Separovich v Ferrao

Court of Appeal (NSW)|2011-02-09|Before: Beazley JA, McColl JA, Macfarlan JA

Ross v Elderfield [2006] NSWCA 192; DFC 95-338 Saric v Steward [2006] NSWCA 260; (2007) DFC 95 Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 White v White [2004] NSWSC 208 Wilson v Vine [2003] NSWSC 341; DFC 95-269 Category: Principal judgment Parties: Steven Michael Separovich (Appellant) Paula Cristina Ferrao (Respondent) Representation: A Givney (Appellant) R Maurice (Respondent) Maclarens Lawyers (Appellant) Carlisle Attorneys (Respondent) File Number(s): CA 2010/94896 Decision under appeal Citation: Ferrao v Separovich [2010] NSWSC 213 Date of Decision: 2010-03-24 00:00:00 Before: McLaughlin AsJ File Number(s): SC 6423/2008

Judgment 1BEAZLEY JA : By statement of claim filed on 24 December 2008, the respondent sought an order pursuant to the Property (Relationships) Act 1984, s 20 that the appellant pay to her the sum of $175,000 in return for the transfer by her to the appellant of her interest in the parties' jointly owned property at Gwandalan, subject to the mortgage thereon. The sum of $175,000 would appear to represent 50 per cent of the upper limit of the range of the estimated values of the Gwandalan property at the time of the hearing. 2By cross-claim filed on 9 April 2009, the appellant sought an order that the respondent transfer to him her interest in the Gwandalan property and pay him the sum of $80,362 (the appellant's estimation of the mortgage debt); or, in the event the appellant did not effect the discharge of the mortgage on the property, that it be sold and after the discharge of the mortgage and payment of commission and legal fees, the remaining balance be paid to the appellant. 3His Honour ordered that upon payment to the respondent by the appellant of a sum of $160,000, an amount which his Honour considered was about midway in the range of the then estimated value of the property, the respondent was to transfer to the appellant her right, title and interest in the Gwandalan property, subject to the mortgage thereon. His Honour dismissed the appellant's cross-claim and ordered that the appellant pay the costs of the respondent of the proceedings. 4The appellant appeals from his Honour's orders. On the appeal, the appellant seeks the same orders that he sought in his cross-claim. Although the appellant has raised nine grounds of appeal, the essential issue was whether his Honour's order resulted in a just and equitable adjustment of property, in circumstances where the respondent has retained substantial assets that she acquired during the course of the relationship.

Facts 5The appellant was born in 1973. The respondent was born in 1974. The parties lived in a de facto relationship from 30 October 1996 until 17 June 2008. They have one child together, a son born in 1997 and now aged 14 years. The son has lived with his father, the appellant, since the separation. The respondent pays child support for him and continues to pay his school and associated tuition fees at a leading private school, as she has done since he commenced at that school when he was approximately 7 years of age. 6At the commencement of the relationship, the appellant owned a Ford Falcon motor vehicle and some band equipment, together with superannuation entitlements of an unknown, but it would appear small, value. The respondent had savings of about $2,000, furniture and personal effects and a superannuation entitlement of approximately $5,800. 7The parties also jointly owned a residential property situated in Gwandalan on the Central Coast of New South Wales. The Gwandalan property was originally purchased in 1993 as vacant land by the appellant and his brother, now deceased, for a purchase price of $39,000. The purchase of the Gwandalan land was financed by a deposit paid by the appellant's parents and an amount of $40,000 borrowed by the appellant and his brother from Westpac Bank. The appellant's father, who was a licensed builder, commenced construction of a three bedroom brick veneer residence on the land and the appellant and his brother worked as labourers upon the construction. 8By April 1995, the construction of the residence on the Gwandalan property had reached lock up stage. The family agreed that the appellant and the respondent should purchase the interest of the appellant's brother in the property. The transfer was completed in late June 1995. The formal transfer document stated that the sale was for a consideration of $1,000, however, the appellant and respondent jointly borrowed the sum of $117,615 from Westpac which was disbursed as follows: (a) Discharge of the debt of the appellant and his brother to Westpac: $33,419 (b) Payment to appellant's father: $64,695 (c) Further payment to appellant's father: $19,000 9At the time of the commencement of the parties' de facto relationship in October 1996, the mortgage debt on the Gwandalan property was $114,820. The monthly mortgage payments were made from a Westpac account established in the joint names of the parties into which their respective salaries were paid. In February 1998, the parties refinanced the mortgage loan by borrowing $120,000 from Westpac, which they used to repay the existing Westpac loan and the balance to pay for improvements on the property. This mortgage loan was also repaid from the parties' Westpac joint account. 10The Gwandalan property was initially used as a holiday house for members of the respective extended families of the appellant and the respondent. From 2003, the property was rented out and the income was applied towards the mortgage repayments. 11From the commencement of the relationship until early 2004, the parties resided in a granny flat at the rear of the residence of the appellant's parents at Old Toongabbie. Although the parties did not pay rent to the appellant's parents, the appellant assisted in construction work undertaken on the granny flat in 1999. In early 2004, the parties moved into premises owned by the respondent's parents at Dulwich Hill. The parties resided in the Dulwich Hill residence until their separation in June 2008. They paid the respondent's parents $350 a week in rent whilst residing in this property. 12Other than for a period of about six months in about 2002 when he was off work due to injury, the appellant worked full time as a bricklayer up until 2006. In 2006, the parties agreed that the appellant would cease work and become the full-time carer for the child of the relationship. By that time, as the table below illustrates, the respondent was earning a high income. 13Apart from a period of six months after the birth of the parties' child in June 1997, the respondent was in employment throughout the entirety of the relationship. At the commencement of the relationship the respondent was employed as an accounts officer by Schindler Lifts Pty Limited and was studying accounting and finance on a part-time basis at the University of Technology, Sydney, graduating in 2002. In 1998, the respondent commenced employment with her present employer, Hunter Hall Ltd. In addition to her salary, the respondent has received share options and bonus shares as part of her employee entitlements. 14After her maternity leave, the respondent returned to her employment, part-time, working five day fortnights from 9 am to 1 pm. She continued to work on a part-time basis until she returned to full-time employment. It is not clear on the evidence when this was, but would appear to have been when the child was 4 or 5. During this time, she continued to earn substantially more than the appellant. 15The respondent has always earned a higher income than the appellant, even during the periods in which she worked part-time. Her earnings increased significantly upon her graduation and increased significantly again when she was appointed Manager, Finance and Administration with Hunter Hall in about 2003. The table below sets out the respective income of the parties during the course of the relationship. Schedule of taxable income Year Respondent's pre-tax income Appellant's pre-tax income 1996 $30,193.00 $20,757.00 1997 $22,250.00 $17,810.00 1998 $26,662.00 $5,512.00 1999 $24,784.00 $16,387.00 2000 $38,665.00 $21,146.00 2001 $59,878.00 $22,042.00 2002 $86,651.00 $14,249.00 2003 $118,029.00 0.00 2004 $138,946.00 $976.00 2005 $188,420.00 $21,836.00 2006 $208,358.00 $21,450.00 2007 $287,971.00 $669.00 2008 $329,281.00 $544.00 Total $1,560,088.00 $163,378.00

16Both parties contributed to the care of the child and performed work of a domestic nature in the household. During the course of her maternity leave, the respondent was the primary homemaker and carer for the child. When she returned to part-time employment she continued to undertake the major role in the care of the child and continued as the primary homemaker, although with contribution from the appellant, particularly in the evenings. Likewise, when the respondent was studying part-time, which involved her attending university one night per week, she first tended to the needs of the child before leaving for university or before studying. 17The parties were assisted in the care of the child by the appellant's mother when the parties lived at Toongabbie and were also assisted by the respondent's parents when the parties moved to Dulwich Hill. As the appellant worked as a bricklayer and commenced work early in the morning, the respondent was largely responsible for the care of the child in the morning, including taking him to preschool and then later to school. When the child commenced private schooling, the respondent would get him ready for school and then the respondent, the respondent's mother and brother and the child would leave home together. The child and the respondent's brother would be dropped off at school and the respondent's mother would then drive the respondent to work. The appellant, or the respondent's father, would collect the child from after-school care. 18During the course of the relationship, the appellant spent money from the parties' joint account on gambling activities, betting with the TAB and hotel poker machines. Neither the extent of his gambling nor its net effect on the assets of the parties was determined during the course of the hearing. 19At the termination of the relationship, the parties still owned the Gwandalan property jointly subject to the mortgage debt which was then in the sum of approximately $80,000. There was no formal valuation of the Gwandalan property in evidence, although there was no dispute that it was worth at least $300,000. It may have had a likely range of value of between $300,000 and $350,000. 20The appellant's assets at the termination of the relationship did not differ significantly from what they had been at its commencement. The respondent held shares in Hunter Hall Limited to an estimated value of less than $250,000 and had savings of about $20,000, as well as furniture and personal effects. Both had superannuation entitlements. The respondent's superannuation entitlements were significantly more than the appellant's.

Reasons of McLaughlin AsJ 21His Honour viewed the financial and material circumstances as being more or less equal at the start of the relationship. His Honour regarded the appellant's contributions in his role as full-time homemaker and parent in the last two years of the relationship as " significant and important ". However, he also found that the respondent made " significant contributions " to the relationship as a homemaker and parent within the constraints imposed by her employment. 22His Honour held that the respondent's successful business career was achieved by her own industry and diligence and that the appellant was not involved in her professional success beyond his contributions as a homemaker and parent. His Honour also held that the shares and options that the respondent acquired during the course of the relationship were achieved by virtue of her professional accomplishments and her employment and were not acquired in consequence of any conduct or contribution by the respondent. 23His Honour found that it was the financial contributions of the respondent that financially and materially maintained the family throughout the relationship. He considered that the housing loan secured by mortgage on the Gwandalan property was possible only because of the respondent's salary. His Honour observed that in the year when the mortgage was entered into, the appellant's taxable income was only $5,512, which would not have been sufficient to have enabled him to have obtained a loan let alone to have made the repayments on the mortgage loan. 24The appellant had not referred to his gambling activities nor to his use of joint funds for that purpose in his affidavit evidence. His Honour considered that the appellant had thereby failed in his obligation to place before the Court as fully and frankly as possible all information concerning his financial and material circumstances during the relationship. His Honour considered that this failure was all the more serious in circumstances where the appellant was seeking relief by way of his cross-claim. His Honour also found that the appellant had used the funds from the joint account to fund his gambling activities and that he had used his time and energy on these activities during the course of the relationship. 25His Honour regarded any evidence concerning events and matters after the termination of the parties' relationship as " totally irrelevant " to a consideration of their respective contributions. This appears most likely to be a reference both to the appellant's continued care of the child of the relationship and the funds the respondent had earned on share transactions after the parties had separated. 26His Honour concluded, at [48], that: "... the overwhelming contributions to the relationship were the financial contributions of the [respondent]."

A preliminary problem: the meaning of the order made by the trial judge 27The trial judge ordered that the respondent transfer to the appellant her interest in the Gwandalan property upon payment to her of the sum of $160,000, subject to the mortgage. 28The parties have interpreted his Honour's order as requiring the appellant to bear the mortgage debt in its entirety, so that the property as transferred was subject to the mortgage of about $80,000. 29A question was raised by the Court as to whether this interpretation of the order was correct. One and, indeed, the only reason it may not be correct is because his Honour did not make consequential orders that would usually be made when an order of that type is made. In particular, his Honour did not make an order that the appellant effect a discharge of the mortgage over the respondent's interest in the property or otherwise indemnify her in respect of her personal liability under the mortgage for the mortgage debt. 30The only relevant reference to the proposed order in the judgment is at [48], where his Honour stated: "I am satisfied that the overwhelming contributions to the relationship were the financial contributions of the Plaintiff, and that it is appropriate in all the circumstances of this case that the Plaintiff, as she desires, should transfer to the Defendant her interest in the Gwandalan property, subject to the present mortgage upon that property, and that, in return, the Defendant should pay a monetary sum to the Plaintiff. I am satisfied that the appropriate monetary sum should be the amount of $160,000 (that figure, which is somewhat less than the amount sought by the Plaintiff in her statement of claim, being one half of an amount which is about mid-way in the range of the present estimated value of the property)." 31In my opinion, his Honour's statement, at [48], that the respondent should " transfer her interest in the property subject to the mortgage " supports the interpretation that the parties have given to the order. I also consider that his Honour's order that the appellant pay to the respondent the sum of $160,000, reflects an intention to require the appellant to bear the entire burden of the mortgage. The figure of $160,000 reflected approximately half the value of the property. Had his Honour intended that the respondent's adjusted interest in property was to be subject to a half share of the mortgage, he would have ordered that she be paid a lesser sum to reflect that half interest. That sum would likely to have been approximately $120,000 ($160,000 less $40,000, being half the mortgage debt). Even on that approach, his Honour ought to have ordered that the mortgage debt be discharged and/or that the appellant indemnify the respondent in respect of her personal covenant to the bank under the mortgage. His Honour's orders were deficient to that extent. 32I am further fortified in my conclusion that the parties' have correctly understood the order that was made by his Honour for two reasons. First, his Honour's order reflects, indeed replicates, the order sought by the respondent, save for the amount to be paid to the appellant. Secondly, his Honour's judgment reflects an assessment that the respondent made by far the greater contribution to the assets acquired during the marriage. 33In my opinion, in determining whether the adjustment made by his Honour was just and equitable, the Court should proceed on the basis that the order made by his Honour was that the property was to be transferred to the appellant subject to the mortgage: that is, the appellant was to bear the burden of the mortgage. The parties have acted on that basis and the appellant has based his appeal on that understanding.

Issues on the appeal 34In his grounds of appeal, as refined by counsel's written submissions, the appellant contended that:

His Honour failed to determine the divisible pool of property (ground 2).
The order made by his Honour was not a just and equitable adjustment of the property of the parties or each of them (grounds 1, 4, 5 and 6).
His Honour erred in finding that the appellant's gambling involved him wasting assets or income of the parties (ground 7).
His Honour erred in failing to give adequate reasons as to the effect the parties' respective contributions had on the adjustment of property interests that he made (grounds 3 and 8).
That his Honour erred in ordering the appellant to pay the respondent's costs (ground 9).

Proper approach to s 20 35It is convenient, before proceeding to deal with the issues raised on the appeal, to have regard first to the principles which govern the determination of an application for property adjustment under the Property (Relationships) Act , s 20. That section provides: " 20 Application for adjustment (1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to: (a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and (b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely: (i) a child of the parties ..." 36There are, as might be expected, a plethora of authorities as to how the Court should approach an adjustment of property under s 20. It is sufficient for the purposes of this case to refer to the following. In Manns v Kennedy [2007] NSWCA 217; DFC 95-406 Campbell JA (Santow JA and Bryson AJA agreeing) observed, at [62], that under s 20, the Court was required to make a holistic value judgment in the exercise of a discretionary power of a very general kind: see Davey v Lee (1990) 13 Fam LR 688 at 689; Ross v Elderfield [2006] NSWCA 192; DFC 95-338 at [35]; Kardos v Sarbutt [2006] NSWCA 11; DFC 95-332 at [36]. 37However, that " holistic value judgment " is the final step in the process of arriving at an order, being the just and equitable adjustment of property, having regard to the contributions identified in s 20. Before the court can make that final determination, it is necessary to identify and value the property in respect of which it is open to the court to make an adjustment and to identify and value the contributions that are being taken into account: see Howlett v Neilson [2005] NSWCA 149; DFC 95-321 at [25]; Saric v Steward [2006] NSWCA 260; (2007) DFC 95 at [61]; Chanter v Catts [2005] NSWCA 411; 64 NSWLR 411 at [22]. 38The authorities recognise that notwithstanding that the court exercises a wide discretion under s 20, a mathematical calculation of the contribution of the parties is of assistance in finding and testing conclusions as to what is just and equitable and in promoting transparency and consistency in decision-making: see Howlett v Neilson per Hodgson JA at [39]. 39The discretionary considerations that may influence and/or determine the ultimate order made depend upon the particular circumstances of the case. As Ipp JA observed in Bilous v Mudaliar [2006] NSWCA 38 ; 65 NSWLR 615 at [63]: "Determinations as to what orders should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other property was able to retain that property, while the market value increased, because 'of joint efforts of wage earning, homemaking and parenting, and mutual support'. In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. In other instances, the non-financial contributions of one partner may allow the other to advance his or her career and earn a high income that enables the property in question to be maintained and retained. Thus, an increment in capital value may well result, indirectly, from 'joint efforts of wage earning, homemaking and parenting, and mutual support'."

First issue: the asset pool 40The appellant contended that the primary judge erred at the outset of his determination by failing to set out the asset pool and the resources of the parties at the time of the hearing. The appellant also complained that it was unsatisfactory for his Honour to deal with the asset pool distributively throughout the judgment. The appellant acknowledged that during the course of his judgment his Honour referred to the Gwandalan property, the respondent's shares in Hunter Hall, the savings of the parties, furniture and personal effects, the appellant's motor vehicle and the mortgage and that he attributed values to each of those assets and specified the amount outstanding on the mortgage. His Honour also dealt with the Hunter Hall shares that the respondent sold during the course of the relationship, which was a notional asset that the appellant contended at trial should be taken into account in the determination of the adjustment that ought to be made. 41It should be noted that his Honour did not deal with the value of dividends that the respondent had received post-separation, as he took the view that post relationship assets were not relevant to his determination. There is no express ground of appeal challenging this conclusion. However, the appellant complains in his written submissions that his Honour failed to have regard to the shares sold post-separation. On the appellant's submission, these should have been notionally added back into the pool of assets, or at least taken into account, in the determination of what would be a just and equitable adjustment. 42The appellant also pointed out that his Honour appears to have misstated or misunderstood the value of the Hunter Hall shares. As will appear, this submission was made against interest as the value that his Honour apparently attributed to the shares was more than twice their value. The problem arises from his Honour's reasons, at [30], where his Honour stated: "At the termination of the relationship each of the parties owned a one half interest in the Gwandalan property. In addition, the plaintiff held shares in Hunter Hall to an estimated value of $605,000 and the savings of about $20,000 as well as furniture and personal effects." 43His Honour's reference to the value of the Hunter Hall shares as having an estimated value of $605,000 was seriously inaccurate. The appellant had submitted that the value of the shares, net of tax, was approximately $236,000. The appellant also contended that the shares that the respondent had sold during the relationship for approximately $60,500, should also be taken into account, giving a net value to the shareholding acquired during the course of the relationship of approximately $296,000. The respondent had submitted that the net value of the shareholding was just under $210,000, taking into account capital gains tax of approximately $77,000. This did not include the value of the shares that she had sold during the course of the relationship, which she had disclosed in her affidavit evidence. 44The appellant had also identified two notional assets, namely, shares sold by the plaintiff during the course of the relationship and dividends received by her post-separation. The associate judge, at [28], identified the shares sold during the course of the relationship, noting that those shares had been sold at a profit of almost $61,000. However, his Honour did not refer to the dividends received by the respondent post-separation. This is considered further below. 45The appellant also complained that his Honour failed to take into account the respondent's significant superannuation entitlements. This complaint was essentially directed to the second issue on the appeal. Nonetheless, it is relevant to the assets and resources of the parties. The appellant contended that the respondent had a superannuation entitlement of approximately $116,000 as compared to the appellant's superannuation entitlement of approximately $20,000. The appellant acknowledged that given the delayed actual receipt of the superannuation (the parties are still in their 30s), the superannuation was not to be treated as a presently available asset, but as a resource of the respondent to which his Honour ought to have had regard in determining what was just and equitable. 46The appellant's submission in respect of the respondent's superannuation entitlements was made somewhat faintly. He acknowledged, as I understand his submission, that his Honour's finding that the appellant made no contribution to the entitlements the respondent obtained from her employment, was open to him. His Honour's finding in that regard is to be found at [43]. There, his Honour was dealing with the shares and options that the respondent acquired during her employment with Hunter Hall. It appears that the appellant acknowledged that the same reasoning applied to the respondent's superannuation. Given the faintness of the argument, I consider that the complaint as to the superannuation can be put to one side. 47The respondent submitted that although the associate judge did not set out the assets of the parties in a tabular form, he dealt with all of the assets during the course of the judgment. In this regard, the respondent pointed out that the assets and liabilities the appellant identified as being in existence at the end of the relationship were: (a) the property at Gwandalan, subject to a mortgage in favour of Westpac Bank; (b) shares in Hunter Hall Limited; (c) a 2003 Ford motor vehicle; (d) furniture and household effects; (e) a joint Westpac bank account; (f) an account in the respondent's name with the St George Bank. 48The respondent noted that the associate judge identified each of these assets, as well as the mortgage, in his judgment. 49I consider that there is no substance in the complaint as to the particular issue that the appellant raised, namely, the failure to set out the asset pool. His Honour, during the course of his judgment, made reference to all of the assets of the parties, albeit with the error in relation to the value of the shareholding to which the appellant referred. There is no requirement that the Court deal with the assets in any particular manner, provided that it is apparent in the course of a trial judge's reasons that he had full and proper regard to all of the assets relevant to the determination of the just and equitable adjustment of property under s 20.

Second issue: was the adjustment just and equitable? 50The particular factual situation which presented itself to his Honour in this case was the disparity of income between the parties throughout the entirety of the relationship. Added to that was the significant asset position of the respondent, acquired during and as a result of her employment. It is not unusual for parties to a relationship to have vastly different incomes although, in this case, it was the female partner in the relationship who earned substantially more than the male partner for a significant period of the relationship. The appellant contended that his contribution, although significantly less financially, ought to be assessed as equal, given that he worked to his full capacity and, in the last two years of the relationship, made a contribution as a full-time homemaker and parent. In this regard, the appellant relied upon comments I made in Gazzard v Winders (1998) 23 Fam LR 716; DFC 95-209 . This submission is considered further below. 51In the course of his judgment, the associate judge noted that it was essentially the Gwandalan property that was the subject of the dispute between the parties. It is likely that his Honour discerned that this was the case from the parties' respective claims in the statement of claim and the cross-claim. The respondent sought the transfer of the property to the appellant, subject to the mortgage (that is, with the appellant having full responsibility for it) and that she be paid a sum of money apparently representing about half the value of the property. The appellant sought a transfer of the property and the payment of a sum of money equivalent to the mortgage debt. He did not make an express claim on the respondent's shareholding. 52The appellant complained that the effect of his Honour's order was that the respondent received most of the asset pool, which was outside an acceptable range of the adjustment of assets and was not just and equitable. In this regard, it should be noted that the effect of his Honour's order was that the Gwandalan property was divided approximately one-third to the appellant and two-thirds to the respondent and that she otherwise retained the entirety of her shareholding that had been acquired during the course of the relationship. 53The appellant submitted that his Honour erred in giving primary weight to the quantum of the parties' earnings rather than having regard to the fact that each worked in accordance with their respective earning capacity. The appellant also complained that his Honour failed to give appropriate weight to his contribution as full-time homemaker and carer of the child of the relationship in the last two years of the relationship. The appellant pointed out that at the commencement of the relationship the parties had approximately equal earnings and assets, as found by his Honour. The respondent's significantly greater earning capacity was the result of her tertiary studies, which she had undertaken during the course of the relationship. It was, therefore, not just and equitable to give to the respondent the sole effective benefit of that greater earning capacity by giving her the substantially greater share of the assets of the parties at the conclusion of the relationship. 54In a related submission, the appellant contended that during the same period that the respondent's income position was improving dramatically, he was continuing to earn to his full capacity, until, first, he suffered an injury and secondly, he took on a full-time homemaker and parental role. In this regard, the appellant relied upon my comments in Gazzard v Winders at 77, 868 as follows: "... the parties were each employed in jobs of a manual nature. Neither earned substantial salaries, although the respondent earned significantly more than the appellant. Whilst there was a discrepancy in their salaries, this disparity should not, by that reason alone, be assessed as a factor in the respondent's favour or as a matter to the disadvantage of the appellant. No doubt the disparity, in part at least, reflected a systemic imbalance in our society in the wages paid to females as opposed to the wages paid to males. There is nothing in s 20 which requires, without more, that this entrenched inequality be reflected in an adjustment of property interests. These were two people each working in full time manual jobs. There was no evidence to suggest that either was working below her or his full capacity." 55These comments were made in the context of the particular facts of that case. In that case, there was no child of the relationship, each party had worked fully to their respective capacities, each had similar employment in the sense that each worked in manual jobs and each made an approximate equal non-financial contribution to their joint assets. The position here is different. The respondent earned substantially more than the appellant, she gained tertiary qualifications without any additional assistance from the appellant and it was those qualifications that significantly increased her earning capacity. As a result of her particular employment, she became entitled to substantial shares and options. 56In addition, apart from the last two years of the relationship, her domestic contribution to the child and the home was greater than the appellant's. As I have already stated, prior to 2006, the appellant worked full-time, save for the period when he was off work for six months due to injury. During this time, he participated in looking after the child and undertook some household chores. However, as I have explained, the greater share of those duties was borne by the appellant. There was some dispute between the parties as to the full extent of the homemaker role played by each of the parties after 2006. The respondent acknowledged that the appellant undertook the substantial role in that regard. However, the respondent continued to undertake some household duties. These were detailed in her affidavit evidence as follows: "[44] In 2006 when [the appellant] ceased working, the morning routine for the care of [the child] did not change. Often, I observed that [the appellant] did not get out of bed before [the child] and I left in the morning. However of an evening, when I returned home from work, I observed that [the appellant] generally cooked the evening meal for he and I and [the child]. I still however continued my previous practice of washing all the clothes, cleaning the house and attending to the performance of the general household chores." 57In cross-examination, the respondent conceded: "Q. Who did the most washing? A. He did." Save for that concession, the respondent's evidence at [44] (above) was not diminished by the cross-examination. 58In my opinion, and leaving aside for the moment the question of the appellant's gambling, there was no error in the trial judge's assessment of the respective contributions, both financial and non-financial, that the parties made to their joint assets and the assets of each of them. This assessment involved the recognition that the respondent was able to earn a high income from an early point in the relationship. This was particularly so from 2003 onwards because of the respondent's own special skills and application. In addition, from then until June 2006, both parties were working full time and both were making a contribution in the capacity of homemaker and parent, although the respondent's contribution in this period was greater than the appellant's. It was only during the last two years of the relationship that the appellant ceased work and took on the role of a full-time homemaker and parent that the appellant's non-financial contribution was of a significant order. Even then, the respondent continued to make a contribution as a homemaker and parent. 59It is difficult, given these facts, to see that there was error in the associate judge's assessment of the just and equitable adjustment of property. His Honour's determination involved the exercise of a discretion. Accordingly, error in the House v R [1936] HCA 40; 55 CLR 499 sense has to be demonstrated before appellate intervention is warranted. His Honour's exercise of the discretion could have been differently exercised. In particular, one available mode of exercise of the discretion could have been to make an order whereby the Gwandalan property was effectively to be shared between the parties equally. However, it is apparent from his Honour's reasons, sparse though they were, that he considered the property was only acquired, and the mortgage only paid, because of the respondent's financial position. In other words, it is apparent from his reasons that his Honour considered that the respondent made the greater contribution to the acquisition of that property. This assessment was clearly one that was available to his Honour to make on the evidence.

Third issue: the appellant's gambling 60The associate judge, at [38], found that the appellant expended considerable amounts of money from the joint account of the parties upon his gambling activities, betting on horse racing with the TAB and on poker machines in hotels. His Honour noted that a statement from Tabcorp, produced on subpoena, disclosed that 3,776 bets were made upon the appellant's Tabcorp account, involving the expenditure of $63,522, between the period January 2001 to January 2006. 61The figure of $63,522 was derived from the summary page of the appellant's Tabcorp account for the period 25 January 2001 to 28 February 2006. The information on the summary page is enigmatic, to say the least. It is convenient to set it out: DETAILED STATEMENT REPORT Account Number. 91414 Statement Period: 25/01/2001 to 28/02/2006 SUMMARY TXN Total Number REF 181.50 17 WDL 3,490.00 16 Summary 63,522.42 3,776

The legend on the summary page made no reference to the abbreviations TXN, REF or WDL, although the abbreviation WDL is obviously a reference to 'withdrawal', as is apparent, both as a matter of commonsense and from other entries in the Tabcorp statement. 62The appellant submitted that this material did not support his Honour's findings at [38]. In particular, the appellant argued that it could not be assumed that the amount of $63,522 represented the appellant's net expenditure, that is, after taking into account wins and losses, on gambling during the period. In this regard, the appellant pointed to other entries in the Tabcorp account which indicated that his winnings exceeded the amount of the bets that he placed. Unfortunately, this submission is of little assistance in understanding either the Tabcorp documents or the net effect of the appellant's gambling activities. In the first place, the submission (see Tr 15) misread the amount of the bets placed. The transaction summary to which reference was made (supplementary blue 10) in fact demonstrated that the appellant's winnings were less than the bets placed. There is a further problem with the submission in that it appears to relate to a different period from the summary page upon which the associate judge derived the figure of $63,522. 63There was evidence before his Honour that the respondent alleged that the appellant had withdrawn substantial sums from the joint bank account. It was her contention that this money was used by the appellant substantially for his gambling. She prepared a schedule of withdrawals from the joint account during the period April 2000 to 2 June 2008. The withdrawals ranged in amounts from $20 to $100, $200, $300, $400 and $500 and totalled a substantial amount. It was apparent from the entries that part of this sum was used for gambling. 64The appellant denied that he expended considerable sums of money for the purposes of gambling. The appellant responded to cross-examination relating to the amount of $63,522 by saying that he did not know whether that was the extent of the money that he had expended on gambling, as he had never been sent a statement. The appellant was also cross-examined to the effect that he withdrew significant sums of money from the joint bank account over a short period of time which he used for gambling. On one occasion, for example, the appellant withdrew an amount of $850 over a two or three day period. The appellant denied, however, that he used all of this money for gambling. Rather, he contended that although he would have used some of the money for gambling, he lent money to friends who were also gamblers. The trial judge rejected this appellant's explanation and found, as has been set out, that he expended considerable sums of money on gambling. 65His Honour's reference to the sum of $63,522 however was not a finding that that was the total amount of his expenditure. As I understand his Honour's reasons at [38], he referred to that amount as an indication of expenditure from the joint account that he had already described as being " considerable sums of money on gambling ". His Honour, at [46], also noted that the appellant's failure to refer to his gambling activities constituted a failure of his obligation to fully and frankly place before the Court information as to his financial circumstances. 66The appellant accepted that it was appropriate, in determining the just and equitable adjustment of property, to take into account the extent to which one party was responsible for the waste of an asset. However, in addition to the submission that there was no evidence of the net result of the appellant's gambling, the appellant's point was that, having regard to the parties' family income, there had been no relevant impact on their joint financial position which called for an adjustment against his interest. 67In this regard, the appellant pointed out that the parties had a very comfortable standard of living, including attending concerts, having holidays, including a holiday to Europe and sending their child to an elite private school. The appellant submitted that, in those circumstances, it was irrelevant for his Honour to have taken the gambling into account. The appellant contended that it appeared that his Honour used the evidence relating to the appellant's gambling to diminish the value of the contribution that he made. 68His Honour's comment, at [47], that the appellant's gambling " occupied [his] time and energy " could be interpreted to support this last argument. However, in my opinion, his Honour's finding that the appellant expended large sums of money from the joint account on gambling was open to him. First, the appellant did not dispute that part of the Tabcorp summary report that indicated he had made 3,776 bets in the five year period to which the summary related, namely, 2001 to 2006. The respondent had been cross-examined to the effect that the appellant's betting was in small sums, usually in the order of $10. She made a concession in this regard, but her concession as to the amount of individual bets being $10 was in respect of phone betting. The evidence revealed that this was not his only mode of betting activity. However, even if one assumes that each bet referred to in the Tabcorp summary was in the amount of $10, there was at least an expenditure of approximately $38,000 in that period. 69Next, the appellant did not give evidence that he was a successful gambler. If it was the fact that his winnings exceeded his betting outlays, he had ample opportunity to give evidence of that fact. He did not do so. The stance that he took in his evidence was that he did not use all the moneys that were shown to have been withdrawn from the joint account for the purposes of his own gambling, but lent monies to friends for their gambling. His Honour rejected this explanation and there was no challenge to that rejection on the appeal. 70Having said that, however, it is not apparent how and to what extent his Honour's finding in respect of the appellant's gambling was reflected in the adjustment of property that he made. The only specific reference to the consequence of the failure to provide the Court with information concerning his gambling activities was, as I have noted above, that it constituted a failure by the appellant to place before the Court as fully and frankly as possible all information concerning his financial and material circumstances during the relationship. His Honour considered that that failure was all the more serious in a situation where the appellant was seeking substantive relief by way of his cross-claim. 71In her argument on the appeal, the respondent placed considerable emphasis upon this failure, contending that the Tabcorp account was an asset of the appellant at the date of separation and was therefore relevant to the adjustment of property. The appellant, however, submitted that his Honour's error in arriving at an adjustment of property that was not, on his argument, just and equitable in all circumstances, was because he substantially focused upon the individual contributions of the parties, rather than assessing their contributions on the basis that they were functioning as a joint household. Leaving to one side the question whether his Honour's order resulted in an adjustment of property that was just and equitable, the appellant's submission gains support from his Honour's initial comment, at [47], that the appellant's gambling " was largely the expenditure of money earned by [the respondent] ". 72There is an undoubted obligation on parties to proceedings under the Property (Relationships) Act , s 20 to make a full and fair disclosure of their respective financial positions at the commencement of the relationship, during their relationship and at the end: see Wilson v Vine [2003] NSWSC 341; DFC 95-269; White v White [2004] NSWSC 208; Hayes v Marquis [2008] NSWCA 10. This obligation facilitates the court's assessment of the adjustment, if any, to be made of the property of the parties or of either of them. A failure to make a full and frank disclosure may permit the court to draw an inference in accordance with the principle in Jones v Dunkel [1959] HCA 8; 101 CLR 298, that that party's case would not have been assisted by the evidence if it had been adduced. The court may also, in such circumstances, make findings as to the value of the asset in accordance with Armory v Delamirie (1722) 1 Stra 505. 73In this case, neither of these principles has any application. Certainly, this is not a case where the value of assets is in question. Even if it is open to draw a Jones v Dunkel inference, that inference does not support a case that the appellant had a Tabcorp account at the conclusion of the relationship with a credit balance of any significant amount. Nor is the Court able to draw an inference that as a result of the appellant's gambling the parties were unable to acquire an asset, pay the mortgage, or have a satisfactory standard of living. 74I have already concluded, without reference to the appellant's gambling, that there is no error in his Honour's discretionary determination of the just and equitable adjustment of interests. Nonetheless, the evidence does indicate a substantial level of gambling by the appellant and in my opinion that evidence entitled his Honour to make an adjustment of property at the lower end of the discretionary range. It is likely that the evidence of the appellant's gambling was taken into account by his Honour in this way and provides an additional reason why the appellant's challenge to his Honour's discretionary determination fails.

Fourth issue: failure to give adequate reasons as to how his Honour arrived at the adjustment of property: grounds 3 and 8 75The appellant complained that his Honour failed to explain how, as a matter of the just and equitable adjustment of property between the parties, one block of assets, namely, the respondent's shareholding, should remain entirely with her and that the remaining asset, being the jointly owned real estate, should be the only property taken into account in determining the just and equitable adjustment of assets between the parties. The appellant submitted that there was no discernible pathway in his Honour's judgment as to how he reasoned that the overall result was just and equitable in circumstances where there was no reference to the asset pool nor any reference to justice and equity to each of the parties: see Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247. 76I had initially considered that there may have been substance in this complaint. However, once the evidence is understood in its entirety, his Honour's reasoning process is apparent, as I have sought to explain. In any event, neither party asks that the matter be remitted for determination so that even if there was such error, it would not have any impact on the manner in which the Court would deal with the appeal.

Costs: ground 9 77The trial judge ordered that the appellant pay the respondent's costs of the proceedings. The appellant complained that his Honour did not hear the parties as to the appropriate costs order that ought to be made and to this extent he was denied procedural fairness. The appellant submitted that as his Honour made an order for costs in the respondent's favour, he appears to have exercised his discretion on the basis that the respondent was wholly successful in her claim, notwithstanding that she did not achieve the result for which she contended in her statement of claim. 78The appellant also complained that the effect of all his Honour's orders, including the costs order, is that the appellant will have a nil result in the proceedings, in the sense that by the time he pays the costs, the value of the adjustment made in his favour will be totally eroded. The appellant submitted that the appropriate order that should have been made in respect of the proceedings at first instance, even if this Court did not disturb his Honour's order, was that each party pay his and her own costs. 79One of the difficulties in the Court now determining the question of costs is that it appears the respondent made a Calderbank offer in respect of the trial proceedings: see Calderbank v Calderbank [1975] 3 All ER 333. The trial judge was not informed of that, the respondent taking the view, apparently, that it was not necessary, having regard to the outcome. The respondent also made an offer in respect of the appeal. Accordingly, I will defer proposing any order as to costs until those offers have been considered. I would only wish to add that in proceedings under s 20, an order that one party pay the costs is not always an appropriate exercise of discretion: see Dunstan v Rickwood (No 2) [2007] NSWCA 266; Hayes v Maquis at [14] and [145]. 80Accordingly, I would propose the following orders:

Appeal against orders (1) and (2) made by McLaughlin AsJ on 24 March 2010 dismissed;
Further to order (1) made by McLaughlin AsJ on 24 March 2010 order that: (a) simultaneously upon payment to the plaintiff by the defendant of the sum of $160,000, the plaintiff transfer to the defendant her right, title and interest in the property situated at Quinalup Street, Gwandalan and the defendant cause the discharge of the mortgage to the Westpac Bank; (b) the defendant indemnify the plaintiff in respect of her liability under the Westpac mortgage on and from 24 March 2010;
Stand over the final determination of the appeal against order (3) in respect of the costs of the proceedings at first instance made by McLaughlin AsJ pending the parties making further submissions thereon;
Stand over any order as to the costs of the appeal pending the parties making further submissions thereon;
Direct the respondent to file any written submissions in respect of costs of the proceedings at first instance and on appeal within 14 days of today's date;
Direct the appellant to file any submissions in reply within 14 days of receipt of the respondent's submissions. 81McCOLL JA : I agree with Beazley JA's reasons and the orders her Honour proposes. 82MACFARLAN JA : For the reasons that her Honour gives, I agree with Beazley JA that the appellant did not establish that the primary judge made any error of fact or principle that would justify this Court interfering with his Honour's exercise of discretion. As the parties adopted an agreed position as to the effect of the orders that the primary judge made, I make no comment as to that matter. I agree with the orders proposed by Beazley JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 July 2011

(1990) 13 Fam LR 688

(1998) 23 Fam LR 716

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