97,134
(net assets excluding claimed debts for legal fees)	$52,345	$415,789	$468,134
Superannuation
1	Wife’s Super Fund F	$202,388
2	Wife’s Super Fund Q	$1,112
3	Husband’s Super Fund F	$242,758
4	Husband’s Super Fund R	$60,311
Total Superannuation	$203,500	$303,069	$506,569
Total assets and superannuation	$84,845	$518,858	$603,703
Total assets and superannuation excluding claimed debts for legal fees	$255,845	$718,858	$974,703

The treatment of debts for legal fees

The Full Court in Trevi v Trevi referred to the following paragraphs of the Full Court decision in NCH v RCH (2004) 186 FLR 240, [2004] FamCA 633 as an accurate statement of the correct approach to expenditure on legal fees:
55.    This decision [referring to Finlayson v Finlayson (2002) 29 Fam LR 460; [2002] FamCA 898] appears to confirm the principle that where the payment of legal costs can be regarded as a premature distribution of funds (in which both parties have an interest), it is appropriate to add back those costs as a notional asset. It also confirms the principle that where funds have been borrowed to pay legal fees, and such liability is still outstanding, neither the payment of the fees nor the liability should be taken into account. The decision also supports the proposition that where it is determined that a payment of legal fees should be taken into account as a notional asset, any outstanding liability in respect of those fees should also be taken into account.
56.    In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57.    If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58.    If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
59.    Outstanding legal fees themselves are generally not taken into account as a liability.
60.    If in the exercise of the discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.
I propose to ignore the indebtedness of the parties for money borrowed to pay legal fees. However, I will add back as a notional asset the amount of $70,000 from savings in existence at the time of separation used by the husband to pay legal fees, in conformity with the guidelines in NHC v RCH.

Contributions: non-superannuation

The parties submitted that contributions during the relationship were equal, although the husband adopted a different position in relation to the real property he owned with his family. In relation to this he appeared to deny any contribution by the wife. It was not in dispute that the husband co-owned real properties with his family prior to the relationship. According to the husband’s father, the properties were purchased at various times between 1990 and 2003. Mr Lombard Snr said he and his wife contributed the capital toward the first house purchased in 1990 for $85,000 and thereafter the other purchases were purchased using the equity of the existing property or properties as security for further borrowings. Mr Lombard Snr did not say what amount of capital was contributed. However, it would appear that, apart from the initial capital contribution all or almost all of the growth in equity in the properties was from capital appreciation. Mr Lombard Snr also said that until mid-2019 the co-owners, including the husband, contributed a monthly amount to a fund for the properties, presumably to make up the shortfall between rents received and mortgage payments. The amount of the contribution had increased over time to $300 a month. The husband contributed to this fund throughout the relationship of 8 years and 5 months. This would suggest that the cash contribution during the relationship was somewhat less than $30,000. The wife was aware of this contribution and at one point in her evidence said that she considered the contribution was for the parties’ future.
In addition to foregoing the use of family income, I am satisfied that the wife has made a contribution to the acquisition of this asset by contributing to the welfare of the family and as a homemaker and parent. Further, she supported the husband throughout the period, including accompanying him on his transfers to various employers, some of them remote, so that he might advance his career. Similar observations may be made in relation to the husband’s interest in the share portfolio, although there was no evidence of the initial value of this portfolio or any appreciation in value.
There was no evidence of the amount of the original capital injection for the first real property purchase by Mr Lombard Snr but it was probably at least 80% of the purchase price of the first property or $68,000. If 1/6 of this amount, $11,333, is treated as the husband’s initial cash contribution injection and if the average duration of the husband’s holding is 24 years (say from 1996, the mid-point between 1990 and 2003) to trial and the length of the relationship is 8.4 years then an approximate measurement of the wife’s contribution to the husband’s interest in the family properties and the shares, valued at $224,145, less his initial cash contribution, might be seen as ($224,145 - $11,333) x 8.4/24 x .5 = $37,242. Taking into account that there is no evidence of the original cash contribution for the husband’s shares and that there is likely to be a CGT liability arising at some point in the future which will fall on the husband I would, using a broad brush, ascribe a value of $28,000 to the wife’s contribution to these particular assets or 12.5% of the value of these assets.
Another aspect of initial contributions is that, according to Mr Lombard Snr, at the time he commenced the relationship the husband owed family members $52,226 arising from his business conducted before he became a public servant. Mr Lombard Snr said that the husband repaid this at the rate of $400 a month during the relationship. Over the 8.4 years of the relationship this would equate to $40,320.
As noted, the wife applied some $45,000 of savings to her own benefit following separation. Although there was no clear evidence about the matter, I am satisfied most or all of this sum is likely to have accrued during the de facto relationship. However, in broad terms I consider that this offsets the amount referred to in the preceding paragraph. The husband also submitted that the rents from the B Street, Suburb C property received by the wife should be taken into account. I reject that submission. I consider that simply an instance of the wife getting on with her life following the informal property division.
In respect of the husband’s interest in the family owned properties and shares (in total valued at $224,145), I find the wife’s contribution was 12.5% as noted. In respect of the other non-superannuation assets (in total valued at $243,989) the contributions were equal. This equates to an overall contribution to non-superannuation interests by the wife of 32%.

Contributions: superannuation

I am satisfied that each party contributed to the accumulation of the superannuation interest of the other. This not only because the parties were engaged in a joint enterprise during their relationship in which their contributions can be seen as a joint savings vehicle but, additionally, because the wife supported the husband through his public service career, accompanying him to various postings, and spent time away from the work force caring for their child. I am satisfied that superannuation contributions during their relationship should be seen as equal. However, it must also be recognised that each had some initial superannuation interest and also that the parties separated about 5 ½ years ago. I do not consider it just in this case, where the earning capacity of the parties is approximately equal but each has taken a somewhat different path following separation, including the wife returning to tertiary study, that each should be seen as contributing to the other’s accumulation interest after separation.
One approach to quantifying the respective contributions is as follows. The wife’s superannuation interest was worth $203,500 at trial. Her initial contribution was $28,318 so the accumulation to trial was $175,182. The period of the relationship was 8.4 years and the period from the commencement of the relationship to trial was 13.75 years. If contributions during the relationship were equal the husband’s contribution to the accumulation of the wife’s superannuation interest can be expressed as 8.4/13.75 x .5 x $175,182 = $53,510. Conversely, the husband’s initial interest was $32,500 and the fund stood at $303,069 at trial, an accumulation since the beginning of the relationship of $270,569. The wife’s contribution to the accumulation of the husband’s interest can be expressed as 8.4/13.75 x .5 x $270,569 = $82,647. The difference between the two amounts is $29,137. This equates very nearly to a contribution of 46% by the wife and 54% by the husband, which I find are their respective contributions to the superannuation interests. This results in a contribution based entitlement of $233,021 to the wife and $273,547 to the husband. I am satisfied, allowing for rounding, that it is just and equitable that there be a subtraction from the husband’s interest of $30,000 and a corresponding addition to the wife’s interest.

Section 90SF(3) factors

Neither party submitted that any adjustment was required for s 90SF(3) factors. Both parties are in good health, have excellent employment histories and prospects and, in my view, have very similar capacities for gainful employment. The responsibility for care of their child is equally shared pursuant to consent orders of the Court.
Although no specific submission was made about s 90SF(3)(i), “the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; … “ it is apparent that any order and the enforcement of that order may have an effect on the debt the husband owes his family for legal fees. As the lending appears to be on flexible terms and the husband’s long term employment prospects are secure, I am satisfied that the family creditors will not be disadvantaged by any order I make.
I am satisfied for the foregoing reasons that the present legal and equitable interests of the parties in the matrimonial assets and superannuation do not properly reflect their contributions to those assets and superannuation. I am satisfied that orders for alteration of those interests is just and equitable.
I am satisfied that it is just and equitable to order the husband to pay the wife the sum of $97,665 within 90 days. There will also be a splitting order in favour of the wife of $30,000 from the husband’s Super Fund F.
In the result the asset pool will be as follows:

Description	Wife	Husband	Total
Assets
1	B Street, Suburb C	$510,000
2	D Street, Suburb E	$625,000
3	Wife’s car	$6,600
4	Husband’s car	$25,000
5	Husband’s trailer	$500
6	Husband’s equity in family investments	$196,500
7	Husband’s shares	$27,645
8	Wife’s savings	$2,004
9	Husband’s savings (Bank N account)	$18,634
10	Wife’s household contents	$15,000
11	Husband’s household contents	n/k
12	Husband’s cash at bank	$161
13	Add back for husband’s “savings/tax refunds” spent on legal fees	$70,000
Total assets	$533,604	$963,440	$1,497,044
Liabilities
1	B Street, Suburb C mortgage	$472,000
2	D Street, Suburb E mortgage	$530,000
3	Wife’s claimed debts in respect of legal fees	Ignored
4	Wife’s credit card debt	$9,269
Husband’s credit card debt	$3,208
5	Husband’s claimed debt in respect of legal fees	Ignored
6	Husband’s estimated estimate of unpaid tax liability for 2019 (substantially CGT liability from sale of O Street, Suburb P, Qld)	$14,443
Total Liabilities	$481,269	$547,651	$1,028,920
Net assets (excluding claimed debts for legal fees)	$52,335	$415,789	$468,124
Husband pays wife	$97,665	($97,665)
$150,000 (32%)	$318,124 (68%)	$468,124
Superannuation
1	Wife’s Super Fund F	$202,388
2	Wife’s Super Fund Q	$1,112
3	Husband’s Super Fund F	$242,758
4	Husband’s Super Fund R	$60,311
Total Superannuation	$203,500	$303,069	$506,569
Splitting order in favour of wife	$30,000	($30,000)
$233,500	$273,069	$506,569
Total assets and superannuation	$385,835 (40%)	$588,858 (60%)	$974,693

The matter was listed for trial on 18 October 2019 but was not reached. The wife’s self-drafted trial affidavit was struck out after application on that occasion due to prolixity and irrelevance. The affidavit and annexures or exhibits was hundreds of pages long. The respondent has sought a costs order in respect of the application. I am satisfied that both solicitor and counsel were required to spend some hours reading and attempting to understand that affidavit and that the time so spent was wasted and that s 117(2A) of the Act applies. I propose to make a costs order against the wife in the sum of $1,000 which is to be set-off against the amount payable by the husband.

I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Judge Young

Associate:

Date: 26 June 2020

CORRECTIONS

Catchwords:
a. Line 1 changed from “application by the de facto wife (“the wife”) …” to “application by the de facto wife …”
b. Line 3 changed from “whether the wife made the application …” to “whether the de facto wife made the application …”
Paragraph 6, line 5 changed from “The Wife continued in employment …” to “The wife continued in employment …”
Paragraph 66, line 17 changed from “… and $273,547.” to “… and $273,547 to the husband.”