WENDON & PADBURY
[2018] FCCA 1748
•9 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WENDON & PADBURY | [2018] FCCA 1748 |
| Catchwords: FAMILY LAW – Final property adjustment – application for de facto property adjustment – premature distributions of capital – where the respondent has failed to provide proper disclosure – consideration of financial and non-financial contributions. |
| Legislation: Family Law Act 1975, ss.44(6), 69ZW, 75(2), 79, 90MT, 90SF, 90SM, 90RD, 106A |
| Cases cited: Jamine & Jamine (No.2) [2012] FamCAFC 104 Sebastian & Sebastian (No.5) [2013] FamCA 191 Chang v Su (2002) 29 Fam LR 406 Kannis & Kannis [2002] FamCA 1150 |
| Applicant: | MS WENDON |
| Respondent: | MR PADBURY |
| File Number: | PAC 3789 of 2016 |
| Judgment of: | Judge Harman |
| Hearing dates: | 26-27 April 2018 |
| Date of Last Submission: | 27 April 2018 |
| Delivered at: | Parramatta |
| Delivered on: | 9 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms Druitt |
| Solicitors for the Applicant: | Dignan and Hanrahan Solicitors and Attorneys |
| Counsel for the Respondent: | Mr Smart |
| Solicitors for the Respondent: | Camden Solicitors and Conveyancers |
THE COURT ORDERS ON A FINAL BASIS THAT:
By 4:00pm 17 August 2018, the Respondent shall pay to the Applicant sums of:
(a)$635,000 by way of property adjustment; and
(b)$17,415 (being costs ordered to be paid by the Respondent to the Applicant by Orders 5 July 2017) together with interest, calculated in accordance with Federal Circuit Court Rules 2001, accrued upon that sum or such portion of it as remains outstanding from time to time, calculated from 5 July 2017 until the date of eventual payment.
In the event that the Respondent should fail to comply in full with Order 1 by 4:00pm 17 August 2018, then the Respondent shall then forthwith do all acts and things and shall sign all deeds, documents and instruments necessary to effect the sale of the following properties by private treaty, namely:
(a)Property A;
(b)Property B;
and shall immediately place the properties in the hands of an agent agreed upon between the parties for sale at an agreed price or at a price determined by an independent valuer agreed upon between the parties, and failing such agreement, at a price determined as the fair market price by the President for the time being of the New South Wales Division of the Australian Property Institute, or their nominee, and the proceeds of sale thus obtained shall be applied as follows:
(c)In discharge of any mortgage presently encumbering title of the said property;
(d)In discharge of any outstanding council and water rates;
(e)In payment of real estate agent’s proper commission arising from the sale;
(f)In payment of proper legal costs and expenses arising from the sale;
(g)In payment of all other expenses which may have been reasonably incurred in respect of such sale, including valuer's fees, if appropriate;
(h)In payment to the Applicant of the sum of $635,000 together with payment to the Applicant of the sum of $17,415 together with interest accrued upon each sum pursuant to the Federal Circuit Court Rules 2001 calculated from 17 August 2018 (as regards the sum of $635,000) and 5 July 2017 (as regards the sum of $17,415) respectively until the date of eventual payment;
(i)In payment of the balance then remaining to the Respondent.
Pending the Respondent’s compliance in full with the above Orders:
(a)The Respondent shall be and is hereby restrained from receiving or otherwise dealing with any rental monies received or relating to the aforementioned properties, save for the purpose of applying such funds to payment of any mortgage or line of credit encumbering the property with respect to which rent is received; and
(b)The Respondent shall be and is hereby restrained from drawing down funds or otherwise increasing the outstanding balance of any mortgage encumbering the aforementioned properties and the Respondent shall attend to payment of all required instalments of principal and/or interest in respect to such mortgages required to be paid over and above rental monies applied for such purpose together with payment of all other outgoings relating to such properties, including council rates and water rates.
The Respondent shall do all acts and things and shall sign and execute all deeds, documents and instruments as may be necessary to transfer his interest in the Motor Vehicle 1 to the Applicant and the Applicant shall be forthwith declared solely entitled to same.
The Respondent shall retain and be forthwith declared solely entitled to the following items of personal property:
(a)Motor Vehicle 2 motor vehicle;
(b)Motor Vehicle 4 motor vehicle;
(c)His shareholdings;
(d)Furniture and contents contained in the former matrimonial home at Property C.
The following Orders take effect from the operative time.
A base amount $362,890 is allocated, as required by section 90MT(4) of the Family Law Act 1975, to the Applicant out of the Respondent’s interest in the (employer) Superannuation Scheme.
In accordance with section 90MT(1)(a) of the Family Law Act 1975:
(a)The Applicant, Ms Wendon, is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(b)The Respondent, Mr Padbury’s entitlement to payments out of their interest in the (employer) Superannuation Scheme and the entitlement of such other person to whom a splittable payment may be payable, is correspondingly reduced by force of this Order.
The Trustee of the (employer) Superannuation Scheme (“the Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
(a)Calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement created for the Applicant, Ms Wendon, by these Orders; and
(b)Pay the entitlement whenever the Trustee makes a splittable payment out of Respondent, Mr Padbury’s interest in the (employer) Superannuation Scheme.
These Orders have effect from the operative time and the operative time for this Order is four (4) days after service of this Order upon the Trustee.
This Order binds the Trustee of the (employer) Superannuation Scheme.
The solicitor for the Applicant shall forthwith cause a sealed copy of these Orders to be served on the Trustee of the (employer) Superannuation Scheme.
Otherwise than as provided for herein, each party shall be declared entitled to retain and shall relinquish in favour of the other party any claim to any right, title or interest in all items of property presently in the possession or custody of the other party, including but not limited to real property, monies held in any bank, building society or credit union, shares, superannuation or life entitlements, motor vehicles, chattels, furniture, furnishings and personal effects.
The Applicant shall indemnify and keep indemnified the Respondent from and in respect of all actions, claims, suits and demands as may be made against the Respondent in relation to all liabilities in the name of the Applicant or any joint liabilities not otherwise included in these Orders and any and all property in the name of the Applicant.
The Respondent shall indemnify and keep indemnified the Applicant from and in respect of all actions, claims, suits and demands as may be made against the Applicant in relation to all liabilities in the name of the Respondent or any joint liabilities not otherwise included in these Orders and any and all property in the name of the Respondent.
The parties are hereby directed and shall do all acts and things and execute all deeds, documents, instruments, authorities and writings and give all consents necessary to give effect to the Orders made herein. In the event of either party neglecting or refusing to execute such deeds, documents etc. the Registrar of the Court is hereby empowered to execute such deeds, documents etc. pursuant to section 106A of the Family Law Act 1975 (as amended).
The Respondent shall be and is hereby declared to be solely responsible for payment of any Capital Gains Tax liability arising as a result of sale of the aforementioned properties pursuant to Orders herein.
Leave is granted to each party, should they wish to press any Application with respect to costs, to relist the proceedings on 7 days’ notice to the other party and provided further:
(a)Such liberty is to be exercised within 28 days of these Orders and not otherwise;
(b)At the time of requesting relisting, a Minute of Orders sought is to be filed and served upon the other party specifying the costs that will be sought and quantifying those costs by reference to the Federal Circuit Court Rules 2001 or as otherwise sought.
All outstanding Applications and Responses are withdrawn and dismissed and all issues are removed from the list of matters awaiting hearing.
Upon the expiration of the Appeal period and in the event that no Appeal is lodged, that all exhibits then be returned to the party who tendered same and that all material produced on subpoena or pursuant to section 69ZW of the Family Law Act 1975 be returned to the person or organisation who produced same or securely destroyed.
IT IS NOTED that publication of this judgment under the pseudonym Wendon & Padbury is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PARRAMATTA |
PAC 3789 of 2016
| MS WENDON |
Applicant
And
| MR PADBURY |
Respondent
REASONS FOR JUDGMENT
These proceedings relate to issues of property adjustment between the parties Ms Wendon, the Applicant, and Mr Padbury, the Respondent.
Ms Wendon and Mr Padbury were parties to a de facto relationship which subsisted for a period of 10 years and 8 months. An earlier hearing, conducted 5 July 2017, determined that factual issue and resulted in a declaration, pursuant to section 90RD of the Family Law Act 1975, that the parties had lived together from 17 May 2005 and the relationship concluding no earlier than 15 January 2016.
These proceedings have been on foot for some little time, having been commenced by an Application Initiating Proceedings filed in the Family Court of Australia on 15 August 2016. The proceedings were subsequently transferred to this Court and the substantive plea has been heard and determined at a two-day trial. The earlier declaratory proceedings occupied a one-day trial.
Material considered
In dealing with the proceedings, I have read and considered each of the documents that were identified in the Case Outline documents filed by Counsel for each of the parties, together with the documents tendered in the proceedings.
In the case of the Applicant, this material comprised:
a)An Amended Initiating Application filed 31 January 2017;
b)A Financial Statement, sworn or affirmed 3 April 2018 and filed 4 April 2018;
c)The Affidavit of the Applicant, sworn or affirmed 7 April 2017 and filed that day;
d)The Affidavit of Ms T, sworn or affirmed 11 April 2017 and filed 11 April 2017;
e)An Affidavit of Ms J, sworn or affirmed 7 March 2017, filed 7 April 2017.
The last Affidavit leads evidence with respect to the commencement and conclusion of the relationship. The Affidavit does not assist in this determination, noting that the earlier hearing determined the jurisdictional threshold issue establishing jurisdiction.
The Applicant and Ms T were required for cross-examination.
A number of documents have been tendered in the Applicant’s case, comprising:
a)Exhibit A1, what is referred to as “the tender bundle”, comprising a ring-binder with some 233 pages of material. Much of that material was before the Court on 5 July 2017, when the jurisdictional hearing was conducted. To the extent that the material is relevant, it largely goes to matters pertaining to the Applicant and Respondent’s superannuation and the Applicant’s bank accounts;
b)Exhibit A2, an updated Form 6 valuation, provided by the Respondent’s superannuation fund;
c)Exhibit A3, a Notice to Produce which was served upon the Respondent and those instructed by him;
d)Exhibit A4, a statement with respect to a mortgage or line of credit account with Bank L covering a period 2 June 2014 to 2 August 2014;
e)Exhibit A5, tax returns for the Respondent for financial years concluding 30 June 2005 to 2013, together with notices of assessment for the same years;
f)Exhibit A6, an amended Minute of Orders sought;
g)Exhibit A7, an amended balance sheet;
h)Exhibit A8, a statement as to the Applicant’s paid legal fees;
i)Exhibit A9, correspondence evidencing procedural fairness afforded to the trustee of the Respondent’s superannuation interest.
In the case of the Respondent, I have read and considered the following:
a)The Amended Response filed 16 March 2018;
b)The Respondent’s Financial Statement filed 27 March 2018;
c)The Affidavit of the Respondent, sworn or affirmed 15 March 2018 and filed the same date;
d)An Amended Financial Statement of the Respondent filed 26 April 2018 (being the first day of trial).
The Respondent was cross-examined.
In addition to the Affidavit material referred to above, there is one Exhibit tendered in the Respondent’s case, comprising Exhibit R1, a tender bundle of documents with index attached.
I will, in due course, turn to the evidence of the parties and discuss contentious issues as well as matters pertaining to credit. From the outset, however, it must be observed that there are a significant number of agreed facts. The facts that are agreed go to the gravamen of the issues in dispute between the parties and are, generally, of far more importance and relevance than the disputed evidence.
Agreed facts
The agreed facts between the parties would appear to comprise the following.
Disparity of income
During the relationship and until at least the time that the Respondent ceased employment with (employer omitted) , the wages and earnings of the parties (both being in full-time paid employment or substantially so) were disparate. It is agreed that for the period until the Respondent left employment with (employer omitted) that the Applicant’s earnings from wages were approximately one half of those of the Respondent.
Deposit of funds
For the majority of the relationship, a significant portion of the Applicant’s income was deposited to accounts in the name of and controlled by the Respondent. I have referred to accounts in plural as the accounts to which funds were deposited changed over time. Initially, the deposited funds went into what might be described as a savings account in the name of the Respondent. It has been described in the evidence as an account ending in. Subsequently, the account to which funds were deposited changed such that the funds were deposited into a line of credit account. That account is identified as an account with Bank L ending in. That line of credit is secured against a property, Property E.
During the Respondent’s cross-examination, it became apparent that there are, in fact, two line of credit accounts secured against the Property E property with drawable balances of $85,000 and $100,000 respectively. During cross-examination the total outstanding with respect to those lines of credit (one having credit available but a zero balance, the other an outstanding balance) was clarified.
The Applicant’s evidence, that a significant proportion of her exertion earnings were deposited into accounts controlled by the Respondent, would not appear in dispute. That is particularly so as at the commencement of cross-examination of the Applicant, a proposition was put to the Applicant to the effect that, from approximately 2007, she had started putting “significant amounts of money” into the Bank L account (the line of credit account referred to above). The Applicant responded in the affirmative and added that it was her recollection that she had begun making deposits earlier than that (2007), but that she was unable to confirm this from her bank records as they did not go back that far.
Introduction of real estate
There is no issue that a substantial number of real properties, four in total, had been acquired by the Respondent prior to the relationship between these parties. The Applicant gives clear and frank evidence in this regard acknowledging, at paragraph 11 of her Affidavit, that the Respondent owned four parcels of real estate, all subject to mortgage, at the commencement of cohabitation. The Applicant goes further and concedes when those properties were all purchased well prior to the relationship between the parties.
It would also appear to be common ground, and consistent with the Respondent’s evidence, that each of those properties (which will hereinafter be referred to as “the investment properties”) is encumbered by an interest-only mortgage. As a consequence, the mortgages encumbering the investment properties have not substantially decreased during the relationship nor have they increased or been extended or further borrowed against. They have remained static and such payments as have been made with respect to them have serviced interests rather than having been applied to reduction of the capital borrowing.
Respondent’s employment
During 2014, the Respondent ceased employment with (employer omitted). The Respondent was medically retired as unfit for work. It is agreed that the Respondent left the (employer omitted) at about that time and on that basis.
It would also appear agreed or, if not agreed, irresistible on the evidence, that the Respondent will never return to employment with (employer omitted) and will not likely ever be engaged in remunerative employment again in the future.
Use of credit cards
It is an agreed fact that during the relationship each of the parties operated a credit card attached to an account in the name of the Respondent. The credit cards were held with the Bank N. The Respondent was the primary card-holder with respect to the credit card account and the Applicant had, what might be described, as a companion card.
It is also agreed that from the time that the line of credit was obtained and secured against the Property E property (as referred to above), that the parties would each pay the majority of their day-to-day bills and expenses using the credit card. It is further agreed that as each statement for the credit card was generated, an amount would then be paid from the line of credit sufficient to reduce the balance of the credit card account to nil and so as to ensure that interest was not payable on purchases made using the credit card.
There is some real controversy on the evidence as to the nature of some purchases and whether they should be taken to reflect negatively as regards the contribution of one party or the other. However, the pattern of usage of the credit card (that is each party using the card to meet the majority of day-to-day living expenses incurred by the parties jointly or individually) is not in dispute. It is also agreed and entirely consistent with the Respondent’s evidence that the funds that were used to discharge the credit card on a month-to-month basis were drawn from the line of credit account.
Otherwise, with respect to the disputed evidence of the parties, I will touch upon certain aspects of it. I do not propose to canvass the evidence in great detail. Each of the parties was cross-examined and gave evidence over a two-day trial. A transcript will adequately reflect the specific details of the evidence that was given by the parties. I will discuss specific aspects of the evidence, principally by reference to the legislative provisions that must be considered in this case. However, from the outset, I make clear that, to the extent that the evidence of the parties is at odds, I accept and prefer the evidence of the Applicant.
Credit
In making the above reference to an acceptance of the Applicant’s evidence in preference to that of the Respondent, I do not suggest that a finding is made that the Respondent is untruthful.
The Applicant’s evidence was clear and consistent and, I am satisfied, balanced and absent exaggeration or hyperbole.
In closing submissions, the Applicant’s credit was sought to be impugned, particularly by reference to one portion of the Applicant’s evidence (paragraph 49 of the Applicant’s Affidavit) wherein the Applicant suggested that the parties had, at all times throughout their relationship, slept together in the same bed. It was readily conceded by the Applicant during cross-examination that they had not, at all times, slept in the same bed. The Applicant conceded that the parties had spent periods of time maintaining separate bedding accommodation, sometimes in different rooms.
Beyond that concession by the Applicant, the Applicant’s evidence was not significantly attacked or eroded.
A further aspect of the Applicant’s evidence which was suggested to demonstrate that she was not a credible witness related to the Applicant’s evidence as to the purchase by these parties of a property at Property C. That property, purchased during the relationship, is the only parcel of real estate (one of five considered by this Judgment) which came into existence during the relationship.
The parties are agreed that the property was purchased for $515,000. The 10% deposit for the property ($51,500) is suggested, by the Respondent, to have been paid by him from a personal loan obtained by him in his sole name ($25,000) and from savings held by him ($29,000).[1] Those propositions were put to the Applicant. The Applicant did not deny the propositions. She agreed that she had not contributed funds or significant funds of her own to the purchase of the property and certainly not to the deposit.
[1] The additional amount in excess of $51,500 presumably related to purchase costs and the like.
As to the Respondent’s propositions, she simply indicated that she did not know whether a loan had been obtained or the funds obtained from the Respondent’s savings. Had the Applicant sought to assert a contrary proposition, such as suggesting that she had provided those funds, then a credit issue may have arisen. Within the tender bundle, Exhibit R1, are documents which corroborate the Respondent’s allegations. However, as the Applicant did not seek to deny that which was put to her, simply to indicate that she did not know the source of the funds, her credit is not impugned. To the extent that the Applicant’s evidence might be suggested to be an admission against interests, her responses are appropriate and credible. She did not assert that her funds had been used for the deposit nor did she challenge that the Respondent had applied funds, from whatever source, for the deposit.
In contradistinction, the Respondent was, at times, vague with respect to his answers or unable to recall matters that were put to him. I pause to observe that this is not a fundamental criticism of the Respondent. The Respondent suffers from a severe depressive condition which, I accept from the Respondent’s evidence and that which is tendered on his behalf, has a significant impact upon his day-to-day functioning, health, mood, and memory.
However, the basis upon which the Respondent’s memory is poor is not the issue here. The issue that arises is the reliability of the evidence that is given by the parties.
The Applicant’s evidence is clear, concise and consistent. The Respondent concedes, appropriately, that his memory is, in many regards and especially when not aided by documents to refresh his memory, defective and inferior to that of the Applicant.
The Respondent’s evidence is far clearer when that evidence relates to either the assertion of something of credit to the Respondent[2] or the assertion of something by way of criticism of the Applicant.[3] The Respondent’s evidence was notably absent or deficient in relation to the operation of his mortgage and savings accounts and his tax affairs. That particularly relates to issues of disclosure, which have some significance, and, in this case, connection with credit.
[2] Such as the prior ownership and introduction of the four investment properties, although that was never an issue in dispute.
[3] Such as the Applicant’s use of the companion credit card as to which the Respondent led detailed evidence and produced voluminous disclosure documents.
Disclosure
This case, like so many which come before the Court, is typified by allegations and complaints of poor disclosure. In this case, the allegations are with some foundation.
The Applicant is criticised for failing to provide certain documents, including documents relating to the value of her superannuation interests. However, those very documents are provided by the Applicant in the tender bundle, Exhibit A1, already referred to. More importantly, that tender bundle is identical to that which had been tendered at the interlocutory hearing 5 July 2017, at which hearing the section 90RD declaration founding the Court’s jurisdiction was made. The tender bundle includes the very documents that the Applicant is criticised for failing to comply. Thus, the criticism is without foundation.
Similarly, a submission was put seeking to attack the Applicant’s credit on the basis of a small and otherwise insignificant aspect of her evidence. It was put to the Applicant that she had had little involvement, during the relationship, with the care of the Respondent’s now adult child Mr D.[4] Further, it was put that the Applicant did not enjoy and had never enjoyed a good a relationship with Mr D at any time. The Applicant denied this, and, whilst conceding that certainly she and Mr D had arguments from time to time, the Applicant asserted that she and Mr D had been very close and that she had been very fond of the child and did a great deal for him.
[4] Mr D had, in the later years of the relationship, lived with the parties. At separation Mr D remained living with the Respondent (his father) and continued to live with his father until recently. Mr D is now living in one of the Respondent’s investment properties.
The proposition was then put to the Applicant that her evidence could not be accepted, as if there had been such closeness in their relationship then she would have continued to engage in some form of relationship with Mr D post-separation, whereas the agreed evidence is that she has not. The Applicant indicated that she had terminated communication with Mr D a time after separation from the Respondent and when Mr D was 19 years of age or so, and after Mr D had sent her a text, as the Applicant described it, “putting it on me for sex.”
It was submitted (even though the Applicant was not challenged as to the accuracy of that evidence during cross-examination) that the Applicant had manufactured the allegation as a matter of convenience to avoid the criticism made of her by the Respondent. However, page 223 of Exhibit A1 comprises the text message that is referred to in the Applicant’s evidence, in which the child Mr D does indeed advance “Can we have sex? I know it’s wrong”. The Applicant responded, “No. That’s in appropriate (sic). Your (sic) my step son.”
On the basis of the above, it would appear that the Respondent has simply not appropriately turned his attention to or considered the evidence that has been available by way of disclosure by the Applicant for some significant time, a period approaching 12 months by the time of this hearing.
I do not accept that the Applicant has been deficient in her disclosure of documents. I accept that the Applicant’s evidence is, subject to the one minor and relatively inconsequential criticism above, accurate and credible.
In contradistinction to the above, the Respondent’s case is very much typified by an absence of appropriate disclosure on his part.
The non-disputed evidence in this case is that the Respondent was a meticulous keeper of financial records, what was described in submissions by the Applicant as “his minutia style of control.”
The Respondent’s evidence, with which the Applicant agrees, is that he used a software package to track all expenditure. That expenditure is set out in some detail in portions of the Respondent’s Affidavit, and, in particular, commencing at paragraph 43 and continuing on to paragraph 45. Therein the Respondent complains as to the Applicant’s expenditure on the Bank N credit card account discussed above. The Respondent has gone to the effort of extracting what are described as “illustrative examples” of the Applicant’s “excessive spending” on the credit card. These include entries of such moment as “13 June 2011, Coles Express, $2.69.”
The Respondent’s case is very much typified by a substantial trawling through of financial records, whether those documents have been produced by way of disclosure or not (and with respect to the above evidence regarding the Applicant’s expenditure, I accept that the statements are produced, at least in part, and being those which corroborate the illustrative examples) to find fault with or criticism of or to minimise any contribution made by the Applicant.
The basic documents that would be of the greatest assistance to the Court as the tribunal of fact in “getting to the truth” were not disclosed by the Respondent. Many documents have still not been produced by the Respondent, notwithstanding that the proceedings have, by the time of trial, been on foot for approaching two years. It is noteworthy that of those documents of particular relevance which were produced, many of these were made available to the Applicant for the first time on the second day of trial.
A significant issue in these proceedings is an allegation by the Respondent that the investment properties purchased by him prior to this relationship should be treated differently to any other asset in the relationship, whether it is described, as often arises, as a “quarantining” of those assets or, as is advanced in submissions on the Respondent’s behalf, by an asset by asset approach being adopted. Following therefrom, the Respondent submits that the Applicant has made no contribution whatsoever to the investment properties as they have not been substantially renovated or altered and have been entirely self-funding with rental income being sufficient to meet all expenses. Accordingly, the Respondent submits that the investment properties should not be subject to any Order for adjustment.
It was observed at the commencement of the trial that the most relevant documents would be the Respondent’s tax returns, as these would demonstrate what income had been received from the investment properties, what expenses incurred, and thus, potentially, corroborate the Applicant’s evidence that the properties had been, for the totality of the relationship, self-funding.
The tax returns which were ultimately produced on the second day of trial (and tendered as Exhibit A5) make clear that the properties were not – and in all probability are not – self-funding.
The Respondent was cross-examined with respect to the taxation returns and the losses incurred with respect to the investment properties for each of the financial years for which returns are produced.
The Respondent was clear in his evidence that he has not lodged an income tax return for the financial years ending 30 June 2014, 2015, 2016 or 2017. Counsel was put on notice that submissions would be required as to why a referral to the Commissioner of Taxation should not be made in light of that evidence.[5]
[5] An Application was also made, after the above evidence had been given by the Respondent and given without objection, for the issuance of a Certificate pursuant to section 128 of the Evidence Act1995. That Application was refused.
The issue of referral was very much overtaken by the production, on day 2 of the trial, of the Respondent’s tax returns. Those returns demonstrate that, in all probability, there would be no assessable income tax liability as against the Respondent for the years for which returns have not been lodged and, accordingly and irrespective of the legislative obligation to attend to one’s affairs diligently, late lodgement is a matter for the Respondent and to be addressed between the Respondent and the Commissioner for Taxation. In all probability, the Respondent will be due a refund of some significance by reference to his past and, in all probability continuing, negative gearing losses.
The issues that arise from the non-production of the Respondent’s tax returns [6] are somewhat complex.
[6] Including those not yet prepared.
Firstly, I am concerned that the Respondent’s approach to disclosure is far from ideal. In ordinary circumstances, that would be sufficiently problematic of its own to impinge upon findings of credit, let alone other issues such as an assessment of the parties’ present legal and equitable interests in property and an appropriate consideration of adjustment of interests.
In this case, the Respondent’s lack of appropriate disclosure is complicated by the reality that the Respondent is, on his own assertion and as accepted by the Applicant, a fastidious and meticulous keeper of records.
What was produced by the Respondent on day 1 of the trial and in response to a Notice to Produce was largely irrelevant to any issue in the proceedings.
At one point, Counsel for the Applicant, in cruciform, held up for the benefit of the Respondent and the Court, two very large bundles of bull-clipped receipts that were produced by the Respondent. The receipts were for shopping at supermarkets and other places. They did not go to any issue of significance or substance in these proceedings, and one wonders why they would have been produced (excepting that they may have been called for in the Notice to Produce).
A troubling aspect of the Respondent’s evidence is that he required the Applicant to provide to him each and every receipt for any expenditure that she undertook, particularly with respect to but not necessarily limited to expenditure upon the Bank N credit card. The Respondent indicated that all such items would be entered into his software package and presented to his accountant, although the vast majority of that expenditure could not be, in any way, related to income production and, thus, would not be required by the accountant. I do not doubt that the spreadsheets the Respondent spoke of were prepared and produced and provided with other materials to the Respondent’s accountant. It is simply that much of the information within those spreadsheets would have been irrelevant to the address of the Respondent’s tax affairs.
Secondly, the Respondent’s less than meticulous address of disclosure is concerning, as it is an obligation upon litigants to give disclosure.[7] Whilst the Federal Circuit Court Rules 2001 do not permit formal discovery on oath without the Court’s leave,[8] there are still obligations which arise from the Court’s Rules with respect to disclosure, including Rule 24.04 of the Rules, which requires that a party give full and frank disclosure in proceedings by producing certain relevant documents.[9] True it is that the Respondent can validly assert that he is not able to produce tax returns for the last four completed financial years, as he has not completed them. That, however, ignores the common law obligations which arise with respect to disclosure and created by authorities such as: Jamine & Jamine (No.2) [2012] FamCAFC 104, Sebastian & Sebastian (No.5) [2013] FamCA 191, Chang v Su (2002) 29 Fam LR 406, Kannis & Kannis [2002] FamCA 1150, Black & Kellner [1992] FLC 92-287 and Weir & Weir [1993] FLC 92-338, to name but a few.
[7] The Federal Circuit Court Rules 2001 refer to disclosure rather than discovery, although the two terms might be used interchangeably.
[8] Nor the administration of interrogatories.
[9] Federal Circuit Court Rules 2001, Rule 24.04:
There is an obligation upon litigants to keep their affairs in order to enable the Court to “get to the truth” and do justice between the parties. To do so requires a symmetry of evidence. That task is rendered difficult, if not impossible, in circumstances such as this, where the Respondent has simply failed to produce material and has failed to create the material which would be necessary (and which should have been created), such as past tax returns and tax returns for the last four completed financial years.
Disclosure is a process by which parties identify documents and other evidence that they will rely upon to seek to prove the facts that they allege and to disprove the allegations of fact advanced by the other party. Disclosure is intended to “get to the truth”. To the extent that the truth cannot be gotten to as a consequence of the Respondent’s failures to disclose, the Applicant should not be prejudiced and the Court should not be overly cautious in approaching issues in dispute (see Burgoyne & Burgoyne (1978) FLC 90-467).
Thirdly, the Respondent’s failure to appropriately address disclosure obviates against any realistic prospect of settlement. Disclosure is about identifying, obtaining and evaluating evidence. It is about disclosing what evidence you have to prove or disprove facts. Disclosure allows an assessment of the strengths and weaknesses of each party’s case. In essence, it is about what can and can’t be proved. To that end, disclosure is an investment in settlement.
Disclosure assists in establishing what can and cannot be proven and, thus, facilitates settlement and the smooth and expeditious conduct of litigation. Disclosure also allows advice to be given that will, at least potentially, help shift attitudes and shape instructions. The production of the Respondent’s tax returns, importantly, including negative gearing schedules, would have allowed the Respondent to receive advice disabusing the Respondent of any notion that the investment properties were “self-funding”. As will be seen, they were not.
Fourthly, and flowing from the above, the Respondent’s evidence and late production of material is problematic from the perspective of his own case.
Two significant issues arise from the income tax returns, and particularly with respect to the negative gearing of the four investment properties.
During his cross-examination, the Respondent indicated that, whilst he conceded that the investment properties incurred losses for tax purposes,[10] these losses were suggested to be not “real” and merely “paper losses” caused by depreciation.[11] It is clear from an examination of the produced returns that the losses were not, as the Respondent asserts, “paper losses”. They were real losses wherein income had been expended in meeting expenses incurred within that financial year and which expenses exceeded the income produced by those properties.
[10] Losses in some financial years up to or exceeding $50,000 and thus resulting in a significant tax refund to the Respondent.
[11] Depreciation not involving expenditure in the assessable year but reflecting depreciation of assets produced in previous years.
The Respondent’s explanation was that each of the homes was the subject of depreciation.[12] The Respondent asserted that it was this depreciation that made up the majority of any negative gearing loss.
[12] The Respondent’s contention was that whilst land did not depreciate, that the buildings and structures erected upon the land did depreciate and that the dwellings on each parcel were depreciated at 2.5% per year for tax purposes.
The depreciation schedules which are annexed to the returns make clear that, with respect to one of the four properties, the property at Property E, that there is an annual entry for “building write-off.” Therein, an original cost of $58,974 is given and depreciation at 2.5% per year is claimed.[13] That property is the only one of the four investment properties for which any such depreciation is claimed. However, that depreciation cannot, as the Respondent asserted, explain the losses that are incurred for that single property or the four investment properties collectively. The majority of depreciation losses, themselves minimal, relate to fixtures, fittings, and personalty.[14] That very proposition, when put to the Respondent, was denied.
[13] Totalling depreciation of no more than $1,474.35 per year on acquisition cost.
[14] Or “bits and pieces” as was put to the Respondent and rejected by him.
Further, the issue of depreciation cannot explain the level of losses that are incurred with respect to these four negatively geared investment properties. The total depreciation per year for all depreciable items is in the order of $2,500.
The total losses that are incurred, as reflected in the tax returns tendered, are in excess of $16,000 for each of the years and, at times, in excess of $50,000 and, in the 2008-2009 return, exceeding $60,000.
The additional matter that arises with respect to the Respondent’s income tax returns and their late production is that the returns cause significant dispute and controversy regarding the fundamental proposition put in the Respondent’s case, namely, that the Applicant has made no contribution whatsoever, directly or indirectly, to the investment properties. On the basis of the losses that have been incurred and the deposit of a significant proportion of the Applicant’s income to the Respondent’s accounts,[15] that proposition simply cannot be maintained.
[15] From which the losses were met.
It is to be remembered (as set out above) that a significant proportion of the Applicant’s wages and salary were deposited into the account of the Respondent, whether his savings account or the line of credit account secured against the Property E property. It is from those sources that the losses in relation to the investment properties have been met. Those funds, even if contributed disproportionately between the parties as to two-thirds by the Respondent and one-third by the Applicant, have contributed to the investment properties and their maintenance.
There is no controversy in this case that the Applicant has made no contribution to the acquisition of the investment properties.[16] However, the Respondent’s assertion is that the Applicant has made no contribution of any kind to the “conservation or improvement of any of the investment properties”.[17]
[16] That is a matter that I will touch upon by reference to various authorities to which I am referred as regards assessment of contributions.
[17] Section 90SM(4) referring to “…(a) the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship…(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or (ii) otherwise in relation to any of that last-mentioned property”.
Fifthly and finally, the significant difficulty that the Respondent’s poor disclosure creates is that the Court cannot accurately assess the present legal and equitable interests of the parties in property (or the assets available).
The Respondent has been able to produce hundreds of pages of statements and detailed calculations arising therefrom, when it is suggested that this production or these calculations are disadvantageous to the Applicant.[18] Why such effort could not have been put more productively into producing material by way of disclosure which went to issues that were germane, such as the rental received from and the expenses incurred with respect to the investment properties,[19] is unclear. However, those difficulties, as the Full Court of the Family Court of Australia has discussed in authorities such as: Burgoyne & Burgoyne, Black & Kellner and Weir & Weir must result (and I am satisfied do in this case) in an adverse credit finding such that wherever there is controversy between the Applicant and Respondent, I prefer the evidence of the Applicant.
[18] Relating to the Applicant’s use of the credit card account.
[19] And the expenses incurred in production of that income or otherwise.
With respect to the Respondent’s evidence regarding the self-funding nature of the investment properties, the Respondent is plainly wrong and in circumstances whereby he was the only party in a position to know the truth.
Otherwise, with respect to the evidence of the parties and before turning to the legislative provisions and other relevant legal issues, I make clear that upon an acceptance of the Applicant’s evidence, the chronology of events provided by the Applicant is adopted and accepted. That chronology is incorporated herein.
Chronology
Chronology:
DATE:
EVENT:
SOURCE:
1965
Respondent born (52yrs).
1970
Applicant born (47yrs).
W@2
2005
Parties commenced cohabitation.
Both employed as (occupations omitted). Applicant later moved to (employment omitted) industry.
W@4
W@13-14,21
2007
Applicant received lump sum $12,000 redundancy payment from (employer omitted). Applicant transferred money to Respondent’s account.
W@24
2007
Parties purchase property at Property C for $515,000 in the Respondent’s name. Mortgage cross secured on Respondent’s property at Property E.
W@27
2011
Respondent’s son, Mr D (20yrs) moved in with the parties.
W@9
2011
Applicant received lump sum of $14,000 from her mother. Applicant purchased Motor Vehicle 1 and registered it in Respondent’s name.
W@24
2013
Parties holidayed together on the Region C for one week.
W@52h
08.05.2014
Respondent said to Applicant “if you support me through this we should get married”.
W@52i “I”
2014
Respondent medically discharged from the (employer omitted).
Respondent received lump sum payment.
W@21,25
2014
Parties attended wedding of Mr L as a couple.
W@52j
2015
Parties held an engagement party for the Applicant’s daughter at the [Property C home].
W@52k
2015
Parties attended Respondent’s niece’s birthday as a couple.
W@52l
September 2015
Parties attended fundraising event for Respondent’s friend Mr R as a couple.
W@52m
25.12.2015
Parties attended Christmas Dinner at Respondent’s brother Mr B’s house.
W@52d
January 2016
Parties separated. Applicant left the [Property C home].
W@49-50
January 2016
Respondent commenced cohabitation with partner Ms L in the [Property C home]
W@47
May 2016
Respondent attended Applicant’s workplace and sought to reconcile.
W@56
June 2016
Applicant commenced cohabitation with partner Mr J.
W@47
15.08.2016
Applicant filed Initiating Application.
05.07.2017
Order: Declaration under s90RD of the Family Law Act that the parties resided together in a de facto relationship for a period commencing no earlier than 17 May 2005 and concluding no later than 15 January 2016. Respondent ordered to pay the Applicant’s costs of $17,415 by 06.10.2017
06.10.2017
Respondent failed to pay the Applicant’s costs as per order 05.07.2017.
The parties’ proposals
From the commencement of these proceedings, it has been clear that the Applicant seeks a substantial adjustment of interests in property. The Initiating Application that was originally filed had proposed Orders for sale of the property at Property C, and the retention, by the Applicant, of the entire proceeds of sale of that property. The Applicant also sought the sale of the four investment properties and a 35/65% division as between the Applicant and Respondent respectively of the proceeds of sale of those properties.
I observe, at this point, that a sale of any of the investment properties will, in all probability, trigger an assessment of Capital Gains Tax (CGT) as against the Respondent. That is not an issue that is at all addressed in the evidence. It is regrettable that it is so. Beyond acknowledging the probability that such a tax liability will arise, it is simply not possible to give any consideration as to how that might be addressed.
On the basis that the parties have no substantial cash assets available to them, it is inevitable that any amount that is to be paid to the Applicant by the Respondent[20] will be funded either by borrowings made by him[21] (the repayment of which he would then need to service, and there is some real issue as to how realistic either obtaining or servicing such borrowings might be) or through sale of real estate.
[20] Beyond an amount of approximately $100,000 that would be available from existing lines of credit.
[21] The Respondent has two lines of credit available to him with available funds of $185,000 in total. The lines of credit are presently drawn to an amount of a little over $60,000 leaving available credit of a little over $120,000, being a sufficient amount to enable a payment to the Applicant by the Respondent as proposed by him.
To the extent that a Capital Gains Tax liability will almost inevitably arise from the necessary sale of income producing property to fund settlement, any such Capital Gains Tax liability simply cannot be quantified, adjusted or appropriately considered in this Judgment. That arises through the failure of the Respondent to produce highly relevant evidence[22] and being evidence that could only have been obtained by him.
[22]Another instance of evidence to which the Respondent might have turned his attention more appropriately than seeking to set out in detail the suggested miscreant expenditure of the Applicant of $2 or more at a time with respect to the Bank N credit card.
By her Amended Initiating Application, the Applicant does not substantially vary the relief that she seeks. The Amended Initiating Application does little more than to agitate for a superannuation splitting Order allocating a sum certain to the Applicant from the Respondent’s superannuation interest (whereas the originally drafted Application sought a percentage division of the same superannuation interest).
By the Response initially filed in these proceedings, the Respondent had opposed the Court’s jurisdiction, suggesting that leave to commence the proceedings was required as the proceedings were commenced outside of the “timeframe allowed” by the Family Law Act 1975.[23] It is to be observed that the Respondent did not deny that a de facto relationship had ever existed. The Respondent had sought to assert that the relationship between the parties had concluded at an earlier date, although that date was unspecified in the Response.
[23] It is necessary for any Application for property adjustment (per section 44(6) of the Family Law Act 1975) to be brought within two years of termination of the de facto relationship. In any event, that issue was addressed at the earlier hearing 5 July 2017.
On the above basis, the Respondent sought nothing further than an Order that the Application be dismissed and that the Applicant make no further property claims against the Respondent. Notwithstanding that claim for relief, the Respondent reserved his position, indicating:
Should The Court, not dismiss this matter under the above stated section, the Respondent Mr Padbury reserves the right to make application for further orders in relation to proiperty (sic) and assets of the Applicant.
An Amended Response was filed on 16 March 2018. The Amended Response proposed that the Respondent pay to the Applicant the sum of $120,000 within 48 days of an Order and that Motor Vehicle 1 be returned by the Applicant to the Respondent.
The latter portion of the claim is curious, to say the least, noting that the Respondent’s Financial Statement discloses that he presently owns two motor vehicles. The Applicant has only one motor vehicle, being the Motor Vehicle 1. Why the Respondent would feel the need to obtain the vehicle driven by the Applicant (other than the reality that the vehicle was purchased during the relationship) is unclear. Such an Order will not be made and was not pressed at trial.
In closing submissions, an Amended Minute of Order was tendered on the Applicant’s part. That Minute of Order sought relief in the alternative. The alternate relief sought to avoid a sale of the Property C property and, instead, sought that the Applicant be appointed as trustee for sale with respect to three of the four investment properties and that the Respondent transfer those properties to the Applicant so that she might, pending their sale, receive their rents (and presumably attend to payment of their fees and charges). On completion of the sale of each property, the Applicant sought to retain the nett balance remaining after payment out of secured liabilities. Again, an issue arises as to the Capital Gains Tax issues that might arise upon the sale of any of those parcels of real estate, although such issues as might arise cannot be addressed as they are not addressed by the evidence.[24]
[24] If the properties were transferred by the Respondent to the Applicant, a CGT roll-over relief could be claimed at the time of transfer, although a CGT liability as against the Applicant might be assessable upon sale of those parcels and income tax issues might arise as regards the receipt of income (and the incurrence of expenses) pending sale.
By closing submissions, the Respondent’s position had not changed. The Respondent continued to seek that he make a payment of $120,000 to the Applicant and that he retain title to the four investment properties together with the Property C property. The Respondent otherwise seeks that each party retain the assets and resources in their respective possession. When pressed, by reference to that opined by the High Court of Australia in U & U [2002] FLC 93-112 as to the obligation upon parties to advance a position, the Respondent submits that he would “leave it to the Court” to determine what Orders should be made.
The Applicant’s case is prefaced upon a 45/55% division[25] of the total available property.[26] The Applicant urges an assessment of the Applicant’s contribution as equating to 40% of the value of the nett assets and with an adjustment of 5% for section 90SF of the Act made in the Applicant’s favour.
[25] With the Applicant receiving 45% and the Respondent receiving 55%.
[26] That being, essentially, the 5 parcels of real estate and the superannuation interests of the parties.
In the Respondent’s case, it is submitted that the Court should assess the Respondent’s contribution as equating to 85% of the total asset pool (and, thus, the Applicant’s contributions at 15%). The Respondent submits that a further adjustment should be made in his favour of 5-8% with respect to section 90SF of the Act. That would result in the Respondent receiving or, perhaps, more correctly, retaining[27] 90-93% of the assets and resources which are known and available for consideration.
[27] As the Respondent is the sole registered proprietor of all five parcels of real estate, as well as holding the majority of the superannuation interests of the parties.
The present legal and equitable interests of the parties.
As the High Court of Australia discussed in Stanford v Stanford [2012] HCA 52, the starting point for any Application for adjustment of interests in property must be the ascertainment of the present legal and equitable interests of the parties in property, what is often referred to as the available pool of property.
As is submitted by Counsel for the Applicant, it is difficult, in this case, to accurately determine a balance sheet. That difficulty arises partially from the Respondent’s poor disclosure. The difficulties are compounded by changes in position which occurred during the Respondent’s evidence. A number of changes are of particular significance.
The Respondent’s superannuation
At the commencement of the trial the balance sheet, as contained within the Case Outline document submitted by Counsel for the Applicant, was accepted as agreed. The only issue of dispute arose with respect to the present value of the Respondent’s (employer) Superannuation Scheme. The Applicant asserts that, in accordance with the Form 6 valuation provided by the fund, that the Respondent’s interest had a value of $1,341,059. The Respondent asserts that the superannuation interest has a value of $318,939.
The above issue is simply addressed. The superannuation fund has been requested, not only by the Applicant but also the Respondent (that document being produced by the Respondent on the second day of trial), to advise the value of the fund. The fund has valued the Respondent’s interest in accordance with the specific provisions which apply to the fund, namely, the (employer) Superannuation Scheme, and the Family Law (Superannuation Scheme) Determination 2010, (being a determination made by the Attorney General under regulation 64(7) of the Family Law (Superannuation) Regulations 2001. The valuation, thus, cannot be cavilled with.
The value of the fund is a separate issue to any argument as to how the fund might be treated or contributions towards it assessed. However, I am satisfied that the value of the fund is, as valued and asserted by the fund, $1,341,059.
Notwithstanding that the balance sheet was agreed (save and except the one controversy with respect to the Respondent’s superannuation) three further changes arose from the Respondent’s evidence.
Line of credit accounts in the Respondent’s name
During cross-examination regarding the line of credit accounts secured against the property at Property E, it was conceded by the Respondent that the total funds available to be drawn from the lines of credit are $185,000. This was made up of two separate line of credit accounts, one with an available balance of $85,000 and one of $100,000.
The Respondent indicated with respect to those two line of credit accounts, that one of the two accounts was not drawn upon at all (and thus had a zero balance) whilst the second line of credit account had been drawn upon but only so as to produce a balance of $61,661 as at the date of hearing. The Respondent indicated during his evidence, “It’s worse now,” but no document has been produced, nor any figure advanced, as to what the balance might be, save and except that which was shown in the most recent statement, namely a balance of $61,661.
To the extent that the balance sheet, agreed at the commencement of trial,[28] reflects a mortgage encumbering the Property E property with a balance of $146,160 the previously agreed balance sheet is wrong. The actual balance[29] is, as reflected in the balance sheet tendered at and during submissions (Exhibit A7) is $61,661.
[28] Per the Case Outline of the Applicant.
[29] As a line of secured line of credit rather than mortgage.
The Respondent’s paid legal fees
During cross-examination the Respondent indicated that he had drawn against the line of credit, secured against the Property E property, to pay legal fees. No schedule of paid legal fees has been produced in the proceedings by the Respondent. Such a schedule has been produced by the Applicant.
The Respondent indicated that his paid legal fees were “$50-$55,000, I might be understating that.” It was put to the Respondent that but for his withdrawal from the line of credit account for the payment of legal fees, that the balance outstanding would only be $5,000 or $6,000. That proposition was agreed with.
On that basis, two matters arise. Firstly, the balance which had initially been asserted and agreed for the line of credit is simply not correct. The total outstanding balance for the line of credit is as shown in the amended balance sheet, which I will incorporate in these reasons shortly, namely the sum of $61,661.
Secondly, the Respondent clearly has paid legal fees of $50-$55,000 and possibly more, (on the basis that the Respondent’s assertion that it may well be more). I intend to include the figure of $55,000 as what might be regarded as an “add-back.”
I am conscious of the line of authorities commencing with Kowaliw & Kowaliw (1981) FLC 91-092 regarding such issues. However, notwithstanding the Kowaliw & Kowaliw line of authorities, if they might be so described,[30] I am satisfied that authorities such NHC & RCH [2004] FamCA 633 and Hayton & Bendle [2010] FamCA 592 remain good law, and thus allow and permit the inclusion of such amounts or their adding back. Lest I be wrong in that regard, I am conscious that an alternate methodology might be to simply remove the debt of $55,000 from the current outstanding balance of the line of credit, to place that debt at the amount that it should be but for the Respondent’s expenditure and premature distribution.
[30] Those authorities dealing with issues of premature distribution, wastage and their appropriate address, and whether such expenditure is addressed by add-back or section 75(2)(o) adjustment (in this case section 90SF(3)(r)).
With either approach, I am satisfied that it would be unjust and inequitable to impose upon the Applicant her effective forgiveness of the debt created by the Respondent representing the funds expended by the Respondent on his own legal fees. On the basis that the Respondent seeks that the debt created by his expenditure of legal fees be taken into account, the nett effect of its inclusion would be to reduce the equity in the property and to cause the Applicant to contribute, albeit indirectly, to the Respondent’s legal fees.
With respect to paid legal fees, the Applicant is frank and candid in disclosing, as per Exhibit A8, that she has paid legal fees of $4,547. That amount could be included, although I do not propose to do so. That is not on the basis that its inclusion is resisted by Counsel for the Applicant but as the expenditure on legal fees by each party have different effect. Inclusion of the Applicant’s paid legal fees, particularly when considered in the context of the discussion of the principles first espoused in Kowaliw & Kowaliw, and the desirability of avoidance of add-backs, is unnecessary. The payment of legal fees by the Applicant is not a premature distribution of capital.
The Applicant has paid her legal fees from her income earnt post-separation. The Applicant has not depleted an asset or created a debt which she seeks to have taken into account through paying her legal fees. That is in contradistinction to the Respondent’s position whereby he has drawn upon a line of credit[31] to pay his legal fees, and then seeks to have the debt taken into account. The Respondent’s actions do represent a premature distribution of capital.
[31] As he is entitled to do as the line of credit is in his sole name and secured against property of which the Respondent is the sole registered proprietor.
But for cross-examination on the point, the actual balance of the line of credit account let alone the reality that the line of credit debt included, in fact predominantly so, paid legal fees, would not have been apparent.
For those reasons, I propose to include in the balance sheet Exhibit A7 (incorporated below) an amount for the Applicant’s paid legal fees. I will make no further adjustment for the Respondent’s. The Applicant’s paid legal fees are a trifling amount representing only a fraction of 1% of the assets available for division. In any event, even if considered, that amount can be appropriately adjusted by reference to section 90SF(3) of the Act.
The Respondent’s (employer) Superannuation Scheme Credit Union account
The Respondent did not produce statements with respect to his (employer) Superannuation Scheme Credit Union bank account. Statements were not produced for the period prior to separation nor for the period from separation to the present.
The Respondent was asked what the balance of the (employer) Superannuation Scheme Credit Union account was at the date of separation. Objection was taken to the question on the basis that one would not generally expect any litigant to recall the balance of their account some two and half years earlier. However, as the statements had been the subject of a Notice to Produce and were not produced and, thus, no better evidence was available,[32] the question was allowed. The question was allowed on the basis that the documents which could and should have been produced by the Respondent and which would have assisted in refreshing his memory and/or have spoken for themselves upon tender were not produced.
[32] Or available to assist the Respondent in refreshing his memory.
There was no explanation offered as to why the Respondent, who continues to operate the account and who has possession, custody and control of the statements for the account, had not produced the statements.
The Respondent was able to recall that the balance of his account as at January 2016, the month of separation, was approximately $84,000. I propose to include that amount in the balance sheet Exhibit A7.
The Respondent’s savings at separation and their depletion would potentially fall within the category of premature distribution as discussed in the Kowaliw & Kowaliw line of cases.
On the Respondent’s own evidence, he had a surplus of income over expenditure during the relationship and continues to. On that basis alone, the Respondent could hardly be heard to argue (indeed the submission was not put) that the expenditure of those funds occurred to meet reasonable living expenses. Expenditure of those funds would, prima facie, be a premature distribution of capital.
I am also conscious with respect to contribution that the majority of funds held in the Respondent’s (employer) Superannuation Scheme Credit Union account at separation are suggested, by the Respondent, to have come from payment out of long service leave and other entitlements. The difficulty in that regard, of course, is that the Respondent has, by and large, failed in his duty of disclosure. Thus, the Respondent’s allegation, whilst not disbelieved, is not corroborated. Clearly, evidence in the nature of the Respondent’s bank statements, being documents within the Respondent’s possession, custody and control, were available and as no explanation was provided for their non-disclosure, both of the Jones & Dunkel (1959) 101 CLR 298 inferences identified as available in Brandi v Mingot (1976) 12 ALR 551,[33] are drawn in accepting the Applicant’s contention that she contributed to the funds held by the Respondent at separation. In any event, the Respondent’s savings at separation are funds which, because of the duration of the relationship, the Applicant contributed to in any event, albeit indirectly and which should be considered as favouring the Applicant.
[33] (1976) 12 ALR 551 at pages 559-560:
On the basis of the above findings, the balance sheet as tendered, Exhibit A7, and as amended or augmented in light of the above discussion is incorporated herein.
Ownership
Description
Value
ASSETS
1.
R
Property C
$848,500
2.
R
Property D
$832, 000
3.
R
Property A
$767,500
4.
R
Property B
$555,000
5.
R
Property E
$535,500
6.
R
Furniture and household effects
$10,000
7.
A
(employer) Superannuation Scheme Bank Account
nominal
8.
R
(employer) Superannuation Scheme Bank Account (balance at separation and retained by R)
$84,000
9.
R
Bank O account
NK
10.
R
Bank M account
NK
11.
A
Motor Vehicle 1
$7,000
12. R
Motor Vehicle 2
$17,000
13.
R
Motor Vehicle 3 sold
$500
14.
R
Motor Vehicle 4
$4,000
15.
R
Shares 540@ $4.10 as at 26.4.18
$2,214
16.
R
Paid legal fees
$55,000
Total
$3,718,214
LIABILITIES
17.
R
Mortgage on Property C
$423,308
18.
R
Mortgage on Property D
$588,926
19.
R
Mortgage on Property A
$221,383
20.
R
Mortgage on Property B
$274,236
21.
R
Mortgage on Property E
$0
22.
R
Bank L line of credit
$61,661
Total
$1,569,514
Net assets
$2,148,700
SUPERANNUATION
Member
Name of Fund
Value
23.
R
(employer) Superannuation Scheme
$1,341,059
24.
A
Super A
$49,479
25.
A
(employer) Superannuation Scheme
$6,846
Total
$1,397,384
Tangible assets less Liabilities
$2,148,700
Nett Assets plus super
$3,546,084
With respect to the balance sheet, it was raised with Counsel for the Applicant whether any resistance would arise from focusing only upon the significant items of value[34] and the lesser items[35] being excluded from consideration. No resistance arose. The issue was not addressed with Counsel for the Respondent, although the omission of items of lesser value favours and reflects the Respondent’s position and, thus, I infer it would similarly not be opposed.
[34] Being the 5 parcels of real estate and superannuation.
[35] Furniture, present bank accounts, motor vehicles and shares.
On that basis, I intend to address and deal with the pleas for adjustment of interest in property by reference to the real estate and the liabilities encumbering them or secured against them, the balance of funds which had been held by the Respondent in his bank account at separation, the Respondent’s paid legal fees, and the superannuation interests of the parties.
As would be apparent, the real estate interests of the parties, together with the funds which had been held by the Respondent at separation, and his paid legal fees total $3,677,500.[36] The debts encumbering real estate or secured against real estate total $1,569,514,[37] leaving a nett sum available for division of $2,107,986.
[36] Items 1-5, 8 and 16 of the Balance Sheet Exhibit A7.
[37] Items 17-22 Balance Sheet Exhibit A as amended.
Whilst I appreciate that it is repetitious, it must again be observed that no evidence is led as to any likely Capital Gains Tax debt to be assessed as against the Respondent upon transfer or sale of any parcel of real estate. That evidence should have been led by the Respondent and has not been led. Accordingly, it cannot be taken into account other than as an unquantified section 90SF(3) adjustment.
In relation to that opined by the High Court of Australia in Stanford v Stanford, I am satisfied that it is appropriate and just and equitable to proceed with an exercise of jurisdiction in this case, and to consider what Orders, if any, should be made with respect to property adjustment.
I do not take their Honours comprising the High Court of Australia in Stanford v Stanford to be suggesting that there is any preliminary or threshold step, separate from the consideration of sections 90SM and 90SF of the Act, of determining that it is just and equitable to make any Order. What their Honours were expressing is twofold.
Firstly, the Court must be satisfied, by reference to the evidence, that it is appropriate to proceed to hear the case and interfere with the interests of the parties irrespective of a consideration of what Order (if any) might be appropriate.[38] I am so satisfied.
[38] See paragraphs 41 – 44 and, in particular paragraphs 41-42 (portions thereof) making clear that justice and equity:
Secondly, the Court must, in determining whether it is just and equitable to make any particular Order with respect to property adjustment, consider sections 90SM and 90SF of the Act and decide whether the present legal and equitable interests in property reflect, if those interests remain unadjusted, a just and equitable outcome. In this case, I am not satisfied and could not be so satisfied that interests in property remaining as they are without some adjustment is just and equitable.
In this case, there is no controversy that the Property C property was purchased by the parties as a joint endeavour (irrespective of who provided what cash funds for the purchase). The property is registered in the sole name of the Respondent and thus, the Applicant would be left with nothing with respect to that property without the Court’s jurisdiction invoked and exercised. To some extent, the Respondent could be taken to submit to jurisdiction through the plea he presents to the Court. He seeks that a payment be made to the Applicant. Without proceeding on that basis, it is clear that the parties have both made contributions of some form, without specifically assessing them at this point, to, at least, the Property C property. In light of the present legal ownership of that property vesting solely in the Respondent, the Court’s jurisdiction must be invoked and exercised for justice to be done.
Contributions
The issue of contribution is vexed and complex in this case. The parties are dramatically apart as to that which they submit and that which they seek to achieve. In addition, the Respondent submits that the Court should, from the outset, consider whether a global or asset by asset approach is to be taken. That consideration is a convenient starting point.
Counsel for the Respondent has referred the Court to a number of authorities addressing the approach to be adopted, to what I will hereinafter refer to as the “asset pool”,[39] being the adoption of either an asset by asset or global approach. In particular, the Court is referred to Full Court decisions of Williams & Williams [2007] FamCA 313, Holland & Holland [2017] FamCAFC 166, Lenehan v Lenehan (1987) 11 Fam LR 615, Pierce & Pierce [1998] FamCA 74 and Money v Money (1994) FLC 92-485.
[39] This terminology is adopted as it is the terminology advanced by the parties.
I am satisfied that the most erudite discussion of those principles flows from the Full Court of the Family Court of Australia’s decision in Holland & Holland, wherein an eminently qualified bench of jurists discussed the approach to be taken, commencing with the High Court of Australia’s decisions in Stanford v Stanford and Norbis & Norbis (1986) FLC 91-712. The discussion arising under the heading ““Exclusion” of Property in s 79 Proceedings” concludes with reference to the decision of Kay J in Farmer & Bramley [2000] FamCA 1615. It is difficult to identify a more eminent jurist in the Australian Family Law context than his Honour.
Kay J, having referred to an analysis of earlier cases by Guest J, had the following to say:[40]
65. Guest J, having analysed several relevant cases, reaches a conclusion that there should be no consideration of s 79(4)(a), (b) and (c) issues other than those that post-date the acquisition of the lottery winnings. In my view the passages cited by Guest J from Shaw and Shaw (1989) FLC 92-010, Jones and Jones (1990) FLC 92-143 and Branicki (unreported Full Court 18 May 1990), place beyond doubt the proposition that an assessment of contributions made under s 79(4)(a), (b) and (c) does not have to bear a direct relationship to the assets as they presently exist. The court is asked to determine what is an appropriate and just and equitable order, bearing in mind not only the contributions made directly to the existing assets, but contributions made generally during the course of the relationship between the parties both to the acquisition, conservation and improvement of assets (which may or may not still exist) and to the welfare of the family in the role of homemaker and parent.
66. This is not to say that the Court should be blind to the circumstances in which any assets were acquired post separation. Clearly contributions made towards the acquisition of such an asset by one party and the lack of contributions made towards its acquisition by the other party may weigh heavily in the exercise of discretion. However, it is quite wrong to say that contributions made under s 79(4)(a), (b) or (c) before an existing asset was acquired could have no bearing on the outcome of the proceedings.
[40] Paragraph 65-66.
The relevance of this passage to this case is twofold. Firstly, the contributions made by the parties need not be specifically identified as applying to or made with respect to an identified property presently in existence. Secondly, contributions should generally be assessed broadly by reference to the relationship rather than specific assets.
Earlier in the Judgment, a no less eminent bench of the Full Court of the Family Court of Australia had conveniently summarised the position:[41]
30. The considerations just discussed recognise that nothing said by the High Court in Stanford calls into question what was earlier said by that court in Norbis v Norbis.[42] There, for example, Wilson and Dawson JJ said:
… Of course, it may be possible and appropriate in many cases to determine the proportions in which the property is to be divided without treating any of the assets separately, but where the interests of the parties differ, a different approach will be open. Section 79, in particular s. 79(4), refers to “any property of the parties to a marriage or either of them” and that expression is sufficient to encompass both the entirety of their property and their individual interests. If the parties’ interests in specific items of property differ or they have made differing contributions, it may be desirable to proceed upon an item by item basis in the division of the property between them. In such a case, justice and equity may best be served by treating the items separately for the purpose of determining the proportions in which they are to be divided, particularly if the overall division is to be effected by the transfer or retention of interests in individual assets, as was convenient in this case. …
31. Thus, the nature of a particular interest or interests in property and when and how it was acquired, utilised, improved or preserved may be very relevant to each or all of three central questions: should a s 79 order be made at all;[43] whether contributions should be assessed “globally” or “asset by asset”[44] or by reference to two or more “pools”;[45] and, what is the nature and extent of each party’s contributions. However, there is no basis for excluding from consideration any property in which the parties have an existing legal or equitable interest.
32. Importantly, while it might be convenient to describe property by reference to a characteristic (for example, as an “inheritance” or “post-separation” or “after‑acquired” property), its place within the ambit of s 79 is determined by the fact that it exists as a legal or equitable interest of the parties to the marriage or either of them and that the nature, form and characteristics of it and the contributions of all types made by the party suggest that it should be treated in a particular way.
33. The consideration of the three central questions earlier referred to call in each case for the exercise of discretion by a trial judge. That discretion is exercised not by reference to whether property might conveniently be described as “an inheritance” or “after-acquired” but, rather, by reference to the nature, form and characteristics of the property in question and the nature, form and extent of the parties’ contributions of all types across the entirety of their relationship.
34. In respect of the last point, it is important to emphasise that the categorisation of property as “an inheritance” or as “after-acquired” property often leads to an erroneous argument that unless contributions to that property can be established, the property should be “excluded from consideration”. As we have said, that argument is erroneous by reason of ignoring the fundamental premise that s 79 is directed to all of the existing legal and equitable interests in property of the parties or either of them without exclusion of any of those interests.
[41] Paragraphs 30-34.
[42] (1986) 161 CLR 513, 532 – 533 (“Norbis”).
[43] Section 79(2); Stanford.
[44] Norbis, per Mason & Deane JJ, particularly at 523; per Wilson & Dawson JJ at 532 – 533.
[45] See, for example, Coghlan and Coghlan (2005) FLC 93-220 (“Coghlan”).
One curious aspect of the evidence was the proposition put to the Applicant during cross‑examination that she would often complain that she was too tired from paid work to undertake vacuuming or other cleaning of the home when the home was in “a state of disarray”.[51] At the time the question was put, (and the question was ultimately not pressed), it was made clear that the question was illogical in light of the Respondent’s evidence that he attended to the majority of home work and always kept the property spick and span as it were.
[51] Being the proposition directly put to the Applicant.
I accept that the question was put on instructions. On that basis, the question must represent a concession of some form that the Applicant had a significant role to play, at least as significant as that of the Respondent, in maintaining the home and in the day-to-day running of the household. That was so notwithstanding that the Applicant worked some real distance from the home (something which she was criticised for and for which the Respondent sought to have the Applicant brought to account for as regards, for example, the E‑tolls incurred and paid from joint or intermingled funds whilst travelling to and from work using freeways).
Ultimately, I am not satisfied that the evidence could safely lead to any conclusion other than an equality of contribution as homemaker and parent. Leaving aside any issue arising from Robb & Robb (and noting that the duty to maintain a child, whether financially, physically or otherwise, is that of the parent, not of a step‑parent), I am still satisfied the contribution should be assessed as equal and any consideration of Robb & Robb would perhaps bend towards supporting that finding if one were to favour the position predominantly advanced by the Respondent.
The contribution that is made to Mr D’s upkeep does not relate purely to services rendered to him. All of the expenses of the household were met from intermingled funds. That is the one overriding reality of this case. It is and was, from the outset, an uncontested fact. Whether the funds were contributed equally or otherwise is not the Court’s real concern at this point. In that regard, I am particularly conscious of that which fell from the bench in Mayne & Mayne [2011] FamCAFC 192, an esteemed group of jurists, Faulks DCJ, May and Strickland JJ, was also clear that:
It is not the Court’s function to conduct an audit of the marriage or of the relationship finances. The parties’ remedies for resolving disputes about expenditure while they are together are centred on them and them alone.
Whilst the above discussion occurred in the specific context of “add- backs”, I am satisfied that it is germane to the manner in which the Respondent has sought to conduct his case. The Respondent, having set out his initial contributions and employment history, significant as they are, then goes on to lead his criticisms, including with illustrative examples, of the expenditure of the Applicant described as “excessive travel expenses including E‑Toll charges as she drove to work in the (location omitted)” (paragraph 43). The Respondent’s criticisms of the Applicant extend to and include what are suggested to be “the Applicant’s excessive spending” on the credit card (paragraph 45 – a paragraph to which I have already referred wherein the Respondent goes to great detail and produces exhibits to his Affidavit to corroborate the allegation that the Applicant has excessively incurred expenditure through, for example, purchasing her lunch at (restaurant) for $12.28 or has purchased an item at Coles Express for $2.69). Such complaint as to the Applicant’s expenditure continues at paragraph 57, complaining of the money spent by the Applicant in regularly going to the movies.
Those criticisms, in the context of the clear and undisputed evidence that the nett tangible assets presently available for distribution between these parties have a nett value in excess of $2 million, are ill advised if not irrelevant and misconceived. When one also has regard to the superannuation entitlements of the parties, the total nett pool rises to an amount of approximately $3.5 million. Why time and effort were spent by the Respondent and those instructed by him detailing such miniscule expenditure beggar’s belief, particularly when that time might better have been devoted by the Respondent to discharging his obligations of disclosure, which disclosure ultimately unfolded on the second day of trial and remains incomplete.
The Respondent gives detailed evidence of who was responsible for undertaking the purchase of groceries and the like. However, none of the Respondent’s evidence shakes me from the view that a finding of equality of contribution as homemaker and parent should be made.
In relation to the financial contributions of the parties during the relationship, whether to the meeting of day‑to‑day living expenses or to the meeting of more significant expenses relating to mortgage payments and the like, I am satisfied that their contributions, whilst not equal, are each significant.
The differentiation between the financial contributions, in a mathematical sense, is the proportional disparity in earnings. The Respondent earned twice as much, by way of wages and salary, than did the Applicant. However, two matters must be balanced against that reality. Firstly, the Applicant provided to the Respondent the majority of her income each week. She provided income which was intermingled with the Respondent’s and which intermingled income then met all expenses, including expenses in relation to the investment properties. Secondly, it must be observed that whilst the Respondent had greater earnings, he also had far greater expenses including the investment property losses to which, I am satisfied, the Applicant contributed her income.
The losses incurred with respect to the investment properties, which I am satisfied were, by and large real expenditures, required income to meet those expenses (albeit the Respondent then received some recompense through tax refunds when tax returns were lodged). Those expenses were a significant portion of the expenditure of these parties during the relationship. In those circumstances, an assessment of equal financial contribution between the parties during their relationship becomes more realistic. If, dollar for dollar, the Respondent’s contribution was double that of the Applicant, so it must be observed that, dollar for dollar, the expenses of the Respondent were significantly more than twice those of the Applicant. The investment properties did not look after themselves as the Respondent asserts. The investment properties required the application of funds in significant amounts.
Overall, I am satisfied that the assessment of contributions during the relationship, financially and otherwise should be assessed, as is submitted by Counsel for the Applicant, as to not less than 40% to the Applicant.
That then leaves the balancing of those contributions against the initial contributions that were indisputably made by the Respondent through the introduction of funds. I am conscious of the discussion which arose in Pierce & Pierce on that very issue. Importantly, I adopt and incorporate herein that expressed by their Honours comprising the Full Court of the Family Court of Australia at paragraph 28, namely:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all of the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home.
That is an additional element of the Respondent’s case, asserting that “but for” the property that the Respondent introduced, the parties would not have been able to have acquired the matrimonial home. Based upon their incomes as earned at the time of the home’s purchase, that proposition could not be supported.
The parties obtained a 10% deposit (albeit through the Respondent obtaining a personal loan and using savings, although it is likely those savings represented at least, in some part, intermingled funds of the parties) and borrowed the remainder. There is nothing to suggest that their incomes would not have supported that borrowing. Accordingly, I do not accept the Respondent’s inferred position that his contribution towards acquisition of the Property C property should be seen as further weighted in his favour.
The initial contributions of the Respondent are, however, significant. The Respondent’s submissions that his initial contributions should see an adjustment in his favour as regards overall findings of contribution, of at least 40% and possibly as high as 50%, must be balanced against:
a)The findings of contribution during the relationship wherein there is little, if anything, to differentiate between the parties;
b)The reality of intermingling of funds throughout the relationship;
c)The reality that the four investment properties were encumbered at the commencement of the relationship by interest only loans and have remained so encumbered throughout. Thus, whilst there may have been increase in value through the mere effluxion of time and increase in markets, the equity has not been further increased through reduction of a mortgage by principal and interest payments; and
d)The intermingled funds have met the significant shortfalls with respect to those properties which arose during the relationship, which shortfalls predominantly involve real expenditure rather than “paper losses”.
I am satisfied that when the above matters are taken into account the adjustment to be made, so as to take account of the Respondent’s initial contributions, is diminished (not eroded) from the position the Respondent agitates. The importance of the initial contributions must be balanced against all that has happened since, including the Applicant leaving the relationship with possession of no asset, save the Motor Vehicle 1 and the Respondent retaining all other assets and their rents and profits.
Overall, I am satisfied that the contributions of the parties, taking into account the initial contribution, should be assessed at 30% in favour of the Applicant and 70% in favour of the Respondent as against the entire pool of available assets and resources. That also leaves the issue raised in the Respondent’s case, one of very many issues raised by the Respondent protective of his position, that his superannuation interest should be dealt with differently (as separate to the argument as to the value of the fund to be used).
Superannuation
Counsel for the Respondent points to “unexplained increases” in the suggested value of the Respondent’s superannuation interests. The fund statement that was issued to the Respondent, as contained within his tender bundle commencing at page 31, being a statement for 2005 (proximate to the commencement of the relationship) advises the total lump sum benefit as at 30 June 2005 (page 36) as $113,041.42. That is certainly a significant change from the value asserted at the present time in accordance with the Form 6 response and valuation provided by the fund, namely a value of $1,341,059.27.
Firstly, Counsel for the Respondent points to a similar statement for the Respondent’s superannuation fund as at 30 June 2014 (page 154 of his trial Affidavit). At that point, the withdrawal benefit is stated as being $318,938.60. What is misconstrued in the above argument is a conflation of withdrawal benefit and the value of the fund. They are not the same thing.
The withdrawal benefit is described in the document as, “In the event of your resignation, dismissal, discharge or retirement before age 55, your benefit is a choice of either an Immediate Withdrawal Benefit or a Deferred Benefit.” That immediately suggests that the deferred benefit might be the more realistic figure to consider by way of comparison to value. In that case, the values for 2005 and 2014 respectively are, instead, $191,834.56 and $580,940.32.
Secondly, it is submitted that the mere passage of time from 2014 to the present with accumulated contributions (assuming any contributions are made from 2014 to the present and that would not appear to be the case since, at least, September 2015) together with interest and growth of the fund, could not account for the increase in value more than doubling in a period of not quite four years. However, that argument, again, is not supported by evidence. There is simply no investigation undertaken by the Respondent as to why the value is as it presently is. It is, however, the value the fund calculates and asserts.
It was open to the Respondent to call evidence as to what his fund would have been valued at if valued in accordance with the regulatory framework identified above as at the various dates to which the statements refer. The Respondent has not called that evidence. The Respondent simply invites the Court to infer that the increase in value could only have arisen as a consequence of the Respondent now being treated as “hurt on duty”. I do not accept that such an inference is safe or even available.
The value of the fund is as given by the fund itself. Whatever changes have occurred, whether through accumulated interest, fund growth, impact of various other conditions or the like, cannot be ascertained and the absence of such evidence falls at the feet of the Respondent. It is he who wishes to advance the argument that, for some reason, connected with his receiving a pension for being hurt on duty, that the Court should treat the superannuation differently to the other assets. I am not satisfied that the argument is made out. That is, of course, separate and distinct from any consideration of the Respondent’s hurt on duty status as regards his future income and earning capacity by reference to section 90SF of the Act.
Accordingly, I propose to include the totality of that superannuation interest as set out in the balance sheet for consideration of division on a global basis between these parties. It would seem appropriate to do so in light of the length of the relationship of the parties and particularly having regard to the date the Respondent joined the fund.
The documents that are identified above make clear that the Respondent commenced contribution to his Super fund in 1987, some few years prior to the commencement of the relationship but not that many. The value of the fund at the commencement of the relationship, if one accepts the Respondent’s argument, was very modest indeed.
There are great difficulties with the mathematical approach to the issue as the Respondent urges.[52] I am not satisfied that it is appropriate to exclude the superannuation interest on any basis (as would appear to be the Respondent’s primary position) or to treat it as different. As the Full Court of the Family Court of Australia clearly stated in Holland & Holland:[53]
…it is wrong as a matter of principle to refer to any existing legal or equitable interests in property of the parties or either of them as “excluded” from, or “immune” from, consideration in applications for orders pursuant to s 79. Again, what was said by the High Court in Stanford pertains
[52] The mathematical approach the Respondent urges is not dissimilar to the approach adopted in West & Green (1993) FLC 90-647, an approach disavowed by the Full Court of the Family Court of Australia in M & M [2006] FamCA 913.
[53] See paragraph 25.
The assessment of contributions with respect to superannuation should, I am satisfied, reflect the same adjustment for initial contribution and contributions during the relationship as occur with respect to the tangible assets, i.e. it acknowledges that the Respondent had joined the fund and had been contributing to it for some six to seven years prior to the relationship commencing and then continuing to contribute for the majority of the relationship between these parties.
Overall, I intend to assess the contributions of the parties as to 30% in favour of the Applicant and as to 70% in favour of the Respondent. That then leaves the issue of adjustments, if any, to be made pursuant to section 90SF(3) of the Act.
Each party argues for an adjustment in their favour. The Applicant suggests an adjustment of not less than 5% in her favour and the Respondent an adjustment of 5-8% in his favour.
I will touch on each of the factors briefly.
Age and state of health of the parties
As is apparent from the evidence, the Applicant is 47, soon to turn 48 years of age, the Respondent a few further years advanced, being 52, turning 53 this year.
The state of health of each of the parties is problematic. Each has experienced significant trauma in their prior professional life with the (employer omitted). It is acknowledged that the Applicant has experienced PTSD symptoms since prior to the commencement of the relationship and, whilst these do not presently impact upon her participation in paid employment, they may well do so in the future.
With respect to the Respondent it is conceded, as addressed above, that he is unfit to ever return to work as a (occupation omitted), the only job of consequence that he has held during his adult life and a service which he provided willingly. In all probability, it is unlikely that the Respondent will ever engage in remunerative employment in the future.
At present, the Respondent receives a work pension. It is not possible to accurately discern from the evidence whether it is so, but it is suggested by the Respondent that the pension will continue until he is 60 and he will then be left with his superannuation together with such assets as he holds.
Thus, the prognosis for the effect of the Respondent’s health as regards his participation in employment is poor. The Respondent’s evidence as to the symptomology he experiences, the medical interventions he engages with and the medication that he is prescribed and takes also suggests that he experiences significant disability beyond that which the Applicant presently experiences. This factor would favour the Respondent.
The income, property and financial resources of the parties and their capacity for gainful employment
The latter factor is touched upon above. It is unlikely the Respondent will ever work again. The Applicant continues to work, although it is unlikely that her income will ever grow beyond that she is presently earning, being a modest income slightly above average weekly wages. Her health issues may impact upon her gainful employment in the future, but there is no evidence that would enable any projection of when or if that will likely occur.
The income, property and financial resources of the parties must be considered by reference to the circumstances of these parties. Since the separation of these parties, the Respondent has retained use and occupation of all tangible assets of significance and has received all rents and profits therefrom, including the uninterrupted use and occupation of the Property C property, albeit whilst servicing the mortgage encumbering it. The Applicant, on the other hand, has been left to the vagaries of the rental market and paying rent has taken a sizable portion of her income in the process. This is in contradistinction of the Respondent’s willingness to allow his adult son to occupy one of the investment properties at a reduced rental. Such largesse has not been extended to the Applicant.
The income of the Applicant is comparable to the income of the Respondent at this time. In addition to the hurt on duty pension, there is also such income as is generated from the investment properties, although, as I have found, they operate at a loss. The loss is less now than it had been in past years whilst the relationship subsisted. The accumulated losses do, or will, when the Respondent deigns to file his tax returns for the last four years, produce a substantial financial benefit to him. In addition, the Respondent is able to reduce the income tax that he is required to pay in relation to his (employer omitted) income and will receive tax returns in all probability. This factor thus favours the Applicant.
Whether either party has care and control of a child under 18
Neither does. The child, Mr D, is now an adult, 21 years of age. Notwithstanding that the Financial Statement sworn by the Respondent on the first day of hearing and filed that morning suggested that Mr D resides with the Respondent, he does not. He lives in one of the four investment properties, albeit paying rent suggested to be at a discounted rate. This factor is not relevant.
Commitments of each to enable them to support themselves or any other child or person they have a duty to maintain
Neither party has a duty to maintain any child or any person other than themselves. The commitments that the parties have to support themselves are relevant. On an acceptance of the Applicant’s evidence, including her Financial Statement, the Applicant’s expenses exceed her income by $410 per week. The Respondent has a surplus of income over expenses, albeit modest. The Respondent has secure accommodation and has not incurred the vagaries of the rental market, nor the costs of moving and relocating himself. He has consistency of accommodation. These factors, albeit slight in balance, favour the Applicant.
The responsibilities of either party to support other persons
Neither has such responsibilities. Each of the parties has re-partnered, although those circumstances only became apparent during cross-examination. The partners of each of these parties would not appear to be persons of great financial substance. The Applicant’s partner would appear to be engaged in casual or zero-hour contract work, such that he is, to some extent, beholden to the Applicant to pay most of the household expenses. The Respondent has re-partnered and the Respondent’s partner is in receipt of a disability support pension. The factor is somewhat neutral.
The eligibility of either party to receive a pension or allowance under the law of the Commonwealth or State or superannuation scheme
The Respondent is entitled to receive his hurt on duty pension as his primary source of income. The investment properties allow him to structure his finances advantageously.
Some issue was raised as to whether the Respondent’s superannuation interest, whilstsoever he is receiving the pension, would be splittable. However, Exhibit A9 would suggest that the fund has indicated they have no objection to the superannuation splitting Order that was advised to them. That would appear to be, by the timing of the correspondence (December 2016), the originally proposed superannuation splitting Order, which sought a percentage division. Not a great deal turns upon any distinction between the percentage division or a sum certain division. I am satisfied the same absence of objection would arise.
I am satisfied that the pension received by the Respondent would not preclude superannuation splitting. There is no evidence adduced as to any impact upon the Respondent’s pension entitlement of a splitting Order.
The Respondent’s pension provides him with an income. It is not a great income. However, it allows the Respondent to meet all of his expenses and, importantly, it is a certain and guaranteed income stream. The pension sees the Respondent receiving an income that is greater than the Applicant’s exertion earnings. The Applicant is presently earning, from her personal exertions, an income of $1,124 gross. The Respondent receives, from his pension, an amount of $1,478 gross. The difference between the two is not substantial and, thus, I am satisfied that the factor is neutral.
The standard of living of the parties being reasonable in the circumstances
A consideration of maintenance is not being undertaken. This factor is considered prospectively as to achieving an outcome by reference to the assets of the parties. Upon the making of Orders for property adjustment, each of these parties will experience change in their financial position. The Applicant’s position will substantially increase. She will have a capital sum that she can use as she wishes, whether to purchase accommodation or otherwise. The Respondent’s position will diminish. Any sum to be paid will result in either further borrowings or the sale of assets.
Accordingly, the standard of living of the Respondent will decrease. The standard of living of the Applicant will increase. However, I am satisfied that those changes will move them closer towards something resembling an equality of their post-separation standard of living. Certainly, since separation the Applicant’s standard of living has deteriorated substantially, whereas the Respondent’s has not. This factor has some relevance, but only very slight and, to the extent that it is relevant, it favours the Applicant.
The extent to which a course of education or training would assist either party with respect to earning capacity
A course of educational training will not assist either party. The Applicant is already in employment in the area in which she has worked most of her adult life. The Respondent is unlikely to be fit to return to work at any time in the future. The factor is neutral.
The effect of proposed orders on creditors
No Order that I propose to make will affect a creditor. The parties are in a positive nett asset position and all and any debts will be discharged from the proceeds of sale of the property against which the debt is secured.
The extent to which each party has contributed to the income, earning capacity, property or financial resources of the other
This factor potentially favours the Applicant, but I am satisfied is adequately addressed by a consideration of contribution. The Applicant has contributed towards and, thus, assisted with the maintenance, improvement and conservation of property and financial resources of the Respondent, to wit, the investment properties, the Property C property and the Respondent’s superannuation. Beyond acknowledging the contributions that have been made, there is no contribution by either party towards the present income or earning capacity of the other. The factor is neutral.
Duration of the relationship and the extent to which it has affected earning capacity
The relationship subsisted for a period of ten years and eight months, a fairly lengthy time as regards a de facto relationship, being some years in excess of the average length of a marriage, let alone the general acceptance that de facto relationships, by and large and with some notable exceptions, tend to be shorter lived. However, the duration of the relationship has not affected the earning capacity of either party. What has affected the earning capacity of these parties is ill health disconnected from the circumstances of the relationship and, largely, pre-existing conditions. The factor is neutral.
The need to protect the role of a party as a parent
This is not relevant.
If either party is co-habiting with another, the financial circumstances of that co-habitation
Very little is known with respect to the parties’ new partners or the circumstances of those relationships. Those relationships would not appear to bring any real financial advantage to either. What the relationships bring, perhaps, is that which has impacted upon the findings of contribution made in favour of the Applicant.
The Applicant commenced her case by indicating that the Respondent was “a hard person to live with”. Whether the Respondent is or is not a hard person to live with or harder to live with than other people, need not be determined. What is readily apparent is that the Respondent, for the majority of the relationship, experienced a significant depressive illness leading to suicidal ideation, (although the Respondent expressly denies active planning), and significant emotional dysregulation.
From the Respondent’s own evidence, it is clear that the Respondent could not function well for major portions of the relationship. Whilst the Respondent would not concede, at least not readily or completely, the emotional support, comfort and nurture provided to him within the family structure comprising these two parties in a de facto relationship, I accept that such emotional support clearly flowed from the Applicant to the Respondent.
The Applicant has not sought to conduct what might be described as a Kennon & Kennon (1997) FLC 92-757 argument, seeking to suggest that her contributions were made more onerous. This is appropriate as the argument was not available on the evidence as presented. However, I accept there has been a very substantial and significant contribution by the Applicant in that regard, which should be taken into account with respect to the above discussion. That contribution as a person of succour and support, emotional availability and the like is significant and was disingenuously dismissed or, at least, undervalued by the Respondent. The Respondent’s concession, when the proposition was put to him that such support was provided, was that, at times, it was but, at others, it was not.
As regards the present relationships that these parties practice, I am not satisfied that the factor assists.
The effect on bankruptcy or creditors
This is not relevant.
Impact on third parties and other persons
This is not relevant.
Child support as assessed or paid
Again, this is not relevant.
Other facts or circumstances
I am conscious of a number of factors that are already identified in the above discussion of evidence, including:
a)The probability that the Respondent will receive a significant capital payment from the Australian Taxation Office (ATO) upon lodgement of his last four years of tax returns. He will have made losses in each of those years and will, thus, receive a refund;
b)The paid legal costs of the Applicant have not been included as an asset. However, that is on the basis described. The paid legal fees of the Respondent have been included as, otherwise, the debt incurred by payment of those legal fees would be an onerous burden to impose upon the Applicant;
c)The consequences of these Orders will be to reduce the assets available to the Respondent and, thus, the very financial advantages that are spoken to in the case of the Applicant through negative gearing. Some of the negatively geared properties will need to be sold to be able to fund payment out to the Applicant. The Respondent presents no evidence that would suggest that he is able to borrow further funds against the existing properties, lines of credits or otherwise. Accordingly, I propose to make Orders not entirely as sought, but with the intent and effect of affording an opportunity to the Respondent to pay a sum certain and, if not paid within the time specified, to require the sale for sale of sufficient properties to enable those amounts to be paid out to the Applicant.
Finally, I am conscious with respect to other relevant factors that there is the complete absence of evidence with respect of the Capital Gains Tax implications of the Orders that will be made. That evidence should have been obtained and led by the Respondent. I accept that, in all probability, it has not been obtained nor led as the Respondent did not contemplate that Orders would be made by this Court which might require that a property be sold. To the extent that the Capital Gains Tax debt is somewhat inevitable but cannot be quantified, I am satisfied that the best that can be done is to temper any adjustment pursuant to section 90SF of the Act.
A number of the section 90SF factors favour the Applicant and would warrant some adjustment in her favour, whether at the rate of 5%, as sought, or otherwise. However, I am satisfied the preferable approach, both to accommodate the above factors which, to some extent, are balanced between themselves and, as regards the issue of Capital Gains Tax is simply completely unknown, is to make no adjustment. There are factors which favour each of the Applicant and the Respondent as regards section 90SF of the Act and, perhaps, all of those factors, in combination, inevitably lead to the position I propose to adopt of making no further adjustment.
Conclusion
On the basis that the asset pool as identified above ($2,107,986 excluding superannuation)[54] is to be divided as to 30% to the Applicant and as to 70% to the Respondent that would see the Applicant receiving payments of $632,395.80. I propose to round that amount up to $635,000 dollars.[55]
[54] Per paragraph 122 – including only real estate and deduction of encumbrances together with funds at separation and paid legal fees.
[55] The difference that rounding makes, as a percentage of the total nett assets, is 0.004 of one per cent. ($635,000 – 632,395 equals $2605, divided by 632,395 equals 0.004 per cent.
To obtain payment of that amount, it will be necessary for properties to be sold. I propose to make Orders, in default of payment by the Respondent to the Applicant within a fixed period, to require the sale of such properties as will be necessary and sufficient to see the Applicant receive the amount that is to be paid. Whilst Orders appointing the Applicant as trustee for sale of property have been sought, I do not propose to make such Orders at this time. In the case of demonstrated non-compliance by the Respondent it would be open to the Applicant to renew an Application that she be appointed trustee for sale (together with costs if such an Application became necessary). However, the complexities that would potentially arise regarding income and Capital Gains Tax are not warranted at this point.
The Applicant does not seek to move against the Property C property so as not to disturb the Respondent’s residence. That then leaves the issue of which of the investment properties would be sold. My preference would be that the properties at Property A and Property B would be sold. Those properties have equity, respectively, of $546,117 and $280,764. Accordingly, there should be more than sufficient funds to pay out the Applicant’s entitlement as to both property settlement and costs.[56]
[56] Although, again, it cannot be certain as Capital Gains Tax, if assessable, cannot be quantified.
In addition to payment to the Applicant of her entitlement as determined herein, there is also the issue of payment of costs as previously ordered. At the conclusion of the jurisdictional hearing, an Order for costs in the sum of $17,415 was made against the Respondent. No payment whatsoever has been made towards reduction of that debt and, thus, interest continues to accrue with respect to it. That is so notwithstanding that the Respondent clearly had the means to pay those costs bearing in mind he has paid his own costs, by drawing on the line of credit account, in a sum of $55,000 or more. Payment of the previously ordered costs will be secured at this time.
I do not wish to make any Order which would secure payment to the Applicant by requiring a sale of the property at Property E as it is that property which provides security for the lines of credit which are fundamental to the day-to-day financial affairs of the Respondent. That property is also cross security for the mortgage encumbering the Property C property. Further and finally, I would be loath to make any Order with respect to the Property D property as the adult child, Mr D, is now resident in that property or, at least, one part of it. It would also appear to be the greatest income-producing asset and would thus cause further financial disadvantage to the Respondent.
However, security for payment is necessary, particularly in light of the Respondent’s candid evidence that he has taken no step whatsoever to making any repayment towards the costs Order of $17,415, notwithstanding that a period of ten months has passed and that he has had the financial wherewithal to discharge that debt should he have chosen to.
With respect to superannuation, I am satisfied that the Applicant should receive 30% of the total available superannuation. The total available superannuation is $1,397.384.[57] If the Applicant is to receive 30% of the total, then the Applicant should receive or retain $419,215.[58] The funds presently held by the Applicant total $56,325.[59] Accordingly, to receive 30% in total the Applicant would need to receive an amount of $362,890[60] from the Respondent’s Superannuation Fund.
[57] See balance sheet paragraph 119.
[58] Total is $419,215.20 and cents are omitted.
[59] Super A $49,479 plus (employer omitted) Super $6,846 = $56,325.
[60] $419,215 - $56,325 = $362,890.
Accordingly, and for those reasons, I make Orders in accordance with the Minute of Order Exhibit A6 and as modified to address the above matters (see Orders).
I certify that the preceding two hundred and thirty-eight (238) paragraphs are a true copy of the reasons for judgment of Judge Harman
Date: 9 July 2018
Production of documents (proceeding other than for maintenance only)
(1) Unless the Court or a Registrar otherwise orders, a party required under this Part to file a financial statement or affidavit of financial circumstances (other than a respondent in a proceeding for maintenance only) must serve on each other party who has an address for service in the proceeding the following documents:
(a) copies of the party's 3 most recent taxation returns;
(b) copies of the party's 3 most recent taxation assessments;
(c) if the party is a member of a superannuation plan:
(i) if not already filed or exchanged--the completed superannuation information form for any superannuation interest of the party; and
(ii) for a self-managed superannuation fund--the trust deed and copies of the 3 most recent financial statements for the fund;
(d) if the party has an Australian Business Number, copies of the last 4 business activity statements lodged;
(e) if there is a partnership, trust or company (except a public company) in which the party has an interest, copies of the 3 most recent financial statements and the last 4 business activity statements lodged by the partnership, trust or company.
If a witness is not called, two different types of result might follow. The first is that the tribunal of fact might infer that the evidence of the absent witness, if called, would not have assisted the party who failed to call that witness. The second is that the tribunal of fact might draw with greater confidence any inference unfavourable to the party that failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn.(2) The documents must be served within 14 days after the first court date.
41.…require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife.
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