[2005] FamCA 996
FAMILY LAW ACT 1975
IN THE FULL COURT OF
THE FAMILY COURT OF AUSTRALIA
AT BRISBANE
Appeal No. NA 77 of 2004
File No. BRF 3336 of 1997
IN THE MATTER OF:
Z
Appellant/Husband
- and -
Z
Respondent/Wife
REASONS FOR JUDGMENT
BEFORE:Finn, Coleman, and Boland JJ
HEARD:26 May 2005
JUDGMENT: 24 October 2005
APPEARANCES:
Mr Lethbridge SC instructed by Primrose Couper Cronin Rudkin Lawyers, 1st Floor, 35-39 Scarborough Street, Southport QLD 4215 appeared on behalf of the Appellant Husband.
Mr Kirk SC instructed by Lehns Solicitors, 29 Commerce Drive, Robina QLD 4226 appeared on behalf of the Respondent Wife.
APPEAL SUMMARY
MATTER:Z and Z
APPEAL NUMBER: NA 77 of 2004 (BRF 3336 of 1997)
CORAM:Finn, Coleman and Boland JJ
DATE OF HEARING: 26 May 2005
DATE OF JUDGMENT: 24 October 2005
CATCHWORDS:
APPEAL – property – asset pool of parties – post separation liabilities – whether trial Judge erred in disregarding husband’s alleged liability to his former de facto partner – whether the husband’s half interest in a unit should have been included in asset pool – whether relationship of father-in-law and daughter-in-law gave rise to a presumption of advancement in favour of the wife – whether property should have been divided in accordance with terms of settlement signed one year after separation but not finalised by consent orders – assessment of contribution in case of substantial lapse of time between separation and date of hearing particularly when informal agreement between parties – asset by asset approach may be preferable – whether trial Judge entitled to place weight on husband’s non-disclosure at that time – whether trial Judge’s adjustment of 30 per cent for the husband’s post-separation contributions was inadequate – whether trial Judge erred in making a 10 per cent adjustment in favour of the wife for s 75(2) factors – consideration of specific s 75(2) factors under s 79(4)(e) – whether trial Judge should have taken ss 75(2)(j) and (k) into account as relevant factors – avoiding the possibility of “double counting” – whether order giving husband a period of three months to make a cash payment of almost $500,000 to the wife was just and equitable due to husband’s composition of assets, his ability to realise assets and the associated costs including capital gains tax
Biltoft and Biltoft (1995) FLC 92-614
Af Petersens and Af Petersens (1981) FLC 91-095
Townsend and Townsend (1995) FLC 92-569
Prince and Prince (1984) FLC 91-501
Chorn and Hopkins (2004) FLC 93-204
Nelson v Nelson (1995) 194 CLR 538
Calverly and Green (1984) 155 CLR 242
Gronow v Gronow (1979) 144 CLR 513
House v The King (1936) 55 CLR 499
Wirth v Wirth (1956) 98 CLR 228
Black and Kellner (1992) FLC 92-287
Weir and Weir (1993) FLC 92-338
Kannis and Kannis (2003) FLC 93-135
Norbis v Norbis (1986) 161 CLR 513
G and G (1984) FLC 91-582 at 79,697
DJM v JLM (1998) FLC 92-816
B and B (No 2) (2000) FLC 93-031
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CaseChat Overview and Summary
The central legal issue was whether the court, in exercising its discretion under section 79 of the *Family Law Act 1975* (Cth), should take into account a liability incurred by one party after separation, particularly where that liability was alleged to have been unreasonably incurred and with disregard for the other party's potential entitlement. The court also considered the extent to which it must account for the rights of third-party creditors when making property division orders.
The court reasoned that it has the discretion not to take into account transactions and liabilities incurred after separation, and that property disbursed post-separation can be notionally added back to the pool if the other party should not bear the liability. This approach, endorsed in cases such as *Af Petersens and Af Petersens* and *Biltoft and Biltoft*, allows for the disregard or discounting of liabilities that are vague, uncertain, unlikely to be enforced, or unreasonably incurred, especially where a spouse has acted in deliberate or reckless disregard of the other party's potential entitlement. The court found that the husband's conduct in consenting to the liability owed to Ms [B] was unreasonable, given his knowledge of the wife's application and his disregard for her entitlement. Furthermore, the court was not satisfied that the husband had discharged his onus to establish the alleged liability, noting significant flaws in the evidence and a failure to resolve conflicts regarding cohabitation.
Consequently, the court ordered that the husband's alleged liability to Ms [B] would not be deducted from the asset pool in these proceedings.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Having made these (and other) findings, his Honour went on to reach the following conclusions concerning this claim by the husband (emphasis added):“145.It is at the discretion of the Court not to take into account transactions, and therefore liabilities incurred, after separation. Further, property to which both parties have an interest, that is disbursed post-separation, can be added back to the property pool on a notional basis where it is determined that the other party should not bear the liability.146.In Af Petersens and Af Petersens (1981) FLC 91-095 Nygh J at 76,669 held that in exercising its jurisdiction under section 79, the Court would normally distribute between the parties the net value of their assets after deduction of all debts with some exceptions. ‘Normally the Court will distribute amongst the parties the net value of their assets after deduction of all debts. But this is not invariably the case: the Court will not normally take account of debts incurred after separation and on some occasions has ignored debts, although incurred during the marriage, for which it felt one of the parties should bear exclusive responsibility: Antmann and Antmann (1980) FLC 90-908. Needless to say, a debt due does not diminish the property of the parties until it is paid or execution is levied. Nor, as has been pointed out earlier, is there anything in the decision of the High Court in Ascot Investments Pty. Ltd. v. Harper and Harper to suggest that this Court cannot make an order dividing the assets of the parties because such a division might hamper a third party in his or her chances of recovery of a debt.’147.This approach was endorsed in Biltoft and Biltoft (1995) FLC 92-614 where the Full Court held that it was appropriate in certain cases not to take into account or to discount the value of an unsecured liability in certain circumstances. It was held that such liabilities could include but are not limited to a liability which is vague or uncertain, is unlikely to be enforced, or that was unreasonably incurred. It is further concluded at 82,125; ‘In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in a deliberate or reckless disregard of the other party’s potential entitlement under s. 79.’148.Biltoft is also authority for the position that there is no rule of priority as between a creditor claimant and a spouse and as such there is no requirement that the claim by a third party must be considered and dealt with prior to the Court making an order under section 79. The Court was however careful in that case, and subsequent cases, to not ignore the rights of the third party, taking them thoroughly into account and balancing them against the rights of the spouse before making any determination.149.I have undertaken the same consideration in this case. I find that in the circumstances outlined in detail in these Reasons, that the Husband’s conduct in consenting to the total of the liability owed to Ms [B] was unreasonable. He entered into the proposed Consent Orders with Ms [B], his former defacto, in the knowledge of the application before this Court by his former Wife, and with a complete disregard for the Wife’s reasonable entitlement arising from property settlement.150.I am unpersuaded by the argument raised by the Husband that he had in his mind that the Wife had received the sum of her entitlement from the settlement in their informal property agreement, made some years earlier. His own actions call this assertion into serious doubt in that he saw fit to include his interest in the matrimonial home, which under the agreement would have seen him transfer his interest entirely to the Wife, in the pool of property to be divided with respect to Ms [B]’s claim.151.Furthermore, in addition to the above, I am satisfied, for the reasons set out in some considerable detail, that the evidence adduced by the Husband in respect of this issue, is significantly flawed. Not only are there the serious omissions to which I have referred, but no attempt was even made to resolve the major conflict between the Husband and Ms [B] as to when, if ever, they actually cohabited. That conflict may have been resolved by arranging for the Husband’s son Glen to give evidence, who, on the Husband’s evidence, resided with him from early 1995 until February 2003, save for one year when he resided in Toowoomba and returned to the Father’s residence each weekend. That same paucity of evidence meant that it was simply not possible to make any assessment as to a likely reasonable award to be made in favour of Ms [B]. Having given the issue lengthy consideration, I am not satisfied that the Husband has discharged his onus, on the balance of probabilities, to establish any alleged liability to Ms [B].152.For these Reasons, I do not propose to deduct the Husband’s alleged liability to Ms [B] from the asset pool in these proceedings.”