WB v GSH
[2008] QSC 346
•23 December 2008
SUPREME COURT OF QUEENSLAND
CITATION:
WB v GSH [2008] QSC 346
PARTIES:
WB
(applicant)v
GSH
(respondent)FILE NO:
BS No 8837 of 2006
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court of Queensland
DELIVERED ON:
23 December 2008
DELIVERED AT:
Brisbane
HEARING DATE:
6-10 October 2008
JUDGE:
Applegarth J
ORDER:
1. Pursuant to s 333(1)(d) of the Property Law Act, 1974 (Qld) the respondent pay the sum of $350,375 to the applicant.
2. On or before 2 February 2009 the applicant file and serve draft minutes of orders, including orders for the payment of the said sum, that payment be wholly or partly secured and that, in the event the sum is not paid by a specified date, for the sale of specified property and the distribution of $350,375 plus interest at a specified rate from the proceeds of sale.
3. The respondent file and serve her response, if any, to the applicant’s draft minutes of orders within seven days of receiving the same.
4. On or before 2 February 2009 the parties file and serve submissions on costs.
5. The matter be listed for review at 9.15am on Wednesday, 11 February 2009 for the making of further orders, including orders as to costs.
6. There be liberty to apply.
7. The matters referred to in paragraphs [185] and [186] of the Reasons for Judgment be referred by the Registrar to the Attorney-General of Queensland, and that the Registrar publish to the Attorney-General the identity of the parties.
CATCHWORDS:
FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – GENERALLY – where applicant seeks a property adjustment under Part 19 Property Law Act 1974 (“PLA”) – de facto relationship of approximately 16 years – where parties made substantial contributions to a business that had no significant value at date of hearing – where respondent’s initial financial contributions substantially exceeded those of applicant – erosion doctrine in de facto property cases – where respondent’s overall financial and non-financial contributions to the relationship greatly outweighed those of applicant – where pool of assets included assets not contributed to relationship – whether a property adjustment should be made under the PLA
FAMILY LAW AND CHILD WELFARE – DE FACTO RELATIONSHIPS – ADJUSTMENT OF PROPERTY INTERESTS – OTHER MATTERS – unreasonable conduct of respondent – where respondent forged applicant’s signature to obtain title deed to a property in which applicant had an equity – use of applicant’s equity to raise loans to acquire further properties – where respondent made excessive personal use of assets without taking full advantage of income-producing capacity – where respondent’s expenditure after relationship was unreasonable – whether respondent’s conduct warranted an adjustment in applicant’s favour
Property Law Act 1974, s 286, s 288, s 291, s 292, s 293, s 294, s 295, s 297, s 298, s 300, s 304, s 305, s 306, s 307, s 309, s 333(1)(d), s 343
Australian and Securities Investments Commission v Carey (No 6) (2006) 233 ALR 475, cited
Baker v Towle [2008] 39 Fam LR 323, considered
Bilous v Mudaliar (2006) 65 NSWLR 615, considered
Biltoft, In the Marriage of [1995] 19 Fam LR 82, cited
BLM v RWS [2006] QCA 528, applied
Browne & Green [1991] FLC 92-873, considered
Challen & Challen [2007] FamCA 1292, applied
Chang and Su, In The Marriage of [2002] Fam CA 156, applied
Chorn v Hopkins [2004] FLC 93-204, applied
CL v JMG [2007] QSC 169, cited
Delany v Burgess [2007] NSWCA 360, cited
Douglas v Douglas (2006) FLC 93-300, cited
EB v CT [2008] QSC 303, cited
Evans v Marmont [1997] 42 NSWLR 70, cited
FO v HAF [2007] 2 Qd R 138, [2006] QCA 555, applied
G and G (1984) 9 Fam LR 969, cited
HAG v MAW [2007] QCA 217, cited
Kardos v Sarbutt [2006] NSWCA 11, cited
LW v GAB [2007] QCA 386, cited
Mallet v Mallet (1984) 156 CLR 605, cited
Manns v Kennedy [2007] 37 Fam LR 489, cited
Norbis v Norbis (1986) 161 CLR 513, cited
Pierce, In the Marriage of (1998) 24 Fam LR 377, [1999] FLC 92-844, considered
Proudman v Dickason [2008] NSWC 681, citedSharpless v McKibbin [2007] NSWSC 1498, considered
COUNSEL:
A J H Morris QC, with him V G Brennan for the Applicant
The Hon T Carmody SC for the RespondentSOLICITORS:
Alex Mackay & Co for the Applicant
Hopgood Ganim for the Respondent
Introduction
The applicant and the respondent were in a de facto relationship between early 1989 and early 2005. During the relationship they exhausted most of the large inheritance that the respondent received from her grandfather in 1987. That inheritance was consumed by a loss-making horse stud business and a lifestyle that the collective incomes of the applicant and the respondent could not support.
At the start of the relationship the applicant worked as a lifeguard at Noosa and owned a house at Tewantin. Currently he is not in paid employment, lives in a de facto relationship with a lawyer and cares for their two young children. In 1998 the proceeds of sale of his Tewantin property and some money that he had inherited were invested by the applicant in a property at Thredbo owned by the respondent. He contributed $165,000. Only in the final stages of the hearing did the respondent, through her recently-appointed legal representatives, acknowledge the applicant’s interest in the Thredbo property. Otherwise, the applicant has no substantial property or other financial resources.
The true extent of the respondent’s assets, liabilities and financial resources is an issue that occupied a large part of the hearing. Even after a lengthy hearing their true extent is somewhat uncertain. This uncertainty is largely the result of the unreliability of the respondent’s evidence and the absence of documents that would either support or undermine her assertions about her assets and liabilities.
A preliminary issue:the date the de facto relationship ended
There is a preliminary issue to determine, namely the date the de facto
relationship ended. The respondent asserted that the de facto relationship ended in April/May 2004. The evidence does not support this. I find that it ended on 15 February 2005 following a confrontation between the respondent and the applicant. I accept the evidence of the applicant and the evidence of other witnesses that the applicant remained in a relationship with the respondent during the latter part of 2004 and that the relationship continued after the respondent’s return in late January 2005 from a holiday in Europe. The respondent did not respond to this evidence by way of affidavit, and did not cross-examine the applicant or his witnesses so as to test their evidence on this issue.
The application under Part 19 of the Property Law Act 1974 (“PLA”) for a property adjustment order was made within time.[1]
[1]PLA s 288.
The principal issues
I intend to adopt the four step approach discussed in FO v HAF.[2] This approach involves:
[2][2007] 2 Qd R 138 at 155, [51]-[52]; [2006] QCA 555.
(1) The identification and valuation of the property, resources and liabilities of the parties.
(2) The identification and assessment of the contribution of the parties to their pool of assets and the determination of their contribution-based entitlements in accordance with s 291 to s 295 of the PLA.
(3) The identification and assessment of the factors in s 297 to s 309 of the PLA to determine the adjustment to the contribution-based entitlement.
(4) Consideration of the result of these earlier steps to determine whether that result is just and equitable in accordance with s 286 of the PLA.
The applicant submits that an appropriate order is to make a property adjustment order in his favour of 50 percent, made up of 35 percent for s 291 to s 295 factors and a further 15 percent for s 297 to s 309 factors. A property adjustment order of 50 percent overall is said to take account of all of the relevant factors prescribed by statute. He further submits that an appropriate “broad brush” approach would be to make orders which, in effect, award to him the Thredbo property (in which the respondent belatedly acknowledges that he has a one-third interest) by ordering the respondent to provide the amount necessary to discharge the existing mortgage over it.
The respondent submits that no property adjustment order is justified and that it would not be unfair to make no order at all on the application. She submits that there is no basis to give the applicant a share of her pre-relationship assets in circumstances in which those assets were consumed, rather than conserved, during the relationship. Her position is that:
(a) there is a massive disparity in their respective financial contributions, in that she met all mortgage and other outgoings in respect of the properties and (save for the $165,000 contributed by the applicant in 1998) funded all significant capital acquisitions, and the improvements to, and the maintenance of, her properties;
(b) she met “joint everyday spending and lifestyle expenses” out of business income or her assets;.
(c) the extent of the applicant’s non-financial contributions is exaggerated, and, in any event, any non-financial contributions by him were matched or exceeded by her own.
The respondent’s alternative submission is that she be ordered to pay no more than $266,666 to the applicant “in exchange for his Thredbo equity”.
Before dealing with the substantial issues in dispute between the parties in accordance with the approach that I have outlined, it is appropriate to provide a summary of the de facto relationship and matters that have occurred since it ended. I shall also refer to the conduct of the proceedings, and to the reliability of the applicant and the respondent as witnesses. My adverse findings concerning the respondent’s conduct of the proceedings and her failure to disclose and produce relevant documents are not a reflection upon the conduct of her legal representatives. The respondent’s solicitors and her counsel only came into the matter shortly before the hearing. Before then, the respondent was not represented by solicitors, and had some assistance from a barrister who was a friend of her family and who appeared on interlocutory hearings.
The de facto relationship
The respondent came from a wealthy family. By the end of 1987 she had inherited from her grandfather a share portfolio worth $1 million, $100,000 in cash and various artworks and antiques. She had unencumbered title to a seven acre property at Maleny and vacant land at Thredbo. She commenced a relationship with the applicant in 1988.
They commenced a de facto relationship in about April/May 1989 and lived together at the respondent’s Maleny property. They each contributed to the operation of a horse stud business, EM[3]. It consistently lost money. The respondent says that by 2000 she had exhausted all of her capital in its operations, having introduced funds totalling in excess of $1.6 million.
[3]Initials have been used to identify the parties, various witnesses and entities because of the provisions governing publication found in the PLA, s 343.
By about 1997 both the applicant and the respondent had lost interest in running the stud and its operations declined. Each accuses the other of shortcomings. The applicant says that the respondent and her father used the business to indulge their interest in horses whilst he worked in the operation without payment. Even after 1997 the applicant still took horses for breaking and training and this produced some income and saved the business the expense of paying for outside trainers and employees. Commencing in about 1996/1997 the applicant was absent from the stud for substantial periods. After February 1997 he lived at the Thredbo property and did some intermittent cash work. He built a shed on the Thredbo property and lived in it. He returned to Maleny in July 1997. In the following years he usually went to the snowfields each year in about late June and obtained work there driving a snowmobile or working as a “snow groomer”. During these winters the respondent also spent substantial periods away from the horse stud and at the snowfields.
The applicant and the respondent had a volatile relationship and argued about the business. The applicant says that the respondent enjoyed the good life, travelled extensively overseas and talked about living in London or Thredbo. She says that he enjoyed the good life and did not accept any responsibility in the business, absented himself from it, claimed unemployment benefits for lengthy periods and did not devote the work required to make the business a success. The applicant admits receiving unemployment benefits during part of the time that he worked in the business.
The Thredbo property had been purchased in 1987 by the respondent. A house was built on it in March/April 1991. When the applicant contributed $165,000 in 1998 the title deed to the Thredbo property was deposited with a firm of solicitors as a form of security. Commencing in July 2001 the respondent was involved in a number of property transactions.[4] In August 2001 the respondent forged the applicant’s signature on an authority which resulted in the release to her of the title deed. The respondent did not tell the applicant about this, and used the Thredbo property to secure loans for various purposes and property transactions. From time to time the loans secured over the Thredbo property were refinanced.
[4]Summarised in Exhibit 4.
The respondent sought to justify her conduct in forging the applicant’s signature on the authority and not telling him about these matters. Her evidence was that over the years she had always signed his name with his consent on various documents that were required to operate the stud business and, at the time she signed his name on the authority in order to recover the title deed she believed that she had his permission to do so.[5] But under cross-examination she admitted that she did not have authority to forge his signature.[6] The applicant says that his agreement with the respondent was that the title deed would only be released with the signatures of the applicant, the respondent and the solicitor in whose custody it was placed by way of security. He says that in mid-2001 the respondent said that she wanted to mortgage the Thredbo property and that he told her in no uncertain terms that he would not agree to mortgage it since he did not want to risk his one-third interest in the property. He says that he told the respondent that the property could be sold and she could give him his one-third share, but that he would not agree to it being encumbered. He says that was the end to the matter so far as he was aware, that the respondent forged his signature on the authority and did so without his knowledge or consent. It was only in early 2005 that the applicant learned from the solicitor who had taken over the relevant files that an authority, dated 26 August 2001, had been signed authorising the release of the title deed.
[5]Affidavit of the respondent filed 25 February 2008, paragraph 57.
[6]Transcript 1-32 ll 30-37.
In December 2002 the respondent purchased a property at Mission Beach in North Queensland for $570,000.
Before the end of their relationship in February 2005 the applicant and the respondent enjoyed the use of the Thredbo property and the Mission Beach property. Their use of the Thredbo and Mission Beach properties limited the extent to which these properties could be used to generate rental income. The respondent travelled overseas to visit her sons. The applicant earned little income from personal exertion. On occasions he provided some funds to the respondent. In general, however, it was the respondent’s assets, income from rented properties and income from the horse stud business that funded their lifestyle.
The horse stud business made losses. The applicant took no interest in its financial affairs. He says that he was not encouraged to be involved in its management, which was undertaken by the respondent, and to some extent, her father. However, he must have appreciated that it was not a financial success.
In summary, during their relationship, and when he was living at Maleny, the applicant did manual work around the horse stud, trained horses and broke horses. The respondent took on the responsibility of managing the business. They contributed in their separate ways to a business that lost large amounts of money.
Developments since the relationship ended
After the relationship ended in February 2005 the applicant attempted to discuss a property settlement with the respondent. He sought repayment of the monies
he had invested in the Thredbo property. The applicant first did so no later than 22 August 2005.[7] The applicant asked the respondent to have the Thredbo property valued and to be paid for a third share on the basis that the $165,000 that he had contributed was for a third share in Thredbo. He was content at that time to accept a one-third share in the Thredbo property in full and final settlement. I accept his evidence that in June 2006 he met the respondent, who was not prepared to discuss a property settlement and who said to him words to the effect:
“You left me so you’ll get nothing. I’ll send you broke if you try to get any of your money off me.”
[7]Affidavit of the applicant filed 16 January 2008, paragraphs 100-103; Exhibit 31.
The respondent took no steps to refund the $165,000 that the applicant had contributed to the Thredbo property. She did not sell the Thredbo property, the Mission Beach property, the Maleny property or any other property in order to consolidate her financial position and meet any valid claim that the respondent had to the Thredbo property or to a court-ordered adjustment of their property.
After the relationship ended the respondent spent lengthy periods away from Maleny. She went to the Mission Beach property and undertook work there to restore it after it was damaged by a cyclone in March 2006. She also stayed at the Thredbo property. Her reluctance to live at Maleny during this period, in close proximity to the applicant and his new partner, is understandable. The respondent says that she was depressed as a result of the end of the relationship and, whilst there is reason to disbelieve many parts of her evidence, I accept that she experienced personal problems and depression after the relationship ended.
She was cross-examined about her spending during 2005, as disclosed in her credit card records. Some of her expenditure during this period is unreasonable for someone with her income and financial obligations, and who at various times in 2005 informally acknowledged an obligation to pay the respondent for his one-third interest in the Thredbo property.[8]
[8]ibid paragraph 100.
It is hard to know if the respondent’s spending habits during this period are representative of spending patterns during earlier years. At the start of the hearing the applicant contended that weight should be given to the effect of the respondent’s “consistent and unreasonable spending since the dissolution of the relationship”. In due course it will be necessary to consider what should be made of the respondent’s expenditure since the end of the relationship, and the extent of her credit card and other liabilities. These liabilities include an unsatisfied judgment in favour of David Jones which issued a bankruptcy notice against the respondent. Her evidence was vague about the status of the bankruptcy proceedings against her.
The respondent was taken in cross-examination to the outline of her case that was filed on 30 September 2008 and the accompanying schedule of liabilities. She stated that she was “in trouble” financially.[9] The respondent could not adequately explain how as recently as 17 October 2006 she told the ANZ Bank that she had net assets of $2.2 million, whereas her Schedule of Property,
Capital Liabilities and Financial Resources filed on 30 September 2008 stated that her net property was $325,985. The respondent pointed out that caveats lodged by the applicant on her properties prevented her from selling them, however, there is no evidence that the respondent had approached the applicant’s solicitors with a view to reaching an arrangement to sell any property and to lodge the proceeds of sale into an account. She said that she has no money in the bank and has exhausted her credit card facilities. She has borrowed money from her family.
[9]Transcript 2-85 l 42.
It will be necessary to consider in greater detail the evidence concerning the applicant’s assets and liabilities as at the date of the hearing. It was only during the course of cross-examination and after being confronted with a document that she eventually acknowledged that the applicant was entitled to a one-third interest in the Thredbo property.[10] As a result, her final submissions adjusted matters by submitting that the applicant’s property included this one third interest valued at $266,666 with the result, it was submitted, that the respondent’s net property was $59,319. I do not accept that the respondent is as poor as some of her evidence would suggest. The extent of her current assets and liabilities is considered later. In essence, she is asset rich and cash poor.
[10]Transcript 1-49 l 55; compare her earlier answers at transcript 1-32 l 58 – 1-33 l 5, 1-47 l 3.
The respondent is now aged 58. She is not in a permanent relationship and lives on her Maleny property which is only some 300 metres away from where the applicant, his partner and their two young children live. The applicant is aged 51. He described himself as a house husband. In May 2007 he broke his leg and dislocated his ankle in a horse riding accident. He has a permanent disability which prevents him from running or riding horses. Recent medical advice is that there is no medical procedure that is likely to improve this condition. This limits his income-earning capacity. He has a capacity to operate machinery that is hand operated, such as an excavator. In any event, he has no plans to return to work in the next five to ten years unless something unforeseen happens. In his words, he is “doing okay” and is reliant financially upon his new partner.
Assessment of evidence
In several paragraphs of her written submissions, the respondent submitted that contentions made by the applicant about the value of her assets had not been proved and that the applicant could not rely upon certain documents to discharge his onus of proof. For instance, it was submitted that cross-examination of the respondent upon her financial statements and taxation returns for the year ended 30 June 2006[11] had been so effective as to destroy the probative value of the document as a whole, and that the applicant was left with no evidence to support the values contended for by him. These submissions raise a general issue relevant to fact finding in circumstances in which the respondent has not disclosed or produced documents that are relevant to the determination of her assets and liabilities, and where some of the documents produced by her are unreliable, at least in part.
[11]Exhibit 15.
The respondent’s legal representatives did not respond to the applicant’s submission that her attitude to her disclosure obligations could only be described as woeful. I adopt this description of the respondent’s attitude. The respondent has provided no explanation for her failure to disclose relevant documents or to produce them in the course of the hearing. The Court of Appeal has recognised that a party’s failure to make proper disclosure makes it impossible to approach the determination of the true extent of the asset pool with precision.[12] The Court of Appeal cited with apparent approval decisions of the Family Court of Australia in relation to
non-disclosure. In The Marriage of Chang and Su[13] the Family Court stated that where there has been non-disclosure by one party, the court should not be “unduly cautious” about making findings in favour of the other party. I adopt this approach in respect of the non-disclosure and non-production of documents that the respondent reasonably could have produced and in respect of which she has given no reasonable explanation for their absence. However, the absence of evidence and adverse inferences that I draw concerning the respondent’s unexplained failure to produce relevant documents do not entitle me to simply guess the extent of her assets and liabilities.
[12] LW v GAB [2007] QCA 386 at [41].
[13][2002] Fam CA 156 at [101].
Consideration must be given to the informality which may exist when individuals provide financial assistance to a member of their family or reach agreement about financial matters with a family member. Individuals may not document their arrangements with the same degree of care that they would in an ordinary commercial transaction. For instance, one would not expect the respondent’s sister to keep a pocket book of loans made to the respondent as if these loans were made in the course of a money-lending business.
In circumstances in which the respondent has submitted taxation returns disclosing plant and equipment in depreciation schedules there is, at least, an evidentiary onus on the respondent to explain why reliance should not be placed upon such documentary sources in determining the true extent of her assets and liabilities. In circumstances in which the respondent contends that one of her adult sons has a one-third share in her Mission Beach property she bears an evidentiary onus of proof in respect of that matter. This onus is not discharged by generalised evidence to the effect that he had such a share in the property. Her son’s belief that he had a share in the Mission Beach property does not make this a fact.
It will be necessary to address the evidence in relation to relevant assets and liabilities and to make findings in relation to the reliability of evidence given by the respondent and other witnesses called by her, including the extent to which their evidence is supported by documents. Before doing so I shall address the general reliability of the evidence of the applicant and the respondent.
The reliability of the evidence of the parties
The applicant relied upon affidavits that he had filed. He was not challenged about the value of his current assets and his cross-examination was limited to a number of topics. The respondent’s version of events was not put to him in elaborate detail and this is understandable because the rule in Browne v Dunn has a modified operation where affidavit evidence is filed and served prior to trial, as occurred in this proceeding.[14] The applicant filed and relied upon an affidavit in response to the respondent’s affidavits.
[14]Cross on Evidence (Australian edition) [17445].
The applicant’s oral evidence was given frankly. There were some overstatements, for example, the applicant claimed to have devoted “blood, sweat and tears” working on the stud.[15] However, he admitted that “for probably three or four years on and off” he was in receipt of unemployment benefits at the same time as he was working on the stud.[16] At some time he may have been on sickness benefits because of a broken leg.[17] However, he admitted signing on for unemployment benefits in December 2001, to have been registered with the Department of Social Security from then until the relationship with the respondent ended in February 2005 and to have claimed benefits as he “needed to”.[18] The precise dates when the respondent received unemployment benefits is not in evidence, however the applicant’s Response to a Notice to Admit[19], his Statement of Financial Position and his oral evidence are to the effect that he claimed unemployment benefits for substantial periods when he was also working in the stud business. The applicant’s oral evidence was to the effect that he claimed unemployment benefits “later in the nineties” when he was “put off in the snowfields”.[20]
[15]Transcript 1-14 l 28.
[16]Transcript 1-10 l 58.
[17]ibid.
[18]Applicant’s affidavit filed 15 April 2008, paragraphs 34-36.
[19]Court document 83 filed 25 February 2008, which was read as part of the respondent’s case.
[20]Transcript 1-10 l 52.
The evidence does not permit me to conclude that the applicant received unemployment benefits to which he was not entitled. That is a matter that is appropriate for investigation by the Department of Social Security. His registering for unemployment benefits, commencing either in the late 1990s or after December 2001, and his receipt of unemployment benefits during periods when he was also working on the stud farm calls into question his entitlement to receive those benefits, the accuracy of his evidence about the extent to which he was occupied with work on the farm, or both. The impression that the applicant’s first substantial affidavit gave was that the applicant worked literally from dawn to dark,[21] and that even after the operations of the business wound down from 1997 onwards, it was still “a full-time job” until early 2003.[22] If this is true, the applicant’s registration for, and receipt of, unemployment benefits has not been adequately explained.[23] I do not accept the applicant’s evidence that he was working “full-time” in the stud business after 1997 and until early 2003. I conclude that his original affidavit evidence, in not disclosing his registration for and receipt of unemployment benefits, overstated the amount of work that he performed in the horse stud business. I place limited reliance on his other evidence concerning the hours that he worked in the business.
[21]Applicant’s affidavit filed 16 January 2008, paragraphs 26-28.
[22] ibid paragraph 81.
[23]cf. the explanation given that on occasions the respondent would “throw him out” : Applicant’s affidavit filed 15 April 2008, paragraphs 34-36. This does not explain the occasions when the parties were living together and the respondent would accompany him when he went to claim unemployment benefits: Applicant’s affidavit filed 15 April 2008, paragraph 36; Respondent’s affidavit filed 25 February 2008, paragraph 44.
The unreliability of the respondent’s evidence was of a different order. I found her oral evidence generally unreliable. She had a poor recollection of matters and appeared to be easily confused. She had difficulty in giving answers to relatively simple questions.
The respondent was prepared to say things that suited her purpose, for instance, to give unreliable estimates of the extent of her assets. When taken to depreciation schedules that disclosed the written down value as at 30 June 2006 of substantial plant and equipment was $142,814, she asserted that these items had a current value of $15,000 to $20,000.[24] I found her evidence about these matters totally unreliable.
[24]Transcript 3-30 l 25.
The respondent’s representations to financiers and the Australian Taxation Office are hard to reconcile with her evidence to the court. For instance, she signed a loan application to the ANZ Bank on 17 October 2006 that represented that she had a total net monthly income of $22,000 and net monthly expenditure of $940 providing her with an uncommitted monthly income of $21,060. These figures cannot be reconciled with her evidence in these proceedings. Her financial statements and taxation returns in which she has claimed all of the expenses incurred in relation to the Mission Beach property are hard to reconcile with her contention that her eldest son, JM, has a one-third interest in that property.
Parts of the respondent’s evidence were inconsistent with credible witnesses called by her. For instance, she complained about a solicitor’s failure to register mortgages and that his failure to do so had made her “ropable”.[25] The solicitors’ evidence, which I accept, is that the respondent told him not to proceed with the stamping and registration of the documents because she could not afford the stamp duty.[26]
[25]Transcript 3-10 l 57.
[26]Transcript 3-88 ll 10-11; 22-24.
The respondent was prepared to swear a Statutory Declaration dated
19 August 2008 that stated that she was “gifting the sum of $600,000” to her son, JM, to assist in the acquisition of the Mission Beach property and that the funds were “a gift”.[27] The respondent made no such gift and she acknowledged as much in her evidence.[28] She knew that it was not a gift but sought to excuse making this false statutory declaration because others had suggested that she use this term.
[27]Exhibit 12.
[28]Transcript 1-59 – 1-60.
This was not an isolated instance of providing false information to obtain some advantage for herself or her family. In September 2001 she procured documents that were used to represent that she had an overseas income of $140,000 that would form part of a taxable income of $238,473.[29] This representation was made on her behalf to a financier. The applicant relied upon documents evidencing amounts that had been sent to her from overseas by her son, JM. JM described the suggestion that the respondent derived income from an investment in his overseas business as “ludicrous”.[30]
[29]Exhibits 19 and 20.
[30]Transcript 3-79 ll 25-29.
Finally, and to her discredit, the respondent forged the applicant’s signature on an authority and lied to a solicitor to facilitate release of a title deed for her Thredbo property.[31]
[31]Transcript 1-33 ll 30-37.
I accept the truth of some parts of the respondent’s affidavits about matters such as the applicant’s lack of interest in the management of the horse stud business, his receipt of unemployment benefits, his absence from the business when he went to Thredbo each year and her contributions to that business. However, in general, I find the respondent’s evidence unreliable.
On contentious matters concerning the current extent of her assets and liabilities and her financial resources, I find the respondent’s oral evidence unreliable. In circumstances in which she has not produced relevant documents and has not provided a satisfactory explanation for her failure to do so, little or no reliance can be placed upon the respondent’s evidence on disputed questions of fact about the extent of her current assets and liabilities and her financial resources.
The identification and valuation of the property, resources and liabilities of the parties
The applicant estimated his total assets in September 2008 as having a value of $43,750. These assets included cash in the bank of $20,000, motor vehicles and personal effects. I accept the applicant’s evidence. Account is required to be taken of the belatedly-acknowledged one-third interest of the applicant in the Thredbo property.
Several issues require determination in respect of the respondent’s property and financial resources. These can be summarised as follows:
(1) What weight should be accorded to her contention that her son, JM, has a one-third interest in the Mission Beach property.
(2) The position in relation to Unit 19 at the Oasis apartments.
(3) The existence of liabilities that are said to be owed by the respondent to family members, the extent of those liabilities and the likelihood that they will be enforced.
(4) Whether the respondent is the beneficial owner of certain shares in a family company, W Pty Ltd.
(5) The extent to which the respondent’s potential future interest in a family trust should be taken into account as a financial resource.
(6) The value of various assets, including household contents and plant and equipment, and the extent of her liabilities.
The identification and valuation of the property, financial resources and liabilities of the respondent is, of course, only one step in the exercise of the judicial discretion conferred by s 286 of the PLA. If, for example, the respondent owns shares in
W Pty Ltd then an issue arises as to what weight should be given to these and other assets that she owned before the de facto relationship. Senior Counsel for the respondent submitted that if the respondent’s shares in W Pty Ltd or the respondent’s interest in the trust were to be included “in the pool” it was only the respondent, and not the applicant, who contributed to the pool and therefore “she gets full credit for it”.[32]
[32]Transcript 5-8 l 35.
More generally, Mr Carmody SC submitted that ultimately it did not matter how much I found to be “in the pool” because the applicant had not proved an entitlement to anything other than the property that he currently retains,[33] which was said in submissions to include a one-third interest in the Thredbo property.
[33]Transcript 5-16.
I do not accept the submission that it does not matter how much I find to be “in the pool”. I accept that there is an important distinction between property that was contributed to the relationship and property which forms part of the pool of property which was owned by a party prior to the relationship, which is still retained by that party and which was never contributed to the relationship. The latter may still be the subject of a property adjustment order. The fact that it was not contributed to the relationship may have implications for any percentage adjustment to existing property interests and may justify a submission that, prima facie, a party who owned property prior to the relationship, who did not use it during the relationship, being property to which the other party did not contribute, should remain the property of the party who owns it. However, such property cannot be ignored even if the property does not constitute a contribution for the purposes of s 291. It is property against which an order might be made and is a matter which the Court must consider to the extent that it is relevant in deciding what order adjusting interests in property is just and equitable.[34]
[34]PLA ss 296, 298(a).
Accordingly, it is necessary to identify and value the property, resources and liabilities of the parties.
The Mission Beach property
This property was acquired by the respondent on 5 February 2002 for $570,000. Its current value is $1.5 million, and it is mortgaged to the ANZ Bank for approximately $760,000.
The respondent asserts that her son, JM, has a one-third interest in the property. This requires consideration of the circumstances in which JM is alleged to have acquired this interest.
In 2001 JM was living overseas. He was then 30 years old. In July 2001 the respondent acquired Unit 67 in the Oasis Apartments. JM swore an affidavit that his mother and he had an arrangement that she would be the purchaser on the contract but that they would be equal owners of the property. The property was acquired for $336,000 with $200,000 financed by the ANZ Bank. JM and the respondent contend that a similar arrangement was entered into for the purchase of Unit 69 in Oasis which was purchased in November 2001 for $450,000, $270,000 of which was financed by the first mortgagee, RAMS.
There is evidence that JM transferred sums totalling $182,973 between February 2001 and July 2003. Otherwise, there is no documentary evidence to support a finding that there was a financial contribution of JM to either unit or to establish whether any financial contribution that he made towards the acquisition of Units 67 and 69 entitled him to a share in the equity of those units. It is possible that JM made a substantial contribution towards the balance of the purchase price of each unit, but if he did so, he may simply have been an unsecured creditor of his mother to the extent of any such contribution.
In paragraph 6 of his affidavit JM acknowledged that he was not a good document keeper, particularly in relation to dealings with his mother. He says that from documents held by his mother he was able to confirm that in the period 2 February 2001 to 3 July 2003 he sent funds totalling $182,973 to his mother.[35] The transfer of funds from JM to his mother during this period does not establish that the funds in question were used to purchase Units 67 and 69. JM says that from about 1997 his mother had been investing in Australian shares on his behalf. The payments might have been repayment of personal loans made by the respondent to her son. They may have been to pay his mother for shares that she had earlier purchased on his behalf. Documents recording the transfer of $182,973 by JM to his mother prove no more than the fact of these transfers. They do not prove the purpose of each transfer or what became of the funds.
[35]Exhibit 26.
JM’s oral evidence provided no satisfactory basis to conclude that he acquired a half-share in Units 67 and 69 or that the proceeds of their sale resulted in his acquiring a one-third interest in the Mission Beach property. He gave evidence[36] that he understood that his half-share in these units was used to purchase the Mission Beach property but this cannot be so. The Mission Beach property was acquired in December 2002 and paragraph 7 of JM’s affidavit says that its acquisition was funded by the respondent and her father and mother. JM says that when Units 67 and 69 were subsequently sold he did not receive any payment from the proceeds of sale because it was agreed that his contribution to Mission Beach would be funded by his interest in those units. His oral evidence was unconvincing on this point.[37]
[36]Transcript 3-82, ll 10-30.
[37]Transcript 3-82 – 3-84.
Unit 67 was sold in October 2003 to W Pty Ltd for $375,000. Unit 69 was sold in December 2004 for $630,000. After the first mortgagee was paid out a surplus of approximately $297,000 remained. An amount of $250,000 was deposited into the respondent’s bank account. The destination of the balance of approximately $50,000 is unexplained.
If JM acquired a one-third interest in the Mission Beach property then his subsequent conduct is inconsistent with it. In January 2008 JM signed a loan agreement which recited that he was owed $489,000 by his mother.[38]
[38]Exhibit 27.
I have taken account of the understandable informality of financial dealings between JM and his mother and I accept his evidence that he is not a good document keeper. I find, however, that his evidence is unreliable. He does not explain how an original arrangement that he and his mother would purchase Mission Beach as “equal partners” with the contract being in her name was later transformed to an arrangement whereby he acquired a one-third interest. His oral evidence was given without conviction. He seemed to have difficulty in understanding the difference between lending money and providing money to another for the purpose of investment. He took lengthy periods to answer simple questions. His demeanour was not of a witness who knew what he was talking about, and who was slow to formulate considered answers. JM appeared genuinely lost for answers. I derived no confidence that he had any genuine recollection of the arrangements sworn to in his affidavit.
He was unable to produce any documents that supported the contention that the Mission Beach property was held on trust for him. The loan agreement which asserted that he was owed $489,000 by his mother indicates that he perceived their relationship to be one of borrower and lender. Exhibit 28 is a contract which he signed in which he purported to purchase the Mission Beach property for $1,500,000, and he could not satisfactorily explain why he would purchase a 100 percent interest in a property in which he already had a one-third interest.
Neither JM nor the respondent produced taxation returns that reflected his claimed interest in the Oasis or Mission Beach properties. The respondent’s taxation returns claimed deduction for all of the expenses incurred in relation to Mission Beach.[39]
[39]Transcript 2-87 ll 5-30.
The respondent’s affidavit asserted that JM had a one-third interest in the Mission Beach property. However, the respondent is an unreliable witness in relation to such matters.
The evidence does not lead me to conclude that JM acquired a one-third interest in the Mission Beach property.
Unit 19
Between 1999 and 2007, the respondent’s younger adult son LM lived overseas. LM deposed that some time in 2001 he asked his mother to find an apartment like his brother’s. Paragraph 4 of his affidavit states:
“I then bought Unit 19. The contract was in my mother’s name.”
His oral evidence about this was as follows:[40]
[40]Transcript 4-27 ll 33-38.
“How was unit 19 paid for? – To be honest, I am not totally aware.
Well, did you provide the money? – I provided some - for the initial purchase are you talking about?
Yes? – No.”
Apart from the respondent’s evidence, there was no other evidence to suggest that LM had an interest in Unit 19. In late 2005 LM arranged for the title to Unit 19 to be transferred to him. On 10 January 2006 a Bank of Queensland mortgage over Unit 19 was discharged.[41] The fact that the mortgage was paid out on 10 January 2006 is not disputed, but the source of the funds to do so is not apparent.
[41]This appears in Exhibit 2, being the applicant’s summary of the respondent’s property transactions.
The respondent deposed that Unit 19 was purchased in her name “on a blind trust” for her son LM for $300,000 in 2001.[42] She says that 60 percent of the purchase price was financed by RAMS Home Loans with the balance purchase price being funded by LM. She gave LM furniture for Unit 19. In accordance with my earlier finding about the reliability of the respondent’s evidence, I am not prepared to accept her assertion that the balance of the purchase price for Unit 19 was funded by LM. There is no documentary support for this and LM in his oral evidence did not say that he provided money for its purchase.
[42]Affidavit of respondent filed 25 February 2008, paragraph 66B.
Accordingly, there is no satisfactory evidence that Unit 19 was held in trust by the respondent after its acquisition in 2001 for LM, or that he had a beneficial interest in it after its acquisition. There is no evidence that LM contributed between 2001 and early 2006 to the payment of principal or interest on any loan secured by a mortgage over Unit 19, or that he paid for outgoings in respect of the property. Unit 19 was rented, and I infer that, like Units 67 and 69 in the same apartment block, during this period it was “self-funding in that the rentals mostly covered mortgage payments and outgoings”.[43]
[43]Affidavit of JM filed 29 February 2008, paragraph 5.
In the absence of satisfactory evidence of a financial contribution by LM towards the acquisition of Unit 19 in 2001, or contributions towards mortgage payments or outgoings in respect of it prior to January 2006, I find that the respondent has a potential claim in respect of Unit 19 concerning her contributions towards its acquisition in 2001, and to a declaration that LM holds at least part of his current interest in Unit 19 on trust for the respondent. I consider these potential claims to be a valuable benefit and part of the respondent’s “financial resources” within the meaning of s 263 of the PLA. The state of the evidence does not permit me to determine the extent of her interest in Unit 19 or the value of her prospective claim against LM in respect of it.
Liabilities of the respondent to members of her family
The existence and the extent of liabilities that are said by the respondent to be owed by her to various members of her family are in issue. There is also a question of whether any such liabilities are likely to be enforced. I adopt the approach that where an unsecured liability is vague or uncertain or unlikely to be enforced, I may decide not to take it into account or to discount its value. This approach was adopted by the Full Court of the Family Court of Australia in the case of In the Marriage of Biltoft[44] The respondent did not submit that such an approach was inappropriate in determining the net assets of the parties for the purpose of a property adjustment order under the PLA.
[44](1995) 19 Fam LR 82 at 94.
The respondent’s father
The respondent’s father gave evidence that the respondent owes him $280,000. This claimed liability arises from an original loan of $200,000 that was made to enable the respondent to purchase the Mission Beach property. The respondent repaid $100,000 and there was an agreement to pay interest. The balance of $100,000 has not been paid. In addition, the respondent’s father advanced her additional monies of $12,000 per month, which was the amount that the respondent calculated as the expenses required to “keep afloat”. There was some uncertainty about whether the original loan was made by the respondent’s father personally, with appropriate adjustments in loan accounts of W Pty Ltd, or by W Pty Ltd itself. The respondent’s father was unable to explain why a mortgage that was prepared by his solicitor originally recorded the amount owed to him as $150,000 and was later amended, by hand, to record $280,000. Despite some unsatisfactory aspects of the evidence of the respondent’s father concerning his recollection of his loan account with W Pty Ltd, his motivation to protect both his and his daughter’s interests and his acknowledged hostility towards the applicant and his claim, I find that a sum totalling $280,000 as at 1 September 2008 was owed by the respondent. I accept her father’s evidence that he recently checked his bank statements to arrive at the figure of $280,000. This evidence was given on the assumption that the original loan was made by him, rather than by W Pty Ltd, which he controls. If this assumption is in error it simply affects the identity of the parties to whom the total amount of $280,000 is owed.
The evidence of the respondent’s father indicates that he has no present intention of enforcing the liability. I accept his evidence that his only expectation of repayment of any part of the $280,000 is if the respondent chooses to repay it at some future time while he is still alive. The respondent gave no indication of a plan to realise available assets in order to repay any part of the $280,000. This does not mean that the liability does not exist and will not be enforced at some future date. However, the lack of a present intention to enforce the liability leads me to not take it into account in determining the assets that are available to meet a property adjustment order under the PLA.
The respondent’s mother
There is no dispute that the respondent owes her mother approximately $37,000. To date her mother has not taken steps to recover it because she understands that she has a mortgage to secure it. However, that mortgage is presently unregistered and the respondent’s mother says that she needs the money for her house. I take account of this liability and the possibility that the respondent’s mother is likely to require payment of it.
The respondent’s sister
The respondent’s sister gave evidence that between 10 April 2006 and
20 March 2008 she lent the respondent various amounts totalling $63,275. Part of this was a sum of $22,000 which was repaid.[45] I accept the evidence of the respondent’s sister that she arrived at the figure referred to in her affidavit by reference to her bank accounts. Those accounts were not produced by the respondent to prove the amount, but I accept the evidence of her sister. This amount does not include the calculation of interest which the respondent offered to pay at a bank interest rate.
[45]Exhibit 22.
The respondent’s sister has asked for the money to be paid back but not taken any further steps to enforce the debt. She obtained a mortgage in her favour in order to secure her position and to encourage her sister to repay the amount. The respondent’s sister did not rule out taking proceedings against her sister to recover the amount. I take account of the liability of approximately $42,000 that is owed by the respondent to her sister.
The respondent’s son JM
The evidence concerning financial transactions between the respondent and her son, JM is unsatisfactory. One reason for this is that JM acknowledges that he is not a “good document keeper” and that this is particularly so in relation to dealings with his mother. I have already addressed the issue of whether JM has a one third interest in the Mission Beach property. JM’s evidence was that he lived and worked in Europe after 1995 and from about 1997 the respondent invested in Australian shares on his behalf. JM gave oral evidence about cash being brought back to Australia but the extent of those payments, the circumstances under which these transfers occurred and the destination of these funds were not explored further in his evidence and I do not take that evidence into account in determining the existence and extent of any liability that the respondent has to him.
JM’s affidavit lists funds totalling $182,973 which he said were sent to his mother between 2 February 2001 and 3 July 2003. Documents forming part of Exhibit 26 evidence transfers of funds totalling $182,973 during this period. JM’s affidavit also states that between 7 April 2005 and 28 February 2007 he lent his mother a total of $72,000. Documents evidencing payments totalling $72,621 became part of Exhibit 26.
The documents that formed Exhibit 26 do not disclose what the transferred funds were used for, and they do not necessarily prove the existence of a liability. They do not explain whether the transferred funds were used to buy shares or other property for JM and, if so, whether that property was placed in his name. It is possible that some of the funds were used to acquire real property, such as Units 67 and 69. However, all that Exhibit 26 proves is that funds were transferred from JM to his mother. The transfer of those funds does not necessarily create a liability because some or all of the transfers may have been to repay monies that JM owed the respondent, or they may have been used by the respondent for JM’s benefit, for instance to purchase shares.
In circumstances in which neither the respondent nor JM provided reliable evidence about the circumstances under which each of the transfers came to be made, and where the application of the funds, so transferred, is not supported by documents, the respondent has not proven that she has a liability to JM to the extent claimed. I find that it is likely that the sums paid to her between April 2005 and December 2007 totalling $72,000 were paid for the respondent’s benefit. They are consistent with the respondent’s reliance upon members of her family to keep herself afloat in circumstances in which she was unwilling or unable (due to the lodgement of caveats) to sell her real property. It is possible that a number
of the payments sent to the respondent by JM between February 2001 and
3 February 2003 were used by the respondent for her own benefit, but the extent that she did so is not satisfactorily proven and the evidence did not exclude the substantial possibility that some of these transfers were used for JM’s benefit, for example to repay monies advanced by his mother to buy shares on his behalf.
In summary, the respondent has proven the likely existence of a liability to JM in the order of $72,000. Otherwise the extent of her liability to him is unproven.
Shares held in W Pty Ltd
The respondent is registered as a joint owner with her father and her sister in 149,998 shares out of the 150,000 shares issued in W Pty Ltd. The other two ordinary shares are held by her father and her sister. The net assets of
W Pty Ltd are approximately $1.59 million. It is the registered proprietor of Mission Beach and of a property named EM at Maleny. The property named EM is held by W Pty Ltd as trustee for the H Family Trust. The respondent’s father and his wife live upon the property. It is worth $3.5 million.
W Pty Ltd was incorporated by the respondent’s father and her late grandfather in 1960. The will of the respondent’s grandfather bequeathed his shares in W Pty Ltd to his son for his sole use and benefit and upon the death of his son to the respondent and her sister to be held in equal shares. After the grandfather’s death, and acting upon professional advice, the respondent’s father transferred the shares so that they were held jointly between him and his two daughters. The respondent’s father recently received legal advice about this, presumably prompted by his concern that the applicant was trying to “attack” his family trust and what he described as his company.[46] The applicant submitted that the attempt to “quarantine” the respondent’s shares in W Pty Ltd was without effect. It is unnecessary to outline the applicant’s submissions in detail since the respondent did not contest them in submissions in reply. In essence, the applicant’s submission is that, as the sole surviving beneficiaries of the estate, the respondent, her father and her sister chose to restructure the shareholding in the company and, whether or not the legal advice given to the respondent’s father was correct, no steps were taken to adjust the shareholding. If this was to be done then the shares would be held by the respondent’s father and then, upon his death, be transferred to the respondent and her sister in equal shares, assuming they survive him. I accept the applicant’s submission that the respondent’s registered shareholding is property which should be taken into account in determining the extent of her property. If, however, I had not reached this conclusion, then her future interests in the shares in
W Pty Ltd would nonetheless be a valuable benefit.
[46]Transcript 3-64 l 22.
The respondent’s one-third shareholding in W Pty Ltd has a value of $530,000.
The family trust
The H Family Trust has only one asset, the property EM which is valued at
$3.5 million. The applicant contends that it is a valuable financial resource and that I should conclude that the respondent’s minimum entitlement on administration of the trust is one third of its value.
The relevant trust deed directs the trustee (presently W Pty Ltd) to hold the property on trust for certain beneficiaries including the respondent, the respondent’s sister and such of their children as may be living on the death of the respondent’s father as the respondent’s father may appoint by deed, instrumental or will. The current will of the respondent’s father provides for part of the property to be used and occupied by his wife during her lifetime, the balance of the property to be used and occupied by the respondent during her lifetime and for the property then to be sold and divided amongst the surviving grandchildren.[47] The applicant submits that the respondent’s father’s intention in that regard is subject to change and that in the light of certain evidence I should readily infer that, after the proceedings conclude, his intentions will undoubtedly change. I am not persuaded that this is the case. The respondent’s father’s power of appointment is likely to be exercised to place what he regards as his property beyond the reach of his daughter’s ex-partner[48] and her creditors. I do not find that he is likely to change the appointment made by his current will so as to grant the respondent a larger interest.
[47]Exhibit 24, Transcript 3-56 ll 23-30.
[48]Transcript 3-64 ll 20-25.
I accept, however, that the property of the trust may be applied to her benefit and that her interest as a beneficiary in the trust should be included as one of her financial resources. Whether and the extent to which she benefits by the exercise by her father of his power of appointment is a matter that is under the control of her father. The respondent has a mere possibility of receiving a substantial share of the trust’s assets. This is not a case in which it is “as good as certain” that a beneficiary will receive the benefits of distribution either of income or capital or both.[49] I do not accept that the value of the respondent’s financial resources in respect of the trust comes close to the $1 million contended for by the applicant. The possibility of the respondent acquiring a substantial interest in the trust property beyond the life interest that she currently is given is low. There is only a possibility, not a likelihood, that the respondent’s father will decide to alter the appointment made by him after the conclusion of these proceedings.
[49]Australian and Securities Investments Commission v Carey (No 6) (2006) 233 ALR 475 at 485, [36] citing Inland Revenue Commissioners v Trustees of Sir John Aird’s Settlement [1982] 2 All ER 929 at 940.
The second matter relied upon is that the respondent borrowed approximately $22,000 from her sister and subsequently repaid it in order to meet an indemnity costs order made in March 2008. I take account of this matter insofar as her unreasonable conduct in the litigation has diminished the pool of assets that otherwise would be available. However, I have not invoked the “add back” principle discussed in Chorn & Hopkins[110] which is helpfully discussed in Challen & Challen.[111]Instead, I apply the test of reasonableness discussed in those authorities. I take account under s 309 of the respondent’s unreasonable conduct in incurring legal costs that are the subject of the March 2008 order and which have depleted by $22,000 the resources that would be available to meet a property adjustment order.
[110][2004] FLC 93-204 at [32]-[60].
[111][2007] Fam CA 1292 at [72]-[81].
It is convenient to address together the allegation of waste and extravagance in personal expenditure and the allegation of a failure to fully exploit the Thredbo and Mission Beach properties for their rental potential.
The respondent submits that s 309 has no role to play in this case and that her
post-separation credit card spending and her failure to maximise rental receipts on investments properties is not conduct that is so unreasonable as to be unjust to ignore. The respondent submits that she has explained that her state of psychological health prevented her paying full attention to business matters in the aftermath of the separation. So far as her spending is concerned, without acknowledging that there has been any extravagance, the respondent submits that it is her creditworthiness and own money that is at stake.
The legislation governing property adjustment orders does not mention considerations of fault.[112] However, profligate spending after a de facto relationship comes to an end may be considered in determining an appropriate order.[113] The fact that it was the respondent’s money to spend and her creditworthiness which was at stake does not provide a convincing answer as to why profligate expenditure after the relationship ended should be not taken into account. This is not to treat such expenditure as a “negative contribution”.[114] It is simply to recognise that extravagant expenditure operates to diminish the asset pool and the property and financial resources which the court may consider under s 298(a). The entitlement of a party to spend his or her money should be recognised, subject to the qualification that wasteful expenditure in the face of a reasonable claim for resolution of de facto property may result in injustice to a claimant.
[112]Evans v Marmont [1997] 42 NSWLR 70 at 79 per Gleeson CJ and McClelland CJ in Equity.
[113]BLM v RWS (supra) at [50]. For instance, wasteful personal expenditure on gambling and alcohol may require an adjustment to be made: Proudman v Dickason [2008] NSWC 681 at [38]-[40].
[114]BLM v RWS (supra) at [49].
I adopt what was said in M v M[115] in the context of the Family Law Act that neither the PLA nor the case law requires the parties to go into “a state of suspended economic animation” once their relationship breaks down pending the resolution of their financial arrangements. What is crucial is an assessment of the reasonableness or otherwise of the expenditure.[116]
[115][1998] Fam CA 42 at 2.11.
[116]Challen & Challen (supra) at [79].
The respondent was cross-examined extensively upon her expenditure for the period from late 2004 to early 2006 on travel, entertainment and purchases of luxury items.[117] The limitations upon disclosure of documents by the respondent does not permit a confident conclusion to be reached as to whether the respondent’s spending on luxury items escalated and became more extravagant after the relationship ended. One inference is that the respondent engaged in such expenditure, and used all of her credit card facilities in order to claim to be “broke” by the time of the hearing and to carry through on her threat to the applicant that he would “get nothing”. It is unnecessary for me to conclude whether the respondent’s high level of personal expenditure was predominantly motivated by these reasons or simply reflected an inability by the respondent to confront the need to curtail expenditure. Her expenditure on luxury items, entertaining friends and travel was, as she submits, spending her own money. However, it was expenditure incurred in the face of a known claim to resolve de facto property relations with the applicant. Had the respondent acknowledged the validity of the applicant’s one-third interest in the Thredbo property much earlier, the litigation with its attendant costs and distress might have been avoided. In any case, a curtailment of the respondent’s unreasonable expenditure would have increased the available pool of assets in respect of which a property adjustment order may be made. I consider that the extent of the respondent’s expenditure on luxury items, entertainment and travel after the relationship ended was unreasonable and warrants an adjustment in the applicants favour.
[117]Transcript 2-9 – 2-41; Exhibit 14.
The respondent’s failure to fully exploit both the Thredbo and Mission Beach properties creates an injustice. The applicant’s one-third interest in the Thredbo property was not accepted by the respondent in her evidence, his interest was not secured as a result of the respondent’s forgery, and the respondent denied that the applicant had any such interest until the final stages of the proceedings. The respondent’s outline of submissions filed 30 September 2008 identified the Thredbo property as being wholly owned by her. By the end of the hearing, and following the appointment of new legal advisers, the respondent’s submissions were to a very different effect. She submitted that the applicant’s assets were in excess of $310,000 to reflect “his one-third beneficial interest in Thredbo which still exists despite the ‘forged’ release and has a current net agreed value of $266,666.”
The respondent’s belated recognition of the applicant’s interest in the Thredbo property was made in conjunction with her submission that the respondent’s net property was $59,319 such that the applicant’s net property substantially exceeded that of the respondent. I have rejected the contention that the respondent’s net property is in the small amount which the respondent submits. The respondent’s contention in her submission that the applicant has a one-third beneficial interest in Thredbo is inconsistent with her prior conduct of the litigation and her general conduct towards the applicant in the years since the relationship ended. It was unfair for his interest in the Thredbo property to be locked into an underperforming asset, the rental potential of which the respondent has unreasonably failed to exploit. The injustice was compounded by the applicant’s equity in the Thredbo property being jeopardised by the respondent using the Thredbo property to secure loans, something she was only able to do as a result of her forgery.
The failure to exploit the rental potential of the Mission Beach property should be taken into account under s 309.
Rather than acknowledge the validity of the applicant’s claim in respect of his significant financial contribution that the respondent agreed to secure by depositing of the title deed to the Thredbo property with a solicitor, the respondent denied that the applicant had any entitlement to a share in the Thredbo property. The costs generated by the respondent’s unreasonable conduct of the litigation and her unjustifiable denial of the applicant’s one-third share in the Thredbo property should be reflected in an appropriate order for costs rather than a property adjustment order.
The respondent’s conduct in forging the applicant’s signature and in not permitting the applicant to realize the value of his interest in the Thredbo property should not result in an adjustment order which is punitive. Instead, her unreasonable failure to exploit the rental potential of the Thredbo property and the Mission Beach property in circumstances in which she was on notice of the applicant’s claim to an interest in the Thredbo property warrants an adjustment in the applicant’s favour.
Rather than make separate monetary adjustments on account of the three matters that I have considered under s 309, namely unreasonable legal costs, unreasonable and extravagant personal expenditure and an unreasonable failure to use the Thredbo and Mission Beach properties to derive rental income, I will take these matters into account in determining an appropriate adjustment to the parties’ contribution-based entitlements based on relevant matters under Subsubdivision 4.
Taking account of the relevant factors that I have identified under
Subsubdivision 4, I consider that an appropriate adjustment is to increase the contribution-based entitlement to the applicant by a further 10 percent.
The result is a property adjustment order in proportions of 30:70 in the respondent’s favour.
Fourth stage
Having considered the contribution-based factors in accordance with ss 291 - 295 and the factors which I have taken into account in ss 297 - 309 I finally consider whether the result is just and equitable in accordance with s 286 of the Act.
The applicant’s assets have a value of $43,750. The respondent’s assets, excluding her shares in W Pty Ltd, have a value of approximately $1,270,000. A 30 percent share of the relevant asset pool of $1,313,750 equals $394,125. A property adjustment order in the applicant’s favour would be in the amount of $350,375.
I consider that such an order is just and equitable.
Other orders
I will hear the parties about the terms of any order that is necessary to wholly or partly secure such a monetary order, or for the sale of property and the distribution of the proceeds of sale. My provisional view is that the payment should be secured in an amount not less than $266,666 being the sum that would have been secured in respect of the applicant’s one-third interest in the Thredbo property. Payment of the sum ordered may require consequential orders for the sale of specified property,[118] and require agreement to be reached between the parties concerning the withdrawal of caveats to facilitate the sale of one or more of the respondent’s properties.
[118] PLA s 333(1)(b).
I will hear the parties in relation to costs. However, it will be apparent from my reasons that the respondent’s conduct of the litigation, the time spent at the hearing in the identification of her assets and liabilities and the issues in respect of which the applicant has succeeded gives the applicant substantial grounds to seek a costs order in his favour.[119]
[119]PLA s 343(2) and (4).
Orders
I order that:
(1) Pursuant to s 333(1)(d) of the Property Law Act, 1974 (Qld) the respondent pay the sum of $350,375 to the applicant.
(2) On or before 2 February 2009 the applicant file and serve draft minutes of orders, including orders for the payment of the said sum, that payment be wholly or partly secured and that, in the event the sum is not paid by a specified date, for the sale of specified property and the distribution of $350,375 plus interest at a specified rate from the proceeds of sale.
(3) The respondent file and serve her response, if any, to the applicant’s draft minutes of orders within seven days of receiving the same.
(4) On or before 2 February 2009 the parties file and serve submissions on costs.
(5) The matter be listed for review at 9.15 am on Wednesday, 11 February 2009 for the making of further orders, including orders as to costs.
(6) There be liberty to apply.
Other matters
The evidence and the Notice to Admit Facts that was read disclose that the applicant may have received social security benefits to which he was not entitled.[120]
[120]See paragraph [34]-[35] of this judgment.
The respondent admitted to forgery and the use of the forged document to lie to a solicitor in order to gain access to a title deed.[121] She admitted to swearing a false statutory declaration in which she referred to a gift which was not in fact a gift.[122]
[121]T 1-33.
[122]T 1-59 – 1-60, and see paragraph [40] of this judgment.
I direct that the matters mentioned in the preceding paragraphs be referred to the Attorney-General for Queensland by the provision by the Registrar of a copy of these reasons to the Attorney-General. I further direct pursuant to s 342(1)(d) of the PLA that in so doing the Registrar shall publish to the Attorney-General the identity of the parties. It will be a matter for the Attorney-General to refer the matter relating to the applicant to an appropriate Commonwealth authority, and the matters relating to the respondent to the Queensland Police Service and the Director of Public Prosecutions for investigation and possible prosecution.
Kardos v Sarbutt (2006) 34 Fam LR 550 at 561 [36]; Delaney v Burgess [2007] NSWCA 360
at [79]-[82].
Bilous v Mudaliar (supra) at [68]; cf. In the Marriage of Pierce [1999] FLC 92-844; (1998) 24
Fam LR 377; [1998] Fam CA 74..
4