AB & GB (No.2)
[2005] FMCAfam 402
•15 August 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| AB & GB (No.2) | [2005] FMCAfam 402 |
| FAMILY LAW – Property – contributions – damages – gambling losses – waste – add backs – discussion Kowaliw principle – Kowaliw is not a fixed code – even if it does not involve wasted economic consequences of a significant reduction in the asset pool must be considered – whether lost funds should be notionally added back applying Townsend principle or addressed pursuant to s.75(2)(o) – where the asset pool has been seriously depleted it may only be by giving premature distribution its full dollar value that justice can be given – premature distribution concept is not restricted to post separation transactions – future needs. |
| Family Law Act 1975 Child Support (Assessment) Act 1989 Family Provision Act1982 (NSW) |
| In the Marriage of Lee Steere (1985) FLC 91-626 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Clauson (1995) FLC 92-593 Biltoftv Biltoft (1995) FLC 92-614 Russell v Russell (1999) FLC 92-877 Coghlan (2005) FamCA 429 Hickey and Hickey and AG for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 Kowaliw (1981) FLC 91-092 De Angelis v De Angelis (2003) FLC 93-133 Brown v Green (1999) FLC 92-873 Norbis v Norbis (1986) 161 CLR 134 Townsend v Townsend (1995) FLC 92-569 Bell v Bell [2000] FamCA 1301 (unreported) Marker [1998] FamCA 42 Cerini [1998] FamCA 143 Chorn v Hopkins (2004) FLC 93-204 Antmann (1980) FLC 90-908 Kennon (1997) FLC 92-757 G and G [2001] FamCA 1138 (unreported) Williams v Williams (1985) 9 FLR 789 Griffiths v Kerkemeyer (1977) 139 CLR 161 Aleksovski (1996) FLC 92-705 Black and Kellner (1992) FLC 92-287 Tomasetti (2000) FLC 93-023 Anthony Dickey QC “A new concept in property proceedings: notional property” (1996) 70 ALJ 805 Justice Boland “Trends in the Full Court: Recent cases” 9th Australian Family Lawyers’ Conference, Sabah 11-13 June 2005 |
| Applicant: | AB |
| Respondent: | GB |
| File Number: | PAM 2374 of 2004 |
| Judgment of: | Ryan FM |
| Hearing dates: | 19 May & 7 June 2005 |
| Date of Last Submission: | 7 June 2005 |
| Delivered at: | Wollongong |
| Delivered on: | 15 August 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr A. Givney |
| Solicitors for the Applicant: | Caldwell Martin & Cox |
| Counsel for the Respondent: | Mr P. Henness |
| Solicitors for the Respondent: | R J Russell Solicitors |
ORDERS
The orders made 26 May 2005 are discharged.
Unless contracts for the sale of the property at Claymore, being the whole of the land in Folio Identifier 4047/787071 have been exchanged the wife is appointed trustee for the sale of this property and in respect of such sale the following conditions shall apply:
(a)If the husband has previously executed a sales agreement with a real estate agent, which agreement is operative, the property shall continue to be placed in the hands of this real estate agent until the agreement expires or the property is sold, whichever first occurs.
(b)In the event that the contracts for sale of the property have not been exchanged during the term of any selling agreement executed between the husband and a real estate agent upon expiration of the selling agreement, the wife may list the property for sale with a real estate agent of her choosing.
(c)The parties shall agree on the sale price.
(d)If within seven (7) days of these orders, the parties are unable to agree on the sale price, then the parties shall be bound by the assessment of E. F. Hoskins & Associates of the sale price.
(e)Unless the parties agree to reject an offer to purchase above $310,000, the wife shall promptly accept any offer to purchase the property at $310,000 or the sale price determined in accordance with Orders 2(c) or 2(d).
(f)The wife shall keep the husband, via his solicitors, informed of all key steps of the sale.
(g)Caldwell Martin and Cox are appointed to complete the legal matters associated with the sale.
Upon the completion of the sale of the Claymore property, the proceeds of the sale shall be applied as follows:
(a)To pay all costs, commissions and expenses of the sale and to pay any council and water rates and maintenance levies outstanding in respect of the matrimonial home.
(b)In discharge of ANZ registered mortgage number 9714534 secured against the Claymore property;
(c)In discharge of ANZ registered mortgage number 9714509 secured against the Kearns property.
(d)An amount equivalent to fifty percent of the selling costs shall be paid to the wife together with reimbursement of any funds she has paid towards the properties sale. The amount paid to the wife pursuant to this order shall not exceed 100% of the actual selling costs.
(e)The amount needed to reimburse the wife for any adjustments made as a consequence of the husband’s failure to pay rates and mortgage instalments from the date of these orders. The intent of this order is that from the date of these orders the husband pays all outgoings associated with Claymore and if he does not the wife is paid the adjustment needed to protect her from the financial consequences of his default.
(f)Balance then remaining, if any, shall be distributed equally between the parties.
In the event that the Claymore property has not been sold within three (3) months from the date of these orders then the husband and the wife shall make all such arrangements and do all such acts and sign all such documents and the husband shall pay all monies necessary to procure a sale by public auction of the property upon the following terms:
(a)The auctioneer shall be a real estate agent nominated by the wife;
(b)The reserve price shall, unless agreed upon by the parties, be as proposed by the auctioneer.
(c)The auction will take place within six (6) weeks of this order becoming operative.
Each party has the right to bid at the auction.
In the event that the husband fails to pay the auction costs in advance, the wife may make these payments on his behalf which payments shall be reimbursed to her from the husband’s share of his entitlement pursuant to these orders.
Until completion of the sale of the Claymore property, the husband has the right to occupy the property to the exclusion of the wife subject to the husband keeping the property tidy, clean and in repair, having regard to its present condition and permitting inspection by agents and prospective purchaser’s at all reasonable times.
Pending settlement of the sale of Claymore the husband shall pay the council and water rate instalments; household building and contents insurances and repayments in respect of any mortgage secured on the property as they fall due.
If the husband fails to pay outgoings as required by Order (8) above from the husband’s entitlement pursuant to these orders, the wife shall receive an amount equivalent to fifty percent of the amounts levied but not paid by the husband.
Within three (3) months of the date of these orders or simultaneously upon settlement of Claymores’s sale, whichever is the later, the wife shall pay to the husband the sum of one hundred and twenty three thousand five hundred dollars ($123,500) less any reimbursement to which the wife is entitled to pursuant to these orders and any balance outstanding (following Claymore’s sale) to the ANZ Bank pursuant to its mortgages secured against Claymore and the former matrimonial home.
Simultaneously upon compliance by the wife with Order 10 the husband shall do all acts and execute all documents as are necessary to transfer to the wife the whole of his right, title and interest in the property situated at Kearns in the state of New South Wales being the whole of the land in Certificate of Title Folio Identifier 40/830587.
In the event the wife fails to comply with Order 10 the parties forthwith do all such acts and execute all such documents as may be required to effect a sale of the former matrimonial home situated at Kearns in the state of New South Wales to be sold by private treaty at a price agreed upon between the parties and failing such agreement to be determined by the President of the Australian Property Institute of New South Wales or his nominee.
Upon the completion of the sale proceeds of the sale be applied as follows:
(a)To pay all costs, commissions and expenses of the sale and to pay any council and water rates and maintenance levies outstanding in respect of the matrimonial home.
(b)The amount outstanding to the ANZ Bank (if any) pursuant to its mortgages secured against the property and/or the Claymore property.
(c)To the wife an amount needed to pay her entitlement pursuant to these orders.
(d)Balance to the husband.
Unless otherwise specified in these orders:
(a)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the banks’ record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof and superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements.
(b)Each party is solely liable for and indemnifies the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
Until further order both parties are restrained from selling or attempting to sell, disposing or attempting to dispose, mortgaging or attempting to mortgage, charging or attempting to charge the properties at Claymore and Kearns.
In relation to the sale of the Claymore property, in the event the husband fails, refuses or neglects to sign any deed, document or instrument necessary to give effect to the orders for its sale and discharge of mortgages, then pursuant to s.106A the wife is hereby appointed to execute all deeds, documents and instruments in the husband’s name and to do all such acts and things necessary to give validity and operation to such deeds, documents and instruments.
Before exercising her authority pursuant to the order above, the wife shall give the husband:
(a)Copy contract for sale;
(b)Copy authority to list for sale by auction;
(c)Copy settlement instructions;
(d)Copy memorandum of transfer.
Subject to Order 17 in the event either party fails, refuses or neglects to execute any deed, document or instrument necessary to give effect to these orders, then pursuant to s.106A, a Registrar or Deputy Registrar of the Federal Magistrates Court of Australia is hereby appointed to execute all deeds, documents and instruments in the name of the defaulting party and to do all such acts and things necessary to give validity and operation to such deeds, documents and instruments.
Both parties have liberty to apply in relation to the sale of the Claymore and Kearns properties on seven (7) days notice.
All exhibits tendered in these proceedings be returned at the expiration of one (1) calendar month unless an appeal is lodged.
The solicitor who issued any subpoena collects that subpoenaed material and returns it to the owner within seven (7) days.
Subject to any applications for costs all outstanding applications are dismissed.
Any costs application must be made within twenty-eight (28) days by arrangement with my associate.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT parramatta |
PAM 2374 of 2004
| AB |
Applicant
And
| GB |
Respondent
REASONS FOR JUDGMENT
These are proceedings for the adjustment of property pursuant to s.79 of the Family Law Act 1975. When the initial application was filed the court was asked to deal with both children and property issues. The children’s issues were resolved and consent orders made on 5 August 2004. The parties resolved that the two children of the marriage, Bethany (not her real name), born in 1997 and Alexander (not his real name), born in 2000 reside with the wife and have regular weekend and holiday contact with the husband.
The applications
AB “the wife” initiated the proceedings with her application filed in this court on 7 May 2004. The property component of this application sought that the matrimonial property be divided so that she retained the matrimonial home (where she and the children reside) and relinquished her interest in the parties investment property at Claymore (where the husband resides). Each party would thereafter be exclusively responsible for all liabilities attached to the property they receive. Additionally the wife sought $150 per week spouse maintenance, a claim she later abandoned. By her amended application filed on
22 December 2004, the wife merely sought orders that the husband gives discovery. In her counsels closing address it was submitted the wife should receive fifty five per cent of the asset pool to the husband’s forty five per cent. This outcome was to be achieved by selling Claymore, the wife retaining the former matrimonial and paying the husband an adjusting amount, calculated by reference to the asset pool.
GB “the husband” filed his Response on 23 July 2004. The husband sought orders for the sale of the former matrimonial home and an equal division of its sale proceeds. Subject to this adjustment he proposed the parties keep all other assets and carry responsibility for associated liabilities in their respective names. At trial the husband sought orders for the sale of the former matrimonial home and an investment property, with the net sale proceeds divided sixty per cent to the husband and forty per cent to the wife.
Short history
The applicant wife was born in 1971 and is 33 years old.
The respondent husband was born in 1970 and is 35 years old.
The parties commenced cohabitation in 1991 and married in 1994.
In 1996, the parties purchased the former matrimonial home at Kearns. This was acquired using the parties apparently modest savings and borrowed money.
Later that year, or in 1997, the parties purchased an investment property at Rosemeadow, apparently acquired using entirely borrowed funds. This property was rented out.
Their first child, Bethany was born in 1997 and is 8 years old.
The parties separated for the first time during January 2000. At separation the husband moved into rented accommodation at Mount Annan. Although separated, as the parties were contemplating reconciliation they saw each other frequently.
On 14 February 2000 the wife applied to the Child Support Agency for the administrative assessment of child support payable by the husband. I accept she would only have applied if the parties had separated. Thus I reject the wife’s evidence the parties first separated on 18 September 2002. Their pattern of separation and reconciliation started much earlier.
In May 2000 the husband suffered a serious back injury at work. After a period in hospital he returned to live in the former matrimonial home. Although the husband suggests differently I am satisfied the parties reconciled. From the time of his injury until settlement of his Workers Compensation claim, the husband received $360 per week workers compensation.
Alexander was born in 2000 and is 4 years old.
On 8 August 2001 the Child Support Agency issued an assessment requiring the husband to pay $212.42 monthly child support. It appears this coincides with another separation.
The Rosemeadow investment property was sold in December 2001. After paying selling costs and discharging the mortgage the parties each received $21,000. As they were separated the monies were paid into their individual bank accounts and applied to each parties necessary living expenses.
On 6 May 2002 the husband received $423,370.60 Workers Compensation payout, which monies he paid into the parties joint Endeavour Credit Union account. From these funds $176,206 was paid to discharge the National Australia Bank mortgage on the former matrimonial home. By this payment the former matrimonial home was unencumbered. Relevantly, $145,078 was transferred to the husband, giving him a current working balance of $160,000. One of the key issues in this matter concerns the subsequent disposition of these savings.
The parties separated again on 18 September 2002 and have not resumed cohabitation.
On 28 November 2002 the parties entered into a child support agreement covering 31 January 2003 and ending 31 January 2005. By this agreement the husband agreed to pay $700 per term for the children’s attendance at a local Anglican Primary School in return for which his periodic payments reduced by half.
On 10 June 2003 the husband purchased the Claymore property. This property was purchased in his sole name with money borrowed from the ANZ Bank. The purchase price was $295,000. Because he borrowed $310,000 the bank required collateral security. After the husband promised her he would pay all outgoings associated with the Claymore property, at his request the wife agreed to offer the former matrimonial home as collateral security for the Claymore mortgage, and signed a guarantee with the ANZ for the full extent of the advance.
On 30 September 2003 the husband started a contract driving business with Coles Myers.
In January 2004 the husband stopped paying the ANZ mortgage. As at 2 February 2004 the amount owing to the ANZ bank was $308,390. The husband has not paid any mortgage instalments since. The ANZ bank served the husband with a notice of demand on about 25 November 2004. He first spoke with a bank officer concerning his financial difficulties in early 2005.
On 9 March 2005 the ANZ bank issued a statement of claim against both parties claiming repayment of the entire sum. At this stage the amount owing under the mortgage was $325,633.05.
Notwithstanding the wife’s status as a guarantor, the ANZ Bank failed to notify the wife that the mortgage had fallen into arrears until she received a notice of demand under the guarantee dated 20 January 2005. She was served with a statement of claim on 14 March 2005. At about the same time the husband was also served with a statement of claim. The husband made no attempt to resume paying the mortgage, come to an arrangement with the mortgagee or list the property for sale. Thus the amount due to the ANZ Bank continued to climb.
Because the wife wished to examine the husband’s workers compensation file the hearing was not finalised in the allocated time. At the end of the first day the wife sought orders for Claymore’s sale, which application the husband opposed. In the event I delivered judgment on 25 May 2005 ordering its sale. The orders made are set out below:
1. Pending further order the husband shall do all acts and things necessary to sell the property at Claymore (“the property”) and in respect of such sale the following shall apply:
(a) The property shall be forthwith placed in the hands of a Robert R Andrew Agents of Campbelltown;
(b) The wife shall be kept informed of all steps of the sale;
(c) The wife shall agree with the sale price;
(d) If the parties cannot agree on the sale price for longer than seven days then the parties shall be bound by the assessment of E. F. Hoskins and Associates to the sale price;
(e) The husband and wife shall forthwith advise the ANZ Bank of these orders;
(f) The husband shall do all things to facilitate the sale;
(g) Ray Russell is appointed solicitor having carriage of the sale;
2. Upon sale the proceeds shall be paid as follows:
(a) In payment of agent’s commission and legal fees occasioned by the sale;
(b) In payment of the balance to the ANZ Bank.
The evidence
The wife relied upon the following:
· Her Application filed 7 May 2004.
· Her Affidavit filed 1 May 2005
· Her Financial Statement filed 1 May 2005 and her oral testimony.
The husband relied upon the following:
· His Response filed 23 July 2004.
· His Affidavit filed 22 April 2005.
· His Financial Statement filed 22 April 2005 and his oral testimony.
Both parties tendered documents.
Relevant law – property
The approach to the determination of an application under s.79 is well established by authority: See In the Marriage of Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-593. The process involves a multiple part procedure. Firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing. Biltoft and Biltoft (1995) FLC 92-614. Secondly, evaluating the contributions made by the parties as defined in s.79(4)(a) to (c) and the effect of any proposed order upon the earning capacity of either party. I must then evaluate the matters contained in s.75(2) insofar as they are relevant; any other order made under the Act affecting a party or child; and any child support under the Child Support (Assessment) Act 1989 that a party to the marriage is to provide or might be liable to provide in the future for a child to the marriage.
In determining what order should be made under s.79, the court must be satisfied in all the circumstances that it is just and equitable to do so: s.79(2). It is the justice and equity of the actual orders that the court must consider: See Russell v Russell (1999) FLC 92-877.
The court reserved its decision on 7 June 2005. The same day the Full Court delivered judgment in Coghlan (2005) FamCA 429. In this judgment the Full Court discusses the relevant provisions of Part VIIB including the manner in which a court should formulate the asset pool. Specifically, whether the court should effectively adopt a two pools approach, one for s.4(1) property and a separate pool for superannuation. Concerning the different approaches, the majority held:
“Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the Court to conclude that this would be an appropriate approach.
The parties’ contributions to all items on that list (including the superannuation interest) would then be assessed on either a global or an asset by asset basis. It might then be necessary in the s 75(2) context to have regard to the parties’ future superannuation entitlements (having regard of course to any division proposed on the basis of their contributions), with consideration then being given to the overall justice and equity of any proposed award or order (including any proposed splitting order). Indeed, this is the approach which the Full Court has used on its re-exercise of the trial Judge’s discretion in Ilett and Ilett (which will be delivered contemporaneously with the decision in this case).
However, given the conclusions we have reached above, we consider that the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s 4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise). This of course is the approach which the trial Judge adopted in this case.
Then for the reasons we earlier gave, whether or not a splitting order is sought on either party’s application, the parties’ contributions to both the property (as defined in s 4(1)) and also to the superannuation interests should be assessed. The other factors in s 79(4)(d), (e), (f) and (g) would then need to be considered. Specifically in the context of s 79(4)(e), that is the s 75(2) factors, any division of the property (as defined in s 4(1)) and any “division” of any superannuation interest (in the sense of an allocation of the base amount) based respectively on the assessments of the parties’ contributions to the property and to any superannuation interest, would then be considered. Similarly, the parties’ future superannuation prospects (be they in capital or income form) would also need to be considered. The overall justice and equity of the ultimate award (including any proposed splitting order or the need for such an order) would then be considered.”
Following Coghlan neither party sought to list the matter. At trial it was agreed the superannuation would included as an asset and submissions were made on a global basis, concerning superannuation and non superannuation assets. Basically following the approach suggested in Hickey and Hickey and AG for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143. Provided the court does not overlook particular evidence concerning contributions to superannuation, it seems to me justice is done adopting a hybrid approach. Clearly delineating superannuation and non superannuation interests in the first step and then completing the balance of the stages using a global approach. Maintaining a separate pool when the court comes to consider s.75(2) and s.79(2) is complicated and in my view fraught with the risk of injustice, both as to double counting financial contributions and undervaluing homemaker and parent contributions. It is for this reason hitherto one sees an asset by asset approach rarely adopted and usually only where contributions are predominately financial and s.75(2) considerations do not result in further adjustment. Thus while I feel I must depart from the parties agreed pre Coghlan approach to the asset pool, as non financial, s.75(2) and s.79(2) issues loom large in this case, thereafter the matter will be considered on a global basis.
Assets, liabilities and financial resources as at the date of hearing
The parties agree on the value of most of their assets and liabilities.
I find that the assets, liabilities and financial resources as at the date of hearing are as set out in the table below:
| Assets as at the date of hearing | $ |
| Kearns Property (Agreed) (Joint) | 300,000 |
| Claymore Property (Agreed) (Husband) | 310,000 |
| Holden Commodore (Agreed) (Wife) | 25,000 |
| Household Contents (Agreed) (Wife) | 5,000 |
| Trucks (Agreed) (Husband) | 45,439 |
| Notional add back gambling losses (Husband) | 80,000 |
| TOTAL ASSETS | 765,439 |
| Liabilities as at the date of hearing | |
| Selling costs of Claymore (Agreed) (Husband) | 11,000 |
| ANZ Bank (Agreed) (Joint) | 334,000 |
| ANZ VISA - Husband (Agreed) | 9,000 |
| ANZ VISA - Wife (Agreed) | 5,000 |
| Coles Myer – Husband (Agreed) | 2,000 |
| Coles Myer – Wife (Agreed) | 1,500 |
| Esanda Finance – Husband (Agreed) | 45,439 |
| Esanda Finance – Wife (Agreed) | 25,000 |
| TOTAL LIABILITIES | 432,939 |
| TOTAL non superannuation assets | 332,500 |
| Superannuation assets | |
| Superannuation (Agreed) (Husband) | 17,500 |
| Total superannuation assets | 17,500 |
| TOTAL ASSETS | 350,000 |
Virtually all liabilities have been incurred since separation. Nonetheless the parties agree theses liabilities should be included when determining the asset pool.
As already alluded to, one of the key issues concerns whether the court should notionally add back a significant portion of the husband’s savings. It is the wife’s contention that through gambling the husband dissipated the sum of $160,000.00 supposedly invested to provide for the children’s education. There is no suggestion of hidden assets and the wife accepts the husband has spent/lost all funds other than those accounted for. Allowing for the husband’s reasonable personal expenses, the wife asserts that it is appropriate to bring $130,000.00 back into the pool as a notional asset and thereafter treat this as a premature distribution of matrimonial assets which the husband alone enjoyed. If this submission fails the wife claims a greater s.75(2) adjustment.
The husband’s bank statements from the Australian National Credit Union from 23 May 2002 to November 2003 make up annexure K of his affidavit. These statements show a consistent pattern of withdrawals at club and hotel ATM machines. On many days there are numerous withdrawals from clubs and hotels, a pattern the husband agrees indicates he was gambling. In annexure S of the wife’s affidavit she provides a summary of this style of withdrawal spanning from 24 May 2002 to 20 November 2003 totalling $91,770.00. The husband opposes the notional add back and says the wife’s approach ignores she used a significant share of these funds as well as his reasonable living expenses. Essentially he says they gambled together and the amounts lost gambling are in any event relatively modest.
Treatment of economic consequences of gambling losses
In considering the approach the court should take in dealing with wasted income or assets the court must consider:
a) Have assets or income been wasted, that is lost from the asset pool?
b) If lost from the asset pool, should the loss be notionally added back into the asset pool?
c) Alternatively should the loss be taken into account pursuant to s.75(2)(o)?
d) If wasted, is this loss attributable to one or both parties?
e) Having determined the reason for the loss, the loss may be treated as a premature distribution of matrimonial assets by the party responsible for the loss.
The purpose of the following discussion is to ascertain whether the court should notionally add back the lost funds, deal with the issue pursuant to s.75(2)(o) or adopt another course if this is the only way to deliver a just and equitable outcome. Although I may not always agree with him, the wife’s counsel made useful submissions concerning relevant cases and applicable law. Unfortunately, although the husband’s counsels case outline document indicated he would assist the court with analysis of relevant cases, this assistance was not forthcoming.
Turning first to the question of whether wastage has occurred. In Kowaliw (1981) FLC 91-092 the husband allowed prospective purchasers of the matrimonial home to occupy the home rent free for 12 months, that is twelve months lost income. Baker J took the position that marriage, for most couples, is an economic partnership. As a statement of general principle Baker J found that financial loss incurred by the parties in the course of the marriage, whether or not a joint liability, should be shared between them except in the following circumstances:
i)where one of the parties embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
ii)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.[1]
If the losses had been suffered by the parties in the course of the pursuit of the objectives of the marriage, for example gaining income and/or assets, then such losses should be shared by the parties although not necessarily equally. Relevantly Baker J held this issue should be considered under s.75(2)(o).
[1] At 76,644
In De Angelis v De Angelis (2003) FLC 93-133 the Full Court considered the treatment of gambling losses where gambling is identified as a “condition” and also whether losses should be dealt with as any other form of entertainment. The trial judge found that the wife had gambled away $90,000 in marital property to which each party had contributed and dealt with this loss under s.75(2). At trial and on appeal the wife claimed that her gambling losses were not “negligent, reckless or wanton” as required by Kowaliw to constitute waste, but rather due to her condition caused by her husband’s treatment of her. The Full Court agreed with the trial judge’s decision in not excusing the wife’s gambling losses because of her apparent condition. The wife also maintained that the court should treat gambling as it would any other form of entertainment, for example the husband’s golf. The Full Court found that while for some people gambling is a form of entertainment and should attract no more comment than say, golf, the families circumstances are relevant. In the circumstance of this case, specifically the limited assets of the parties, the wife’s losses were reckless and a relevant s.75(2)(o) consideration which counted in the husband’s favour as waste occasioned by the wife.
Kowaliw has received widespread appellate support. In Brown v Green (1999) FLC 92-873 the Full Court considered whether the quarantining of losses from the parties’ failed business as a loss absorbed by the husband was manifestly unjust. The trial judge determined that the husband should bear full responsibility for the losses incurred by the business because the husband alone initiated the venture and had control over it. There was no suggestion of recklessness on his part nor a course of conduct designed to reduce the asset pool. Essentially this case involved a promising business venture which went sour. The Full Court considered whether Kowaliw espoused a rule of general application or is merely a guideline. The Full Court agreed with the trial judge that the principle in Kowaliw does not form a fixed code, but should be used as a guideline. The Full Court cited with approval comments made by Nicholson CJ and Fogarty J in Townsend v Townsend (1995) FLC 92-569 that Kowaliw should not be used to define the parameters of considerations to be applied in all cases involving waste. On the back of Norbis v Norbis (1986) 161 CLR 134, the appellate court found that the trial judge had not explained to their satisfaction why she considered that the circumstances of this case warranted departure from the Kowaliw principle. In placing the full burden of the loss on the husband, the trial judge had made orders which were manifestly unjust.
The issue of whether the loss should be notionally added back into the asset pool or constitutes a s.75(2) factor is quite complex. In Townsend the Full Court determined that the wasted property should be notionally added back to the pool of assets. Simply put, after separation the husband sold the parties most valuable asset, a taxi which sold for $148,000.00. The husband had had the benefit of the money from the taxi and none of the sale proceeds remained. The court found that selling the taxi was a premature distribution of marital property and thus it would be unjust in the extreme to merely treat such conduct by the husband as a matter under s.75(2). The taxi, if it was retained would have been brought into account as any other item of marital property. The Full Court determined the taxi should be brought, “into the pool of assets on a notional basis and make a distribution accordingly.”[2] Anthony Dickey QC raises some of the problems of the notional add back approach in Townsend in his article, “A new concept in property proceedings: notional property” (1996) 70 ALJ 805. Dickey points out that in notionally adding back the money, their Honours infer that the money should be accounted for not in a general way but on a dollar for dollar basis. What concerns Dickey is that their Honours offered no guidance as to when this approach should be taken. Dickey points out that the concept of notionally adding back assets is not novel, citing as an example the Family Provision Act1982 (NSW). However the Family Provision Act1982 (NSW) contains provisions as to when money should be notionally added back, whereas the Family Law Act1975 specifies no such provisions. Hence the necessity for appellate direction. Dickey suggests that the notional add back approach should be used when formerly owned property has been unreasonably disposed of after separation but acknowledges that there is no authority confirming this reasoning.
[2] at 510
In Bell and Bell [2000] FamCA 1301 (unreported) the Full Court makes it clear that notional adjustments are not limited to wasted assets but may also include “identified items of property that have been bona fide disposed of”. Also that “It may also be appropriate, depending on the circumstances, to notionally include in the pool of assets items of property in respect of which no or no reasonable explanation has been given for the assertion that they no longer exist or never existed: Mezzacappa and Mezzacappa (supra). In other words, it is also possible, in appropriate cases, to have regard to, and notionally include in the list of assets, what is called unascertained property the value of which is capable of some identification and quantification. In this case, the trial Judge notionally included in the pool of assets items that were capable of identification and quantification. However, he also found that there were other assets the identity of which was not known but for which an adjustment should be made in favour of the wife. There is no doubt that such a finding is open to a trial Judge.”
The Full Court has been reluctant to notionally add back assets where monies that existed at separation have been spent on reasonably incurred living expenses. Parties are entitled to continue to provide for their own support. In Marker [1998] FamCA 42, Baker, Kay and Chisholm JJ held: “It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s.79. (Wells v Wells (1977) FLC 90-285; Wardman v Hudson (1978) FLC 90-466; In the Marriage of Geyl 7 Fam LR 219). However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC 91-092; Fane-Thompson v Fane-Thompson (1981) FLC 91-053; Winnel v Winnel (1984) FLC 91-580; Townsend v Townsend (1995) FLC 92-569; Doherty v Doherty (1996) FLC 92-652.”
In Cerini [1998] FamCA 143, the Full Court held, where the monies have been shown to have been reasonably disposed of, the notional add back approach should be the exception and not the rule.
Areas where notional add backs commonly arises concerns treatment of paid legal fees. This issue was recently considered by the Full Court in Chorn & Hopkins (2004) FLC 93-204. Writing ex judicially Justice Boland[3] said “The principles which emerge from the Full Court’s review of previous decisions can be summarised as follows:
·Monies reasonably disposed by a party in the conduct of their post-separation lives should not usually be added back.
·The treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge.
·In determining how to exercise that discretion, regard should be had to the source of funds.
·If the funds used existed at separation and are such that both parties can be seen as having an interest in them (on account, of contributions) then such funds should be added back as a notional asset of the party, who has had the benefit of them.
·If the funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example,: by way of gift or inheritance), they would generally not be notionally added back as a notional asset; nor would any borrowing undertaken by a party post-separation for payment of fees be taken into account as a liability in the calculation of the net property of the parties.
·Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
·Outstanding legal fees themselves are generally not taken into account as a liability.
·If in the exercise of discretion it is determined that legal fees already paid should be taken into account as notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.”
[3] 9th Australian Family Lawyers’ Conference, Sabah 11-13 June 2005 “Trends in the Full Court: Recent cases”
The key factors that appear to have general application are the emphasis on the source of the funds. That is were the funds received through one parties efforts alone or in his or her own right, whether the funds disposed of came from assets in which both parties had an interest and whether the funds were acquired pre or post separation. Underpinning all of this is the general notion that paying legal fees is reasonable. This case is not concerned with the issue of notionally adding back assets or income lost unreasonably or wasted.
In contrast to the notional add back approach in Townsend there are numerous decisions where wasted assets and any consequences are considered under s.75(2)(o).
In Antmann (1980) FLC 90-908 the husband had, during separation, closed the doors of the family business resulting in the loss of business income and the ruining of stock. In relation to the business their Honours found that up to the date of closure the business was trading satisfactorily and it was as a result of the husband’s actions that debts were incurred and the stock deteriorated. Counsel for the wife argued that the wife should be compensated for what was called his, “negative contribution”. Their Honours found that there could be no such concept under s.79(4)(a) and (b). Their Honours noted that if the wife had stepped up and began to run the business herself, that would be relevant as evidence of an increased burden on her, but that there was no room for a negative contribution when a party’s passive act causes loss. The wastage of matrimonial assets should be considered as a factor under s.75(2)(o), in cases where there is evidence where the wife has lost as a result of the husband’s actions.
In Kowaliw Baker J considered the decision in Antmann. Baker J found that if there has been a deliberate act or reckless behaviour which has reduced the assets of the parties, then this is directly relevant to s.79(4). Baker J went on to say that if Antmann is to be taken literally and the court is precluded from considering negative contribution under s79(4), then evidence of wantonness and recklessness may be taken into account under s.75(2)(o). The notion of negative contribution was finally put to rest in Kennon (1997) FLC 92-757 a well known case concerning domestic violence.
In De Angelis the trial judge found that the wife had gambled away $90,000 in marital property to which each party had contributed and dealt with this loss under s.75(2). In re-exercising the court’s discretion the appellate court, reaffirmed the use of s.75(2)(o) and ordered the wife to pay the husband an amount constituting half of money which was the parties’ joint money that she has gambled away. This amounted to 50% of $84,220 or $42,110.
A case which draws the issues of waste and notional add backs together is G and G [2001] FamCA 1138 (unreported). In this case, after separation the husband invested $1.8 million in wine, which investment at trial had a value of $1,220,739. The effect of the investment was to reduce the asset pool by $579,261. Counsel for the wife argued that at least the difference between the two amounts ought to have been added back to the asset pool under the Townsend principle. The Full Court noted particular features of the transaction as follows: The investment was made after separation, after the parties had each sought advice on property settlement and on the advice of a financial adviser. The husband was aware that in the short term there would be a significant decrease in the value of the investment and was investing for the long term. His expectation and that of his advisor was that the short-term losses would be significantly outweighed by longer term gains. The trial judge concluded that the investment was appropriate, that is not reckless or irresponsible and not tantamount to waste. Thereafter no further adjustment was made as a consequence of the loss. The Full Court determined this case is not about waste, essentially because the money was not lost and would be returned with a significant profit in the long term. Their Honours concluded that whether or not the removal of $580,000 from the asset pool was a deliberate plan or an unintended consequence of the investment was irrelevant. To deny the wife the right to share in nearly $580,000 which she would have done but for the wine investment, whilst at the same time denying her the opportunity to participate in the investment cannot be said to be just and equitable. The Full Court remitted the matter for re-hearing. However before doing so it held there were a number of ways the economic consequences of the wine transaction could have been taken into account in order to achieve a just and equitable result. “They could have been taken into account in a number of ways, for example: according to the Townsend guidelines; or upon a consideration of the s75(2) factors. Alternatively it was open to his Honour to adjourn the proceedings pursuant to s 79(5).” Presumably to a date when the wine had at least recouped its original investment or its anticipated increased value.
The principles that arise from these cases appear to be the following:
i)The principle in Kowaliw is not a fixed code.
ii)Kowaliw is a useful guideline for dealing with cases involving lost assets or income.
iii)In cases involving waste there must be a proper reason for adopting a non Kowaliw approach.
iv)If the losses occurred in the course of the pursuit of the objectives of the marriage then such losses should be shared by the parties although not necessarily equally.
v)The economic consequences of waste must be dealt with in a just and equitable manner.
vi)The economic consequences (loss) may be treated as a premature distribution of the asset pool and notionally added back as the asset of the party who had its sole benefit.
vii)Taking the premature distribution into account in a general way pursuant to s.75(2)(o) and applying the cumulative outcome of the s.79(4) and s.75(2) findings to the smaller depleted asset pool may offend s.79(2) notions of justice and equity.
viii)Where the asset pool had been seriously depleted it may be that only by giving the premature distribution its full dollar value that justice can be given.
ix)The premature distribution concept is not restricted to post separation transactions.
x)Where the monies have been shown to have been reasonably disposed of the notional add back approach should be the exception and not the rule.
xi)Notional adjustments are not limited to wasted assets but may also include property that has been bona fide disposed of.
xii)The source of the funds is relevant.
xiii)Notionally included assets may include unascertained assets, even if the precise value is not known.
xiv)Even if does not involve waste, the economic consequences of a significant reduction in the asset pool must be considered.
When the husband injured his back, the parties had been separated for approximately four months. Although separated, they saw each other daily and in many respects their marital relationship continued. After the husband was injured, the person he first turned to for support was the wife. She responded positively to his plight and visited regularly whilst he was in hospital. Upon his discharge from hospital the husband returned to live in the former matrimonial home. Because of the seriousness of his injury, the husband was unable to work, care for the children or the home or contribute in a meaningful way to the welfare of the family. Following his return to the home, the wife was overwhelmingly responsible for the children’s care as well as the husband’s. Because the husband was unable to drive the wife drove him to and from regular doctor’s and physiotherapist appointments. The husband attended physiotherapy or his doctor no less than fortnightly. On his discharge from hospital, the husband wore a brace for approximately 3-6 months. He underwent further surgery about one and a half to two years after the accident. Not surprisingly, given the seriousness of his injuries, the husband suffered depression and took prescribed antidepressants. From his $360 per week workers compensation benefits, the husband paid the wife $260 and retained $100 for his own expenses. During this period the parties’ financial circumstances were parlous. In 2001, the wife cashed in her Mercantile Mutual superannuation entitlements on hardship grounds, from which she received approximately $5,500. The whole of this amount was spent on reasonable household expenses.
It appears the parties separated in about August 2001 and remained separated until early 2002. When they resumed cohabitation the husband was still substantially reliant upon the wife’s care and because of his injuries was unable to contribute in any real way to the day to day tasks involved in running the home and caring for the children.
When the husband received his workers compensation payout in May 2002 the parties were living together. Because the husband’s claim settled, there was no apportioning of pain and suffering, loss of income and future needs components in the settlement. However, the sheer size of the settlement, the husband’s hospitalisations including surgery and medical treatment suggests that a reasonable portion of the settlement probably related to pain and suffering, a modest portion for lost income during the period between injury and settlement and the balance, probably the greatest single component related to his future needs. As Williams v Williams (1985) 9 FLR 789 makes clear, a compensation payment is property to be dealt with under s.79. There is no general presumption that the portion of a damages award representing pain and suffering should be left out of account in determining what order should be made under s 79. It seems likely that the husband’s claim included a modest Griffiths v Kerkemeyer (1977) 139 CLR 161 component (that is the voluntary domestic services component). However, because I do not have evidence concerning the components of the settlement it seems to me that it is proper to apply the principles in Aleksovski (1996) FLC 92-705 to the settlement. In a joint judgment, Baker and Rolands JJ held as follows:[4] “In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution by the party who suffered the injury. It should not be considered in isolation for the reason that each and every contribution, which each of the parties makes to the relationship must be weighed and considered at the same time”. Justice Kay, the third member of the Full Court in Aleksovski did not disagree with this statement of principle.
[4] At 83 437
It follows that the husband alone contributed the overwhelming majority of his settlement monies, with the wife’s contributions to the settlement limited to what can only have been a small Griffiths and Kerkmeyer component. Her contribution to the husband’s care is a different consideration. By the time the husband received his settlement, the wife had made significant financial and non-financial contributions for approximately eleven years. In these circumstances, it is not surprising that, notwithstanding the husband’s overwhelmingly greater contribution to the settlement monies, upon their receipt, the parties jointly planned their family’s future hoping to put the funds to their best use.
As I have already found, when the husband received his settlement on 6 May 2002, he deposited the whole amount, $423,370.60 into the parties’ joint Endeavour Credit Union prime access account. These monies were disbursed as follows:
·Discharge of the mortgage secured on the former matrimonial home $176,206;
·Transfer to the wife’s account $56,441;
·Purchase of a Holden Calais registered in the wife’s name $25,500;
·Memorial at the wife’s mother’s grave $1,920;
·Payment to G E Finance of $12,375.25. This loan related to sundry credit card debts in the wife’s name and consolidation of an earlier car loan also in the wife’s name;
·Local Anglican Primary School $278;
·On 23 May 2002 the account was closed and a cheque drawn in the husband’s favour of $145,078.78;
·The balance of the account was spent on sundries and minor bills.
From the monies transferred to the wife’s account she made the following payments by BPAY:
·Joint NAB bankcard $6,500;
·CBA card in the husband’s sole name $2,700;
·ANZ card in the husband’s sole name $2,300;
·Esanda Finance in the husband’s sole name $4,500;
·$1,506.69 to a travel agent for a family holiday to the Gold Coast;
·$3,019.51 on an HSBC credit card in the wife’s sole name;
·On 27 May 2000 she transferred $15,000 to the husband’s Endeavour Credit Union account;
·The wife used the balance of the funds for day to day living expenses.
Upon the wife’s repayment of $15,000 on 2 May 2002, the husband had $160,000 in Australian National Credit Union Account No. 10586458. This account was in the husband’s sole name. In consequence of the settlement, the husband is ineligible for Centrelink benefits from settlement until 3 December 2009. Thus, the husband either needed paid work to meet his reasonable living expenses or otherwise to live on his investment. The husband told the wife he invested $130,000 in shares, which investment would fund the children’s education. He then consulted a financial advisor on whose advice he invested $80,000 with Questor Financial Services and $50,000 with Colonial First State. The funds invested by Colonial First State were re-credited to the husband’s Australian National Credit Union account between 2 June 2003 and 19 April 2004. As a result of a fall in share prices, he received $46,832.48 return on his original investment. Of the $80,000 invested with Questor the husband received a total repayment of $72,918. These funds were re-credited to the husband’s credit union account between 30 September 2002 and
8 January 2004.
During the period December 2002 through to July 2003 the husband says he loaned the wife $20,200. These payments were made up as follows:
·12 December 2002, $6,000;
·21 February 2003, $1,500;
·1 May 2003, $6,000;
·11 May 2003, $6,000;
·10 July 2003, $700.
The wife agrees she received $6,000 on 12 December 2002 but says this was advance child support. For reasons explained later I accept her evidence. In relation to the remaining four loans, other than the advance made 21 February 2003, the wife agreed to repay the husband by instalments. Something she has not done.
The effect of these transactions (including investment losses) is that of the original $160,000, $135,550 remains to be accounted for. The husband claims that during the period between settlement until approximately December 2004, “I would on average give the wife the following sums, sex twice per week $140; child support weekly $150; poker machines $400”. This is approximately $76,000. The wife denies receiving these monies. She says she abhors poker machines and the husband’s chronic gambling is one of the key reasons they did not reconcile. Whilst she acknowledges receiving occasional child support, the wife denies that she received regular amounts. In furtherance of her claim, she points to a number of receipts she gave the husband acknowledging child support. These receipts, the wife claims, evidence the total child support paid by the husband. The wife was deeply distressed by the husband’s allegation that she charged him $70 for each sexual encounter. As to the latter, unsurprisingly there is no evidence other than the parties’ testimony. This is not a case where I am satisfied either party has been fully frank on every issue with the court. As will become apparent, I am satisfied the husband was not frank in relation to expenditure of funds gambling. Similarly, it is plain the wife attempted to construct her case in the manner which maximised the period of cohabitation and did not reveal separations prior to the husband’s work injury.
If demeanour is the measure of honesty the husband’s quiet determination that he paid his wife for sex was no less compelling than her tears at his allegation. Although the allegation is bizarre, it is not so far removed from the experience of what occurs in family courts that it should be dismissed out of hand. It is consistent with the husband’s depressed passivity and the wife’s forceful personality. It is inconsistent with the wife’s nurture of the husband after his accident and her cooperation with the risky venture Claymore presented. Because I am unable to make generalised findings as to credit, I am satisfied that I cannot positively determine this issue in the husband’s favour. Even on the balance of probabilities the evidence is insufficient to prove his contention.
It is the wife’s evidence that having received $6,000 in December 2002, periodic payment of child support began in about August/September 2004. However, attached to the husband’s affidavit are receipts for periodic child support the wife signed on 26 October 2002, 9 December 2002, 17 November 2002, 5 April 2003, in March and May 2004, 26 April 2004, 1 May 2004, 9 May 2004, 24 May 2004, 31 July 2004 and 21 April 2004. Hence, the wife’s evidence is clearly wrong. Flying in the face of the husband’s claim that his $6,000 payment is a loan is the wife’s acceptance that other payments earlier identified as loans are loans. The wife acknowledged in writing receipt of each sum, on a particular date and the terms for repayment. She signed no similar document in relation to the 12 December 2002 payment. The absence of a written document evidencing the terms of the loan when all other loans are supported by documentation, satisfies me that the $6,000 is advance child support, attributable to periodic child support at $150 per week, the amount the parties agreed the husband should pay. Thus it represents forty weeks child support. This largely explains the absence of receipts for child support throughout 2003. After the forty weeks child support ran out, I consider it more likely than not that the husband paid the wife $150 per week, on average, child support, irrespective of whether the wife provided him with a receipt. In late 2003 the parties’ relationship was convivial and reconciliation remained on the agenda. The wife offered the former matrimonial home as security for Claymore’s purchase and was involved in the establishment of the husband’s business. Although the terms of the loans the husband advanced to the wife required repayment by instalment, notwithstanding that the wife failed to make any repayments, the husband made no issue of it. There is no evidence the wife complained to the Child Support Agency about non-payment or sought to register the child support liability for collection through the Child Support Agency. Combined these factors persuade me that from about October 2003 the husband paid the wife $150 per week child support until about December 2004. Including the $6,000, during this period the husband paid approximately $16,000 child support.
In September 2003, the husband established a business delivering and installing goods for Myers Stores Limited. Because the husband potentially had another source of income from which he could meet his living expenses, it is necessary at this stage to examine the business. After securing the Myers contract in September 2003, the business commenced operations on about 30 September 2003. The wife assisted the husband establish the business in the sense that she did most of the paperwork and running around needed to obtain the business name, an ABN number, with the preparation of business cards, and arranging insurances. Using her ANZ credit card, the wife drew down $2,000 which was paid to the husband so that he could pay some of the businesses start up costs. I infer she did this because she believed the $130,000 invested for the children’s education was still secured for this purpose. In paragraph 15 of her affidavit, the wife details deposits made into the business’ ANZ banking account. For the period
31 October 2003 until 21 February 2005 Myers paid the husband $98,985. This averages $1,374.79 per week for the period
30 September 2003 to 21 February 2005. However, it gives a distorted outcome if one only has regard to the businesses income and ignores its expenses. The husband’s 2004 taxation return is attached to his affidavit. This return shows his total 2004 business income was $64,201, an amount which tallies with the wife’s summary for the same period. The husband claimed expenses totalling $57,457 which gave him a net income from the business of $6,744. In addition the husband says that between November 2003 and February 2004 he paid the wife $300 each week for her work managing the telephones and taking orders. The wife denies this and no mention is made of these payments in the husband’s taxation returns. Particularly because the husband’s taxation returns fails to mention this legitimate business expense I am satisfied these payments were not made. No meaningful challenge was made to the quantum of the husband’s expenses. However depreciation, whilst a legitimate business expense, is not an expense paid from the business’ income. Excluding depreciation, the actual business expenses amount to $51,557. This means that from the business, the husband received a total income of $12,644 from the time of its inception to the end of the 2004 tax year. He was required to pay $126.48 tax which means that the husband received approximately $350 per week from the business between its inception and the end of the 2004 tax year.
Because the wife’s figures for the 2004 tax year match the husband’s taxation return, I am satisfied that the wife’s summary in paragraph 15 is probably correct. Thus, for the period commencing with the 2004 tax year until 11 February 2005 the business earned a total income of $34,784. The husband attributes the reduced income to his inability to use the Rodeo after its motor blew up. He needs between $6-7,000 for repairs to the truck, which money he has not had available. Thus, the business has not performed any work for Myers since 30 March 2005. Regrettably, the husband did not provide evidence of expenses which the business incurred in the 2005 financial year. Whilst the 2004 figures provide a reasonable guide, in that year the business incurred start up costs, for example acquisition of office equipment which are unlikely to have been repeated in the 2005 financial year. I do not know how the 2004 casual wages expenses compare with 2005 figures. As the truck is disabled, the husband has not incurred running expenses to the same extent as when it is operational. However, it is counterintuitive that with considerably less gross trading income the business’ net disposable income improved in 2005 over 2004. Notwithstanding the probable fall in business expenses, it is likely that the significantly lower gross trading income resulted in a considerable reduction in the husband’s income. Averaged throughout the year it seems reasonable to conclude the husband’s income fell by slightly less than half. On this basis the husband earned approximately $200 per week net from the business during 2005. His last payment was received in April 2005. Although these figures are not precise, as the husband has failed in a number of material respects to give full and frank disclosure of relevant financial information, the court need not be overly cautious. See Black and Kellner (1992) FLC 92-287.
After the parties separated in September 2002 the husband lived in rented accommodation at Mount Annan. This is the property he rented when the parties first separated and which he says he maintained after they reconciled. As the husband retained only $100 each week from his workers compensation payments, his rent must have been nominal. In about May 2003 the husband rented a granny flat at Smithfield for which he paid $100 plus utilities. The husband lived at Smithfield until he moved into Claymore. The mortgage repayments on Claymore are $450 per week. Shortly after the husband completed the Claymore purchase he took in paid boarders and paid their board into the mortgage. The husband does not disclose how much he received or account for the use of these funds in any appropriate fashion. Applying Black and Kellner I am satisfied that between June 2003 and January 2004 the board covered the mortgage payments. Relevantly, in paragraphs 39 of his affidavit the husband does not say mortgage payments were paid from his income or savings. As the husband has not made any mortgage payments since January 2004, it follows that the husband’s total accommodation expenses were drawn from his savings from separation until June 2003.
Unfortunately the paucity of evidence concerning the husband’s actual expenses post-separation makes the task of determining his reasonable expenses unnecessarily complicated. The wife’s counsel submitted the court would allow approximately $30,000 for the husband’s reasonable living expenses an amount which is manifestly inadequate. Given the parties’ modest lifestyle, the husband’s regular contact with the children and providing sufficient funds for food, clothing, utilities and reasonable entertainment expenses, a fairer amount is $25,000 annually. This is in addition to the husband’s child support expenses.
In his affidavit the husband says $400 per week was spent ($20,800 annually) on poker machines. With regard to the above analysis, clearly he had sufficient monies remaining for this expenditure. The wife submits this underestimates the monies lost gambling and points to the pattern and volume of withdrawals made at gaming venues apparent from the husband’s bank statements attached to his affidavit. While I accept the husband’s evidence that he withdrew funds for his daily living expenses from these venues, the pattern of withdrawals is highly suggestive that he gambles significant amounts of money. For example, at the Camden Club on 25 May 2002 the husband made six withdrawals ranging between $150 and $200 each. On 19 September 2002 the husband made thirteen withdrawals, twelve of which are $150 and the other $200 at the Kentlyn Hotel. Few occasions are as extreme an example as 19 September 2002. This is the day following final separation and tends to suggest that when the husband is feeling low he finds solace in poker machines. On 16 December 2002 there are four withdrawals from Kentlyn Hotel, three from the same place on
7 January 2003, four from a local Tavern on 18 March 2003, five from the same place on 2 April 2003 and so it goes on. The wife agrees that following separation, and until January 2004, the parties worked towards reconciliation and she often met the husband for lunch at one of the clubs he frequented. Pressed to explain his pattern of withdrawals, the husband explained that when the parties fought or he was, “kicked out of home” he gambled. It is highly unlikely that if the catalyst for gambling was an argument with his wife, that the husband gambled with her. Plainly, the husband does not believe he has a gambling problem and taking responsibility for gambling losses is presently beyond his capacity. I accept the wife’s evidence that she abhors gambling and that she sees the monies lost through gambling as a financial catastrophe. In these circumstances, I am satisfied that the husband alone has wasted a considerable portion of his $160,000. Although the amount lost is not capable of precise calculation, having regard to my findings above I am able to satisfactorily calculate the amounts lost through gambling. Adding the husband’s income of $12,600 (2004) and $8,000 (2005) to the remaining $135,550 gives the husband total cash assets of $156,000. From this I deduct $16,000 child support, $56,000 reasonable living expenses, $3,000 rent and sundry expenses at Smithfield which totals $75,000. Thus, although the husband says about $45,000 was lost gambling, the true figure is in the vicinity of $80,000. This pattern of reckless loss was established prior to separation basically within a few days of the husband receiving his settlement payment. It continued after separation and until the husband’s funds were exhausted. These are parties of modest means and limited income. Neither party could afford the reckless loss of matrimonial assets that the husband’s gambling resulted in. The financial consequences of these losses have been disastrous and are properly categorised as waste. It would be manifestly unjust to require the wife to share the financial losses incurred by the husband’s gambling. The question that then must be answered is whether the losses should be notionally added back or dealt with pursuant to s.75(2)(o). When one has regard to the modest size of the asset pool and its continued diminution by virtue of the manner in which the husband has dealt with the Claymore property, it would be unjust in the extreme to the wife to merely treat the husband’s gambling losses as a matter under s.75(2). Although the husband made the overwhelming contribution of the settlement monies, these funds comprises joint matrimonial assets which the parties realised was probably one of the few opportunities they would have to provide reasonable financial security for the family. In the circumstances justice will best be served adopting the Townsend approach and notionally adding back the gambling losses, and treating the husband as having the sole benefit of a premature distribution of joint matrimonial assets by reference to its full dollar value.
Section 79(4) contributions and other factors
At the commencement of cohabitation the wife had no assets or liabilities of significance. The wife was employed full time at Westpac Banking Corporation as a ledger clerk which employment continued until May 1992. When the parties commenced cohabitation the husband was employed on a full time basis as a crane driver. The husband owned furniture and household goods he says were worth approximately $20,000. Photographs of the interior of the parties’ first home[5] indicate modest furnishings and the husband’s estimate of $20,000 is grossly exaggerated. He owned a 1981 Commodore VC motor vehicle which he says was worth $5,000. The husband did not disclose the car was subject to a $10,000 loan to Custom Credit. Eventually, Custom Credit took legal action and demanded payment of $21,000 which monies were repaid during the marriage. It appears likely that at the commencement of cohabitation the husband’s liabilities exceeded his assets.
[5] Exhibit A
The husband worked as a crane driver with the same employer until his accident in May 2000. As I have already found, he then received Workers Compensation payments until he received his settlement. The wife stopped working for Westpac Bank in May 1992 and then studied for 22 months at TAFE. She supplemented the family’s income through casual work as a waitress. During the period the wife attended TAFE the husband’s income provided the financial mainstay for the family. In August 1994 the wife commenced employment as an account’s clerk with QBE Insurance, which employment continued until she took maternity leave in late January 1997. The wife’s income as an account’s clerk was approximately the same as the husband’s income as a crane driver. The wife returned to work on a part time basis in February 1998, taking weekend work as payroll clerk with Woolworths. She worked in this capacity until March 1999 when she commenced part time work as a teller at the National Australia Bank. The wife worked three days a week with the National Australia Bank for four months. Bethany did not settle into preschool and so the wife stopped work. She resumed paid employment in October 1999 when she commenced part time employment with QBE Insurance. The wife worked with QBE until February 2000. Between February 2000 and Alexanders’ birth in September 2000 the wife did relief telling work with the National Australia Bank. Following Alexanders’ birth the wife resumed relief telling work at the National Australia Bank and Commonwealth Bank, during which times the husband was involved in the children’s care.
Until the husband received his settlement monies both parties contributed all income earned to joint matrimonial purposes. The husband claimed the wife spent $120 each week on cannabis. Both parties used cannabis which they grew in the back garden. Any funds spent on cannabis were modest and in the scheme of this case irrelevant. Because of the husband’s secure employment, the parties were able to acquire the former matrimonial home and pay its outgoings, even while the wife was studying or caring for Bethany. Similarly, the husband’s income supported the investment property at Rosemeadow in the sense that he paid the weekly $120 shortfall between its rental income and outgoings. I infer the investment property was negatively geared and the husband’s losses were offset against his income. Ultimately the investment bore fruit in that the parties received a $42,000 capital gain. Prior to the husband receiving his settlement monies I am satisfied the husband made a significantly greater financial contribution than the wife.
When the husband received his settlement monies, the parties’ financial situation was difficult. I do not have evidence of the value of the former matrimonial home at that time, but it is unlikely the home was worth more than its present value. A reasonable understanding of the parties’ asset position can be gleaned from the manner by which the parties applied the settlement monies. Therefore, it appears that at the date of settlement the parties had the following assets and liabilities:
·The Kearns Property – no more than $300,000;
·Household contents – no more than $5,000;
·Wife’s Ford Laser – $7,000;
·Total assets – $312,000
The parties’ total liabilities paid out from settlement were $207,728, which means their total net non superannuation assets were worth about $104,272.
There is no evidence the husband has contributed to superannuation since his accident and I infer when the husband received his settlement his superannuation was worth $17,500. Even cursory examination of the parties’ then financial position reveals that the husband’s compensation payment had the potential to save the parties from financial ruin. Without his settlement monies, their level of debt had reached such a level that in all likelihood it was only a matter of time before the parties would have been unable to afford to maintain the family home. Ingestion of the husband’s settlement monies is a financial contribution of real significance overwhelmingly contributed by the husband. To a considerable extent, any assets of value which the parties presently have were acquired or retained directly as a consequence of his settlement. Plainly they were living on ever increasing borrowings, something that never lasts indefinitely. Although the asset pool is worth less than the monies received, because I have notionally added back the husband’s gambling losses and am satisfied that the balance of funds have been expended to the betterment of the family or on reasonable living expenses, the husband’s contribution carries great weight. As at the date of hearing the husband’s financial contributions greatly outweigh the wife’s.
Neither party contends that they made significant s.79(4)(b) style contributions. Prior to his injury, the husband maintained the exterior of the family home and was overwhelmingly responsible for the grounds and probably also motor vehicle maintenance. After his accident, because of his injuries the husband was unable to continue manual work at which time the wife assumed responsibility for the exterior of the property. On balance, the husband made a greater contribution to the maintenance of the exterior of the former matrimonial home than the wife. Throughout cohabitation the wife was primarily responsible for maintaining the interior of the home. As at the date of hearing the wife’s s.79(4)(b) non-financial contributions exceed the husband’s.
The wife’s contribution as a home maker and parent is one of the important features of this case. From the commencement of cohabitation the wife was primarily responsible for general home making. With Bethany’s birth she was overwhelmingly responsible for the children’s care and running the family. She agrees that the husband worked hard when employed and it is clear to a considerable extent her efforts freed the husband from substantial responsibility for the home and children, enabling him to pursue his career. Whilst the husband was undoubtedly a loving father, his work limited his time and hence ability to play a meaningful role as a home maker. When he was at home he spent time with the children in play and performed some household duties. When the wife worked on weekends I infer the husband cared for the children. From the time of his accident, the wife’s responsibility for the welfare of the family, including the husband’s welfare, became virtually all encompassing. During this period the husband made little contribution as a home maker and parent and in this regard contributions were largely one way. Although reconciled, the husband maintained the granny flat at Mount Annan for a time and either at the wife’s behest or of his own initiative when everything became too much, he left the family home for days at a time. For these periods the wife’s responsibility for the children was all encompassing. Overall, I am satisfied, that as at the date of separation the wife’s contribution as a home maker and parent to the welfare of the family substantially exceeds the husband’s. Her contribution by virtue of her continued care of the children since separation has continued. The wife’s post-separation contribution as a home maker and for the welfare of the family must not be overlooked. As Ferraro makes clear, a parties’ contribution as a home maker and parent must be acknowledged in a real way. Since separation the husband has increased his parenting role through regular contact with the children. Comparatively, the time the husband has with the children is substantially less than the wife’s and his contribution is accordingly considerably less than hers post-separation.
The court must take into account and balance all of the parties’ contributions. This wife is not required to prove a nexus between her role as a home maker and parent and the available assets. It is immediately apparent that this involves quantifying and balancing fundamentally different activities, something that does not lend itself to mathematical precision. Nor is there an artificial divide whereby contributions made prior to separation are inherently more valuable than those made later. Here, the husband has contributed the overwhelming majority of the financial assets, with his settlement monies received within months of final separation. Without the ingestion of these funds the probability is the parties may have gone under financially, possibly losing their home when their borrowing capacity was exhausted. His financial contributions are hugely significant. The wife’s financial contribution does not have the same significance as the husband’s. However, the wife’s non-financial contribution, particularly her home maker and parent contribution has been highly valuable to the family’s welfare.
The orders I propose will not affect the earning capacity of either party.
The husband has paid about $16,000 child support.
Having regard to all of the contributions within the meaning of s.79(4)(a), (b) and (c) from the date of cohabitation to the date of the hearing and the other factors to which I have made reference expressed as a percentage of the net value of their assets, these factors favour the husband 75% compared to the wife’s 25% .
Section 75(2) factors
Subsection (a). The wife is 28 years old and is in good health. The husband is 35 years old. In May 2000, the husband suffered a back injury which prevented him from continuing to participate in full time work. The husband returned to work as a self employed delivery driver and installer in September 2003, which employment has been compromised through back pain. Although I do not have expert evidence concerning the husband’s injury and his prognosis, there is sufficient evidence which enables me to infer he continues to suffer at times debilitating back pain. In turn this suggests the court should recognise he is likely to face further back and pain difficulties in the future. I make an adjustment in the husband’s favour pursuant to the subsection.
Subsection (b). The parties incomes and average weekly expenses are outlined in their financial statements. The wife has worked in a number of clerical positions: as a payroll and ledger clerk. She is an experienced bank teller and recently completed mortgage broking qualifications. In each of these fields her experience and training is reasonably recent. Presently, the wife does not work outside the home and earns $465 per week made up of a Single Parenting & Family Tax benefit of $431 and occasional child support from the husband. Having had primary care of the parties’ two children, the wife has not had the opportunity to fully develop her career. In order to care for the children the wife has interrupted her employment during pregnancy and the children’s infancy and in recent years has limited herself to part time positions. Within the next two years the children will move into full time schooling and the wife will have the opportunity to return to work on a more regular basis has the potential to further develop her career.
The husband worked full time from cohabitation until his injury in May 2000. Before his injury the husband was employed as a crane driver. After his injury the husband was unable to work, even performing lighter duties for over two years. In his own delivery business the husband says that there were occasions where his injuries caused him too much pain to work as a driver. On these occasions the husband would employ casual drivers, the cost of which inevitably eroded his profit margin. However even although the husband’s business is in its infancy and its growth has been fettered by the husband’s poor health, the business returned $350 net per week in 2004. Once the husband repairs the business’s main delivery truck he should again be able to earn at least that amount. Provided he is motivated the husband is capable of meeting these challenges. He is equipped with the necessary skills and capacity and will no doubt learn from some of his mistakes in order to provide for his future.
Both parties have only nominal incomes. The wife has a capacity to earn more when the children are of school age and she can return to regular work. She has been in the workforce relatively recently and any retraining is within her grasp. Based on her earlier earnings it is likely that by the time she is working full time the wife will earn more than the husband can. Given her age, experience and good health it is likely the wife has many years of appropriately paid employment ahead of her. The husband’s capacity is burdened by his back injury and his lack of experience in any white collar industry. I make an adjustment pursuant to the subsection in the husband’s favour.
Subsection (c). Bethany is eight years old and Alexander is 4. Both children reside with the wife and have regular weekend contact with the husband. Day to day primary responsibility for their care will remain with the wife. In Clauson the Full Court of the Family Court held, “In addition it should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on the independent lifestyle which the obligation to care for children usually entails”. The wife has not had the opportunity to fully develop her career as she has taken breaks from paid employment during pregnancy and after the birth of each child. The wife has restricted herself to part time employment, enabling her time to run the household and care for the children. It is likely that the wife be restricted to the same pattern of employment until Alexander enters full time school. At this time the wife will have more time available to work, although this will be limited to a degree by her responsibilities to care for the children after school and on school holidays. I am satisfied that there should be an adjustment in the wife’s favour pursuant to the subsection.
Subsection (d). This focuses on the financial needs of the parties, including their financial commitments supporting any children. Both parties show their expenses exceeding their income. The husband shows his expenses exceeding his income by $670 per week. Notwithstanding this claim, the husband does not meet the bulk of his identified expenses. On 26 May 2005 this court made an order for the sale of the Claymore property and the proceeds used to pay off the mortgage to the ANZ Bank. Once the sale is completed the husband’s expenses will, on his own evidence, be reduced by $450 per week. Furthermore, as outlined in subsection (b), the husband’s income can reasonably be expected to increase when he has the facility to repair his vehicles and when his business becomes more established.
The wife shows her expenditure exceeding her income by $242 per week. The wife’s expenditure is largely made up of living expenses. The wife also pays loan repayments to Esanda and VISA, and insurance premiums to GIO. It is unlikely that the wife’s expenses will fall in the near future. She has primary responsibility for the children and thus must meet significant living expenses, including registration and upkeep of a car. The wife’s loan to Esanda and debts to VISA, Coles Meyer and Buyers Edge Credit Cards amount to $32,500. It is unlikely that the wife will find the resources to meet these obligations in the near future. There is some prospect that in the next few years when both children reach school age, the wife will be able to increase her income through more regular employment. However the wife will find her availability to work limited by the demands of caring for the parties two children. I am satisfied that there should be an adjustment in the wife’s favour pursuant to the subsection.
Subsection (e). Other than their two children neither party has any responsibility to support another person. I make no adjustment pursuant to the subsection.
Subsection (f). The wife receives a Single Parenting and Family Tax Benefit in the amount of $431 per week. The husband is disentitled to receive welfare benefits until 2009. I make an adjustment in the husband’s favour pursuant to the subsection.
Subsection (g). Presently the husband is living a hand to mouth existence, a situation that arises primarily as a consequence of his gambling losses. On receipt of the monies the wife shall pay him by virtue of these orders, the husband will have sufficient funds with which to arrange accommodation and meet essential living expenses until he becomes eligible for social security benefits. Given the modest size of the asset pool and the manner by which the pool has been depleted, although his standard of living post-separation is more parlous then the wife’s, the circumstances do not warrant an adjustment pursuant to the subsection.
Subsection (h) – (k). These subsections do not arise.
Subsection (l). I have already taken into account the impact on the wife’s circumstances of her primary care of the children. I make no further adjustment pursuant to the subsection.
Subsection (m). Neither party cohabits with another person. I make no adjustment pursuant to the subsection.
Subsection (n). Section 75(2)(n) achieves a cross-referencing between s.75(2) and s.79(4). The outcome of the assessment of contributions and other factors has resulted in the husband receiving 75% of the available assets compared to the wife’s 25%. By virtue of the orders I will make, the parties will receive an equal share of the assets. Of the available assets, the husband will receive $17,500 worth of superannuation. Neither party seeks a split of superannuation. In his present circumstances, it is highly likely that the husband is able to claim an immediate distribution of his superannuation based on hardship. Most industry superannuation schemes have hardship provisions, which include a ceiling on the amount that can be drawn annually before retirement age is reached. Just as the wife was able to draw $5,500 from her superannuation based on hardship, it seems likely the husband could claim at least the same amount. In his circumstances preserving at least a small amount of his assets in superannuation may ultimately work to his advantage. By this I mean there is an obvious risk the husband will gamble any money he has access to. Forced to wait he may realise the grave consequences for his financial future if he continues to gamble and finally do something about it. One can only hope that as a consequence of these proceedings at least he will realise that he urgently needs assistance, for example, as provided through organisations such as Gamblers Anonymous. Balancing the husband’s ability to immediately draw on his superannuation and the small amount of funds held in superannuation, I am not satisfied that there should be a further adjustment in the husband’s favour by virtue of him taking a portion of his property adjustment in superannuation whereas the wife receives hers entirely from immediately available assets. If the amount the husband received by superannuation was considerably larger a different approach would be warranted. Plainly, this is not a case where I consider it appropriate to adjourn the proceedings and give notice to the superannuation fund’s trustee so that a superannuation splitting order would be granted. In the circumstances of this case justice and equity does not demand the court split the husband’s superannuation. Having regard to the orders the court will make there are no factors that warrant an adjustment pursuant to the subsection.
Subsection (na). Although he says he pays child support, at the time of hearing, the wife was paying the children’s expenses when they have contact with their father. Essentially, this is because the husband does not have sufficient funds to feed the children during contact. So that the husband agrees to exercise contact, something that the wife considers essential as far as the children’s relationship with their father is concerned, the wife provides groceries and small amounts of money so that the husband can meet the children’s expenses. Although liable to pay child support, the husband has stopped paying child support and the prospect that he will resume child support in the future is at best uncertain. I am far from satisfied that irrespective of any operative child support assessment that the husband will provide appropriate child support for the children. In these circumstances I make no adjustment pursuant to the subsection.
Subsection (o). I have already dealt with the economic consequences of the husband’s gambling losses when quantifying the asset pool. However, the manner by which the husband has dealt with the parties’ ANZ mortgage has been reckless in a Kowaliw sense and amounts to waste. When the husband realised he was unable to service the mortgage he needed to take action in order to minimise the risk that the asset pool would be depleted. Basically, the husband sat back and did nothing, forcing the ANZ Bank through his inaction to exercise its rights pursuant to the mortgage to recover the amount advanced. It was as certain as night follows day that failing to pay the mortgage and cooperate with the bank in devising a plan for either deferred payment or an orderly sale of the property, that the bank would commence recovery action under the mortgage. The husband’s inaction in dealing with the Claymore property defies credulity. Already, the mortgage has increased by approximately $25,000, amount that will continue to climb until the property is sold. Selling costs and discharging the mortgage now exceeds Claymore’s equity. This situation can only continue to deteriorate. Claymore had the potential to be self supporting, for example, through making reasonable attempts to secure tenants which the husband failed to do. Even in the face of this hearing, his reckless conduct continues. Having said he would list the property for sale, the husband opposed orders to do so. Ordered to list the property with a particular agent and nominated solicitor, contrary to orders that he keep the wife informed as to progress, the husband unilaterally nominated a different agent and conveyancer. At best, he made half hearted attempts to prepare the property for an advertising campaign and inspection. By virtue of his conduct, not only is Claymore at risk, but so too the former matrimonial home. The husband’s reckless regard for his obligations pursuant to the ANZ mortgage and the consequent economic loss warrants an adjustment in the wife’s favour pursuant to the subsection.
Subsection (p). this issue does not arise.
Having regard to all of the s.75(2) factors I find that it is appropriate that there should be an adjustment in the wife’s favour of 25 per cent. This outcome reflects the cumulative outcome of the findings I have made pursuant to s.75(2). See Tomasetti (2000) FLC 93-023. Any lesser adjustment, given the size of the asset pool would be notional.
Section 79(2) – is this outcome just and equitable?
Because the court must consider the actual orders, not just the percentage distribution under s.79(2) justice and equity in cases like this requires that the court stands back and looks carefully at the outcome of the s.79(4) and s.75(2) process. It is at this stage that the court considers the actual structure of the orders.
I will not repeat the findings made thus far. There are key findings that lead to my comfortable satisfaction that an outcome which distributes the available assets equally between the parties is just and equitable. Simply put, these include that the wife made an overwhelmingly greater contribution as a home maker and parent prior to and since separation, which contribution must be given significant weight. Her contribution as a home maker and parent supplements her modest financial contribution and s.79(4)(b) contributions. Whilst these contributions are significant, the husband’s greater financial contribution prior to receipt of his settlement and then his overwhelming contribution to the settlement monies received late in the marriage are pivotal to the family’s circumstances. Equipped with a lump sum payment, the husband has the capacity to repair his motor vehicles and re-establish his business. Based on 2004 earnings, the business is capable of providing him with a modest income which he can supplement drawing carefully from capital. The wife has responsibility for the children and will in all likelihood provide for the children financially with little prospect she will receive regular or appropriate child support. For both parties, their financial future is potentially difficult and equal distribution of assets provides a just and equitable platform for the future.
Structure of the orders
Structuring the orders so as to effect an equal distribution of the assets is quite complex. Primarily, this is because the ANZ Bank has commenced proceedings claiming both Claymore and Kearns. Because Claymore’s sale is underway, I will structure the orders predicated upon its sale and the wife’s retaining Kearns. Should this situation change and the ANZ Bank force Kearns’ sale before Claymore is sold the structure of the orders must change dramatically. Although the properties have an agreed value, their selling price cannot be known. Consequently, in order to give a just and equitable outcome, I will preserve to both parties the right to apply to vary the orders for sale in the event Kearns sells before Claymore.
The effect of the orders will mean that the wife has the former matrimonial home, her motor vehicle and house contents, the total value of which is $330,000. Because she has these assets she will also have responsibility for the car loan as well as her credit card debts which means she will have net assets of $298,500. Fifty per cent of $350,000 (net assets) is $175,000. The husband has assets the total value of which is $452,939. These comprise Claymore, his trucks and the monies notionally added back. Including the Claymore mortgage and its selling costs the husbands liabilities amount to $401,439, leaving him with net assets worth $51,500. He is entitled to $175,000 therefore the wife must pay him $123,500.
I have contemplated ordering the wife to pay the husbands s.79 entitlements promptly, basically prior to Claymore’s sale. However, even with orders that the husband’s entitlement is paid directly to the ANZ Bank, it is unlikely the ANZ Bank will release the wife from her guarantee and obligations pursuant to the mortgage. Thus, it provides too risky a scenario viz a viz continued default under the mortgage. In these circumstances, the wife will be ordered to pay the husband his s.79 entitlement within three months or at the same time settlement of Claymore occurs, whichever is the later. This gives her sufficient time to make inquiries and implement necessary arrangements in order to borrow additional funds. This unusual arrangement is necessary because it seems highly unlikely the ANZ Bank would give the wife a discharge of its Kearns mortgage until both mortgages are fully paid. Thus ordering the wife the wife to pay the husband prior to Claymore’s sale and discharge of the ANZ mortgage places the wife in an impossible situation. I also consider it too risky a scenario that the wife pays the husband a lump sum which he may again gamble. While this risk is ever present, the consequences for the family are less dramatic if he receives his funds when the ANZ mortgage is fully repaid. Although the husband’s need for payment is great only by structuring the orders in this manner are the wife’s and ANZ Banks legitimate interests protected. Unfortunately this delays the husband’s ability to repair his trucks and may mean he needs to live with his mother for a brief period. By his reckless economic behaviour the husband has brought this outcome on himself.
In the event that the wife fails to pay the monies ordered, the former matrimonial home will be sold. Although it has an agreed value, the net proceeds cannot be known. Nor is it possible to quantify the amount required to discharge the ANZ mortgage if this sale occurs prior to Claymore’s sale. Thus the orders will be drafted generically and the parties will need to calculate the amounts to be paid out at settlement in order to effect an equal distribution of the available assets subject to any adjustment necessary as a consequence of the husband’s default of his obligations. Similarly if the ANZ Bank forces Kearns’ sale prior to Claymore’s sale, Claymore must still be sold. This is to ensure discharge of the ANZ Bank’s mortgage and that the wife receives her fifty percent of the net asset pool. In the unlikely event this scenario transpires the parties may relist the matter for machinery orders needed to address this eventuality.
Pending settlement of Claymore’s sale the husband must pay all its outgoings, including the mortgage and rates. This is in effect the price of his continued occupation of the property. Although ordered to pay it is highly he will not do so. Because the wife supports the children with virtually no assistance from the husband and is herself of modest means, it would be unjust to require her to contribute any further towards the husband’s living expenses. Thus if the husband defaults the default must be made good by an adjustment at settlement. Similar considerations arise with Claymore’s selling costs. By agreement the parties attributed $11,000 selling costs as the husband’s personal liability. In order to give effect to this agreement there must be an adjustment from the husband’s share so that he actually pays this amount without the wife being called on to contributes after the event. If there is insufficient money available the wife may deduct these sums from the amount she ultimately pays the husband.
Finally the court must consider the wife’s application to be appointed trustee for Claymore’s sale. Although the husband was ordered to sell Claymore on particular conditions he failed to abide he courts order. He explained he was reluctant to list the property for sale and when the matter resumed had not done so. Although he made some informal arrangement with Combined Real Estate, he had not arranged for marketing photographs to be taken basically because his truck was sitting in the front yard. Contrary to the courts order he made arrangements with a conveyancer to have the conduct of the sale. Because of the proceedings initiated by the ANZ Bank a solicitor is essential if the parties are to be allowed to sell rather than have the mortgagee take possession and itself conduct the sale. Such outcomes rarely achieve the best results. Leaving the husband to manage Claymore’s sale is financially highly risky for both parties. Only by having the wife take charge of the transaction can the court be confident its sale will proceed in an orderly manner in accordance with the court’s orders. The wife must keep the husband informed of progress and key events. He will have the opportunity to challenge her decisions and relist the matter before me should he consider she or acting contrary to their shared interests. Having already lost one potential sale the wife will be authorised to sign necessary documents on the husband’s behalf. The parties will have the opportunity to agree on a selling price but must do so quickly. If they cannot agree E.F. Hoskins and Associates will set the selling price. Should the property fail to sell by private treaty in a timely way the property will be sold by auction. As the husband carries liability for selling costs he shall pay these costs and if he fails to do so, the wife may pay his share provided she is reimbursed. The usual conditions for sale by auction shall apply.
Finally in the event the parties must sell their former matrimonial home, excluding both pieces of real estate and associated liabilities, the husband must pay the wife $45,000 from his share of the sale proceeds. This is the adjusting amount needed to give the parties equal shares of the net non real estate asset pool.
Apparently the husband’s solicitors were aware their client was in default but took no steps to bring this to the courts attention. By comparison the wife’s solicitors have tried to keep the mortgagee informed of progress in the matter and seem to have a superior appreciation of the gravity of the situation. Unless contracts for Claymore’s sale have been exchanged, the wife’s current solicitors will assume carriage of the sale. If this involves extra costs to the parties, the benefits of having solicitors equipped to address all the nuances of the sale outweigh the costs.
For these reasons I make the orders identified at the start of this judgment.
I certify that the preceding one hundred and eleven (111) paragraphs are a true copy of the reasons for judgment of Ryan FM
Associate: S. Mashman
Date: 12 August 2005
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