B and B
[2002] FMCAfam 41
•26 February 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| B & B | [2002] FMCAfam 41 |
| FAMILY LAW – Property settlement – adjournment section 79(5) – contributions – section 75(2). |
| Applicant: | P E B |
| Respondent: | A J B |
| File No: | ZH2164 of 2001 |
| Delivered on: | 26 February 2002 |
| Delivered at: | Hobart |
| Hearing Date: | 28, 29 & 30 November 2001 |
| Judgment of: | Roberts FM |
REPRESENTATION
| Counsel for the Applicant: | Ms. B. Baker |
| Solicitors for the Applicant: | Murdoch Clarke |
| Counsel for the Respondent: | Mr. M. Trezise |
| Solicitors for the Respondent: | Trezise Lawyers |
ORDERS
That PATRICK ERIC BOURKE ("the Husband") retain as his sole property that block of land at C B in Tasmania comprised and described in Certificate of Title Volume ….. Folio 1.
That the Husband pay, indemnify and keep A J B ("the Wife") indemnified from any payments that may be due and payable pursuant to mortgage number B577230 to the Australia & New Zealand Banking Group Limited secured over the title to the said block of land.
That the Husband do transfer to the Wife any interest that he may have in the Honda motor vehicle currently in the Wife’s possession or control.
That the partnership P. & A. B trading as M B Newtown be dissolved.
That the Husband pay, indemnify and keep the Wife indemnified from all the liabilities of the said partnership, including but not limited to:
(a)Any debt or liability owing to the Australia & New Zealand Banking Group Limited;
(b)Any debt owing to the Husband’s mother M B
(c)Any debt owing to M B Pty. Ltd.;
(d)Any debt owing to Wilson Dowd;
(e)Any debts to sundry creditors of the said partnership
That the Husband make all reasonable endeavours to obtain releases from the creditors of the said partnership in respect of any liability of the Wife.
That the children of the marriage, J E B born 16th May, 1989 and
M A B born 2nd May, 1992 (“the children”) reside with the Wife.That the Husband and the Wife have the joint parental responsibility for the long term care, welfare and development of the children.
That during school terms the Husband have contact with the children as follows:
(a)Each alternate weekend from Friday evening after school until Sunday at 4.00 p.m.
(b)Each Monday after school until the following morning
(c)With one of the children from after school on Tuesday until the start of school on the following morning in the first week of each two week cycle and with the other child on the same basis in the second week of each two week cycle
That in the event that there is a Public Holiday on the Monday of a weekend that the Husband is exercising contact in accordance with these Orders the contact will be extended to midday on that Monday.
That the Husband have contact with the children during the school holiday periods at Easter, May/June, August/September and the long summer school holiday for one half of such school holidays at times to be agreed between the parties and failing agreement as a Court may order.
That the Husband have contact with the children on Christmas Day, Easter Sunday and the children’s birthdays on the basis that the children spend equal time with each parent.
AND IT IS DIRECTED:
That the written closing submissions of each party remain on the Court file.
AND THE COURT NOTES:
That Orders (1) to (6) hereof are intended to be in satisfaction of the parties’ rights and obligations under Part VIII of the Family Law Act 1975.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT HOBART |
ZH 2164 of 2001
| P E B |
Applicant
And
| A J B |
Respondent
REASONS FOR JUDGMENT
Background and history
The Applicant P E B (“the Husband”) and the Respondent A J B (“the Wife”) were married in December, 1986 and separated on 12th August, 1999. Their marriage has been dissolved but, for convenience, I shall refer to them as the Husband and the Wife throughout these Reasons.
There are two children of the marriage, a boy aged twelve years and a girl aged nine years (“the children”). They live with the Wife and the Husband has regular contact with them as follows:
a)each alternate weekend from after school on Friday until Sunday at midday;
b)each Monday after school until the following morning;
c)with one of the children (ie separately) on each Tuesday evening.
At the start of their relationship in 1986, the Wife owned a unit in B near Hobart. She had purchased that in 1985 for $49,000.00 with the assistance of a loan from what was then the Savings Bank of Tasmania. That property was subsequently sold in late March 1987 and the Wife realised slightly in excess of $22,000.00.
At that time, the Wife was employed as a full-time travel consultant and the Husband was employed as the licensee of a hotel in Hobart. His mother owned that hotel.
At that time, the Husband owned a block of land at C B in Tasmania (“the block of land”). He still owns the block of land and it will be referred to below.
Approximately six months after their marriage, the parties purchased their first home in the Hobart suburb of M S. The parties both contributed to that purchase. The Wife’s contribution was from the sale proceeds of her unit and the Husband’s contribution of $20,000.00 came from a gift from his mother when she sold the hotel in which he was working.
The Wife continued to work as a full-time travel consultant. However, she took two to three months off work at around the time of the birth of their first child. Thereafter, she returned to work on a casual basis.
After his mother sold the hotel in which he was working, the Husband continued to work in other family hotel businesses.
In the middle of 1992 the parties sold their first home, entered into a franchise bakery business and purchased another home. There appears to be confusion between the parties as to the exact order of the purchase of the franchise bakery business and the second home. However, the Order makes no difference to matters.
The parties took financial advice before purchasing the franchise bakery business (“the bakery business”). Notwithstanding that, the bakery business appears to have been the cause of their financial downfall.
It is clear from the evidence that the bakery business appears to have made reasonable profits only in the financial years ended 30th June, 1994 and 1995.
As a consequence of the parties’ financial downfall, they have sold their second home, so it is not an asset to take into account in these proceedings. The entire net sale proceeds were applied in reduction of the parties’ loan liabilities to the A.N.Z. Bank.
Applications
That Applications before the Court are the Husband’s Amended Application filed in the Family Court of Australia on 14th May, 2001 and the Wife’s Amended Response filed 23rd May, 2001. However, both parties are seeking different orders from those set out in those documents. As this matter could not be finalised in the sittings in Hobart in November 2001, I required counsel to provide closing submissions in writing and the second of those was received shortly before Christmas. The Orders that the parties are now seeking are set out in those written closing submissions.
A summary of the Orders sought by the Husband is as follows:
(a)that the Wife relinquish any right, title or interest she may have in the block of land;
(b)that the Husband relinquish any right, title or interest he may have in the Honda motor vehicle in the Wife’s possession;
(c)that the bakery partnership be dissolved;
(d)that the Husband assume responsibility for all the debts of the bakery business, including debts to his mother;
(e)that the Husband make reasonable endeavours to obtain releases from the creditors of the partnership with respect to the Wife’s liability;
(f)that the Wife relinquish any claim she may have in his superannuation;
(g)that he relinquish any claim that he has in the Wife's superannuation;
(h)that the parties have joint parental responsibility for the two children of the marriage;
(i)that the children reside with the Wife;
(j)that the Husband have contact with the children on Monday night after school until school on the following morning and with one child on Tuesday night after school until school on the following morning;
(k)that he have contact with the two children each alternate week from Friday night after school until Sunday at 4.00 p.m., such to extend to midday on Monday if it is a public holiday;
(l)that the Husband have contact for one half of the Easter, June, September and Christmas school holidays with times to be agreed between the parties;
(m)that Christmas Day and Easter Sunday and the children’s birthdays be shared equally between the parties;
(n)that each of the parties have the sole responsibility for the day to day care, welfare and development of the children when they are residing with that particular parent.
It is the Wife’s view now that there is no need for any orders in relation to children. She maintains that parenting orders are only made when the need arises and that there is an onus of proof on the part of the Husband to justify the making of Orders.
In relation to financial matters, the following is a summary of orders sought by the Wife:
(a)That the Husband’s Application be adjourned for a period of twelve months with either party at liberty to re-list upon seven days notice;
(b)That the Wife have sole management of the bakery business and full authority to act on behalf of the partnership in carrying out the business activities;
(c)That the Wife account to the Husband or his agent as to the management of the business and report on or before the last business day of each calendar month or at such other times as may be reasonably requested by the Husband;
(d)That the Wife retain for her own use the Honda motor vehicle in her possession, any funds in her sole name and any chattels in her possession or control;
(e)That the Husband retain any funds in his sole name and any chattels in his possession or control;
(f)That the Wife be at liberty to amend her Response at the expiration of the twelve month period of the adjournment sought.
It is interesting to note that the Wife’s Amended Response seeks some different orders in relation to the children, yet she now says that orders are unnecessary.
As an alternative to the orders in relation to financial matters sought by the Wife as set out above, she seeks the following:
(a)That the block of land be sold and any remaining proceeds be paid to the Wife;
(b)That pending the sale of the block of land the Husband meet all the outgoings of the block of land;
(c)That she retain the Honda motor vehicle, chattels and any funds in her sole name;
(d)That the Husband retain the Nissan Pajero in his possession, the bakery business and any funds in his sole name;
(e)That the Husband is to assume sole liability for all liabilities of the bakery business partnership and indemnify the Wife against any claims;
(f)That pending further order the Husband be restrained from making any application or doing anything to cause his superannuation entitlements to be paid to him
(g)That he forthwith serve a sealed copy of the Orders upon the Trustees of his superannuation fund
(h)That the Amended Application and the Amended Response be otherwise adjourned to a Directions Hearing on a date to be fixed in January, 2003.
The law and findings
The Court’s approach to the determination of an application for the adjustment of property interests has been well established by authority. See Lee Steere and Lee Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335 and Clauson (1995) FLC 92-595. It is essentially a three-step process: firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing; secondly, evaluating the contributions made by the parties as defined in section 79(4)(a) to (c) and thirdly, evaluating the matters contained in section 75(2) if they are relevant.
In determining what Order the Court should make under section 79, the Court must also be satisfied that it is just and equitable in all the circumstances to do so – see section 79(2) and Russell v Russell (1999) FLC 92-877. In that case the Full Court of the Family Court said, at paragraph 80:
“Furthermore, it must be remembered in this regard that under s 79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.”
The parties are agreed in relation to most of the property and liabilities. However, there is some disagreement about which I must make findings. The agreed property is as follows:
The block of land........................................................................... 16,000.00
The Wife’s motor vehicle............................................................ 5,000.00
Husband’s motor vehicle (equity)............................................... 8,500.00Bakery business............................................................................. 25,000.00
Total: $54,500.00
The agreed liabilities as shown in the written closing submissions are $25,000.00 owed to Wilson Dowd (a Hobart firm of solicitors) and approximately $10,000.00 in loan and overdraft liabilities to the ANZ Bank.
Much of the evidence related to the debts of the bakery business owed to M B Pty. Ltd. (“the franchisor”). However, the written closing submissions of counsel appear to show some agreement in relation to the actual level of liability to the franchisor. There appears to be acceptance that the rent, rates and electricity account should be reduced to $28,440.00, and the product account liability should be only $6,129.00 to take into account a $5,000.00 payment on 6th March, 2001. Consequently, the parties are agreed that the liability is at least $34,529.00.
It is not clear whether the franchisor will seek to enforce a further $15,339.63 in the “closed account”. However, it is clear that the amount is in dispute between the parties and the franchisor.
The level of the parties’ liability to the Husband’s mother is very much in dispute.
It is clear that the Husband’s mother has made advances to the bakery business as funds were needed. However, it is also clear from the evidence that the Husband was not even aware of some of those advances at the times that they were made.
It is the Wife’s position that she should not be liable for any advances that she did not know about.
Counsel for the Wife says that the evidence given by the Husband’s mother clearly refutes the position that the advances of funds are properly characterised as loans. Certainly, the Husband’s mother stated that the advances were not made at her son’s request and that it was just the sort of thing that mothers do for their sons.
It is quite clear that the Wife did not know about or consent to the advances.
The total advanced by the Husband’s mother at the time of the hearing exceeded $66,000.00. However, the Wife’s position is that only $18,000.00 should be taken into account. This is because she accepts that there was a joint liability to the Husband’s mother of $35,000.00 at the time of separation. However, that was reduced by a $6,000.00 payment to her in August, 1999 and a further payment of $11,000.00 in October, 1999.
In my view, the Wife’s position is correct in relation to the level of liability to the Husband's mother.
In Biltoft and Biltoft (1995) FLC ¶92-614, the Full Court of the Family Court said:
“Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.”
The liabilities of the parties to be taken into account are thereof as follows:
Wilson Dowd ............................................................................. 25,000.00
ANZ Bank..................................................................................... 10,000.00
Franchisor.................................................................................... 34,529.00Husband’s mother........................................................................ 18,000.00
Total: $87,529.00
Unfortunately for the parties, the liabilities exceed the total value of the property by $33,029.00.
It is hardly surprising, therefore, that the Wife is a little upset that the parties really have nothing to show for thirteen years of marriage.
Both parties have some superannuation and it appears to be agreed that the Husband’s superannuation has a current value of approximately $29,500.00 and the Wife’s unchallenged evidence is that her superannuation is worth $2,900.00. Although her counsel did not mention that in his written submissions, that amount is shown in her Financial Statement and is accepted in the submissions by the Husband’s counsel.
The net result is that the parties have a negative equity in property of approximately $33,000.00 and interests in superannuation that appear to have a positive value of similar magnitude. Consequently, it seems appropriate to me to deal firstly with the Wife’s application to adjourn the proceedings.
In his written submissions her counsel puts that on two bases. Firstly, the interim relief sought in her Amended Response would provide the Wife with an opportunity to manage the bakery business and bring about a “turn around” in the financial affairs of the parties. However, I do not accept that as a reasonable proposition. There was dispute between the parties as to how much the Wife worked in the bakery business but I am satisfied that she does not have sufficient knowledge of the bakery business or the entrepreneurial expertise to keep the business going.
On the other hand, the business may just succeed if the Husband can continue to manage it. Luckily for him, he has his mother assisting him in the day to day management of the business by doing the books and she advances funds from time to time.
I accept that the Husband has made some enquiries about other ways of managing the business, which includes a possible joint venture with another business. It seems to me that those plans have a much better chance of succeeding than the proposal put forward by the Wife to manage the bakery business.
I do not accept that the decline in the fortunes of the bakery business can be laid solely at the feet of the Husband. Further, I do not accept that it is the result of incompetence and/or mismanagement on his part. It seems clear that the franchisor did not provide what was promised, and competition from other bakery businesses and supermarkets selling bakery products was not something that the Husband could control.
The Wife’s second basis for an adjournment is that “as matters stand today, there are insufficient assets from which an adjustment can be made in the Wife’s favour to account for the Husband’s AMP Superannuation entitlements.” He points out that the Family Law Legislation Amendment (Superannuation) Act 2001 will commence operation not later than 29th December, 2002. He also referred me to the decision of the Chief Federal Magistrate in V & A (2001) FMCAfam 231.
It is clear from that case that, because the operation date of that Amendment Act is now certain, adjournments can be ordered if the condition set out in subsection (5) of section 79 are met. Those conditions were set out by the learned Chief Federal Magistrate as follows:
(a)That there is likely to be a change in financial circumstances;
(b)That the likely change is a significant one;
(c)That having regard to the likely and significant change it is reasonable to adjourn the proceedings; and
(d)That an order made if that significant change occurs is more likely to do justice between the parties than an immediate order.
In that particular case, the total value of the Husband’s superannuation exceeded $163,000.00 whereas the Husband’s superannuation in this case is worth approximately $29,500.00. At first blush, that does not appear to be a significant amount. However, given that the value of the parties’ other assets is in the negative, that financial resource assumes a significance that is greater than first thought.
However, given the distribution of property and liabilities that is referred to below, and the fact that Section 81 requires the Court, as far as practicable, to end the financial relationship between the parties, I do not think that it is appropriate in this case to grant and adjournment.
Contributions
It is clear that in the early years both parties were breadwinners. Later, after the birth of the first child the Mother’s direct financial contributions reduced because she worked part-time. However, I accept that she was the primary homemaker and parent and that on the basis of different types of contributions, the parties’ contributions were equal.
Section 75(2) factors
The Wife is forty-seven years of age and she remains primarily responsible for the care of the two children of the marriage. Indeed, she is not receiving child support from the Husband. However, I accept that he is making some contributions to the welfare of the children.
The Wife’s evidence is that her employment is not secure and that the terrorist attacks in the United States on 11th September, 2001 and the collapse of Ansett will place her employment in the travel industry in some jeopardy. She has no skills or other work experience which would enable her to obtain employment in another field.
Similarly, the Husband is lacking in skills. It appears that he has no formal qualifications, although he clearly appears to enjoy working as a baker.
The Wife appears to believe that the Husband’s standard of living has continued at a level that enables him to enjoy a good lifestyle. I do not accept that. He appears to work extremely hard for very little return. Were it not for his mother, he would almost certainly be a bankrupt.
Notwithstanding this, the limited employment opportunities of the Wife and her continuing care of the children mean that the section 75(2) factors weigh heavily in her favour.
Baker J said in Kowaliw and Kowaliw (1981) FLC ¶91-092:
“Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec. 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains? As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(awhere one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.”
That principle has been cited with approval by judges over the years. However, the Full Court of the Family Court said the following in Browne v Green (1999) FLC ¶92-873:
“We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction - a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.”
In this case I do not find that the Husband has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of any asset, nor do I find that he has acted recklessly, negligently or wantonly. However, the division that I will order in attributing all the debts to the Husband is what he is seeking and provides justice and equity in accordance with the principles set out in Russell v Russell (supra).
I am of the view that the Husband should continue to run the business and be responsible for its debts while keeping the block of land. Indeed, it is vital that he keep the block of land because the business debts to the A.N.Z. Bank are secured over that property.
The Orders that I will make will mean that the Wife will come out of the marriage with only a motor vehicle worth $5,000.00 and her chattels. I appreciate that this is not much to show for thirteen years of marriage. However, that motor vehicle has a positive value, whereas the Husband will receive property that has a value that is significantly less than the liabilities that he will assume. The net negative value is $38,029.00.
It is not really possible in this case to work out a percentage distribution because the Husband is receiving assets with a net negative value and the Wife receives assets with a very small positive value.
While I appreciate that the liability to Wilson Dowd remains secured over the Wife's mother's property I accept that the Husband will make all reasonable efforts to rectify that as soon as he can. Further, I have already found that the Husband's proposal for the viability of the bakery business is more realistic than the Wife's proposal.
Children
In my view, the Wife’s position in relation to the making of orders with respect to children is not appropriate. I do not accept that there is any onus of proof upon the Husband to prove that orders are necessary. He is seeking orders and there was no suggestion on the part of the Wife that the type of orders that he is seeking are not in the children’s best interest.
I am also of the view that the making of orders is likely to avoid any tensions in the future, because both parties will know with some certainty the children’s entitlements to contact with their father. Any avoidance of tension between the parties can only be in the best interests of their children. Consequently, I will make orders of the type sought by the Husband.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
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