Baldachino & Hanas
[2010] FamCA 234
•24 March 2010
FAMILY COURT OF AUSTRALIA
| BALDACHINO & HANAS | [2010] FamCA 234 |
| FAMILY LAW – PROPERTY – Just and equitable distribution of property between the parties – Effect of non-disclosure by the husband with respect to value of a corporate entity; taken into account under s 75(2) assessment as a significant financial resource to the husband |
| Family Law Act 1975 (Cth) ss75(2), 79(1), 79(4), 90AE(2), 117(1) |
| Af-Petersens & Af-Petersens (1981) FLC 91-095 Black & Kellner (1992) FLC 92-287 C & C [2005] FamCA 429 Gosper & Gosper (1987) FLC 91-818 Hickey & Hickey & Attorney-General for the Commonwealth (2003) FLC 92-144 Kessey & Kessey (1994) FLC 92‑495 Kowaliw & Kowaliw (1981) FLC 91-092 NHC & RCH [2004] FamCA 633 Pierce & Pierce (1999) FLC 92-844 Pittman & Pittman [2010] FamCAFC 30 Townsend and Townsend (1995) FLC 92-569 Weir & Weir (1993) FLC 92-338 |
| APPLICANT: | Ms Baldachino |
| RESPONDENT: | Mr Hanas |
| FILE NUMBER: | CAF | 421 | of | 2005 |
| DATE DELIVERED: | 24 March 2010 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Canberra |
| JUDGMENT OF: | Faulks ACJ |
| HEARING DATE: | 14 & 15 July 2008 2 & 3 October 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr T. Hodgson |
| SOLICITOR FOR THE APPLICANT: | Nicholl & Co Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr J. Millar |
| SOLICITOR FOR THE RESPONDENT: | Christopher Mackay – Lawyer |
Orders
IT IS ORDERED THAT:
The corporate entities known as “E Pty. Ltd.” and “L Stud Pty. Ltd.” are joined as parties to these proceedings.
In accordance with the relevant provisions of Part VIIIAA of the Family Law Act 1975 (Cth) (and specifically s 90AE(2):
(a)Within ninety (90) days of the date of these orders, the husband and wife will do all acts and things and sign and execute all necessary documents to cause E Pty. Ltd. to transfer to the wife the whole of its right, title and interest free of any encumbrance:
(i)In the property described as Lot 4 being the whole of the land comprised in Folio Identifier … and known as … (‘the B property’) in the State of New South Wales;
(ii)The chattels upon and contents contained within the B property; and
(iii)The Nissan Patrol motor vehicle.
Within seven (7) days of the date of these orders, the wife will do all acts and things and sign and execute all documents necessary to resign as a director of E Pty. Ltd. and transfer her shareholding to the husband or his nominee.
Subject to these Orders, the husband will indemnify and keep indemnified the wife absolutely from any claims against her arising form the activities of E Pty. Ltd. and L Stud Pty. Ltd. and any corporation in which he is a shareholder and director, including claims for directors’ loans. Such indemnity will include any legal costs incurred by the wife in defending any such claims, actions or demands.
The husband will indemnify and keep indemnified the wife and obtain her release from any loans asserted to be outstanding to the husband’s mother, Mrs Hanas, in respect of the purchase of the L Stud property or at all.
Within ninety (90) days, the husband pay to the wife the sum of $517,000.
If the husband should fail to pay to the wife all or any of the sum of $517,000 in accordance with Order (6) above, the husband will at his expense forthwith take all necessary steps to sell the property known as the Gold Coast Unit, Queensland, and the L Stud property in New South Wales, and will sign all documents to effect such sale(s) and upon completion will pay such the net proceeds therefrom as may be necessary to satisfy the terms of Order (6) (including interest).
(a)If the husband should fail within thirty (30) days after the period stipulated in Order (6) above (on the certification in writing by the wife or her solicitors that the husband has so failed) to execute (or sign) any document or to perform any action required in relation to such sale(s), then pursuant to s 106A(1) of the Family Law Act 1975 (Cth) a Registrar of the Family Court of Australia is appointed to sign such documents or perform such action in the husband’s stead.
Otherwise, each of the parties be and is hereby declared to be the owner both at law and in equity of all the property in his or her possession or control including the units at P, Queensland which are owned by the wife (unit ‘P2’) and husband (unit ‘P1’) respectively.
That all extant applications, save as to the any fresh application the parties may wish to make in relation to the question of costs filed before 4.00 pm on 19 April 2010, are discharged.
The matter is removed from the pending cases list, save as to any fresh application the parties may wish to make in relation to the question of costs filed before 4.00 pm on 19 April 2010.
IT IS NOTED that publication of this judgment under the pseudonym Baldachino & Hanas is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: CAF 421 of 2005
| MS BALDACHINO |
Applicant
And
| MR HANAS |
Respondent
REASONS FOR JUDGMENT
Introduction
These were proceedings brought about for the division of the property of the parties pursuant to s 79(1) of the Family Law Act 1975 (Cth).
The parties had arranged their affairs so that various companies had been incorporated to own certain real properties. The case proceeded, however, on the basis that for all practical purposes that the corporate entities might be disregarded in determining the parties’ entitlements under the Family Law Act 1975 (Cth).
The husband, at the time of this judgment, is about 58 years of age and the wife about 50 years of age.
There was an issue between the parties about how long they lived together. The wife maintained that their cohabitation commenced in 1986 while the husband asserted that it did not commence until November or December 1989. The parties were married in 1990 and separated in February 2004. The relationship therefore persisted for not less than 15 years and possibly was as long as 19 years. There was one child of the marriage, a daughter, born in 1992. The parties’ daughter has, during the course of these proceedings, been living primarily with her father.
The father maintains an interest in various taxi businesses. The precise extent and value of that involvement was a matter of some dispute and (in some respects) little revelation by the husband.[1]
[1] For example, see Transcript of proceedings, 15 July 2008, 124ff.
The wife lives on a property at B in New South Wales (NSW), owned by one of the companies of the parties, E Pty. Ltd. It is known as “B Property”. It has an agreed value of $700,000. The husband lives in a property in K, Sydney, NSW which is owned by him.
The wife seeks that the property of the parties (disregarding corporate entities) should be divided as to 70 to 75 per cent to her and the balance to the husband.
For his part, the husband seeks that the property should be divided as to 67.5 per cent to him and 32.5 per cent to the wife. It is apparent that their expectations about the outcome of the division of property are quite different. It seems to be common ground that the wife will retain and own the B property and seems equally agreed that the husband will remain in his house in Sydney.
In addition, the parties acquired two units (‘P2’ and ‘P4’) in Queensland (‘the P Units’) valued (and agreed for the purposes of these proceedings) at $265,000 each. There were also taxi plates owned by the husband which the wife suggested were valued at $730,000 and significantly the proceeds from the sale of a venue in N, NSW bought by the husband at $290,000. There are other items of property which are referred to in the schedule contained later in my judgment.
There was significant dispute about items that were referred to by both counsel as “add-backs” which involved, in particular, a Cabcharge Credit Union account worth $108,000 and the sale proceeds of a G, NSW property of the parties of some $500,000. Again a more expanded list of these matters appears in my judgment below.
There was no significant argument about liabilities, which mainly related to the mortgages on the various properties except for a debt asserted to be owed by the husband (or one of the companies in the sworn evidence of the husband) in the sum of either $150,000 or $225,000 to his mother. There were also taxation debts that were the subject of significant dispute and the cause of delay in these proceedings.
Procedural and interlocutory directions were made following hearings before either myself or a Registrar on: 17 October 2005, 25 May 2006, 13 November 2006, 7 November 2007, 26 November 2007, 11 December 2007, 5 February 2008, 28 March 2008, 22 April 2008 and 3 October 2008. The proceedings limped along somewhat because of what the wife asserted to be the lack of disclosure by the husband and his failure, notwithstanding many procedural orders requiring him to do so, to produce relevant tax returns and company records, financial and otherwise, in relation to the various companies. It appears in the end that the husband “camped out” in the office of his accountant, the very long‑suffering Mr S, and some records were produced. The production of these records, however, led to significant delays in the finalisation of the matter.
The last day of the final hearing occurred on 3 October 2008, were I ordered inter alia:
The proceedings are adjourned for further submissions and for the reception of evidence by way of tender of the tax assessments in respect of [E] Pty Ltd and any other relevant tax assessments provided such tender occurs on or before 4:00pm on 24 October 2008.
Written submissions were not received from the husband until 16 March 2009, and the final written submissions on behalf of the applicant wife were not received until 5 June 2009. Judgment has, therefore, been reserved since 5 June 2009, and the subsequent delay has been substantially my responsibility and I apologise to the parties for any inconvenience or distress that delay has caused to them.
Background to the parties’ relationship and acquisition of property
It seems to be common ground that the parties met in or about 1978 and they both worked together in G, NSW in about 1986. It was about this time that the wife asserted the cohabitation between the parties commenced but the wife in fact moved into a property at Y Street, G, NSW which the husband had bought.
The parties incorporated a company together on 2 February 1987. This was E Pty Ltd and both parties were directors and shareholders. In 1988, the parties bought property (with E Pty Ltd as the registered proprietor) at H Street, G, NSW for about $160,000. The husband contends that a taxi was sold to finance that purchase; the taxi, of course, was owned by him. The parties also bought land for approximately $50,000 on which the present B property is situated (on about 40 hectares). It is asserted (and agreed) that it was funded by an interest‑only mortgage and a deposit provided by the husband. The husband continued to work in the taxi business and the wife, about this time, stopped work with W Company (an agricultural sector provider) and began helping at the taxi base in doing clerical work. She continued her interest in raising livestock. At this time the parties also began to purchase livestock.
At the end of 1989, the husband asserted the cohabitation commenced. On the whole, so far as the evidence of physical cohabitation is concerned, I prefer the husband’s evidence on this matter to that of the wife. The physical evidence adduced during the course of the hearing supports his contention. I find that little however turns on this issue given that the parties have worked together, even to the extent of incorporating a company together, as early as February 1987.
In any event the parties married in 1990 and at that time the husband owned the property at Y Street, three taxi licences, two taxis, a Ford motor vehicle, and had savings and shares and was in partnership with his brother in relation to 60 leased taxis. The wife does not claim to have had much at all in the way of assets at the time the parties began to either work together or live together or were married.
The child of the marriage was born in March 1992 and two years later in 1994 the parties built at the B property in NSW.
Some three years after that in 1997, the parties (through a company known as “L Stud Pty. Ltd.”) bought another property known as “L Stud”, which was about seven kilometres from B Property. The money to buy that property was apparently borrowed from the husband’s father’s estate. Thereafter, the parties hired a manager, and the wife became very involved with running the stud business and looking after the parties’ child.
In July 1999, the wife moved from Sydney to B to deal with the livestock and the running of the two farms. The husband continued to work in the taxi business and visited the property. The wife’s evidence about his visits are complimentary and I accept that as being accurate. His involvement at this time in the life of the child was relatively small.
In 2000, the parties bought the first of the P Units in Queensland and this was bought in the wife’s name alone. Two years later in 2002, the husband sold the H Street, G property referred to above for approximately $1,000,000, and he bought another unit in the P development for $240,000. This unit appears to be in his name.
In 2002, the wife broke her leg while working and made a workers’ compensation claim against the company L Stud Pty. Ltd.
In February 2004, the parties separated.
The wife asserted that in March 2004 the husband sold some shares totalling $37,068.83, and in July 2004, the husband stopped making any payments for the benefit of the wife. These were essentially her wages through the L Stud Pty. Ltd. At about this time, the parties’ child moved to Sydney to live with the husband.
In July 2004, the husband bought an interest in a venue in N in Sydney and also contributed subsequently some $80,000 in cash from his Cabcharge Credit Union account for renovations for the hotel. The venue, its value and, ultimately, its disposal were matters of some contention between the parties.
In November 2004, the husband paid a further $52,000 as a deposit for a unit on the Gold Coast, Queensland. In July 2005, the wife withdrew $10,000 from her Westpac account which she asserted she used for living expenses.
The matter came before the Family Court of Australia (‘the Family Court’) on 13 November 2006 and orders were made which meant that the husband had the responsibility for leasing the L Stud property and paying an amount of $100 a week by way of spousal maintenance for the wife. The wife asserts only five payments were ever made.
In November 2006, the wife received $16,000 from the proceeds of the sale of a truck. In June 2008, the husband sold his interest in the venue at N.
The wife asserted in support of her proposal for division of the parties’ property that she was in employment throughout cohabitation and used her income to meet outgoings and household expenses for the benefit of the family. She did not deny that contributions were made by the husband but stated that she, in addition to the money she contributed, used her physical endeavours on the farm and otherwise for the benefit of the business enterprises conducted by the parties and particularly in relation to the stud business.
The wife also asserted that she was primarily responsible for carrying out household tasks and domestic duties and for caring for the child. Since separation in 2004, she has continued (while living in the B property) to maintain that property and has contributed money towards its upkeep and remain. She has also looked after livestock and carried out the normal farm work.
For his part, the husband contended that he had made much more significant initial contributions. Although the value may be difficult to establish precisely, it is clear that they were significant. He asserted that when the parties began to live together he continued to operate his taxi businesses involving some 60 taxis in all. His arrangements with his brother Mr X Hanas and involvement in the company called U Pty. Ltd. (‘U Company) are not at all clear.[2] It is fair to say, however, that he worked sometimes at night and on weekends and it is not suggested that he did not apply money, particularly during the time of cohabitation, towards the family and the further expansion of the businesses.[3]
[2] In relation to his business dealings, the husband’s cross-examination was peppered with references of the sort: “I can’t answer that question.”
[3] The husband did maintain a betting habit and a “SportsBet” account and in his cross‑examination was vague about the financial consequence of this: see Transcript of proceedings, 15 July 2008, 131.
The husband asserted that since separation he has continued to meet the outgoings in relation to the properties of the parties (to the extent that they have not been met by rental income) and that he has also met lease payments for the motor vehicle that the wife has leased (until August 2006) and in respect of his own Ford Fairlane motor vehicle until October 2007. He asserted that the contribution of both parties to home‑making and parenting were substantial. The husband claimed that the wife does not give him appropriate credit for his efforts in this regard.
For some time from separation in 2004 until she turned 18 years of age the husband was also the major contributor to the welfare of the child.
On the whole, the evidence about these matters is unsatisfactory from both parties, each of whom sees the other in a twisted way through the prism of prejudice and retrospective resentment. I can and I do, however, find as a result of the totality of the evidence, the wife’s contributions to these areas during cohabitation was greater than the husband. Although it is difficult to compare one with the other, any additional contributions made by the wife would not have been such as to offset in full the initial additional contributions made by the husband particularly initially.
Relevant law
The law in relation to alteration of property interests is relatively well settled, and the following (so-called) four stepped approach is to be followed:
a)Identify and value the property, assets, financial resources and liabilities of the parties as at the date of the hearing;
b)Identify relevant contributions and assess them within the meaning of s 79(4)(a) to s 79(4)(c) of the Family Law Act 1975 (Cth) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties;
c)Consider relevant matters referred to in s 79(4)(d) to s 79(4)(g) of the Family Law Act 1975 (Cth); and
d)Ensure my order adjusting the property, assets and liabilities of the parties is just and equitable.[4]
[4] Hickey & Hickey & Attorney-General for the Commonwealth (2003) FLC 92-144, 78,386 (Nicholson CJ, Ellis & O’Ryan JJ) (‘Hickey’).
The assets and liabilities of the parties: a comparative table
During the course of the protracted and serialised hearing, the parties reached certain levels of agreement about the assets to be included for division between them. The below comparative table of assets and liabilities with the valuations placed on them by the parties was confirmed (on 26 February 2010 in open Court) by Mr Hodgson (counsel for the wife) and Mr Mackay (solicitor for the husband) respectively as an accurate representation of the position of each of the parties (it is agreed that some of these figures differ from the original figures at the final hearing).
Assets Wife’s value Husband’s value B, NSW property 700,000.00 700,000.00 Chattels at B property 35,670.00 35,670.00 L Stud property 400,000.00 400,000.00 Nissan Patrol motor vehicle 18,000.00 20,000.00 K, NSW property 750,000.00 750,000.00 P2 Uni 265,000.00 265,000.00 P1 Unit 265,000.00 265,000.00 Gold Coast unit 480,000.00 477,000.00 David Jones shares 8,320.00
(as at 2 October 2008)4,640.00 U Pty Ltd Not known Nil Taxi ‘T1’ 365,000.00 Taxi plates ‘T1’/‘T2’ 730,000.00 Taxis 52,000.00 Ford Fairlane motor vehicle 20,000.00 20,000.00 ‘Ebet’ shares 2,610.00 1,800.00 Livestock 25,000.00 25,000.00 Sydney Cricket Ground (‘SCG’) membership 8,000.00 8,000.00 Superannuation (H) 661.00 661.00 Superannuation (W) 16,807.00 16,807.00 N venue proceeds 290,000.00 Bank accounts 5,626.00 Add backs Truck sale proceeds 19,000.00 19,000.00 Cabcharge Credit Union account 108,000.00 Shares sold at separation 37,068.00 Shares sold in January 2007 17,000.00 Shares sold 2,500.00 G, NSW property sale proceeds retained 500,000.00 Total Assets/Add-backs 4,756,262.00 3,373,578.00 Liabilities NAB mortgage on unit ‘P2’ 103,706.00 103,706.00 NAB mortgage G property 300,000.00 450,000.00 NAB mortgage Gold Coast 468,000.00 468,000.00 Debt to husband’s mother 150,000.00 225,000.00 E Pty. Ltd. tax liability 234,155.00 Agistment debt[5] 25,000.00 Debt to S Accountants 50,000.00 Taxation liability L Stud Pty. Ltd. 8,000.00 Total Liabilities 1,079,706.00 1,505,861.00 NET PROPERTY 3,676,556.00 1,867,717.00 [5] The wife agreed in her list of assets and liabilities as at 3 October 2008 that this was an agreed item.
Counsel for the wife highlighted the “modest quantum” of the parties’ superannuation and the parties agreed, in accordance with the principles enunciated in C & C,[6] that the parties’ superannuation would be included in the total property pool rather than be subject to a splitting order made by the Court.
[6] C & C [2005] FamCA 429 (Bryant CJ, Finn, Coleman, Warnick & O’Ryan JJ).
The law with respect to “add-backs”
It is reasonably clear proposition that the value of the contributions to the property of the parties, as well as the value of property itself, is ordinarily taken as at the time of the hearing.[7] There is also now a substantial line of authority that property that has been pre-emptively taken by a party to the diminution of the total property might properly be the subject of an add‑back on the basis that this is property already received by a party or which constitutes, in effect, a premature or pre-emptive distribution in favour of that party (to the detriment of the other party). A number of exceptions have been made to this proposition. In NHC & RCH,[8] the Full Court of the Family Court stated:
24. We will refer again later in these reasons to the decision in Townsend,[9] but we would in the present context draw attention to the following observations by later Full Courts:
2.11 There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge. (Marker [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ.)
46. Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. (Cerini [1998] FamCA 143, 8 October 1998, per Nicholson CJ, Ellis, Kay JJ.) (Footnotes referred to are of the Full Court.)
[7] See Hickey above and the obiter dicta comments of the Full Court of the Family Court in Pittman & Pittman [2010] FamCAFC 30 (Bryant CJ, Finn and Thackray JJ) at [52]: “Having regard to the provisions of ss 79(4) and 75(2), contributions (whether they be to property or to the welfare of the family) are usually only considered up to the time of trial.”
[8] NHC & RCH [2004] FamCA 633 (Finn, Kay and May JJ).
[9] Townsend and Townsend (1995) FLC 92-569 (Nicholson CJ, Fogarty and Jordan JJ).
In essence a tracing exercise is necessary. To the extent that money which exists at the time of separation is expended by the parties in reasonable living expenses for a party, even if the other party did not have access to the funds, that money ought not necessarily to be the subject of a notional add‑back.
The matters substantially in contention between the parties are as follows.
Taxi and taxi plates
The wife asserted that the taxi plates ‘T1’ and ‘T2’ were worth $730,000. She asserted the husband also had taxis worth $52,000. For his part, the husband agreed that taxi plate ‘T1’ was worth $365,000, but in the circumstances I accept that the taxis were worth as the wife suggested a total of $782,000. This follows from the acknowledgment of the value of one of the taxi plates and the value of the vehicles themselves. Accordingly, that sum ($782,000) will be added back into the property pool.
N Venue
A further area of contention relates to the N Venue proceeds. There is no dispute that the husband received the $290,000 as a result of the sale of the M Venue.[10] On the husband’s behalf, however, he asserted that the proceeds of sale were banked to the NAB mortgage account.[11] Accordingly, the balance of the NAB mortgage account as it appears in the liabilities has already taken account of the receipt of those proceeds of sale. I accept that the proceeds were so used and I accept further that it has the effect as asserted.
[10] Submissions of the husband, filed 16 March 2009, [19].
[11] Transcript of proceedings, 14 July 2008, 105.
Shares sold at separation
It is asserted by the husband that the shares sold at or about the time of separation ($37,068) were used for post‑separation living support for himself and the parties’ child. The husband also asserted that the further shares sold in January 2007 for $17,000 were (it is asserted) used to repay a personal loan from Mr JH which had been obtained for the purpose of meeting the costs and disbursements in relation to these proceedings.[12] Accordingly, the sum of $17,000 should be added back. In my opinion, the $37,068 should not be added back in the circumstances.[13] The expenditure by the husband on his living expenses (as opposed to his legal expenses) falls within the principles as outlined above by the Full Court in NHC & RCH.
[12] Affidavit of the husband, filed 5 November 2007, [72].
[13] NHC & RCH [2004] FamCA 633 (Finn, Kay and May JJ).
Cabcharge Credit Union account
The wife submitted that the Cabcharge Credit Union account should be the value taken as at the date of the parties’ separation. Contrawise the husband submitted that “the balance of bank and credit union account should be taken as near as possible to the time of the hearing.”[14]
[14] Submissions of the husband, filed 5 June 2009, [23].
The husband’s evidence[15] was that $80,000 of the funds in the Cabcharge Credit Union account were part of his contribution to the N Venue. I accept the evidence that is what occurred and as such it would be, in the words of counsel for the husband, a “double count” to add‑back the $80,000 which was invested in the N Venue because the proceeds of the sale of the N Venue were otherwise already added back. However, the husband has failed otherwise to explain how the remaining $28,000 in the Cabcharge Credit Union account was applied. It was at least incumbent upon the husband from an evidentiary perspective to establish that this was perhaps expended on reasonable living expenses. Without such evidence, I am not prepared to make the assumption that that was what the money was used for. Accordingly, on that basis there should be an add-back of $28,000.
[15] Affidavit of the husband, filed 5 November 2007, [58].
G property proceeds
The wife asserted that the proceeds of the sale of the G property by E Pty Ltd (in the sum of approximately $500,000) should be added back into the property pool. This was the subject of affidavit evidence from the husband and cross-examination. The husband asserted as follows.[16] The property was sold for $950,000. Completion occurred in January 2002.[17] The amount of $691,645.62 was received into the bank account of the company.[18] The husband gave evidence that $166,500 went to the purchase of one of the P Units,[19] $65,000 was paid for taxi insurance,[20] $95,000 was paid into the taxi account,[21] and $170,000 was paid for the purchase of shares which were subsequently sold and the funds paid back into the company.[22]
[16] Affidavit of the husband, filed 5 November 2007, [24].
[17] Transcript of proceedings, 15 July 2008, 133.
[18] Ibid.
[19] Transcript of proceedings, 15 July 2008, 191.
[20] Ibid.
[21] Transcript of proceedings, 15 July 2008, 133.
[22] Ibid.
The husband asserted[23] that the balance of the funds were applied for the costs of improvements to the B property, the purchase of livestock, feed and trailers and other equipment, and for the payment of wages to the wife and the two employees in the years following the sale. The submission on behalf of the husband was that the sale occurred some two years before separation. It was further submitted the wife was in as good a position as the husband at that time to have informed herself as to what became of the proceeds if she wanted to know.
[23] Affidavit of the husband, filed 5 November 2007, [25].
On balance, I accept those submissions in relation to the proceeds of the sale of the G property. The expenditure occurred before separation and I accept that no part of it was secreted away by the husband.
Truck proceeds
The husband asserted that the wife should add-back the proceeds of the sale of the Isuzu truck. He asserted[24] that the Court had made orders on 17 October 2005 as to how the proceeds were to be spent. The husband asserted that the wife did not comply but rather spent the money on her own living expenses. It is asserted she acknowledged this during the course of her cross‑examination.[25] The husband stated this also occurred when the wife withdrew $10,000 from the Westpac Bank account in July 2005. I accept that in this matter the wife has at least at a preliminary level, and at a level which has not been disturbed by subsequent cross‑examination, applied the funds (even if contrary to Court orders) for her own living expenses. Given the amount in question and the period to which such funds are referable, I find that this was a reasonable application of those funds. I reject the proposition that there should be any add-back in relation to the proceeds of the sale of the truck in the sum of some $19,000.
[24] Submissions of the husband, filed 16 March 2009, [32].
[25] Transcript of proceedings, 14 July 2008, 32.
G property mortgage
Counsel for the husband asserted in relation to this mortgage that it was inappropriate to bring into account the figure as at the date of separation ($300,000) rather than its figure at the date of hearing ($450,000.)[26] This submission was made in accordance with the first step of the four step process as identified above in Hickey.
[26] Transcript of proceedings, 2 October 2008, 226 & 249.
As a statement of general principle, this is unexceptional. However, in these circumstances some different considerations should apply. Effectively, the increase in the mortgage is not attributable to interest that may have accrued naturally on that mortgage. (Compare the situation where on the other side of the ledger an increase in value of the property may be attributable to inflation.) The increase was achieved by the husband’s drawing down on the line of credit associated with the mortgage (which was apparently up to $650,000) to meet certain obligations. In his submissions, counsel for the husband was somewhat vague about these draw‑downs and referred to them as:[27]
…transactions which have occurred between the day of separation and the date of hearing some of which have been referred to earlier in these submissions.
[27] Submissions of the husband, filed 16 March 2009, [35].
The wife’s counsel in his submissions maintained that the line of credit was used to acquire the interest in the N Venue ($150,000) and to meet the shortfall between the husband’s income and living expenses which he claimed as in excess of $1,000 per week.[28] It is further asserted by the wife that the husband drew‑down on the line of credit to acquire three motor vehicles for $70,000, to pay accountants fees in excess of $20,000 and to pay legal fees of $30,000.[29] Counsel for the wife said in his submissions:[30]
The Husband also contends that he has repaid certain monies to reduce the indebtedness. Because of movements in the indebtedness from the line of credit and because the line of credit has been used for the Husband’s own purpose and to his advantage, it is submitted that it is appropriate to include the liability as a the date of separation (namely $300,000.00) and not add back those items which the Husband has acquired by using it or the legal fees and accountants fees which he has paid.
[28] Submissions of the wife, filed 5 June 2009, p 5-6.
[29] Transcript of proceedings, 2 October 2008, 226–229.
[30] Ibid, 6.
Counsel for the wife continued as follows:[31]
The proceeds of the sale of the [N Venue] should be included (to avoid double counting only) to the extent that there is a balance over and above all of these proceeds which were used to reduce the indebtedness in respect of the line of credit.
[31] Ibid.
With respect to counsel I do not understand that submission. What seems logical is this: if I am to include the proceeds of the sale of the N Venue at $290,000 as is suggested by the wife then logic would suggest that the investment amount of $150,000 which she agrees was advanced for the acquisition of the interest in the first place should, to the extent that it increased the line of credit, be taken into account. The other amounts drawn down on it, which may have increased the mortgage and were applied by the husband for payment of fees and so forth might ordinarily have been added-back, but the wife does not seek that. In my opinion, if the proceeds of the N Venue are to be included so should the amount asserted by the wife to have been applied in relation thereto. This means the mortgage should be brought in at a figure of $450,000. Coincidently, this is the figure that as at 2 October 2008 represented the balance of the account. I so find.
Loan from the husband’s mother
The primary evidence of Mrs Hanas (the husband’s mother) was that she lent money to the husband and for that matter to his brother. The husband’s mother is advanced in age, deaf and does not speak English. Her cross‑examination was conducted by video-link with an interpreter, with Mrs Hanas attending the Sydney Registry of the Family Court. Notwithstanding all of these impediments, I am satisfied that the cross-examiner was able to test her evidence effectively.
There are a number of factors bearing upon these loans and their effect on the proceedings.
I am satisfied and find that Mrs Hanas regarded the sums advanced as loans. In support of this finding, I take account of the fact that she liquidated her own assets for this purpose, to no advantage to herself.
I am satisfied from the evidence of the husband that he regarded the money as advanced to the companies L Stud Pty. Ltd. and U Pty Ltd. The husband made it clear that he was not going to personally repay the money.[32]
[32] Transcript of proceedings, 14 July 2008, 100 – 101.
The mother’s own evidence which was forthrightly or honestly given was that she did not require the repayment of the loans so long as her sons had the benefit of them. The husband’s mother stated:[33]
It doesn’t matter if he [the husband] gives me money … I don’t care about interest.
[33] Transcript of proceedings, 15 July 2008, 165.
Mrs Hanas went on to state:[34]
I don’t want her [referring to the wife] to get the money.
[34] Ibid.
I believe that the husband’s mother believed she had advanced the money to her son or sons. She was content that they should have the use of the money but that she regarded it as a loan. I am satisfied that, for his part, the husband, whether in conjunction with his mother or otherwise, did not regard the money as being advanced to him personally, but rather to the companies as I have suggested previously. In any event, he accepted during the course of the hearing no personal obligation to repay the money at all.
It seems to be common ground that there had been no demand in writing for the money to be repaid and there was no attempt on the part of the husband to repay it notwithstanding that the loans had been outstanding for some time. In such circumstances, while I accept that the loans existed (albeit the borrower being uncertain) I do not believe that any of the parties to the loan transactions expected or wanted them to be repaid up to now or in fact into the future. One thing the husband’s mother was very clear about was that she did not want the wife to have the benefit of that money.
I would therefore, in accordance the principles enunciated in Af-Petersens & Af-Petersens,[35] determine that Mrs Hanas did not expect that this loan would be repaid. Hence, the money had the characteristic of a contribution made by or on behalf of the husband.[36] It appears that the money was used in relation to the operation of the taxi businesses of the brothers. It was on the husband’s evidence that the money was used for the purposes of buying the L Stud property.[37]
[35] Af-Petersens & Af-Petersens (1981) FLC 91-095, 76,658.
[36] See Gosper & Gosper (1987) FLC 91-818, 76,159; Kessey & Kessey (1994) FLC 92‑495, 81,141 (Baker, Finn & McCall JJ).
[37] Affidavit of the husband, filed 5 November 2007, [22].
For this reasoning I reject the submission on behalf of the husband that the amount of $225,000 should be regarded as money due to his mother by both of the parties (in effect) or as a joint liability.[38] I am not satisfied that any interest was either payable or to be imputed to the transaction. The evidence of the husband’s mother in cross-examination at least is corroborative of the fact that she expected no interest to accrue.
[38] $225,000 is referable to the original loan figure plus interest.
Nevertheless what my finding means overall is that there was an additional contribution of relatively significant proportions by the husband in relation to the property and that should be taken into account as well.
Other items of property or liability
There was a difference in the value of the Nissan Patrol motor vehicle asserted between the parties. In general, I prefer on matters of dispute about the figures, particularly those within her own knowledge or experience, the approach of the wife. Accordingly, on that basis I accept that the Nissan Patrol motor vehicle should for these purposes be valued at $18,000. I take a similar view in relation to the David Jones shares because their value as at 2 October 2008 would be in accordance with the wife’s pragmatic approach. I accept that the same would apply in relation to the Ebet shares sold by the husband and the other $2,500 worth of shares sold by the wife. I prefer and accept the wife’s valuation in relation to each of those shares. The wife gives evidence of her bank account being $5,626 and I accept that evidence – there is no contrary evidence. I accept the value of the Gold Coast unit at $477,000 as an admission against interests made by the wife.[39]
[39] See list of assets and liabilities as at 3 October 2008 (filed in Court on 3 October 2008).
In relation to the liabilities I have indicated my view about a number of these already. The E Pty Ltd tax liability is now accepted as a result of the re‑opening of the matter on 25 February 2010 at $234,155, and the husband’s tax liability has now been reassessed as nil by the Australian Taxation Office.[40]
[40] Affidavit of the husband, filed 21 January 2010, [18].
The husband asserted originally a debt of $50,000 to S Accountants. When the proceedings were re‑opened I indicated that I would include that as a liability if the debt had been paid. I have heard nothing to the contrary from the legal representatives to the parties since so I assume that it is accepted that account has been paid.
The taxation liability for L Stud Pty. Ltd. does not appear to be significantly disputed at $8,000.
I do not accept the agistment debt of $25,000. The husband was singularly unsatisfactory in convincing me as to the veracity of this debt based on his cross-examination, where even the husband seemed unsure as to how much the debt (if it did exist) was at all.[41] Accordingly, it will not be included in the liabilities.
[41] See Transcript of proceedings, 14 July 2008, 96ff; Transcript of proceedings, 2 October 2008, 269; Transcript of proceedings, 3 October 2008, 311.
Accordingly, the revised list of assets and liabilities including the relevant add-backs is as follows:
Assets Value B, NSW property 700,000.00 Chattels at B property 35,670.00 L Stud property 400,000.00 Nissan Patrol motor vehicle 18,000.00 K, NSW property 750,000.00 P2 unit 265,000.00 P1 unit 265,000.00 Gold Coast, Queensland unit 477,000.00 David Jones shares 8,320.00 Taxi plates ‘T1’/’T20’ 730,000.00 Taxis 52,000.00 Ford Fairlane motor vehicle 20,000.00 Ebet shares (45,000) 2,610.00 Livestock 25,000.00 Sydney Cricket Ground (‘SCG’) membership 8,000.00 Superannuation (H) 661.00 Superannuation (W) 16,807.00 Bank accounts 5,626.00 Cabcharge Credit Union account 28,000.00 Shares sold in January 2007 17,000.00 Shares sold 2,500.00 N Venue sale proceeds 290,000.00 Total Assets 4,117,194.00 Liabilities NAB mortgage on P2 unit 103,706.00 NAB mortgage G property 450,000.00 NAB mortgage Gold Coast property 468,000.00 E Pty. Ltd. tax liability 234,155.00 Debt to S Accountants 50,000.00 Taxation liability L Stud Pty. Ltd. 8,000.00 Total Liabilities 1,313,861.00 NET ASSET (TOTAL PROPERTY POOL) 2,803,333.00
U Pty Ltd: significant financial resource to the husband?
This leaves unsolved the value of the husband’s interest in U Pty Ltd. Tax returns were not initially filed in relation to this company. I am still not certain that all of the relevant tax records have been produced even at this late stage. The husband claimed in relation to this business that he received no remuneration. The husband effectively maintained he contributed his labour on the basis of being on call while his brother was overseas for some seven weeks, 24 hours a day, seven days a week. The husband claimed he had no valuable interest in the company and that his shareholding should be regarded as valueless.
The failure by the husband to make an initial disclosure about U Pty Ltd, the improbability of his involvement in carrying out what is an extensive administrative management task (management of 60 taxis) alone would lead me to conclude that the husband’s evidence in relation to this matter has been somewhat less than frank. In default of any proper figures and in the context of the vague, hazy and unhelpful evidence of the husband about these matters, it is reasonable to find (and I do find) that this company represents to him a far more significant resource than he is prepared to acknowledge. I am, however, left without enough evidence to enable me to include any figure for it as an asset in the list of assets and liabilities of the parties. Accordingly, it is a factor which I will take into account under s 75(2) of the Family Law Act 1975 (Cth) and in the circumstances of the husband’s initial non-disclosure, his vagueness about the matter, the improbability of his evidence and my finding of his lack of credit in relation to this matter, I am prepared to ascribe to it a significant value as a resource in the overall balancing of other matters between the parties.[42]
[42] In accordance with the principles enunciated in Weir & Weir (1993) FLC 92-338, 79,593-4 (Nicholson CJ, Strauss & Ngyh JJ).
Contributions of the parties
I will turn therefore to the question of contributions. Those matters which are in the husband’s favour are his substantial initial contribution, his contribution from his mother in relation to the L Stud property, and his post‑separation contributions as parent to the parties’ child.
Those matters in the wife’s favour involve her contribution of all of her earnings (I am prepared to accept that there were less than the husband’s but that is not the question) to the family enterprises, her physical labour in the development of and management of the B property and the L Stud property and her greater contributions as home‑maker and parent during the course of cohabitation.
The balancing of these various items is difficult given the contributions were made at different times and have had different effects. In accepting the Full Court’s guidance in Pierce & Pierce,[43] I accept that the husband’s initial contributions have formed a platform upon which most of the enterprises of the parties had been constructed. This adds significance to those contributions. I note also that the contributions received from the husband by his mother in relation to the L Stud property have aided in the acquisition of a substantial asset in the property pool.
[43] Pierce & Pierce (1999) FLC 92-844 (Ellis, Baker & O’Ryan JJ).
It is not, however, purely a matter of monetary quantum that determines contributions. The contributions which I have held in relation to the wife to have been greater than those of the husband as home‑maker and parent over the duration of quite a long marriage and, accordingly, need also to receive proper weight.
Overall, it seems to me that the correct assessment of their parties’ respective contributions is 65 per cent to the husband and 35 per cent to the wife.
Section 75(2) factors
The husband is older than the wife but has a greater capacity to earn income. The wife has a prospective relationship (with Mr KG)[44] which may be of assistance for her although the financial consequences of that relationship are far from clear on the evidence. Care of the parties’ child is no longer a factor in relation to either parent. The wife has some health difficulties arising from her fracture of her leg in 2002 and as I had found previously the husband’s involvement with U Pty Ltd and his brother and the taxi business is a resource of relatively significant proportions.
[44] Transcript of proceedings, 14 July 2008, 40.
Additional factors
In addition, the wife’s counsel submitted that I should take account of the husband’s ineffective investment in the N Venue. It is asserted that he proceeded with the purchase “without regard to a due diligence report and without any consultation with the wife.”[45]
[45] Submissions of the wife, filed 5 June 2009, 10.
There was also the question of the husband’s gambling losses of about $10,000.
I am not prepared to find “negative contributions” (whatever that may mean) in relation to these two matters. I do not find that waste in the same way of Kowaliw & Kowaliw[46] has been made out. Some investments succeed. Some do not. Spouses must ordinarily take the bad with the good. The gambling is marginal but I am not prepared for that amount to find “waste.”
[46] Kowaliw & Kowaliw (1981) FLC 91-092, 76,642.
It was also asserted that the husband had failed to comply with orders of disclosure and had not made a full and frank disclosure of his financial affairs. A startling example of this relates to the husband’s income which he had said in his Financial Statement that he had a weekly income of $683[47] but conceded that his income at that time was in fact some $1,277.[48]
[47] Financial Statement of the husband, filed 5 November 2007, Item 2(a).
[48] Transcript of proceedings, 3 October 2008, 285.
It was also submitted by the wife that notwithstanding two interim applications seeking proper disclosure and four days of cross-examination of the husband he had still at the end of the proceedings fallen short of his obligation to make a full and frank disclosure of his financial position.[49]
[49] ¶ 11 of the submissions
There is some force to these submissions. The husband’s involvement in these proceedings notwithstanding a somewhat belated attempt to paint himself as a victim of the difficulties of getting his affairs into order leaves me with no confidence that I have from him a frank disclosure about his position. It was submitted that I should on the authority of the respective Full Courts in Black & Kellner[50] and Weir & Weir and not be “unduly cautious in making findings in favour of the other party.”[51]
[50] Black & Kellner (1992) FLC 92-287 (Nicholson CJ, Ellis & Cohen JJ).
[51] Weir & Weir (1993) FLC 92-338.
In Black & Kellner, Nicholson CJ (with whom Ellis & Cohen JJ agreed) relevantly stated:[52]
…the first step in proceedings for a property settlement is for the court to ascertain the wealth of the parties and in this regard it is of interest to note the remarks of the Full Court in the case of Guinti and Giunti (1986) 11 Fam LR 160; [1986] FLC 91-759, particularly at Fam LR 165; FLC 75,555 where the court commented:
"It is obviously desirable as a general principle that the court should first of all identify the pool of assets available and evaluate it. If each party complies with his or her obligation to make a full and substantive disclosure of their financial affairs: see In the Marriage of Briese (1985) 10 Fam LR 642; [1986] FLC 91-713, affirmed by the Full Court in Oriolo v Oriolo (1985) 10 Fam LR 665; [1985] FLC 91-653, there is no problem, although there may be disputes as to valuation. However if, as here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require? It would be simple, if that were the case, to evade the jurisdiction of this court, not by outright refusal which would attract sanctions but by obfuscation and evasion.” (Emphasis added; Footnotes referred to are of the Full Court.)
[52] Black & Kellner (1992) FLC 92-287, 79,133-4.
In Weir & Weir, the Full Court relevantly stated:[53]
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC ¶ 92-287 , that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC ¶ 91-759 , and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC ¶ 91-853 … It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non-disclosure … then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature. (Emphasis added; Footnotes referred to are of the Full Court.)
[53] Weir & Weir (1993) FLC 92-338, 79,593-4.
In this matter, I am not being asked to find that the husband has assets of a certain value and for the Court to take account of it. I accept that the decisions referred to above do not permit me, in the absence of any evidence, to manufacture property or to make orders about “notional” property. What is submitted in these circumstances is that there should be a more significant adjustment pursuant to (perhaps) s 75(2)(o) of the Family Law Act 1975 (Cth) on the basis that this Court in particular could find that there had not been a satisfactory disclosure by the husband and that this was unlikely in fact to have been on the basis that he had failed to disclose matters that were not in his interests. Accordingly, while this Court may not be satisfied that he had any particular asset, resource or income that had not been disclosed, it could be satisfied that his financial circumstances generally were better than he had disclosed. The husband had been afforded opportunities through a number of interlocutory proceedings and over the course of a lengthy trial to make appropriate disclosures to demonstrate that he did not have better resources then he had in fact formally disclosed. The husband did not take these opportunities. Consequently, the Court should make a significant adjustment.
Often, adjustments made under s 75(2) are relatively minor. However, taking account of the factors that I have set out above and in particular the non‑disclosure factor it seems to me that an adjustment (as suggested by the wife) in the order of 20 to 25 per cent would be appropriate. I emphasise that this is not only on the grounds of resources of the husband not clearly evident to the Court. It incorporates all of the relevant factors I have set out above and what I assess to be their appropriate balance between the parties. I believe that I should apply the adjustment at 20 per cent, which is a differential between the parties of 40 per cent. In the circumstances, this is particularly significant.
Summary
That would have the effect of reducing the husband’s share of the division of property to 45 per cent and would give the wife 55 per cent of the net assets of the parties as set out above (net assets being $2,803,333). This reflects a notional division of the property pool of $1,541,833 to the wife and $1,261,499 to the husband (which I round up to $1,542,000 and $1,262,000 respectively).
The Fourth Step (so-called): Just & Equitable
If the wife is to receive the B property ($700,000), the chattels in the B property ($35,670), the Nissan Patrol vehicle ($18,000), her P Unit ($265,000), the money in her bank accounts ($5,626), and her superannuation ($661) this would bring about a total of $1,024,957.
If the husband is to receive the L Stud property ($400,000), retain the K property ($750,000), the proceeds of his G unit, the Gold Coast unit ($477,000), the taxis and plates ($782,000), the Ford Fairlane ($20,000), the livestock ($25,000), his SCG membership ($8,000), the David Jones shares ($8,320) and his superannuation ($16,807) this would bring about a total of $2,467,127.
If I then adjust by reference to the add-backs the relevant value of the shares of the parties would result in a payment being made from the husband to the wife of $517,043, which I round to $517,000. I will make orders to that effect, as well as orders that indemnify the wife against the relevant liabilities.
In my opinion, given what each of the parties has finished up with including that each has accommodation and taking account of the other factors relevant to my determination this is, in all of the circumstances, a just and equitable outcome.
Spousal maintenance
The submission in relation to this on behalf of the wife is built in part on hope rather than on substance. It is not clear to me from all of the circumstances that her need for spousal maintenance has been adequately demonstrated. Moreover, even if that had occurred, and I would be prepared to concede that some such need has been established, the husband’s capacity to pay is far from clear. For the reasons I have set out above there is some force to this submission that the husband’s income and his resources have not been adequately disclosed. There is no doubt that his disclosed income on his financial statement was about a half on his own admission of what he was actually earning. Those factors have been taken into account in a relatively generous way in the course of the property proceedings which have enabled the wife to receive a share of the property which would not otherwise have been immediately available to her based purely on her contributions. Notwithstanding my findings about his greater income earning capacity, I also have little, if any, evidence about the continuing capacity of the husband at his age to continue to earn income sufficient to make a payment to the wife of $500 a week as sought.
Taking all reasonable factors into account, including matters under s 75(2) of the Family Law Act 1975 (Cth) and in particular the settlement of property that I have arrived at on behalf of the parties in my opinion the application for spousal maintenance should be refused and is dismissed.
Costs
The wife also sought some $200,000 for legal costs.
The primary rule under s 117(1) of the Family Law Act 1975 (Cth) is that each party should bear his or her own costs. This is a matter in which I have no idea of the offers that may have been made between the parties to resolve the proceedings and could not take that into account without having some knowledge of those offers. It seems to me in the light of the financial circumstances of the parties after the financial division ordered by me that there are no grounds on that basis alone for there to be an order for costs. The application for costs on behalf of the wife in part relates to the conduct of the husband throughout the proceedings and his failure to comply with orders of the Court. This is a factor which could relevantly be taken into account if the application is made in accordance with the directions I give immediately hereafter. It does not seem to me that there are any other relevant factors although I do not preclude submissions being made in relation to other factors about costs.
The parties, if they wish to confirm an application for costs on either side, should file formal submissions in relation thereto together with any short affidavit identifying any offers that have been made or other factors that I have not identified in the paragraphs immediately proceeding this on or before 4.00 pm on 19 April 2010. The parties’ failure to file such submissions or affidavits by that time will indicate an abandonment of any such claim and, ipso facto, the application for costs on either side will be dismissed.
I will make an order removing all extant applications, save as to the any fresh application the parties may wish to make in relation to the question of costs, are discharged and that the matter is removed from the pending cases list (save as to any application about costs).
I certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of the Honourable Acting Chief Justice Faulks.
Legal Associate:
Date: 24 March 2010
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