Parenting order – Protection of children from harm – Parents’ doubtful capacity to provide for their needs

In Beale [2011] FMCAfam 305 (2 May 2011) Altobelli FM made a comprehensive parenting order that sought to minimise the risk of harm to two young children where the court held real concerns about the capacity of both parents to provide for their needs, which included provision for time to be spent with the children at a contact centre; the children’s medical and other treatment; their enrolment at a day care centre; and therapy with a child and family psychologist.

De facto husband entered into a personal insolvency agreement to frustrate the effect of a partial property settlement order – Family Court of WA considers interaction between Bankruptcy Act 1966 (Cth) and Family Court Act 1997 (WA) – Order for controlling trustees to release control of property under s 208 of the Bankruptcy Act  

In Beaman & Bond [2014] FCWA 21 (4 April 2014) Crisford J considered an application by a de facto wife under s 208 of the Bankruptcy Act 1966 (Cth) “to obtain the release of property owned by [her former de facto partner] from the controlling trustees of his estate” (para 1), arguing that his entering into a personal insolvency agreement (“PIA”) appointing trustees to control such property was “an abuse of Part X” of the Bankruptcy Act and “was designed to frustrate existing Family Court proceedings for property settlement” (para 2).

The applicant had brought an application in March 2010 seeking an order setting aside a financial agreement between the parties and orders for property adjustment and maintenance (para 19). In February 2013 the Court ordered that the respondent pay $100,000 to the applicant “for … forensic investigation fees … and future legal costs and disbursements” of the applicant (para 24). After that order was made the respondent was referred to a solvency expert by his solicitor, who said “that [the respondent] needed to enter into a Part X arrangement because of ‘Issues with Family Court settlement’” (para 26). The respondent then “signed an authority under s 188 of the [Bankruptcy Act] in favour of” the controlling trustees who were second respondents to the proceedings (para 28).

The applicant argued that the respondent was solvent such that he was not a debtor for the purpose of s 188 of the Bankruptcy Act, or alternatively, that the authority signed by the respondent “in favour of the controlling trustees was made for a purpose not contemplated by s 188” (para 13).

Crisford J said (at para 5):

“ … As a former de facto partner living in the State of Western Australia when issues of bankruptcy and family law exist together, unlike in every other Australian state, they do not exist harmoniously. The Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) and the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth) … were enacted to overcome the inability of a non-bankrupt spouse to obtain property settlement orders pursuant to s 79 of the FLA in respect of the property of a spouse subject to bankruptcy legislation.”

Crisford J continued at para 9:

“In Western Australia, unlike in other states, de facto property disputes are not subject to the FLA because the West Australian Parliament has not referred the requisite powers to the Commonwealth. Part 5A of the Family Court Act 1997 (WA) … governs such disputes.”

Crisford J was not satisfied that the respondent was solvent (such that the applicant’s argument that s 188 did not apply to him was unsuccessful), however Crisford J then said (from para 98):

“…       Section 208 of the [Bankruptcy Act] provides for a court to terminate control of a debtor’s property in the following terms:

‘The Court may make an order releasing the debtor’s property from control under this Division if:

(a)        an interested person applies to the Court for such an order; and

(b)        the Court is satisfied that special circumstances justify it making the order.’

[99]     [Counsel for the respondent] concedes that [the applicant] is an interested person in accordance with s 208(a) of the [Bankruptcy Act, but] she maintains the Court could not be satisfied there are special circumstances justifying any exercise of discretion in making the order sought.

( … )

[102]    Whilst the term special circumstances can and often does include an abuse of process there is nothing to suggest that an abuse of process is pivotal to a finding of special circumstances. Special circumstances are simply those which are ‘out of the ordinary course’.

( … )

[104]    This is a case in which I consider that special circumstances exist and that the property of [the respondent] should be released from the control of the trustees. There are a number of different factors, which when taken together, can be properly described as ‘out of the ordinary course’.

( … )

[106]    The nature of [the respondent’s] financial circumstances is presently the central issue in contention, both in the FCA and BA proceedings. Rather than having this central issue dealt with and determined in one court hearing, there will be two disparate manners of addressing it. If the PIA proceeds in isolation, it will disable or utterly ruin [the applicant’s] claim in the Family Court. There is a decided risk of an inconsistent result in the two courts relating to the same issue. Proceeding with the PIA will have an irreversible effect on the FCA proceedings.

( … )

[114]    It is difficult to see [the respondent’s] actions in taking steps to enter into the authority as a genuine response to a recently realised insolvency. However, whether the response was genuine or not, the actual effect and impact of the action he took allows him some form of reprieve from the Family Court proceedings.

( … )

[128]    The practical effect of the BA procedures has been to gain, what can only be termed, as some form of collateral advantage for [the respondent]. This is not a purpose contemplated by the BA and, using the words of earlier authority, is simply extraneous to that legislation. The issue of payment by [the respondent] of the $100,000 previously ordered is something that can be dealt with by the Family Court. ( … )

( … )

[130]    The considerable investment in the Family Court proceedings in terms of time, effort and investigation will effectively be frustrated if the PIA is executed and given effect. I find that the removal of [the respondent’s] property from the control of the trustees is unlikely to cause unfair prejudice to either the parties to the de facto marriage or to the creditors. The issues will still be resolved, but in one set of proceedings.”

Orders were made releasing the property of the de facto husband from the control of the trustees.

Child support – Father’s inheritance treated as financial resource in support of departure order – Capital assets – Order also made for lump sum child support 

In Beard & Fisher [2013] FCCA 755 (12 July 2013) Judge Small considered competing child support applications by the parents of a 9 year old. The mother applied for a departure order in respect of all assessments until the child was 18 and an order that such support be paid as a lump sum. The mother’s application for a departure order was such that the father would be assessed at $4,500 per year, which was described by the Court as a “modest increase in the sum set for the previous periods by the SSAT and the CSA” (para 61).

The father’s response sought leave to appeal a previous decision of the SSAT out of time (that decision being that the father’s child support income be $62,000 in respect of a child support period prior to 30 June 2011), and a review of a subsequent child support decision (that the father’s child support income be $64,000 after 30 June 2011).

The Court noted the legislative order in which these matters would ordinarily need to be determined saying (at para 10):

“The parties have agreed to all … applications being heard together despite the provisions of s 123(3) of the Act which require me to determine any pending applications in relation to assessments more than eighteen months old before I can determine a lump sum application … ”

Referring to Lightfoot & Hampson (1996) FLC 92-663 the Court said at para 11:

“ … having the consent of the parties, I consider that I can determine the lump sum application before determining the retrospective application and will do so.”

In 2008 the father’s “mother died, and in March 2009, he received assets in the form of cash and shares worth in excess of $850,000 by way of inheritance …”. The Court said that from “the date of separation until the date of trial [the father] paid child support … on an intermittent and ad hoc basis and was often in arrears with those payments” (para 15). The mother argued under s 117(2)(c) of the Child Support (Assessment) Act 1989 (Cth), that “a departure order ought be made because an administrative assessment based on the respondent’s declared income alone would result in an unjust and inequitable determination of the level of financial support provided by [the father] for” the child (para 28).

The Court said at paras 32-38:

“On his evidence, [the father] retained at the time of trial some $640,000 of the inheritance received from his mother. In cross-examination he conceded that in addition to the $30,000 of interest income per year, he actually spent some $200,000 of the capital on what might be termed discretionary spending since he came into those monies. On average, that expenditure would amount to roughly $50,000 per year since he received his inheritance in March 2009.

His evidence was that he has spent the extra $50,000 per year on holidays, on home renovations and on other discretionary expenditure.

His access to funds in those years can therefore be said to have been closer to $80,000 per year than to $30,000.

The remaining capital of $640,000 is clearly a financial resource in his hands and constitutes a special circumstance in this case. It is therefore able to be considered when the court is deciding whether to make a departure order under s 117(2)(c)(ia). I note the recent decision of Judge Baker in Archer & Archer [2013] FCCA 226, where Her Honour upheld a decision of the SSAT to consider an inheritance of $161,212.00 as creating a special circumstance.

[The father] referred me to the case of Cazet & Faulkner [2011] FMCAfam 117 in support of his argument that he should not be ordered to draw down on his capital for the purposes of paying child support.

In that case … Halligan FM … found that he did not need to decide whether capital sums are to be considered income for the purposes of paying child support. However he did make some ‘observations’ about that issue, and, at paragraph 35, he said:

‘It may be that the level of capital assets compared to actual or imputed income from them, together with any other income, is such that the calculation of a proper level of child support that ensure “that children have their proper needs met from reasonable and adequate shares in the income, earning capacity, property and financial resources of both of their parents” requires that the capital directly influence the quantification of the amount of child support.’

This is exactly such a case. [The father] might only have ‘income’ of $30,000 per year, but since he received his inheritance he has had access to that income, plus to capital funds of some $50,000 per year which are a financial resource capable of being taken into account in an application for a departure order.”

The Court continued (at para 43) saying the father had “not bought a house which he would have to encumber to pay the child support amount asked of him. He has current cash and shares worth about $640,000 from which to make any ordered payments. The decision in Christian & Donald [(2004) FamCA 1171] is therefore distinguished on its facts”.

The Court found the s 117(2)(c)(ia) departure ground was established, and after considering the father’s “duty to maintain” the child, the child’s needs, age, the father’s income earning capacity, financial resources, the hardship to the mother in the event no departure order was made, the lack of hardship that the “modest increase” would cause the father the Court also found it just and equitable to make the departure order sought by the mother. The Court then considered those same issues and said that the mother “has had to take persistent action through the CSA and this court in order to force … [the father] … to satisfy his obligations under the Act … it is otherwise proper having regard to s 117(5) of the Act for me to exercise my discretion” and order the lump sum sought by the mother.

The father’s response was dismissed, the Court not being satisfied of the threshold matters in s 112 (as to leave to appeal an SSAT decision out of time) and while the Court accepted that there were grounds to depart from CSA’s earlier decision (the Court having previously accepted that in the special circumstances of the case the father’s income, property and financial resources were greater than he had declared to the CSA), the Court held that it was not just and equitable nor proper to make the departure order sought by the father (see from para 133). 

Relocation with 6 and 8 year olds from Sydney to Melbourne refused  

In Beaufort [2009] FMCAfam 191 (30 June 2009) Walker FM said no to a move with 6 and 8 year old children from Sydney to Melbourne. 

Wife was two days late to refinance under property order – Husband’s appeal of enforcement order granted to wife dismissed – Court has power to vary its order via machinery or consequential orders – Appeal futile due to husband’s acquiescence in order being carried out

In Bebbington [2017] FamCAFC 31 (8 March 2017) Kent J (sitting in the appellate jurisdiction of the Family Court of Australia) heard the husband’s appeal in a case where consent orders made in December 2015 required him to transfer his interest in a property to the wife within 45 days and the wife contemporaneously to refinance the mortgage secured over the property into her sole name and pay the husband $33,000 ([4]). The orders also provided that “should the Applicant fail to refinance the mortgage” the property would be sold. While a transfer was signed and the wife obtained refinance approval, she was unable to implement settlement until two days after the 45 day time limit. The husband declined to facilitate settlement, arguing that the property should be sold as settlement had not occurred within 45 days.

The wife filed an enforcement application and Judge Purdon-Sully made an order in September 2016 that “authorised and required the transfer of the husband’s interest in the … property to the wife to proceed” and that the refinance and payment occur within 28 days ([10]). These steps were then implemented (the transfer and refinance occurred and the husband received payment) but the husband appealed that order, arguing that the Court had “varied the substance” of the consent orders ([11]).

Kent J said (from [14]):

“( … ) [N]one of the orders made on 29 September 2016 nor, for that matter, the orders made on 2 December 2015, remained executory [yet to be carried out] … [T]he husband’s liability … under the former mortgage was fully discharged; the husband’s solicitors collected on the husband’s account a bank cheque in the sum of $33,000; and the wife extinguished the husband’s liability by refinancing the debt into her sole name, and financed the payment made … The transfer of the husband’s interest to the wife has been lodged for registration. The funds paid to the husband’s lawyers have not been returned.

( … )

[18]     On the scenario that the … orders made on 29 September 2016 are ‘set aside’ the husband would confront what, in my judgment, are insurmountable hurdles to any attempt to now enforce the consent orders made on 2 December 2015.

( … )

[23]     In Ramsey and Ramsey (No. 2) (1983) FLC 91-323 Nygh J emphasised that the power of enforcement under s 105 was discretionary and held that a refusal to enforce earlier property orders made in the context of the parties’ subsequent reconciliation could be justified on the basis that the unconditional transfer of the legal title to the wife provided for in those orders, no longer represented her entitlement in equity. This was so because the subsequent conduct of the parties was seen as conferring upon the husband a beneficial interest in the subject property.

[24]     In Kerr and Kerr (1983) FLC 91-329 the Court had ordered in March 1977 that the parties join in the sale of the jointly-owned matrimonial home. The proceeds of the sale were to be divided equally between the parties. Later in 1977, the husband proposed to the wife that he buy her interest in the home for half the expected net proceeds of the sale. This occurred. In 1981 the wife applied to the Court to enforce the original order. It was held that the wife was estopped from asserting that the original order was still operative and enforceable because the basis upon which the parties had entered into the original order was no longer operative. The husband had acted to his disadvantage in paying the wife. Nygh J (at 78,250) recorded a finding that the Court had a discretion as to enforcement and that ‘even if she [the wife] were not so estopped it would be, in the circumstances of the case by reason of her conduct and her delay in seeking such enforcement, inequitable to exercise my discretion to enforce the orders’.

[25]     There are obviously distinctions between those cases and this, but importantly in this case there is no executory order to be carried into effect. The husband, not having obtained a stay of the subject orders, acquiesced in them being carried into effect.

[26]     In short, there is no executory order capable of enforcement if the subject orders were to be set aside.

( … )

[33]     The consent orders, as with any property orders pursuant to s 79 of the Act, crystallised the parties’ respective rights to property. There are cases where the proper interpretation of property orders, either by reason of their express terms or by necessary inference, yields the conclusion that time for the doing of an act as ordered or for the performance of an obligation as ordered is of the essence, in the sense of time being inextricably bound up with an underlying substantive right. Moreover, the effluxion of time after due performance of an act or obligation may be such that the point is reached that underlying substantive rights acquired under the order have materially changed.

[34]     However, neither is so in this case. The orders did not prescribe that time was of the essence for the acts to be performed nor can the orders as a whole be sensibly interpreted as producing that result. In short, the orders cannot sensibly be interpreted to mean that if the 45 day period was not strictly adhered to, but performance by the 47th day was achievable (as was the case) the underlying substantive rights conferred by the orders would be, as a result of such delay, materially different.

[35]     The primary judge found, at [25], [that] ‘[w]hilst having made the consent orders under s 79 … the Court is functus officio with no power to vary the substance of the orders it does have the power to make machinery orders to give effect to the orders’. No issue is taken with this statement of principle.

( … )

[37]     It is now well settled that the power of the Court to alter property interests is ‘a once and for all proposition’ (Slapp and Slapp (1989) FLC 92-022 at 77,360 (‘Slapp’)) and [that] no power lies to alter the substantive provisions of a s 79 property settlement order (see Taylor v Taylor [1979] HCA 38 … Despite this, the Court has power to vary the ‘consequential’ provisions of an order made pursuant to s 79 of the Act (see Ravasini and Ravasini (1983) FLC 91-312 … )

( … )

[39]     It is argued by counsel for the husband that the orders ultimately made by her Honour vary the substance of the s 79 orders and ‘go further than just giving effect to the original orders’.

( … )

[42]     I do not accept the submissions on behalf of the husband that the orders made by her Honour varied the substantive rights of the parties. Particularly, I note the terms of Order 35 of the consent orders, which provided:

‘Should the Applicant fail to refinance the mortgage secured against the [Northern New South Wales] property, the [Northern New South Wales] Property [sic] is to be sold in accordance with Orders 36 to 39 (inclusive) below.’

[43]     This position is clearly distinguishable from the case of Slapp, in which the orders provided for the appellant to be appointed as trustee for sale in default of the payment of monies. However, in the instant case, no substantive rights are conferred on the husband in the event the property failed to be transferred within the 45 days provided by the orders. The substantive right was conferred on the husband in the event the wife failed to refinance the mortgage secured against that property. As such, extending the time for the transfer to be effected did not alter the right of the husband to seek the sale of the property if the wife was unable to refinance the mortgage.

[44]     In my judgment it is tolerably clear that the substantive alteration of property interests pursuant to s 79 of the Act effected by the consent orders is as earlier identified, that is, the transfer of the husband’s interest to the wife in the … property; the extinguishment of the husband’s liability to the existing mortgagee and assumption of that liability by the wife via refinancing; and the payment of the sum of $33,000 by the wife to the husband. It is likewise tolerably clear, in my judgment, that the mechanisms as to timing and steps were purely machinery or consequential provisions to effect the substantive alterations of property interests being carried out.

[45]     The orders made by the primary judge did not have the legal effect of finally determining substantive rights. The orders made were consequential or machinery in nature and are properly characterised as interlocutory in terms of their legal effect. Leave to appeal is thus required.

( … )

[49]     Not only did the husband fail to demonstrate how any purported prospect of ‘enforcement’ of the original orders was other than illusory, he did not demonstrate how any injustice would be occasioned to him if he did not have the opportunity to pursue that course. Even on the hypothetical enforcement advanced by the husband, resulting in the orders for sale of the … property taking effect, it was not demonstrated that this would be of any benefit to the husband. …”

The husband’s application for leave to appeal was dismissed, the wife’s application for costs directed to proceed by way of written submissions.

SSAT appeal – Calculation of appellant’s income by adding back various company expenses without giving him the opportunity to explain them held to be in error  

In Bedell & Kastens & Anor (SSAT Appeal) [2010] FMCAfam 1250 (15 November 2010) Sexton FM set aside the Social Security Appeals Tribunal’s decision due to its miscalculation of income, concluding at para 52:

“In this case, I am satisfied the Appellant would have known that his financial position was under the spotlight, and that his role in relation to the company would be closely examined. However, I am not satisfied that he (or his legal representative) should have known it was necessary to provide verification for each entry in the company accounts, without a request from the Tribunal. I find the Tribunal was in error in calculating the Appellant’s income by adding back various company expenses, without at least giving the Appellant the opportunity to provide documentary or other evidence he may have been in a position to access, to explain those expenses.”

Unvested share units in employee share fund – Not “property” but a “financial resource”

In Beklar [2013] FamCA 327 (10 May 2013) the categorisation of unvested share units held by the husband was determined by Ryan J who said at paras 114-119:

“There is an issue about whether the husband’s unvested A Ltd Employee Share Fund unvested share units are an asset or financial resource. They were valued by an accountant, Mr L, on 6 December 2012 at $47,599 and however they are characterised their value at this amount is agreed. In essence, the valuation does no more than ascribe to the 4,249 unvested A Ltd shares the share sale price at that date.

As a senior executive, if the husband receives a bonus exceeding $50,000, he is required to invest a portion in these unvested share units. This is designed to achieve staff loyalty and align staff to the A Ltd share price performance. The scheme operates so that where a bonus exceeds $50,000, one quarter of the amount which exceeds that amount is retained and invested in unvested share units. Thus, in 2012, out of the husband’s bonus, $37,500 was retained. The retained amount is released to the employee provided the employee continues to be employed by A Ltd. When the share units vest they do so as A Ltd ordinary shares. Release or vesting of the share units occurs two, three and four years after the date of retention. Each release is for one third of the amount retained.

It follows that from the amount retained from his 2012 profit share, the husband will receive $12,500 (before tax) in 2014, 2015 and 2016. Until the share units vest, he is entitled to receive dividends on the underlying shares but cannot sell, deal or raise money until the units vest as ordinary shares.

Annexure ‘DB8’ to the husband’s affidavit sheds further light on the nature of these share units. The statement explains ‘… past share prices and exchange rates are not an indication of future performance or value. The value of your Awards at the time they vest or at the time you receive or sell shares through the [A Ltd Employee Share Fund] may be higher or lower than this value’. In other words, because the retained amount is invested in shares, in the event there is an improvement in the share price, the value of the husband’s share units when they vest will be greater than they are at present. If they fall they will be worth less. In the event his employment is terminated his entitlement to any unvested share unit is forfeited.

The non-exhaustive definition of property is found in s 4 of the Act. Reference is there made to ‘property’ as ‘… to which … that party is … entitled’. In Kennon v Spry (2008) 238 CLR 366 the High Court referred with approval to the wide meaning given to the word ‘property’ in the context of the Act. Reference was made to In the Marriage of Duff (1977) 15 ALR 476 at 484, where, in turn, the Full Court of this Court adopted remarks by Langdale MR in Jones v Skinner (1835) 5 LJ Ch 87 at 90 who said ‘property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have’. The words ‘financial resource’ are not defined in the Act but, as is explained in Kelly and Kelly (No.2) (1981) FLC 91-108 at 76,802, must mean something ‘not covered by the terms “income and property”, for example, contingent interests or benefits which a party actually received or was likely to receive, whether legally entitled thereto or not’.

Two factors are particularly persuasive of the share units being categorised as the husband’s financial resource rather than property. First, he cannot sell, assign or deal with them until they vest. Second, until the shares vest he is entitled to receive dividends on the underlying shares and nothing more. Notwithstanding the husband’s evidence that his position with his employer is insecure, he did not establish his job is in jeopardy or that he is unlikely to be employed by A Ltd when the share units vest. Thus, although one cannot be certain that the husband will definitely be employed when each of the three tranches of shares are due to vest, the probability is that he will and accordingly this factor is a less significant factor than the two already mentioned. However, it too points to the share units being a financial resource rather than property.” 

Subpoena – Implied waiver of legal professional privilege    

In Bell [2009] FMCAfam 595 (24 April 2009) where a wife applied for a financial agreement to be set aside, her lawyers were held to be required to disclose all written communications between them sought by a subpoena issued by the husband.  

Burnett FM held that the wife’s lawyers had impliedly waived privilege by having written to the husband to discourage him from contesting the matter by saying that detailed instructions had been obtained from the wife as a result of which she had been advised that the agreement should be set aside on certain grounds (which were then set out in their letter).

Wife successfully appeals a roughly equal property division on the ground that the net effect of the order was not such as to divide debt associated with a failed business venture equally

In Bellamy & Gladwell (No. 2) [2017] FamCAFC 238 (17 November
2017) the Full Court (Murphy, Kent & Watts JJ) heard the wife’s appeal against Judge Brewster’s property order made in relation to a 9 year childless
marriage. Initial contributions were made by the wife (“Property B”) which still existed at trial and by the husband (“Property C” and “Property E”)
which were rented during the marriage until Property C was sold. Property C was sold after the husband bought a licence for a business (“ABC”) which
subsequently failed, with all but $2,000 of the sale proceeds of Property C being used to pay off debts. As the parties had borrowed against Property
B to fund the failed business the wife unsuccessfully sought a notional add-back at trial, the court at first instance finding that it would not ascribe
responsibility for the loss.

On appeal, the Full Court said (from [26]):

“On 4 July 2016 the trial judge made the following orders:

(1) That the wife be entitled to retain the property owned by her at [Property B] and is to be responsible for the [Bank D] mortgage on that property.
In this respect she is to indemnify the husband in relation to any liability with respect to that mortgage.

(2) That the husband be entitled to retain the property owned by him at [Property E] and is to be responsible for the [Bank F] mortgage on that property.
In this respect he is to indemnify the wife in relation to any liability with respect to that mortgage.

(3) That the parties take all steps necessary to divide any monies held in trust equally between them.

(4) That as against the other each party be entitled to the chattels in his or her possession and the choses in action in his or her name.

( … )

[28] The trial judge’s conclusions that these orders will leave the parties with roughly property of equal value was not challenged. The effect of the
trial judge’s orders is in fact to give the wife slightly more than half of the net assets

( … )

( … )

[36] The trial judge at [3] of his Reasons says:

‘The gravamen of the dispute involves the treatment of debts incurred during the relationship. When the parties commenced their relationship the wife was,
and still is, the owner of [Property B]. At the commencement of the relationship this property was subject to a mortgage of about $150,000. Additional
borrowings have increased this mortgage to some $320,000. … Essentially the wife maintains that the husband should be responsible for the debts
incurred during the relationship.’

( … )

[40] At trial the wife asserted that because the husband two and a half years prior to the separation alone had initiated ‘the business ventures’ and had
the sole and total control over them, the husband should be responsible for the loss of assets and income and those losses, particularly the business
losses, should be notionally added back into the asset pool against the husband.

( … )

[42] ( … ) The trial judge without engaging in that controversy said:

‘This is a most unfortunate case. There is no doubt that the financial history of the parties’ relationship was a disaster. Essentially this was a result
of the failure of a business purchased during the marriage called “[ABC]” … It failed. I do not ascribe the responsibility for this failure to either
party.’

( … )

[46] The wife’s fundamental complaint was that she came into the cohabitation with a property which had a mortgage on it of $150,000 and has been left
at the end of the hearing with the same property but now with a mortgage of $320,000. … The trial judge left all of the debt raised for the
ABC business and secured over the Property B with the wife. The wife asserts that upon the facts that was unreasonable and plainly unjust.

[47] The wife’s central assertion is that the trial judge failed to take into account that the wife had made a superior initial contribution by way of
introduction of real property. … At the date the parties commenced living together in 2004 Property B had a mortgage of $150,000.

( … )

[57] The trial judge does not actually say what adjustments (if any) he makes based upon the limited findings he did make in relation to contributions.
… [I]t is tolerably clear that the trial judge concluded that on an overall basis the parties had made equal contributions. This is for two
reasons:

The trial judge finds that no adjustment should be made for s 75(2) factors at [32] and concludes at [35] that ‘each party will retain a property of roughly
equal value’;

There is nothing in the trial judge’s discussions of the parties’ contributions that would indicate that one party’s contributions should be seen as greater
than the other.

[58] There was some evidence before the trial judge which made it important for him to focus on whether or not there was a significant disparity in initial
contributions between the parties, namely:

At the date of hearing Property B was worth $610,000; Property E was worth $370,000 and Property C had been sold in 2015 for $400,000. There is no indication
that any increase in the value of these properties during the cohabitation was due to anything other than market forces. These facts gave some clue
as to how the gross values of the properties might have compared at the date of cohabitation with the inference being that the husband’s two properties
might have been worth slightly more than the wife’s property;

However, and most significantly, there is no information as to what level of debt existed in respect of the husband’s two properties. ( … )

( … )

[61] The trial judge’s orders have the result that the wife is left solely responsible for slightly more than 70 per cent of the total debts of the
parties or either of them. That includes, as a major component, the entirety of the accumulated debt attributable to funding, relatively late in
the relationship (April/May 2011 onwards), the failed ABC business; that debt was added to, and remains as part of, the mortgage debt upon the
wife’s Property B. Thus, aside from any inferences that might have been drawn from evidence concerning the debt level each party had at the outset
of the relationship referable to initial capital disparity, issue was squarely joined between the parties as to the allocation of debt accumulated
during the relationship and, specifically, the debt accumulated by reference to the failed business.

[62] To focus, as the trial judge did, only upon an approximately equal division of the net assets now remaining, was to lose sight of that issue.

( … )

[64] It is clear enough that the trial judge determined that responsibility for the business failure should not be ascribed (solely) to either
party. Implicit in that conclusion is that the loss should be shared equally. Yet, the trial judge completely failed to recognise that by leaving
the entirety of the current mortgage debt on Property B as the wife’s responsibility his Honour was, in practical terms, ascribing to the wife
sole financial responsibility for the business failure. That is, it does not logically follow, as it would seem the trial judge has assumed,
that by apportioning the value of the net assets now more or less equally, this results in the parties more or less equally sharing financial
responsibility for the business failure. It bears repeating that the wife introduced Property B with a mortgage debt of only $150,000. The
effect of the orders is that she retains the Property B mortgage but now with a debt of $320,000, an increase attributable to the money lost
because of the failed business venture.

[65] On that basis we conclude that the order which left the wife with the responsibility for the whole of the current mortgage on Property B is
unjust and unreasonable.”

The appeal was allowed and the matter was remitted for re-hearing.

 

 

De facto relationship – Evidence inconsistent with prior statements to Centrelink and ATO not excluded – Elias principle not applied

In Benedict & Peake [2014] FCCA 642 (23 May 2013) the Applicant alleged and the Respondent denied the existence of a de facto relationship, the Respondent’s case being that any such relationship ended in 2006 and was thus out of time. At a preliminary hearing of the declaration application the Respondent sought to exclude “substantial portions of the Applicant’s evidence by reference to the ‘Elias principle’” (para 10). 

Judge Harman said at para 17:

“The written submission of the Respondent asserts, in essence, that as a consequence of and in reliance upon the ‘Elias principle’ … all evidence of the Applicant which seeks to assert a proposition contrary to that asserted and held out by her to Centrelink [statements by her that she was single and not in a relationship] and the Australian Taxation Office [statements in her tax returns that she was ‘single’, no benefit being claimed on the basis of being in a relationship] ought [to] be rejected and found inadmissible.”

The Respondent (para 18) relied on Elias (1997) FLC 90-267 and other case law, in particular Jordan (1997) FLC 92-736. 

Judge Harman said at para 23:

“It is sought to assert that the principle or rule would have stronger expression with regards to declaration proceedings pursuant to section 90RD (based upon the definition of such relationships in section 4AA), on the following basis:

‘ … the context in s.4AA is different from s.79 where a broad range of factors need to be considered in the exercise of discretion to alter property interests. In the context of a s.4AA determination, the Court is being called upon to decide whether a de facto relationship exists, and this is a decision about a fact (based upon examination of a range of circumstances). A person who repeatedly makes a declaration of fact to the relevant authorities for financial gain ought not to be able to assert to a court that it should find the facts to be different than he or she has repeatedly claimed them to be. A formulation of the rule in those clear terms is consistent with broader principles of the general law that people should not profit from their own wrongs, or should come to equity with clean hands.’”

Judge Harman continued at para 26:

“The Respondent asserts (and it is accepted by me) that the ‘Elias principle’, with respect to the admissibility of evidence, represents a rule of law rather than a rule or presumption relating to evidence or credit. However, as it is a rule of law, it is subject to exception, application to specific facts and circumstances and, over all, equity and the overall interests of justice.”

Judge Harman referred at para 30 to the decision of Chisholm J in Jordan (above) as follows:

“In declining to apply the principle or rule of law his Honour specified that such action was taken on bases that:

a)        There was no reliance by the husband on the representation;

b)        There was, at best, a single representation;

c)        The penalty to the wife in preventing her from leading the evidence might well be disproportionate to the advantage she gained from the prior inconsistent representations;

d)        The evidence did not satisfy his Honour that the wife was sufficiently aware of facts such as to satisfy his Honour that she had made a knowingly false declaration; and

e)        If some breach of revenue law had occurred, appropriate action could have been taken by the authorities to seek to recover the funds.”

Judge Harman said at paras 35-36:

“It is conceded in all the authorities, and particularly emphasised in the decision of Justice Chisholm in Jordan, that the principle or rule of law is not founded in and does not equate to the expression of a form of estoppel. If the principle or rule were to be applied arbitrarily and so as to exclude evidence in each case in which a false representation (or series of false representations) were found, then the rule would, in the absence of discretionary application by reference to the facts and circumstance of each case and the justice and equity of each case, be elevated to or, as his Honour observed in Jordan, beyond, estoppel.

By reference to the Applicant’s assertion that her statements to relevant government agencies were made with the knowledge if not encouragement and support or assistance of the Respondent (perhaps stopping short of a circumstance that could fairly be described as a common purpose) I am not satisfied that I should express or apply the rule as I am urged to in the Respondent’s submissions … ”

Judge Harman continued at para 39:

“To allow the admission of the evidence does not … preclude the testing of the Applicant’s evidence and her credibility, and if her assertions (especially as to knowledge of her actions, assistance in them and ultimately financial gain for the parties (plural) jointly and severally) are found wanting, rejection of that evidence and adverse determination of the judiciable controversy including with appropriate orders for costs.”

In deciding not to apply the Elias principle, Judge Harman concluded at paras 42-43:

“The Applicant asserts that both parties have gained financial benefit from a statement made by the Applicant but with the knowledge of and at least acquiescence by the Respondent. The Applicant has disclosed the statements and has produced the documents in which such statements or declarations are made.

Those circumstances, and especially the frank disclosures of the Applicant and the assertions and allegations by her that each party has had knowledge of the statements and has each benefited from the statements (at least to the extent of income thus derived) both:

a)        Place the matter within exceptions to the rule as discussed above; and

b)        Distinguish the facts of this case from the earlier authorities.”