Whinton & Whinton

FAMILY COURT OF AUSTRALIA

WHINTON & WHINTON AND ORS

[2014] FamCA 102

FAMILY LAW – PROPERTY SETTLEMENT IN RELATION TO MARRIAGE – Just and Equitable – Contributions – Where the husband and wife cohabited for approximately 30 years and raised two children to adulthood – Where the adult children joined as parties in the proceedings – Where the parties conducted business as real estate investors and developers – Where the financial circumstances of the parties are complicated involving companies, numerous bank accounts and a considerable number of properties – Where the husband was involved in a very serious motor vehicle accident in 1986 and received a substantial compensation award for his injuries – Where it is just and equitable to make an order under s 79 of the Family Law Act – Where the husband has a limited capacity to earn income due to his age and mental health – Where the parties’ contributions of income and effort during the marriage were found to be equal – Where the husband borrowed funds without satisfactory explanation about their expenditure – Where it is appropriate to make an adjustment in favour of the wife to take account of this matter – Where a modest adjustment was made in favour of the wife under s 75(2).

Family Law Act 1975 (Cth) – ss 79(1), (2) & (4) and s 75(2)
Family Law Rules 2004 (Cth)

Bevan & Bevan (2013) FLC 93-545
Black and Kelner (1992) FLC 92-287
Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693
Kowaliw and Kowaliw (1981) FLC 91-092
Noetel v Quealey [2004] FamCA 790
Stanford v Stanford (2012) FLC 93-518

APPLICANT:

Ms Whinton

1st RESPONDENT:

Mr L Whinton

2nd RESPONDENT:

Mr R Whinton

3rd RESPONDENT:

Mr T Whinton

FILE NUMBER:

SYC

2227

2010

DATE DELIVERED:

3 March 2014

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Johnston J

HEARING DATE:

20, 21 & 22 March and 8 and 9 July 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Othen

SOLICITOR FOR THE APPLICANT:

Watkins Tapsell Solicitors and Barristers

COUNSEL FOR THE 1ST RESPONDENT:

Mr Graham

SOLICITOR FOR THE 1ST RESPONDENT:

Flintoff Lawyers

FOR THE 2^ND RESPONDENT:

Mr R Whinton in person

FOR THE 3^RD RESPONDENT:

Mr T Whinton in person (20 March 2013 only)

Orders

It is declared that the liabilities to the husband and the wife by Mr R Whinton and Mr T Whinton are $181,339 and $205,500 respectively, that such liabilities are assets of the wife and that the husband shall forthwith do all things and sign all documents necessary to assign to the wife his interest in such liabilities.
That within 42 days the husband is to pay to the wife the sum of $262,081.
That in the event that the husband fails to comply with the above order he shall forthwith do all things and sign all documents necessary:
(a)To sell the property at Property P, I Street, Town B by public auction;
(b)To pay from the proceeds of sale, after paying agent’s commission and costs of the sale including legal costs on sale, and after discharging any mortgage thereon, the sum of $262,081 to the wife plus interest thereon at the rate prescribed under the Family Law Rules 2004.
That the husband shall forthwith do all things and sign all documents necessary to transfer to the wife his interest in the property at Unit A, C Street, Suburb D free of any encumbrance.
That the husband shall forthwith do all things and sign all documents necessary to:
(a)Sell the property at Unit E, C Street, Suburb D at the best price reasonably able to be obtained; and
(b)Pay the proceeds of sale, after paying agent’s commission and costs of the sale including legal costs on sale, and after discharging any mortgage thereon, to the husband and the wife in equal shares.
The wife is declared to be the sole legal and beneficial owner of all shares in the company F Pty Limited.
That the husband shall forthwith arrange for all mortgages secured over the following properties to be discharged:
(a)       Property H, J Street, Town G;
(b)       Property K, J Street, Town G;
(c)       L Street, Town G;
(d)       M Street, Town G;
That the husband shall forthwith do all things and sign all documents necessary to transfer to the wife his interest in:
(a) The RAMS account;
(b)The Commonwealth Bank account the balance of which at trial was $709;
(c) The Town N Time share … .
That the husband shall forthwith prepare two lists of the personal property, furniture and effects of the husband and the wife situated at Property Q, I Street, Town B as at the date of separation of generally equivalent value. That the husband forthwith present the lists to the wife and upon her choosing the items in one of the lists such property will become her sole property and the items in the other list will then become the sole property of the husband.
That within 42 days the husband shall discharge all mortgages in respect of which the wife is a mortgagor.
The husband is declared to be the sole legal and beneficial owner of all shares in the following companies:
(a)       Whinton Pty Limited;
(b)       O Pty Limited;
(c)       R Company;
(d)       S Pty Limited.
The husband is declared to be the sole legal and beneficial owner of the following properties:
(a)       Property P, I Street, Town B;
(b)       U Street, Town B;
(c)       Property V, W Street, Town B;
(d)       Property X, W Street, Town B;
(e)       Unit T, C Street, Suburb D;
(f)       Y Street, Town B.
That the husband shall indemnify the wife in relation to, and do all things and sign all documents necessary to effect an unconditional release of the wife of all obligations and personal guarantees provided by her to any person, company or institution in relation to any liabilities of, the companies referred to in order (11).
That the husband shall do all things and sign all documents necessary to release and indemnify the wife in relation to any liability owing by the wife to S Pty Limited and in relation to any liabilities of the said company.
That the husband shall pay all rates, taxes, insurance premiums, mortgage repayments and loan repayments for any property standing in his sole name, the sole name of the wife, the joint names of the husband and wife or any company controlled by the husband and he shall indemnify the wife in relation to all such loans and payment thereof, pending the sale or transfer of each such property, or the discharge of all relevant mortgage debts, pursuant to these orders.
That within 42 days the wife shall do all things and sign all documents necessary to transfer to the husband her interest in the property at Property Q, I Street, Town B.
That the wife forthwith do all things and sign all documents necessary to transfer to the husband her interest in the Z Financial Institution accounts.
That the husband and the wife shall forthwith do all things and sign all documents necessary:
(a)to cause the money in the Falvey Associates trust account including interest thereon to be paid to them in equal shares; and
(b)to transfer to the husband the Telstra shares and the Henderson shares.
That the husband and the wife are each declared to be the sole legal and beneficial owners of all other items of superannuation and property including money, motor vehicles, furniture and furnishings, insurances and personal effects presently in the possession or control of each of them respectively except such personal property situated and located in Property Q, I Street, Town B as of the date of separation which shall be dealt with in accordance with order 9 above.
That in the event that the husband or the wife refuse or neglect to comply with any provision of these orders within seven (7) days of the document being forwarded to them for completion, a Registrar of this Court shall be appointed pursuant to s 106A(1) of the Act to sign all such documents in the name of the defaulting party and to do all things necessary to give validity to the said document.
That a Registrar is authorised to execute any such necessary document upon being satisfied by affidavit that the refusal, neglect or default as the case may be has occurred.
That all exhibits may be released.
That all parties have leave to re-list these proceedings by arrangement with the Associate to Johnston J in relation to the implementation of the orders.
That the above orders shall not commence operation until 8 April 2014.
That all parties have leave to re-list these proceedings by arrangement with the Associate to Johnston J at any time not later than 7 April 2014 for the purposes of further submissions in relation to the form of the orders only.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Whinton & Whinton and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2227 of 2010

Ms Whinton

Applicant

And

Mr L Whinton

1^st Respondent

And

Mr R Whinton

2^nd Respondent

And

Mr T Whinton

3^rd Respondent

REASONS FOR JUDGMENT

Ms Whinton (“the wife”) and Mr L Whinton (“the husband”) have been unable to resolve issues about property settlement and have asked this Court to determine these matters for them.
There are two other parties in the proceedings, the adult sons of the husband and the wife, namely Mr R Whinton and Mr T Whinton.

Applications

The wife seeks orders to the following effect:
·That the husband transfer to her unencumbered his interest in the following properties:
-Unit E, C Street, Suburb D;
-Unit A, C Street, Suburb D;
-Unit T, C Street, Suburb D;
·That she receive all rents from such properties from the date of the orders and that the husband discharge any mortgage to the IMB Bank secured over these properties;
·That the husband assign to her, his interest in their loans to their children Mr R Whinton and Mr T Whinton;
·That she be declared the sole owner of all shares in the company F Pty Limited;
·That she have the benefit of the monies in the controlled money accounts in the name of Graeme Falvey, solicitor together with interest thereon;
·That the husband transfer to her his interest in specified accounts including all Z Financial Institution accounts and Qantas frequent flyer points;
·That various orders be made in relation to personalty and superannuation as specified;
·That she transfer her interest in Property Q, I Street, Town B to the husband and that the husband discharge the mortgages on this property and on U Street, Town B;
·That various default and enforcement orders be made as specified;
·That the husband be declared the sole owner of all shares in the following companies, effect an unconditional release of the wife of all obligations and personal guarantees provided by her and indemnify her in relation to all liabilities of the companies:
-S Pty Limited;
-Whinton Pty Limited;
-O Pty Limited;
-R Company;
·That the husband transfer to the wife his interest in the Town N Timeshare … ;
·That the husband pay all rates, taxes, insurance premiums, loans and mortgages in respect of all properties pending their sale or transfer pursuant to these orders;
·That a superannuation splitting order be made to split the husband’s interest in First State Super 100 per cent in favour of the wife;
·That the husband be restrained from encumbering any of the properties pending discharge of the mortgages pursuant to the orders without the written consent of the wife;
·That otherwise each of the husband and the wife be declared the sole owner of all other property and superannuation in their possession and/or control respectively and
·That the husband pay the wife’s costs as well as half the costs of Mr AB.
On the other hand, the husband seeks orders to the following effect:
·That the wife transfer to him her shares in F Pty Limited, that she resign from all positions held by her in the company, that he indemnify her from any liability of the company and that they share equally the costs involved in such transfer;
·That the wife transfer to him her interest in Property Q, I Street, Town B, the wife to pay all rates including water rates and outgoings to the date of transfer, the husband and the wife to pay transfer costs and disbursements in equal shares and the husband to discharge the mortgage and refinance any mortgage into his own name;
·That the husband be declared sole owner of the following:
-U Street, Town B;
-Property P, I Street, Town B;
-Property V, W Street, Town B;
-Property X, W Street, Town B;
-Unit T, C Street, Suburb B;
on the basis that he discharge all mortgages where the wife is a mortgagor and refinance them into his sole name;
·That he transfer to the wife his interest in Unit A, C Street, Suburb D;
·That Unit E, C Street, Suburb D be sold and the net proceeds of sale be paid to the husband and the wife in equal shares;
·That he be declared sole owner of:
-Whinton Pty Limited;
-O Pty Limited;
-R Company; and
-S Pty Limited;
·That the shares in the Henderson Group and Telstra be transferred to him;
·That the wife transfer to him her interest in all Z Financial Institution accounts with subscriptions paid to date of transfer;
·That the costs of transfers of property and shares be paid by the husband and the wife in equal shares;
·That various machinery, default and enforcement orders be made as specified;
·That each of the husband and the wife be declared the sole owner of all other property and superannuation in their possession and/or control respectively;
·That Mr R Whinton and Mr T Whinton repay to him monies loaned to them for the purchase of Units BB and DD at C Street, Suburb D and enforcement of same by way of sale of real estate to satisfy the debt;
·That the monies held in the trust account of Falvey & Associates Lawyers be paid to him and
·That the wife pay the husband’s costs.
Mr R Whinton seeks a declaration to the effect that the amount of his liability to the husband and the wife is $181 339.
Mr T Whinton resolved his dispute with the husband and the wife during the course of the hearing.

Background

The background facts to this dispute are as follows.
The husband, 56 years of age and the wife, 55 years of age, commenced cohabiting in late 1979. They married in May 1986 and they separated on 21 July 2009. They cohabited therefore for almost 30 years.
There are two adult children of the marriage, Mr R Whinton, 26 years of age and Mr T Whinton, 23 years of age.
In December 1974, the husband commenced a partnership business with a friend, Mr CC, known as EE Business.
In November 1975, the wife commenced employment with Company FF.
In approximately 1978, the husband and his father established GG Business.
In November 1979 the husband and the wife commenced cohabitation at the wife’s rented home unit at Suburb AA.
In approximately 1982, they purchased as tenants in common a property at HH Street, Suburb JJ for $65 000. The husband’s parents lent them $15 000 and the balance was borrowed on mortgage from the St George Bank. The husband paid the 10 per cent deposit and the wife repaid him $2600 being 40 per cent thereof in accordance with her interest as a 40 per cent tenant in common.
In approximately 1983, the husband sold his interest in the EE Business partnership to Mr CC.
In 1984, the Suburb JJ property was sold for $85 000.
The husband and the wife then purchased a property at KK Street, Suburb LL for $105 000 as joint tenants, funded from the $50 000 net proceeds of sale of the Suburb JJ property and a loan on mortgage from the National Australia Bank. The husband and the wife subsequently undertook substantial extension and renovation of this property.
In April 1986, the wife resigned from Company FF and received a payment of $20 000.
As indicated above, in May 1986, they married.
In June 1986, the wife recommenced employment with Company FF.
In July 1986, the husband was injured in a motor vehicle accident. He sustained serious injuries and was hospitalised.
In approximately 1986, the husband sold his interest in GG Business to his father for $25 000.
In October 1986, the husband commenced employment with Company MM, a construction industry company, as a manager and a year later he was promoted to General Manager, Asia Pacific Region.
In January 1988, the wife took maternity leave from her employment with Company FF. Their first child R Whinton was born in February 1988.
In February 1989, the wife resigned from her employment with Company FF.
In approximately April 1989, the husband was retrenched by Company MM. Shortly thereafter the wife suffered a miscarriage. The husband, the wife and R Whinton then went on a long driving holiday through the northern part of Australia for a few months.
In April 1990, the husband commenced employment with Company NN, a construction industry company, as a manager. He worked for this company for approximately 11 months then went on the disability pension.
In May 1990, T Whinton was born.
In July 1991, the husband commenced part time employment at an institution in an education role, one night per week, based in Sydney.
In October 1991, the wife’s brother Mr OO died and she subsequently received approximately $10 000 from his estate.
In early 1992, the wife suffered a breakdown and was admitted to hospital after taking an overdose of sleeping tablets.
In 1993, the husband obtained a full time education role position at an institution at Town B. He relocated to Town B initially living by himself at a motel for three days per week after which he would return to the family in Sydney.
In June 1993, the husband received an award in the sum of $392 742 net by way of compensation for his motor vehicle accident.
In January 1994, the wife and the children relocated to Town B and lived with the husband at a rented home. They rented out their Suburb LL home.
On 3 March 1994, the husband and the wife purchased a property at PP Street, Town B as joint tenants for $145 000 using part of the husband’s compensation award. This home was subsequently renovated.
In 1994, the wife commenced casual employment at Company QQ doing clerical duties. She also sold products on commission for approximately one year.
In November 1996, the wife commenced employment at a customer service centre with Company RR initially working part time but soon increasing to approximately 40 hours per week.
In March 1997 Property P, I Street, Town B was purchased in the husband’s name for $199 000 and Property Q, I Street, Town B was purchased in the wife’s name for $200 000. The husband’s parents loaned $140 000 to them for the purchases (which has been repaid) and the remainder was funded from the husband’s motor vehicle compensation award.
In July 1998, a vacant block of land at U Street, Town B was purchased in the husband’s name for $43 500 funded from savings and by refinancing Property Q, I Street. The husband arranged for 4 townhouses to be constructed on this property.
In 1998, the property at KK Street, Suburb LL was sold for $413 000.
In 1999, the wife was diagnosed with breast cancer and ceased employment with Company RR. She underwent treatment including a lumpectomy, removal of lymph nodes, chemotherapy and radiotherapy.
In August 1999, the wife recommenced employment with Company RR through the recruitment agency, Company SS, working approximately 20 to 30 hours per week.
The husband established a company known as Whinton Pty Limited which was registered on 8 October 1999. This company holds property.

In February 2000, Whinton Pty Limited purchased a block of four home units at TT Street, Town B for $287 000 funded by loans. The husband subsequently renovated the units.
Also in February 2000, Whinton Pty Limited purchased Property KL, UU Street, Town B for $65 000. This was funded by a loan from the husband’s parents (which has been repaid) and by refinancing Property P, I Street. Five industrial units were subsequently constructed on this property.
On 7 April 2000, Whinton Pty Limited purchased a property at VV Street, Town B for $65 000 funded by refinancing Property Q, I Street. The husband then constructed a factory unit on the property.
In September 2000, the wife resigned from her employment with Company SS and she then undertook much of the work involved in the administration of the various properties.
By 2001 the wife had recovered from her cancer treatment and she went on a five week overseas holiday with two friends.
In May 2001 a property at WW Street, Town B was purchased in the wife’s name for $95 000. The husband and the wife paid cash but later refinanced the property with a Z Financial Institution loan. The bathroom was subsequently renovated and some roof repair was undertaken by the husband.
The husband established a company, F Pty Limited which was registered in May 2001. Like the company Whinton Pty Limited, this company does not trade but holds property.
In May 2002, a property was purchased in the wife’s name at XX Street, Town B for $187 000 funded from loans. The property was subsequently renovated.
On 30 June 2003, F Pty Limited purchased Property H, J Street, Town G for $50 000 funded from loans.
On 23 December 2003, F Pty Limited purchased a property at M Street, Town G for $285 000 funded by refinancing Property P, I Street. The property has been renovated extensively.
On 8 January 2004, F Pty Limited purchased vacant land at L Street, Town G for $77 000 funded by loans.
On 17 September 2004, a home unit at Property V, W Street, Town B was purchased in the husband’s name for $250 000. This was funded initially by loans from the husband’s parents and later by loans secured against other properties.
The husband established a company known as S Pty Limited which was registered in September 2005. The husband is the sole director and secretary. He owns an 80 per cent interest and his partner, Ms YY holds the remaining 20 per cent.
In 2005, F Pty Limited purchased properties at Properties K, ZZ and BC, J Street, Town G for the total sum of $205 000. These purchases were funded by loans secured against other properties.
In 2005, the husband transferred his interest in F Pty Limited to the wife for $1.00. The wife is the sole director, secretary and shareholder of the company.
In October 2005, a home unit at Property X, W Street, Town B was purchased in the husband’s name for $95 000 funded by loans secured against other properties.
On 22 November 2006, home units Properties CD, FG, HI and IJ, DE Street, Town EF were purchased in the husband’s name for $275 000. These purchases were funded by a loan on mortgage from Newcastle Permanent Limited. The properties were subsequently renovated.
In mid-2008 the office clerk for S Pty Limited, Ms YY took leave to have an operation. The husband asked the wife to work in the office which she did full time. Upon Ms YY’s return to work, the wife continued to work in the office three days per week until Christmas that year. Then she returned to this work in March 2009 continuing until separation in July 2009.
In December 2008 the husband asked the wife to leave the home. Over the next few days the husband transferred $30 000 from the account of S Pty Limited to an account he had established recently at the Bendigo Bank.
In June 2009, studio apartments Units E, A and T at C Street, Suburb D were purchased in the husband’s name for a total purchase price of $548 900. These purchases were funded by a loan from the Commonwealth Bank of Australia.
In June 2009, Mr T Whinton purchased an apartment at Unit BB, C Street, Suburb D. At the same time, Mr R Whinton purchased a similar apartment at Unit DD, C Street, Suburb D. The husband said he advanced $442 617 for the acquisition of these units. I shall refer to this matter again below.
In July 2009 the husband went on a two week holiday to Thailand with a friend. Upon his return, on 17 July 2009, there was serious trouble between the husband and the wife. The wife alleges that he was hitting her with a closed fist. What actually occurred is far from clear to me.
On 18 July 2009 the husband transferred $55 000 from the joint account to the account of Whinton Pty Limited.
As indicated above, on 21 July 2009, the parties separated. The wife left the former matrimonial home at Property Q, I Street, Town B and travelled to Sydney with the parties’ son Mr T Whinton. The wife then resided with Mr T Whinton in his apartment.
On 31 July 2009 the wife cancelled the husband’s supplementary credit card on her Citibank account. But on 3 August 2009 the husband arranged for this to be reactivated and he withdrew approximately $17 500 against the account without consulting the wife.
In August 2009, the husband’s parents lent him $18 000, being the first of numerous loans by them which have become the subject of issue between the husband and the wife. I shall refer to this matter again below.
At approximately the time of Mr T Whinton purchasing his apartment at Suburb D he was successful in obtaining a loan of $176 000 from the Commonwealth Bank. In August 2009 he transferred $175 000 from this money to the wife’s account.
On 30 September 2009 the husband transferred $10 675 from the joint account to the account of Whinton Pty Limited.
The husband established a company, O Pty Limited which was registered in November 2009. He is the sole shareholder and director.
In December 2009, O Pty Limited, purchased Property JK, UU Street, Town B for $850 000. The purchase was funded by a loan from the Commonwealth Bank of Australia. The husband has undertaken some improvement of this property.
In late 2009 the wife paid a total of $39 500 to purchase a motor vehicle for Mr T Whinton.
In February 2010 the Australian Taxation Office credited the husband’s Bendigo Bank account with $90 469 being a refund of the GST paid at the time of purchasing the five Suburb D apartments.
On 14 April 2010, the wife filed her Initiating Application in this Court.
In May 2010, the husband went on sick leave from his employment at the educational institution.
In May 2010, the wife commenced to care for her mother, Ms LM, after she fell ill.
In June 2010 the husband, on behalf of S Pty Limited, borrowed $645 475 from the Commonwealth Bank of Australia. The husband says that he used most of this money to purchase building materials for installation at the properties at VV Street, Town B and Property JK and Property KL, UU Street, Town B. This matter also became the subject of considerable issue between the husband and the wife. I shall refer to it again below.
In 2009 or 2010, the husband lent $40 000 to Ms YY. This has been repaid.
On 7 September 2010, the parties attended a conciliation conference.
On … September 2010, sadly, the wife’s mother died.
In October 2010 the husband withdrew approximately $64 000 from his superannuation account.
In late 2010 the wife received $8000 from Z Financial Institution by way of a refund of past subscriptions. The wife applied this money to living expenses.
In January 2011 the wife’s father loaned her $20 000, almost the entirety of which the wife paid towards her legal costs.
In early 2011 the wife became eligible for a $50 000 interest free loan from Z Financial Institution. After subscriptions and costs the wife received the net amount of $40 844. The wife deposited these monies to the account of the parties’ son Mr T Whinton.
On 22 April 2011, the wife commenced living with her father and became his full time carer.
On 7 May 2011, the wife commenced receiving a carer’s allowance from Centrelink in the amount of $110.00 per fortnight.
In May 2011 the husband was admitted to hospital suffering from depression and underwent electric convulsive therapy. Apparently this therapy achieved a short term benefit.
In mid-2011 the husband purchased a commercial property at Y Street, Town B in his name. He borrowed $570 000 which was in excess of the costs of purchase. This matter is in issue and I shall refer to it again below.
On 28 October 2011, orders were made by consent for, amongst other matters, the sale of eighteen of the 22 items of real estate held by the parties. There were some difficulties in the husband and the wife not being able to agree about selling agents. The wife listed properties for sale by agents other than in accordance with the orders.
In January 2012, Mr T Whinton sold his apartment at Unit BB, C Street, Suburb D for $438 000. But none of the money owed to his parents was repaid. I shall refer to this again below.
Between February and June 2012 the following properties were sold:
·Properties ZZ-BC, J Street, Town G for $165 000
·MN Street, Town B for $225 000
·XX Street, Town B for $320 000
·PP Street, Town B for $335 000.
The proceeds of the sales of these properties were to be applied in priority to the Commonwealth Bank, CBFC, AMS Mortgage Services, Newcastle Permanent Building Society and Morgan Brooks Direct. On 30 January 2012 the orders were varied by consent with the effect that the proceeds of sale of Properties ZZ-BC, J Street, Town G could first be applied by the wife in payment of mortgage arrears to Morgan Brooks Direct Pty Limited, Pepper Australia Pty Limited and Newcastle Permanent Building Society Limited. The balance of the proceeds was placed in a trust account at Falvey Lawyers.
In November 2012, Properties CD-FG-HI, DE Street, Town EF sold for $345 000 and the net proceeds of sale were placed in the trust account of Falvey Lawyers.
On 25 February 2013, I made an order pending further order, that Mr R Whinton be restrained from disposing of, dealing with or otherwise encumbering his apartment at Unit DD, C Street, Suburb D. I also ordered that the husband be permitted to register a caveat over the title of the apartment.
On 9 July 2013, during the substantive hearing, I ordered that by consent Mr R Whinton be permitted to remove the above caveat. I also noted that the wife was prepared to accept as part of final orders Mr R Whinton’s liability to her and the husband (or Whinton Pty Limited) in the full amount as determined by the Court.

Issues

The issues for determination were agreed as follows.
1.The husband’s credit.
2.The nature, extent and treatment in the balance sheet of the husband’s post separation financial dealings with his father.
3.Whether the husband has adequately explained the use to which he put the funds from his father and whether the husband has adequately explained the use to which he put the funds raised on hire purchase from the Commonwealth Bank of Australia, including in relation to the acquisition of building materials for installation at three properties owned by a company controlled by the husband.
4.The husband’s decision to purchase real estate at Y Street, Town B post separation on 100 per cent finance causing loss.
5.The frankness of the husband’s disclosure about his business activities in S Pty Limited during the years ending 30 June 2012 and the reliability of his business records.
6.Waste (Kowaliw) by the husband in relation to:
6.1.His post-separation financial dealings with CBA and his father and the acquisition of building materials;
6.2.His post-separation acquisition of Y Street;
6.3.His failure to take steps to sell negatively geared property investments in the context of his stated health conditions, business failure and resignation from employment;
6.4.His apparent waste of a business valued at $202 133 as at 30 June 2011 and $59 000 as at 30 June 2012.
7.Whether Mr R Whinton agreed with his parents that he would pay interest on a loan of $181 339 and if so on what terms.
8.Whether the wife’s Z Financial Institution Membership has any value and if so what.
9.If the building materials installed on the husband’s properties are included within the balance sheet, whether they are worth $38 100 as contended by the wife or $0 as contended by the husband.
10.Whether $40 000 received by the wife from Z Financial Institution should be added back (use and application of funds)
11.Whether $4700 received by the wife from an insurance claim on a diamond ring should be added back (use and application of funds).
12.Whether the wife received $156 000 of rental income and applied it for her sole use, and if so, whether it should be added back (use and application of funds).
13.Whether funds withdrawn by the husband from his First State Superannuation should be added back (use and application of funds).
14.Whether the parties’ post-separation credit card liabilities should be included in the balance sheet.
15.Whether the wife owes her son Mr T Whinton $44 000, and if she does, whether such liability should be included in the balance sheet.
16.Amounts of money received by the wife from Mr T Whinton and the use and application of those funds.
17.Whether CGT potentially payable on the sale of real estate the parties seek to retain as part of their property settlement should be included on the balance sheet, in the context of substantial losses carried forward in the accounts of the husband’s property holding companies (Rosati).
18.Whether the parties’ contributions were equal as contended by the wife, or favour the husband as to 59 per cent as contended by the husband having regard to:
18.1.The contributions during the marriage and post-separation by both parties; and
18.2.The receipt by the husband of an award of damages referrable to a motor vehicle accident in 1986.
19.At the third stage of the s 79(4) exercise:
19.1.Whether the Court accepts the husband’s evidence that he has a limited earning capacity by reason of his health.
19.2.If the husband’s post-separation liabilities as outlined above are included in the balance sheet, rather than excluded as proposed by the wife, whether there should be a substantial adjustment favouring the wife to reflect a lack of proper accounting for expenditure of the funds borrowed (Black v Kellner) and/or the husband’s waste (Kowaliw).
19.3.The wife’s earning capacity.
19.4.Whether the Court accepts that the husband’s business S Pty Ltd has truly ceased and/or will not trade as it did in the years ending 30 June 2009 – 30 June 2011 once these proceedings have concluded.
19.5.Whether the Court has regard to the losses available to the husband within his trading company to offset against future company taxation liabilities upon profit.
I shall endeavour to deal with these issues as best I am able during the course of these Reasons.

Credit

Mr R Whinton

Mr R Whinton is the elder son of the married parties in these proceedings. He gave his evidence in a forthright, responsive manner. I regard him to be a witness of the truth. Where his evidence is in conflict with that of his father I prefer the evidence of Mr R Whinton.

The wife

The wife was generally responsive in her answers to questions. Occasionally the wife provided extraneous or irrelevant information which presumably she perceived as likely to serve her case. The wife also did not demonstrate a great knowledge or recollection for detail and in response to one question said that she gets her years confused.
Having said this, I regard the wife as a witness of the truth and generally regard her evidence to be reliable.

The husband

Generally the husband was forthright in answers to questions. Like the wife, occasionally he lapsed into unresponsive information. Generally he demonstrated a reasonable recollection for detailed matters. But bearing in mind that he has been the party who has undertaken almost all of the financial management during the marriage and particularly in recent years, at times I had a real concern that he was not able to provide much more detailed information than he did. This was particularly the case in relation to the circumstances involved in his acquisition and installation of the building materials the subject of so much controversy after separation. There were significant inconsistencies in his evidence about this and I shall refer to the matter in more detail below.
I have the view that when the husband approached the Commonwealth Bank to apply for the loan of $645 475, he mislead them. Firstly, he did not require anything like this amount to fund the purchase and installation of the building materials. I shall also refer to this matter below. Secondly, he failed to disclose that $50 000 of income had been paid to his superannuation fund thereby inflating the amount of income the Bank would have thought was available to him.
The husband in his dealings with the Commonwealth Bank represented his business profit to be $283 157. Yet at the same time he was representing to the wife that in fact business was trading at a loss. He also presented his financial circumstances to the Bank in a way which would have led them to believe that he was the owner of a property at Town MN and in receipt of rent from an Ms OP in respect of the property. In fact this property was not owned by him at all. In addition there was no reference to this arrangement in the husband’s financial statement sworn shortly after that time.
Most seriously of all, I also have the view that the husband fabricated a tax invoice with the intention to mislead the wife, her legal representatives and this Court. I shall refer to this again below.
I must say I have a poor view overall of the husband’s evidence and in many instances regard it as likely to be unreliable.

Mr PQ

Mr PQ is the husband’s father.
He gave his evidence in a reasonably responsive manner.
I regard Mr PQ as a witness of the truth. But it was clear that the husband was involved in the preparation of his father’s affidavit.
It was also clear that there has been a great deal of enmeshment between the financial circumstances of the husband and his father which has not been explained in sufficient detail to enable the Court always to be able to make appropriate findings. This was particularly the case in relation to the period surrounding the purchase and installation of the building materials.
To this extent I have reservations about the evidence of Mr PQ.

Purchase of Suburb D properties by Mr T Whinton and Mr R Whinton

In early 2009, Mr T Whinton had been unable to find an apartment to rent in Sydney. He found a studio apartment for sale at SuburbD. He suggested to the husband that the husband could purchase the unit and that Mr T Whinton could then rent it. What followed was that ultimately five units in the same development at C Street, Suburb D were purchased, one by each of Mr T Whinton and Mr D Whinton and three by the husband.
There is no question that the purchase of each of the units owned by the parties’ sons was funded by the husband drawing down funds on a Commonwealth Bank loan account made available to fund the purchase of the five units. But there is an issue about the level of indebtedness of the sons to their parents arising from these transactions. It is clear that neither son has repaid any part of their loans to their parents.
To the parties’ credit, during the course of the hearing Mr T Whinton was able to settle his dispute. On 22 March I made a formal note that Mr T Whinton and his parents agreed that there was $163 000 owing on the principal plus $42 500 in interest, a total of $205 500. I also noted that it was agreed that the wife would accept this indebtedness as an asset which would be made available to her under the final orders to determine these proceedings.

The parties also agreed that the outstanding amount of the principal loan to Mr R Whinton is $181 339. But a dispute remains about whether Mr R Whinton is liable to pay any interest to his parents. It was also agreed that the wife would accept this indebtedness, in whatever amount the Court might find appropriate, as an asset which would be made available to her under the final orders.
Although Mr T Whinton’s dispute with his parents has been resolved, there is an aspect of the circumstances of acquisition of his apartment which remains relevant to the broader dispute. So it is necessary to continue to refer to him in this context.
It is common ground that on 22 June 2009 the purchase of Unit BB, C Street, Suburb D was completed, the registered proprietor being Mr T Whinton. It is also common ground that on 24 June 2009 the purchase of Unit DD, C Street, Suburb D was completed, the registered proprietor being Mr R Whinton.
It is also common ground that the purchase cost of each property was $200 000 plus GST plus legal costs.
The husband said that he advanced each of his sons $220 000 to complete the purchase as well as funds to pay their legal fees (which the husband said totalled $2617.10) such funds being a direct draw down from the Commonwealth Bank of Australia (“Commonwealth Bank”). In fact he advanced less than these amounts because each of the sons had savings which were paid towards the purchases.
Mr T Whinton had applied to the Commonwealth Bank for a loan to assist with the purchase of his apartment. But the money was not available at settlement. So funds were provided by the husband sufficient to enable completion.
The husband had mortgages prepared but Mr R Whinton declined to sign the relevant mortgage. He said that the draft mortgage sent to him did not reflect the appropriate amount of indebtedness to his father and therefore he did not sign it. The husband then lodged caveats against the titles to the properties of his sons, that in respect of Mr T Whinton’s Unit BB having been lodged on 6 August 2009 and that in respect of Mr R Whinton’s Unit DD having been lodged on 28 August 2009.
In September 2009 Mr T Whinton served his father with a lapsing notice in relation to the relevant caveat and the caveat lapsed on 28 October 2009. That day the Commonwealth Bank registered a mortgage over Mr T Whinton’s property which secured a $176 000 loan by the Bank to Mr T Whinton. Instead of using these funds to repay the loan from his father, Mr T Whinton made $175 000 available to his mother. I shall refer to this aspect of the matter below.
As indicated above, during the hearing I made orders permitting Mr R Whinton to cause the caveat against his property to be removed.
On 21 February 2012 Mr T Whinton sold his property for $438 000. He has not repaid any money to his father apparently because until this hearing they remained in dispute about how much the husband was owed.
I now turn specifically to the ongoing dispute between Mr R Whinton and his father. As I have said, all parties agree that $181 339 is owing by Mr R Whinton to his father in respect of the principal of the loan. The husband asserts that Mr R Whinton also owes him interest on the principal amount calculated on the basis of compound interest. Mr R Whinton asserts that there was never any suggestion by his father that he would require him to pay interest on the loan until the husband raised this after he and the wife had separated.
The husband said that in early 2009 he had informed Mr R Whinton that he thought that Unit DD was a great buy, that Mr R Whinton should qualify himself for the first home owner’s grant, that the husband could finance the loan but Mr R Whinton would have to repay him on the same basis that Mr T Whinton would. The husband said that Mr R Whinton replied that he was going to university so he could not meet the repayments. The husband said that he then said that the interest would capitalise accordingly. He said that Mr R Whinton then said that he would do the paperwork necessary and would have it all in order.
During cross-examination by learned counsel for the wife, the husband was asked what he meant when he said that he informed Mr R Whinton that the interest would capitalise accordingly. He answered that he meant that the interest would compound, that effectively he was lending Mr R Whinton the interest, so that interest would accrue on the interest he loaned Mr R Whinton. He conceded that this was a different arrangement from that which he had agreed upon with Mr T Whinton.
Mr R Whinton said that his conversation with his father was quite different from that asserted above by his father. Mr R Whinton said that in early to mid-2009 the husband said to him that the units were a good buy, that if Mr R Whinton wanted to buy one he would give him a loan which he would not have to repay until he could afford it and that it would be a nice place for him and Mr T Whinton to live together. Mr R Whinton said that he replied that it was not a good time for him and that this would be far better if it came along when he was actually earning income. Mr R Whinton said that his mother suggested that he should take advantage of the loan his parents were offering and that if he did not buy the apartment they would do so. He said that he did not wish to purchase the unit at that time because he was still a university student. He said that he informed his parents that it was not the right time for him.
Mr R Whinton said that a few days later he informed his father that, given the terms of the loan he offered, he had decided to buy the unit. He said he informed his father that his savings of $20 000, which his father had, was to be used as the deposit.
Mr R Whinton said that there was never any discussion about paying interest on the loan. He said that his understanding of the terms “you don’t have to repay until you can afford it” was that he would not have to repay the loan until he obtained full time employment after leaving university which would be some time in 2012.
In my view the question which arises for consideration is whether or not there was some agreement between the husband and Mr R Whinton at the time the apartment was purchased to the effect that Mr R Whinton would have to pay his father interest on the loan.
Mr R Whinton said that he and his father only had two conversations about the purchase and its funding prior to purchase and that such conversations were as he described above. On the other hand the husband said that they had about six conversations about this matter prior to purchase.
The wife said that at the time Mr T Whinton was negotiating the purchase of his unit she had a conversation with Mr R Whinton and suggested that Mr R Whinton should purchase a unit. She said that she was not aware where the actual funds came from to complete the purchase. The wife also said that she could not recall any conversations concerning payment of interest by Mr R Whinton on the monies used to purchase his unit.
Mr R Whinton cross-examined his father in some detail about this matter. It became clear to me during this cross-examination that the version asserted by Mr R Whinton was more likely to have been accurate and that it was unlikely that his father had suggested to him that he would have to pay interest in accordance with the arrangement the husband had negotiated with Mr T Whinton. The husband conceded during this cross-examination that Mr R Whinton did not know the terms of Mr T Whinton’s loan.
I have the view therefore, that the husband has been unable to establish that a term of the agreement he reached with Mr R Whinton at the time when Unit DD was purchased, was that Mr R Whinton would be required to pay interest on the loan by his father to him. Accordingly, I find that the total indebtedness which Mr R Whinton has to his parents is the agreed sum of $181 339.

Husband’s purchase and installation of building materials post-separation in June 2010

As indicated above, in mid-2010 the husband, through his company Whinton Pty Limited, borrowed $645 475 on hire purchase from the Commonwealth Bank of Australia. There was an issue between the husband and the wife about how these monies have been spent.
The husband said that the purpose of this funding arrangement was to enable him to purchase and install building materials on the three commercial properties at Property KL, UU Street, Town B, Property JK, UU Street, Town B and VV Street, Town B.
In his application to the Bank the husband included a tax invoice from his company S Pty Ltd directed to the Bank which contained details of the building materials which the company proposed to acquire and provide to the company Whinton Pty Limited for installation on three properties. The total amount of the cost of this equipment was presented in the invoice as $645 475.
It was contended on behalf of the wife that the husband did not spend anything like the $645 475 which he borrowed, on the purchase and installation of building materials.
The husband was cross-examined in considerable detail about his alleged expenditure of these funds for this purpose. It was suggested by learned counsel for the wife to the husband that the total cost of the building materials should have been approximately $105 000 plus GST. This was on the basis of an estimate that Mr QR, the single expert who provided a valuation of the business, S Pty Limited, made from his inspection of the records of the business. He formed the view that the cost of these building materials was approximately $2.35 per unit in 2010.
The husband said that he thought that the cost of the building materials for the exercise cost approximately $211 000 plus GST. But he said that purchase of the building materials was only one component of the expenditure in the exercise. He said other types of building materials had to be purchased. He said there were tradesperson’s costs which were considerable, particularly in respect of one property where he said equipment was contained in a large room which had to be almost entirely rebuilt.

Authenticity of the ST Tax Invoice

In a letter to the wife’s then solicitor Mr Adrian Byrne dated 14 December 2010, the husband attached a tax invoice dated 18 August 2010 which appeared to be from a company ST Pty Limited in Western Australia. The husband said that this company had supplied S Pty Limited with the building materials. In the letter the husband informed the solicitor that the total cost of the installation was expected to be approximately $698 000. This invoice (which was annexure G in the wife’s tender documents) referred to, amongst other things, “529 [ST] [building materials]” at an amount of $514 055.75, “1 Freight 40 ft Conatiner (sic)” at an amount of $10 216.50, “27 [Ancillary building materials] 5 year Warranty” at an amount of $72 963.75 and “1 Freight 1xXL Pallet” at an amount of $1214.00. The total amount in the invoice was $598 450.
The wife challenged the authenticity of this invoice submitting that it had been fabricated.
The wife filed an affidavit by Mr TU, the managing director of ST Pty Limited. Mr TU said that ST has had business dealings with the husband in which his business S Pty Limited has purchased their building materials. Mr TU said that he inspected the above tax invoice a copy of which was forwarded to him by the wife’s solicitors. He said that based on his knowledge of, and experience with, ST’s business records, and a review of their business records, he confirmed that the invoice was not produced by ST and was not a document that related to any business records at ST. Mr TU gave a detailed explanation about how the invoice differed from invoices produced by ST including differences in text, billing address, stylistic matters and numerous other differences the details of which it is unnecessary to describe.
It was suggested to the husband by learned counsel for the wife that the invoice was a complete work of fiction. The husband denied this. The husband described the invoice as a pro forma invoice and said that it was sent to him by Mr WX to give him a fair idea of what he believed the installation would cost. The husband said that he had very little experience in the application of these building materials at the time and that it gave him a budget to work off. The husband subsequently said as follows:
That’s a pro forma invoice from [ST] giving me their valued experience to say what that [amount of building material] would be, roughly. [Mr WX] was an experienced [application of these building materials] person and I wasn’t.
It was then suggested to the husband that Mr WX was not employed by ST at the relevant time and that therefore the husband’s assertion that the invoice was prepared by Mr WX on behalf of ST simply could not be true. The husband replied that he was not aware of the date Mr WX departed. The husband then suggested that he was not sure about the time frame.
It was suggested to the husband that he created the document and he disagreed. It was suggested to the husband that he created the document to give the false impression to the wife and to the Court that he had spent the amount of money referred to in the invoice on the purchase and installation of the building materials when in fact he did not spend anything like that amount. The husband said he did not make it up and that the total cost of the building materials was $645 475 funded from the Commonwealth Bank.
The husband subsequently said:
There was a world shortage of [the specified building materials]. Massive world shortage. The only [specified building materials] that I could actually get at that particular time were [Company XY]. I then tried to get more [specified building materials], and the only ones that were available were [ST]. I asked [Mr WX] how much roughly would it cost fully installed. He gave me a very, very approximate price with the [specified building materials], [other building materials], etc, and built it into the total [building material] price which is how the CBA loan paid for everything – the lease.
(transcript page 74)
Mr TU was cross-examined by learned counsel for the husband. It was suggested to Mr TU that Mr WX could have prepared a draft document such as the invoice. Mr TU agreed that it was possible that Mr WX could have created the tax invoice.
It was also suggested to Mr TU that Mr WX had the capacity to not only negotiate and create prospective arrangements but he also had the capacity to generate a document, not necessarily on the computer system that was in the head office. Mr TU agreed that that would be possible, but he said that it would be highly unlikely. He said that it would have been a breach of his employment to have created an invoice outside the system without either Mr TU’s knowledge or the then managing director’s knowledge or the chief financial officer’s knowledge, but it would be possible.
Mr TU said in re-examination that the ST invoicing was done by their sales administration and accounts department, not by a person such as Mr WX in the position of sales manager. He also said that special payment arrangements which were negotiated by sales staff required his approval or the then managing director’s approval back in 2010 and he did not have any record of the funds to which the particular invoice refers, namely $598 000 being receipted by ST.
The above cross-examination of Mr TU occurred on 21 March 2013. The following day I adjourned the hearing because the three days allocated had been insufficient to complete it. The hearing was adjourned to resume on 8 July 2013. In the meantime, on 29 May 2013, Mr TU swore a further affidavit. He said that he was troubled by the inference that Mr WX might have been acting outside the scope of his employment with ST to prepare the invoice. He said that he reviewed Mr WX’s employment records with ST which confirmed that Mr WX was not employed by ST in August 2010, the date on the invoice. He said that Mr WX was employed by ST from 1 March 2009 to 8 January 2010. He said that after 8 January 2010 Mr WX had no role at ST and did not represent the company in any capacity after that date.
Mr WX swore an affidavit on 28 May 2013. He confirmed that he had been employed as state sales manager for New South Wales by ST Pty Limited for the period from 1 March 2008 to 8 January 2010. He confirmed that he had sold building materials to S Pty Ltd. He said that he did not produce the relevant invoice nor had he ever produced an invoice or document styled to look like an invoice for ST outside their normal course of business. He said that he had no involvement in the production of the invoice nor had he ever cooperatively created any document styled to appear as a ST invoice with the husband. He also said that he has no knowledge of, and had no involvement with or discussions with the husband about, the transaction detailed in the invoice. He said that ST sales employees were unable, and were not permitted, to create invoices such as the relevant invoice. He said that invoices were created automatically once goods were despatched and that was done by the customer service officer.
He said that he never bypassed the ST in-house systems to prepare an invoice. He also said that he never negotiated any “deal” with the husband or any of his companies which involved the transaction set out in the invoice or which involved special arrangements for payments of invoiced amounts by instalments over time as reflected in the invoice. Finally, he said that he had never sent the relevant invoice to the husband as a “pro forma” invoice or as an indication of, a guide to, or an estimate of, the cost of the supply and / or installation detailed in the invoice.
In my view, in the light of all this evidence, the only conclusion available to the Court is that on the balance of probabilities, it is more probable than not that the relevant invoice was created by the husband and for the purpose as asserted by learned counsel for the wife. That is, that the husband deliberately set out to mislead the wife, her legal advisors and this Court that his company S Pty Limited had received a tax invoice from ST Pty Limited for supply of the relevant equipment at the total price of $598 450. And I infer that the purpose of this was probably an endeavour to present the cost of the purchase and installation of the building materials at close to the $645 475 borrowed from the Commonwealth Bank.

Cost of the Building Material Installation

Mr YZ, as single expert, filed a valuation of the relevant building materials but this did not purport to make any observations about the initial costs of the purchase and installation of the building materials. Rather Mr YZ valued this equipment as at October 2011. He assessed the in-situ value of the equipment at $38 700. On the basis that the equipment had been removed from the sites, his valuation was $17 700.
There are problems with this valuation. Mr YZ was in error in that he reported that the building materials were Type 1. It became clear from the husband’s evidence and that of Mr ZA, building industry consultant, that in fact it they were Type 2 building materials.
Mr YZ was cross-examined. The husband had attended at Mr YZ’s inspections of the properties upon which the building material had been installed. Mr YZ said that he did not identify the type of the building materials. The type of building materials used in the report as the basis of his valuation report was based on information provided to him by the husband. Mr YZ did not check the type of the building materials but believed where he referred in his report to the type of the building materials, such information was gained from his conversation with the husband and from the letter of instruction.
In my view Mr YZ’s valuation is of little assistance because he has mistaken the type of the building materials. On his own admission, he valued the building materials which he understood to be Type 1, whereas they were actually Type 2.

Mr ZA, a building industry consultant, filed an affidavit in the wife’s case. He said that it was unclear whether the ST building materials were 220 units or 185 units each. He said that based on the costs included in the invoice to the Commonwealth Bank dated 4 May 2010 (referred to above), the GST-exclusive price of the building materials excluding freight was $4.02 per unit or $4.78 per unit depending on the actual total units. Mr ZA said that considering the building material prices available on the market in 2010 were typically $3.20 per unit and as low as $2.00 per unit, the price asserted to have been paid for the building materials involved a significant premium. Mr ZA made a similar analysis in relation to the Company XY building materials and reached the same conclusion. In conclusion he expressed the opinion that the price said to have been paid for the equipment was far higher than the then current reasonable market price. Mr ZA also said that the price referred to in what I shall refer to as the fabricated invoice was at least 33 per cent higher than the price invoiced by ST to S Pty Ltd for supply of building materials in June and August 2010. He said that he was concerned that the amount borrowed was higher than the market price.
Despite vigorous cross-examination of Mr ZA by learned counsel for the husband, in my view the thrust of his opinion remained soundly based. I accept this evidence.
The husband, during his cross-examination about the costs of the purchase and installation of the building material, gave what I regarded as being quite inconsistent evidence. Initially he held to his assertion that the building materials cost approximately $598 000 and that his company made approximately $50 000 profit. He subsequently gave a variety of different opinions about what the ultimate cost was. He conceded that he received rebates worth $108 000. He appeared to accept that the actual cost of the building materials was approximately $211 000. This amount was calculated on the basis that the husband had informed the single expert Mr QR that the price per unit in 2010 was $2.35. The husband said that the $2.35 per unit price was “a bare [building material] price”. To his credit the husband had always maintained that the ancillary building materials cost approximately $72 000. He said that the installation costs were approximately $50 000. But in addition there would be costs for other necessary building materials and work. Subsequently the husband departed from what I thought had been an acceptance that the building materials cost approximately $211 000 saying that the building materials he purchased and installed were “a dearer [material]” than presumably those which he suggested to Mr QR could have been purchased at $2.35 per unit.
Later in his cross-examination the husband said that the installation in round figures cost approximately $600 000, that he received a (rebate) of $108 000, that he made about $50 000 profit so that the net cost was approximately $487 000. He said that he paid the difference between the borrowed funds of $645 475 and the $487 000 to his father to reduce his outstanding indebtedness to him.
In my view, the husband’s evidence, both oral and documentary, about this matter was most unimpressive, particularly considering that he was the person involved intimately in the exercise of purchase and installation of the building materials. After all, it is his business. I find myself unpersuaded that the cost of this project was even as high as the $487 000 which the husband has conceded.
In my view the wife has established on a balance of probabilities, that it is more probable than not that the costs of purchase and installation of the building materials was significantly less than the $645 475 borrowed by the husband. This leaves unexplained what the husband has done with this money. This is a most unsatisfactory aspect of the proceedings.
In my view, in relation to this issue, the husband has fabricated evidence with the intention to mislead, he is the person best equipped to provide a satisfactory explanation about the expenditure of the borrowed funds yet he has failed to do so and this notwithstanding the very serious obligation on him to make a full and frank disclosure. In these circumstances, in my view, the Court is entitled to draw the inference that he has had the benefit of substantial funds which the Court is unable to quantify.
I propose to take this matter into account pursuant to s 75(2)(o) of the Act.

Loans to the Husband by his Parents Since Separation

The husband asserted that since separation, his parents, Mr and Ms PQ, have loaned him substantial sums of money. The husband’s father swore an affidavit on 23 September 2011 setting out details of the advances. He said that at that time he had loaned the husband a total of $1 105 000, that the husband had repaid him $760 349.21 leaving an outstanding balance of $344 650.79 which did not include any interest.
At the time of final submissions, it was submitted on behalf of the husband that he owed his father a total of $802 950 which included interest at 18 per cent on all outstanding amounts from the commencement of original advances.
On 31 August 2010 the husband and his parents entered into a deed to record their agreement that the money advanced would be repaid by the husband with interest at the rate of 18 per cent per annum calculated on daily rests.
The husband’s father annexed to his affidavit copies of his St George Bank customer receipts in respect of most of the transactions. The husband annexed to his affidavit copies of the relevant bank statements for the Whinton Pty Limited account into which these advances were received. The histories of payments and receipts mirrored one another. It became clear that most of the work in preparation of these affidavits had been undertaken by the husband. Learned counsel for the wife described the husband’s father, rather disrespectfully, as having been somewhat of a “stooge” albeit “probably an innocent one” in the process.
The husband said that the purpose of these loans had been to assist in meeting shortfall between rent received and costs of the various mortgage repayments. It also became clear during cross-examination that the husband’s father had understood that money advanced by him was to be used by the husband to meet such shortfall. Yet $211 801 of the funds advanced was used towards the acquisition of the building materials, and the husband’s father was subsequently repaid from the $645 475 loan from the Commonwealth Bank and from rebates.
Annexed to the affidavit of the husband’s father was a copy of the deed referred to above made between the husband and his parents on 31 August 2010. This was, of course, after separation. It would be difficult to avoid the inference that this deed had been made for the purposes of these proceedings. In any event, this deed recorded, amongst other matters, that advances made to the husband of $100 000 on 11 November 2009 and of $40 000 on 18 May 2010 have been repaid although not with any interest.
The next advances referred to in the deed were $100 000 on 21 June 2010 and $150 000 advanced on 15 July 2010, a total of $250 000. The husband acknowledged that these funds were used to purchase the building materials in approximately August or September 2010. The husband also acknowledged that his father was repaid for these advances from the $645 475 loaned by the Commonwealth Bank for the purchase of the building materials.
Learned counsel for the wife undertook an analysis of monies advanced by the husband’s father compared with what has been repaid for the period commencing with the advance of $100 000 on 21 June 2010 and concluding on 30 June 2011. This document became Exhibit 13.
Total advances between 21 June 2011 and 30 June 2011 were $857 000. Total repayments during the period were $605 497, consisting of the husband’s father being paid numerous amounts to a total of $331 500 and also being paid a total of $273 997 from rebates. The difference between $857 000 owed and $605 497 repaid is $251 503. This appears to me to be what was owed to the husband’s father as at 30 June 2011, apart from the question of any interest. The husband appeared to agree with these basic figures during his cross examination.
The husband’s father also advanced $75 000 on 5 August 2011 and $15 000 on 6 September 2011. It is not clear to me on the basis of any objective evidence that these amounts have not been repaid. Because I regard the evidence of the husband and his father to have been most unsatisfactory in respect of this whole area of their enmeshed relationship and because the extent to which advances have been repaid is quite unclear, I do not find that these monies remain owing. Accordingly, I propose to find that the current amount outstanding to the husband’s father is $251 503.
In relation to the assertion that interest is outstanding, the husband said that his father had always charged him interest on short term loans. I must say I have difficulty accepting that the husband’s parents require the husband to pay interest on outstanding loans at 18 per cent. The husband’s father said that this was the rate that would have been charged on unsecured commercial loans at the time.
In the event that the husband’s father requires interest to be paid on the outstanding amount as I have found it to be, he will have to look to the husband for payment. I do not propose to add any interest to the $251 503 for the purposes of these proceedings. I do not regard 18 per cent interest to have been required and do not consider it appropriate for the Court to pick some other figure.

The Applicable Law

Sub-section 79(1) of the Family Law Act 1975 (Cth) (“the Act”) provides to the effect that in property settlement proceedings the Court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property.
Sub-section 79(2) provides that the Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) sets out various matters which must be taken into account in considering what order (if any) should be made under the section. These matters include direct and indirect contributions, financial and otherwise by or on behalf of a party or a child to the acquisition, conservation or improvement of any property of the parties, contributions by a party to the welfare of their family including as a homemaker or parent, relevant matters referred to in s 75(2) and the other matters referred to in s 79(4).
The operation of s 79 was the subject of consideration by the High Court in the recent case of Stanford v Stanford (2012) FLC 93-518.
In Stanford the majority said (at page 86,640) in referring to ss 79(2) and 79(4) as follows:
35.… the requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. … while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
The High Court said that the first of these propositions is for the court to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
The second is that although s 79 confers a broad power on the court, it is not a power that is to be exercised according to an unguided judicial discretion. It must be exercised in accordance with legal principles, including the principles which the Act itself lays down.
The High Court said that the third fundamental proposition is that the question of whether the order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters set out in s 79(4). To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2) would be to “conflate” the statutory requirements and ignore the principles laid down by the Act.
And the High Court majority went on to say (at page 86,642) as follows:
41.… The fundamental propositions that have been identified 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.

The Parties’ Existing Legal and Equitable Interests in Property

To the parties’ credit they were able to agree on the values of the numerous items of real estate.
There are a number of issues about other matters.
As indicated above, the parties were at issue about the amount of outstanding liability Mr R Whinton has to his parents in respect of the loan to him to purchase his apartment. As indicated above, I have determined the outstanding amount to be $181 339. As also indicated above, the wife has agreed to accept this as one of her assets in the final distribution as she will also accept the $205 500 owed by Mr T Whinton.
It was submitted on behalf of the husband that an insurance claim paid to the wife for a lost diamond ring in the amount of between $4700 and $5000 should be added back to the available assets as against the wife. I do not propose to do so. The wife said that she paid this money towards her legal costs. In my view, this is a very modest amount in the context of the parties’ property and superannuation and I shall take account of it generally pursuant to s 75(2)(o) of the Act rather than add it back to the available property.
There was a dispute about Z Financial Institution membership subscriptions and possible future eligibility for an interest free loan of $95 000. I accept that it is the wife who has been making subscriptions to the member accounts, and who received the benefit of the $40 844 loan referred to above. But I propose to make an order that the wife transfer to the husband her interest in the Z Financial Institution accounts. This is a minor matter, the advance of the $40 844 and future eligibility for further loans do not constitute property. At its highest there might well be opportunity for the husband to receive interest free loans up to $95 000 in the future. The wife has received a benefit and in my view, it would be fair for the husband to receive any further benefits. I shall take this into account pursuant to s 75(2)(o).
There was an issue about the value of the husband’s 80 per cent share in his business S Pty Limited. On the one hand the husband asserted a value of $59 000 whereas the wife submitted that the interest had a value of $202 133.
Mr QR, the single expert appointed for this purpose, said during the course of his cross-examination that based on the financial statements for the company as at 30 June 2012 it has liabilities in excess of assets by $132 312. He said that basically that means that the company has no value whatsoever. He said that the financial statements show as a liability a loan from the husband for $191 734. But there are not sufficient assets to repay this amount. Mr QR said that because total liabilities are in excess of assets the company is worth nothing. He said that the husband’s loan of $191 734 would not be able to be repaid other than to the extent of $59 422. So he attributed that as being the value of S Pty Limited. I note that the husband has an 80 per cent interest, Ms YY holding the other 20 per cent. However the husband has admitted against his interest that his interest has a value of $59 000 and I shall accept that for the purposes of these proceedings based on the opinion of Mr QR.
There was some suggestion that the husband had caused the business to be wasted. In my view, this lower amount of $59 000 is consistent with the poor performance of the business following very substantial changes to a rebate scheme. Rebates for owners of these building materials reduced considerably in 2010. I accept that this caused a substantial deterioration in the business of S Pty Limited.
There was a related issue that the wife should not be required to bear any responsibility for any part of the $645 475 which the husband borrowed on hire purchase from the Commonwealth Bank. There remains owing $340 500. It was submitted on behalf of the wife that the purchase and installation of the building materials was a reckless or negligent venture by the husband and that it would be unfair to the wife to include this liability.
To an extent, consideration of this issue overlaps with some of what I have already said in relation to the acquisition and installation of the building materials. Some of what I say below relating to the other waste submission is also relevant.
Suffice it to say that at the time the husband set out on the venture, the rebates were relatively attractive but within months this situation changed. In my view, bearing this in mind, as well as the fact that the parties had been investors and developers over many years, the Court would not be persuaded to a finding about this venture such as that sought by the wife. Accordingly, in my view the liability of $340 500 should be included in order to determine the available property.
The next issue concerns the property at Y Street, Town B. It is submitted on behalf of the wife that this item and the relevant mortgage should be excluded from the balance sheet and remain the responsibility entirely of the husband without there being any impact on the wife.
The thrust of the submission on behalf of the wife in this regard is as follows. At the time the husband purchased this property in mid-2011, well after separation, the costs of servicing loans and outgoings on the real estate items in the parties’ property portfolio exceeded revenue received from rents by approximately $148 000 per year. Yet the husband decided to purchase an additional property, this being Y Street. The husband was able to persuade the IMB to lend him $580 000, which was more than the purchase price. The loan was secured also over the Suburb D properties as collateral. The husband did not consult the wife about this purchase. This property has dropped in value, representing a significant loss, its agreed value now being $480 000. The husband entered into this commitment at a time when he was no longer working at the educational institution because of his ill health.
On the other hand, the husband said that he went into this venture as a means of obtaining funds to assist in paying the mortgages over the portfolio of properties. He said that by purchasing Y Street, this produced $50 000 in GST cash which he was then able to use to pay mortgage obligations. He said that he had no ability to borrow money and undertook this venture to avoid the property portfolio collapsing.
It was submitted on behalf of the wife that the husband was negligent, even reckless, in borrowing further funds, especially funds secured over existing assets at a time when the investment overall was not paying its way, the husband was no longer able to subsidise the losses from his income from his employment at the educational institution and the wife had been asking for properties to be sold.
How the Court is to deal with business losses was the subject of consideration in the well-known case of Kowaliw and Kowaliw (1981) FLC 91-092. Baker J said at pages 76,643 and 76,644 as follows:
Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec. 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle. I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.

In the present case it is not suggested that the husband embarked on a course of conduct designed to reduce the value of the assets. But it is submitted that the husband’s conduct in purchasing the property in circumstances where he borrowed in excess of 100 per cent of the purchase price and the property has dropped in value, and the other matters referred to, amounts to reckless or negligent behaviour as referred to in Kowaliw.
I must say that I am not persuaded to such a finding.
In my view the Court should not lose sight of the fact that over many years the parties have been property investors and property developers. This has been an important activity in building their wealth. With the benefit of hindsight, one can only wonder about the soundness of this investment decision. But in the event that the venture had turned out to be successful, the wife, who had no part in it, would be expecting to share in its reward as part of the fruits of their ongoing business.
There was no issue that the building materials, whatever they might be worth, would be excluded from the list of property. There was no admissible evidence that they have any value separate from whatever that might be as the equipment stands installed on the three properties.
Learned counsel for the wife said that the wife would be happy for the husband to have the Telstra shares and the Henderson shares.
There is a timeshare, the value of which is uncertain but modest, and the wife wishes to have this. I accept this and shall make an order to this effect, and take this into account under s75(2)(o).
There was some discussion about Capital Gains Tax (“CGT”). Mr ZB, chartered accountant, estimated that the wife has a current CGT liability for $46 780, that upon sale of properties owned by F Pty Limited the wife would be liable to pay CGT of $1342 and that upon sale of properties owned by the husband he would be liable to pay $215 798.
The estimate of $215 798 includes CGT payable in relation to the property at Unit A, C Street, Suburb D which will be the subject of an order for transfer by the husband to the wife and it is not clear what the CGT implications of this might be.
In any event, I accept that at some time in the future, near or perhaps more distant, the husband will be likely to incur substantial CGT liability.
The difficulties for the Court in dealing with issues concerning CGT, particularly in relation to properties likely to be sold in the future, were referred to by Faulks DCJ in Noetel v Quealey [2004] FamCA 790.
In the present case, it might be tempting to include in the liabilities of the wife, her CGT liability. But in my view, to do so would be unfair to the husband because it is almost certain, based on the estimates of Mr ZB, that the husband will have much more substantial CGT liabilities on the sale of investment properties.
In my view no specific orders need to be made in relation to this. If properties have to be sold or transferred pursuant to orders or otherwise in the future, then any CGT liability shall simply flow in accordance with the sale or transfer to the party liable to pay it. I did not detect any objection to such a course from either counsel when the relevance of CGT was being discussed during the hearing.
It was submitted on behalf of the wife that $64 014 withdrawn by the husband from First State Super should be added back to the pool of assets. On the other hand, it was submitted on behalf of the husband that $156 000 of income from rentals received by the wife should also be added back. I do not accept either of these submissions. The husband said that he used the funds to pay mortgage repayments. Despite my reservations about the reliability of much of his evidence, I shall accept his assertions about this. In relation to the $156 000, the wife needed funds to support herself after separation. She said that she used this money for support. I accept this.
The wife alleged that she has a liability to Mr T Whinton for $44 000. This is disputed. As indicated above, Mr T Whinton transferred $175 000 to the wife’s account in August 2009. This was shortly after separation and, as I have said, the wife was living with Mr T Whinton in his Suburb D apartment.
As indicated above, the wife purchased a motor vehicle for Mr T Whinton in late 2009 paying a total of $39 000.
In March 2010 the wife paid Mr T Whinton $90 000. But he subsequently advanced to her various amounts to a total of $52 000. At this stage the wife owed him approximately $97 500.
When the wife received the Z Financial Institution loan which was $40 844 net in early 2011 she paid this to Mr T Whinton. In my view, this would have left a balance owing by the wife to him of approximately $56 000.
The wife said she now owes him $44 000. This seems plausible and I regard the wife as a truthful witness so I accept this.
Each of the husband and the wife asked the Court to add back to the pool of assets the money they had paid in legal costs. Although it is unclear to me, following Stanford (above), what the current state of the law is in relation to add backs, I shall accede to their requests in this regard.
In relation to credit card liabilities I have decided that these shall be included as part of the fabric of determining the interests of the parties in property. On the same basis I accept the wife’s assertion that she owes her father $95 277.

Assets

The husband’s and the wife’s interests in property and superannuation are as follows:

$

1.         Property Q, I Street, Town B

680,000

2.         Property P, I Street, Town B

500,000

3.         U Street, Town B

855,000

4.         Property V, W Street, Town B

310,000

5.         Property X, W Street, Town B

125,000

6.         Unit E, C Street, Suburb D

220,000

7.         Unit A, C Street, Suburb D

220,000

8.         Unit T, C Street, Suburb D

230,000

9.         TT Street, Town B

560,000

10.      Property KL, UU Street, Town B

700,000

11.      VV Street, Town B

545,000

12.      Property JK, UU Street, Town B

830,000

13.      Property H, J Street, Town G

80,000

14.      Property K, J Street, Town G

70,000

15.      L Street, Town G

35,000

16.      M Street, Town G

340,000

17.      Wife’s Nissan motor vehicle

1,000

18.      Wife’s jewellery

10,000

19.      Wife’s Commonwealth Bank account

709

20.      Wife’s RAMS account

30

21.      Wife’s paid legal fees (add back)

158,138

22.      Husband’s IAG shares

20,868

23.      Husband’s Tower shares

905

24.      Husband’s IOOF Haldens shares

1,514

25.      Husband’s Paperlinx shares

190

26.      Husband’s motor vehicle

22,500

27.      Husband’s interest in S Pty Limited

59,000

28.      Husband’s Commonwealth Bank account

1,626

29.      Husband’s Bendigo Bank account

8,826

30.      Husband’s Colonial endowment policy

4,338

31.      Husband’s St George account

3,000

32.      Husband’s property at Y Street, Town B

480,000

33.      Husband’s paid legal (add back)

192,903

34.      Loan to Mr T Whinton

205,500

35.      Loan to Mr R Whinton

181,339

36.      Telstra shares

9,796

37.      Henderson shares

1,452

38.      Money held in Falvey Associates trust account

124,288

^{_____________}

$7,787,922

Liabilities

The husband and the wife have the following liabilities:

$

1.         Joint AMS Mortgage Services

657,700

2.         Joint Morgan Brooks Direct Pty Limited

479,000

3.         Joint Newcastle Permanent

737,900

4.         Husband’s Commonwealth Bank hire purchase

340,500

5.         Husband’s Commonwealth Bank commercial bill

1,750,000

6.         Husband’s father’s loan

251,503

7.         Husband’s IMB (for Y Street)

570,000

8.         Husband’s Homeloans SA

256,590

9.         Husband’s HSBC Mastercard credit card

12,750

10.      Wife’s Citibank Visa credit card

1,000

11.      Wife’s loan from Mr T Whinton

44,000

12.      Wife’s loan from her father, Mr LM

95,277

^{_____________}

$5,196,220

Superannuation

The husband and the wife have the following interests in superannuation:

$

1.         Wife’s Commonwealth Life

73,677

2.         Husband’s First State Super

500,239

3.         Husband’s AMP

3,853

4.         Husband’s CBA

10,226

^{_____________}

$587,995

$

Total Assets and Superannuation

8,375,917

Minus Liabilities

5,196,220

^{_____________}

$3,179,697

Accordingly, the net property and superannuation has a value of $3 179 697.

Sub-Section 79(2)

Sub-section 79(2) of the Act provides:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
In their recent decision in the case of Bevan & Bevan (2013) FLC 93-545 the Full Court (Bryant CJ and Thackray J) said as follows at page 87,234:
In our view, it will be less likely that the separate issues arising under s 79(2) and s 79(4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order.
In Stanford the High Court majority also said the following (at page 86,642):
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. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order.
In the present case, the parties were married for approximately 30 years and raised two children now to adulthood. Their financial circumstances are quite complicated, involving companies, numerous bank accounts and a considerable number of properties. They purchased their former matrimonial home and the majority of their other assets for their mutual enjoyment as a married couple. The marriage has broken down, they are living separate lives and desire to be financially independent from one another. Their corporate and property affairs need to be untangled as it were.
If the Court did not make orders, not only would the parties’ financial interests continue to be enmeshed but the many unresolved issues between them would not be resolved and reflected in court orders. And the result would be unfair to both the husband and the wife.
In these circumstances, in my view it would be just and equitable to make an order under s 79 of the Act.

Contributions

The parties cohabited for almost 30 years.
At the time they commenced their cohabitation, the wife was working full time with Company FF. The husband was working in the GG Business with his father and also working in his entertainment business.
At the commencement of cohabitation the wife’s assets consisted of some furniture and superannuation. On the other hand the husband’s assets consisted of his ZC Street investment, a Triumph motor vehicle, some cash given to him by his parents, his interest in GG Business with his father, his interest in his entertainment business and some superannuation. Although the husband attributed a value of $125 500 to these items there was no evidence in proper form about this. Having said this, I accept that at this time he had assets of a significantly higher value than those of the wife. The husband subsequently sold his interest in his entertainment business and he also sold his interest in GG Business in 1986 for $25 000, as indicated above.
Through the course of their long marriage the parties purchased and sold a number of matrimonial homes and they undertook renovations to some of the homes and other properties. I am satisfied that the wife also assisted the husband in this. The parties also conducted business as real estate investors and developers. I have referred to the considerable number of items of real estate purchased by them or ultimately for them through various corporations.
I have referred above to their respective employment histories. There can be no question that the husband made the majority of the financial contributions. But the wife also made financial contributions as indicated above.
Each of them has made significant contributions to the welfare of their family constituted by themselves and their two sons. I accept that the wife was the primary homemaker and parent and that she made the overwhelming contribution in this regard. But I am also satisfied that the husband made significant contributions to the welfare of their sons.
There was a strong submission on behalf of the husband that the Court should assess the parties’ contributions overall as favouring the husband to some extent. This was on the basis that his initial contributions were greater than those of the wife but that most significantly in June 1993 he received the compensation award for his serious motor vehicle accident which had occurred in 1986 in the amount of $392 742 net of all costs.
Learned counsel also submitted that the husband’s contributions after separation were considerably greater than those of the wife because he was the person who worked and maintained the assets without any real contribution by the wife.
I must say that in relation to the last submission I am unpersuaded because the reality is that the wife maintained other properties and cooperated in sale of properties which has assisted in the preservation of the overall portfolio of properties.
I accept that the accident had very serious consequences for the husband because it involved his hospitalisation and he still has what would appear to be recurring injuries and pain attributable to that accident. But in the context of an almost 30 year cohabitation period and the vast contributions made by each of the parties in so many ways which have brought about the success of their marriage and their success in being able to accumulate the wealth as reflected on the balance sheet, in my view, the significance of the initial contributions and the significance of the compensation award are not such that the Court would assess their contributions overall as having been other than equal.
On a contributions only basis each of the husband and the wife would enjoy one half of the available property and superannuation which would be $1 589 848 each.

Sub-section 75(2) matters

The husband is 56 years of age.
In his financial statement, the husband deposed to his total average weekly net income as being $454. I must say in my view this is somewhat theoretical. He derives his income from operating his business, S Pty Ltd, and managing the various items of real estate. Mr QR made it clear, as indicated above, that S Pty Ltd is virtually insolvent. The property portfolio runs at a loss.
The husband has not worked in paid employment, other than endeavouring to manage his business affairs, since he was retired on medical grounds from his education role in early 2012.
There are problems in terms of his health. It has to be remembered that the husband was involved in a very serious motor vehicle accident in 1986 and that he received a substantial compensation award for his injuries. He says that he continues to suffer from severe pain in his neck and back. He takes strong pain management medication and other medication each day.
He has been attending a psychiatrist, Dr ZD since August 2010. Dr ZD last saw the husband in June 2013. Dr ZD reported current diagnoses for the husband as follows. Bipolar I Disorder currently depressed narcotic dependent, obsessive compulsive traits, persistent symptoms of neck pain secondary to the motor vehicle accident in 1986 and severe financial stress in the context of these proceedings.
Dr ZD said that the husband had responded poorly to treatment. She thought that he would not be able to work unless his current mental illness was substantially improved. Dr ZD said that the fact that the husband has responded poorly to extensive past treatment, had a long period of chronic illness, made previous claims for worker’s compensation and has chronic neck pain all make it less likely that the husband would be able to return to paid employment. There was some challenge to Dr ZD’s reference to the worker’s compensation claim, counsel for the wife suggesting that the husband had made a dishonest claim. But Dr ZD made it clear that the fact that a claim had been made by the husband was what she thought was significant in this context and whether or not it was honest was not the point.
Dr ZE, consultant psychiatrist, was appointed as the single expert, to assess the husband and the wife. Dr ZE reported that the husband’s mood was agitated and anxious. He said the husband manifested no formal thought disorder, evidence of psychosis, suicidal ideation or features of elevated mood / hypomania. Dr ZE said that the husband was oriented to time, place and person and his thinking was clear.
Dr ZE also said that diagnosis for the husband was not clear cut. He said that his overall impression was that the husband has suffered from a mixed affective Bipolar II Disorder, possibly for several years, the last episode of which has been depressive in nature. Dr ZE said that this affective disorder was occurring within a long-standing background of narcissistic and entitled personality traits. Dr ZE also said that it was difficult to speculate about whether the husband’s psychological condition would deteriorate, improve or remain stable over the next 12-24 months given the fact that he had suffered a severe relapse of depressive symptoms in the recent past requiring electro-convulsive therapy treatment (and was apparently resistant or intolerant to most anti-depressant medications). Dr ZE said there was a reasonable likelihood of further relapse of depressive symptoms in the next 6-12 months.
Dr ZE also said that the husband’s depression has had a very detrimental effect on his ability to conduct his businesses, manage his real estate portfolio effectively, delegate decisions and attend work at the educational institution consistently. He also said that given the husband’s response to treatment, it was likely that his ability to generate income over the next 6-12 months (from September 2011 when Dr ZE assessed the husband) would also be compromised. Dr ZE also said that the husband was likely to require continuous use of anti-depressant medications and mood stabilisers for at least the next 6-12 months and might also possibly benefit from further courses of electro-convulsive therapy if his symptoms relapse.
I accept this evidence.
As indicated above, there are accounts with the Z Financial Institution. I propose to take the Z Financial Institution loans into account under s 75(2)(o) of the Act.
It is the case that the husband is likely to be able to avail himself of the benefit of various tax losses. In my view, there are uncertainties about what the extent of the benefit to the husband might be. I note these matters and consider that they might have the effect of off-setting to some extent the impact of CGT liability on the husband in the future.

On the other hand the wife is 55 years of age and in reasonable health. She has suffered from depression in the past and currently takes Zoloft medication each day.
The wife is living with her elderly father. She is his carer and she receives a carer’s allowance of $110 per fortnight for this. She has not worked other than in the business as referred to above and for 2½ days with a government agency since ceasing her employment with Company SS in 2000. She wishes to be able to continue caring for her elderly father and thinks that when the time comes for her to be free to undertake some employment, she would probably try to obtain work at a call centre or in retail sales.
Although I regard the wife as having a rather limited capacity for work which, as I say, would likely be at a call centre or in retail sales sometime in the future, I rate her capacity for earning income as being slightly ahead of that of the husband. Given his age and what, on the evidence, is a serious mental health issue, in my view he has a quite limited capacity to be able to earn income.
It was submitted on behalf of the wife that the husband has preserved his business S Pty Ltd, notwithstanding that it would appear either insolvent or close thereto, with a view to endeavouring to revitalise the business with the assistance of Ms YY once these proceedings have been completed. I must say while I cannot rule out that possibility, the business has not been profitable over the last few years and as Mr QR said, really only showed a profit in financial year 2011/2012 by reason of calling in cash from various business debtors.
The husband lives with Ms YY and they share their living expenses.
I have referred above to capital gains tax and to difficulties in relation to this.
I also note that the wife is to have the benefit of the Town N time share.
I indicated above that I would take into account the $4700 to $5000 received by the wife as an insurance payout on her lost ring and I do so.
The most significant s 75(2) matter in favour of the husband is what is in my view his poorer prospect for earning income and poor state of health compared with those factors in the case of the wife. This is offset to a slight extent by the fact that the husband has Ms YY to assist him.
A much more significant factor lies in what I regard must be a set-off in favour of the wife to take account of the fact that the husband has not explained in an acceptable way the circumstances of borrowing $645 000 to purchase and install building materials when he did not need anything like that amount.
As I have said above, my view is that the husband fabricated the ST tax invoice for the purpose of misleading the wife, her lawyers and this Court about the amount of money required by him to purchase and install the building materials. Clearly some of the $645 475 was used for the project. And some was used to repay the husband’s father for money advanced to the husband including that used to fund the purchase of the building materials.
It is frustrating however, for both the wife and this Court, that the husband, as the person intimately involved in all relevant financial transactions at the time, has failed to provide a full explanation about the movement of money over the relevant period.
It is a fundamental requirement in family law property proceedings that each of the parties makes a full and frank disclosure. In this regard the Full Court of this Court said in Black and Kelner (1992) FLC 92-287 as follows at page 79,133:
The Full Court in Oriolo and Oriolo (1985) FLC 91-653 referred with approval to the remarks of Smithers J in the case of In the Marriage of Briese (1986) FLC 91-713 and it is perhaps worth reiterating a portion of his Honour's statement at Fam LR 662; FLC 75,181 where he said, after referring to the decision of the House of Lords in Livesey v Jenkins [1985] All ER 106:
"I believe that the conclusion of the House of Lords in the case of Livesey v Jenkins is apposite, namely that in financial proceedings between spouses each party must make a full and frank disclosure of all material facts. In that case it was made clear that full and frank disclosure was required as a matter of principle in the light of the fact that it was the duty of the court, taking into account a number of designated criteria, to make a decision which basically involved the exercise of discretion. This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required. "In my view it is fundamental to the whole operation of the Family Law Act in financial cases that there is an obligation of the nature to which I have referred."
In the present case it is clear that the husband borrowed $645 475 from the Commonwealth Bank asserting that he would use this to fund the purchase and installation of building materials. He has conceded that he did not use anything like this amount for this purpose. And he has failed to explain in a satisfactory manner how, whatever the amount of the balance of these funds was, was expended. In these circumstances I draw the inference that either he has this money or spent it on his own purposes.
In these circumstances, in my view, it is appropriate for the Court to make an adjustment in favour of the wife to take account of this matter.
Weighing these relevant matters in order to arrive at a just and equitable order leads me to the position where in my view the balance swings in favour of a set-off towards the wife. But as I say this is lessened by those s 75(2) matters which favour the husband.
I accept that in the case of Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693 the Full Court of this Court indicated that trial judges need to consider the value of the adjustment in real terms. The Full Court said at FLC page 81,911 as follows:
There is, we think, at times a tendency to assess s 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s 75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.
In the end result, in my view, the appropriate set-off in favour of the wife is 2.5 per cent. This would be a differential of approximately $158 985.

Personal Property

The husband and the wife agreed that in order to divide their personal property fairly it would be appropriate for the Court to make a “pick a list” order.

Conclusion and Fourth Step

The property and superannuation available for division between the husband and the wife has a value of $3 179 697.
The wife is to have 52.5 per cent which is $1 669 341. I propose that the wife is to have the following:

$

1.         F Pty Limited

-         Property H, J Street, Town G

80,000

-         Property K, J Street, Town G

70,000

-         L Street, Town G

35,000

-         M Street, Town G

340,000

2.         Unit A, C Street, Suburb D

220,000

3.         50 per cent of the proceeds of sale of Unit E, C Street, Suburb D

110,000

4.         Nissan motor vehicle

1,000

5.         Jewellery

10,000

6.         Commonwealth Bank account

709

7.         RAMS account

30

8.         Paid legal fees (add back)

158,138

9.         Loan to Mr R Whinton

181,339

10.      Loan to Mr T Whinton

205,500

11.      50 per cent of money in Falvey Associates trust account

62,144

12.      Commonwealth Life superannuation

73,677

^{_____________}

$1,547,537

The wife will have the following liabilities:

$

1.         Wife’s Citibank Visa credit card

1,000

2.         Wife’s loan from Mr T Whinton

44,000

3.         Wife’s loan from her father, Mr LM

95,277

^{_____________}

$140,277

Accordingly, the wife would have net assets with a value of $1 407 260 ($1 547 537 - $140 277 = $1 407 260).
To achieve property and superannuation with a value of $1 669 341 the wife would need additional property and superannuation with a value of $262 081 ($1 669 341 - $1 407 260 = $262 081).
I propose to order that the husband pay such amount to the wife. In the event that the husband fails to pay such amount Property P, I Street, Town B will have to be sold and from the proceeds the wife will be paid $262 081 plus interest.
On the other hand the husband is to have 47.5 per cent of the property and superannuation. This is property and superannuation with a value of $1 510 356.
The husband is to have the following:

$

1.         Property Q, I Street, Town B

680,000

2.         Property P, I Street, Town B

500,000

3.         U Street, Town B

855,000

4.         Property V, W Street, Town B

310,000

5.         Property X, W Street, Town B

125,000

6.         Unit T, C Street, Suburb D

230,000

7.         50 per cent of Unit E, C Street, Suburb D

110,000

8.         Whinton Pty Limited

-          TT Street, Town B

560,000

-          Property KL, UU Street, Town B

700,000

-          VV Street, Town B

545,000

9.         O Property Pty Limited

-          Property JK, UU Street, Town B

830,000

10.      Y Street, Town B

480,000

11.      50 per cent of the money held in Falvey Associates trust account

62,144

12.      Telstra shares

9,796

13.      Henderson shares

1,452

14.      IAG shares

20,868

15.      Tower shares

905

16.      IOOF Holdens shares

1,514

17.      Paperlinx shares

190

18.      Husband’s motor vehicle

22,500

19.      S Pty Limited

59,000

20.      Commonwealth Bank account

1,626

21.      Bendigo Bank account

8,826

22.      Colonial endowment policy

4,338

23.      St George account

3,000

24.      Husband’s paid legal fees (add back)

192,903

25.      Superannuation

514,318

^{_____________}

$6,828,380

But the husband will also have the following liabilities:

$

1.         AMS Mortgage Services

657,700

2.         Morgan Brooks Direct Pty Limited

479,000

3.         Newcastle Permanent

737,900

4.         Commonwealth Bank hire purchase

340,500

5.         Commonwealth Bank commercial bill

1,750,000

6.         Loan from husband’s father

251,503

7.         IMB (for Y Street)

570,000

8.         Homeloans SA

256,590

9.         HSBC Mastercard credit card

12,750

^{_____________}

$5,055,943

The husband would therefore have net property and superannuation with a value of $1 772 437 ($6 828 380 - $5 055 943 = $1 772 437).
The husband is to pay the wife $262 081. This would leave him with property and superannuation with a value of $1 510 356 ($1 772 437 -$262 081 = $1 510 356).
So the wife would have property and superannuation with a value of $1 669 341. She would have ownership of the apartment at Unit A, C Street, Suburb D which she could rent out and derive income therefrom while she continues to care for her father. She also has the investment properties at Town G as well as the other property and her modest superannuation referred to above.
This will enable the wife to enjoy a reasonable standard of living.
On the other hand, the husband will have his residence at Property Q, I Street, Town B. He will also have most of the investment properties, his superannuation and the other property referred to above. He will need to undertake an exercise in refinancing the borrowings to free the wife from mortgage responsibility and to enable him funds to pay the wife in accordance with these orders. But I am satisfied that he will be able to do this, even if he has to sell one or more properties.
The husband will also be free to continue to operate his business although I have the reservations about this to which I have referred above.
In my view, the orders I propose might well affect the husband’s capacity to borrow money, which could affect his capacity to operate his business. But even if this was to occur, in my view, the husband will have sufficient means to be able to enjoy a reasonable standard of living.
In all the circumstances, in my view, the orders I propose will be just and equitable.

I certify that the preceding two hundred and ninety-five (295) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Johnston delivered on 3 March 2014.

Associate:

Date: 3 March 2014

[2014] FamCA 102

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Jurisdiction

Procedural Fairness

Statutory Construction

$
1. Property Q, I Street, Town B	680,000
2. Property P, I Street, Town B	500,000
3. U Street, Town B	855,000
4. Property V, W Street, Town B	310,000
5. Property X, W Street, Town B	125,000
6. Unit E, C Street, Suburb D	220,000
7. Unit A, C Street, Suburb D	220,000
8. Unit T, C Street, Suburb D	230,000
9. TT Street, Town B	560,000
10. Property KL, UU Street, Town B	700,000
11. VV Street, Town B	545,000
12. Property JK, UU Street, Town B	830,000
13. Property H, J Street, Town G	80,000
14. Property K, J Street, Town G	70,000
15. L Street, Town G	35,000
16. M Street, Town G	340,000
17. Wife’s Nissan motor vehicle	1,000
18. Wife’s jewellery	10,000
19. Wife’s Commonwealth Bank account	709
20. Wife’s RAMS account	30
21. Wife’s paid legal fees (add back)	158,138
22. Husband’s IAG shares	20,868
23. Husband’s Tower shares	905
24. Husband’s IOOF Haldens shares	1,514
25. Husband’s Paperlinx shares	190
26. Husband’s motor vehicle	22,500
27. Husband’s interest in S Pty Limited	59,000
28. Husband’s Commonwealth Bank account	1,626
29. Husband’s Bendigo Bank account	8,826
30. Husband’s Colonial endowment policy	4,338
31. Husband’s St George account	3,000
32. Husband’s property at Y Street, Town B	480,000
33. Husband’s paid legal (add back)	192,903
34. Loan to Mr T Whinton	205,500
35. Loan to Mr R Whinton	181,339
36. Telstra shares	9,796
37. Henderson shares	1,452
38. Money held in Falvey Associates trust account	124,288
^{_____________}
$7,787,922

$
1. Joint AMS Mortgage Services	657,700
2. Joint Morgan Brooks Direct Pty Limited	479,000
3. Joint Newcastle Permanent	737,900
4. Husband’s Commonwealth Bank hire purchase	340,500
5. Husband’s Commonwealth Bank commercial bill	1,750,000
6. Husband’s father’s loan	251,503
7. Husband’s IMB (for Y Street)	570,000
8. Husband’s Homeloans SA	256,590
9. Husband’s HSBC Mastercard credit card	12,750
10. Wife’s Citibank Visa credit card	1,000
11. Wife’s loan from Mr T Whinton	44,000
12. Wife’s loan from her father, Mr LM	95,277
^{_____________}
$5,196,220

$
1. Wife’s Commonwealth Life	73,677
2. Husband’s First State Super	500,239
3. Husband’s AMP	3,853
4. Husband’s CBA	10,226
^{_____________}
$587,995

$
Total Assets and Superannuation	8,375,917
Minus Liabilities	5,196,220
^{_____________}
$3,179,697

$
1. F Pty Limited
- Property H, J Street, Town G	80,000
- Property K, J Street, Town G	70,000
- L Street, Town G	35,000
- M Street, Town G	340,000
2. Unit A, C Street, Suburb D	220,000
3. 50 per cent of the proceeds of sale of Unit E, C Street, Suburb D	110,000
4. Nissan motor vehicle	1,000
5. Jewellery	10,000
6. Commonwealth Bank account	709
7. RAMS account	30
8. Paid legal fees (add back)	158,138
9. Loan to Mr R Whinton	181,339
10. Loan to Mr T Whinton	205,500
11. 50 per cent of money in Falvey Associates trust account	62,144
12. Commonwealth Life superannuation	73,677
^{_____________}
$1,547,537

$
1. Wife’s Citibank Visa credit card	1,000
2. Wife’s loan from Mr T Whinton	44,000
3. Wife’s loan from her father, Mr LM	95,277
^{_____________}
$140,277

$
1. AMS Mortgage Services	657,700
2. Morgan Brooks Direct Pty Limited	479,000
3. Newcastle Permanent	737,900
4. Commonwealth Bank hire purchase	340,500
5. Commonwealth Bank commercial bill	1,750,000
6. Loan from husband’s father	251,503
7. IMB (for Y Street)	570,000
8. Homeloans SA	256,590
9. HSBC Mastercard credit card	12,750
^{_____________}
$5,055,943