Beatty & Beatty
[2008] FamCA 496
•2 July 2008
FAMILY COURT OF AUSTRALIA
| BEATTY & BEATTY | [2008] FamCA 496 |
| FAMILY LAW – PROPERTY – alteration of property interests |
| Family Law Act 1975 (Cth) s 75(2); 79(4)d – (g) |
| Kowaliw (1981) FLC 91-092 Norbis & Norbis (1986) FLC 91-712 Lenehan & Lenehan (1987) FLC 91-814 Zyk & Zyk (1995) FLC 92-644 |
| APPLICANT: | Ms Beatty |
| RESPONDENT: | Mr Beatty |
| FILE NUMBER: | PAF | 796 | of | 2005 |
| DATE DELIVERED: | 2 July 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 16 – 17 June 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Langley |
| SOLICITOR FOR THE APPLICANT: | O’Brien Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Dwyer |
| SOLICITOR FOR THE RESPONDENT: | Peter Blackwell & Associates |
Orders
Orders made by consent on 16 June 2008
Each of the parties share joint parental responsibility for the children S born … July 1992 and J born … May 1994.
The children live with the mother at such times as agreed between the parties bearing in mind the wishes of the children.
The children live with the father at such times as agreed between the parties bearing in mind the wishes of the children.
Any application filed by the husband seeking departure from any child support assessment be dismissed.
Pursuant to s.106B FLA the transfer by the husband to the second respondent of the property at F (“the [F] property”) being the whole of the land in Folio Identifier … be set aside.
Within two months of the date of the orders, the second respondent transfer to the husband the whole of his right, title and interest in the F property.
Simultaneously with the transfer referred to in the previous order, the second respondent discharge the current mortgage to Colonial on the F property.
Simultaneously with the transfer referred to in Order 6, the second respondent transfer to the husband his right, title and interest in 50,000 shares in D Pty Ltd.
Any other outstanding application against the second respondent be dismissed.
The husband indemnify the second respondent in relation to any stamp duty payable (if any) in relation to the transfer referred to in Order 6 above.
Orders made 2 July 2008
Pursuant to s.79 of the Family Law Act 1975 (“FLA”) an order be made in the terms of paragraphs 2 to 11 as set out below.
Within 2 months from the date of these orders, the husband pay to the wife the amount of $247,931.
Contemporaneously with the payment referred to in Order 2, the husband be declared to have sole right, title and interest in the F property.
The husband indemnify the wife in relation to any liability outstanding in respect of the F property including any arrears in respect of that property.
In the event the husband fails to pay to the wife the amount referred to in Order 2 within the time referred to in Order 2, then both parties will do all things and sign all necessary documents to effect the sale of the F property at a price to be agreed upon between the parties and failing agreement to be determined by a nominee of the President of the Real Estate Institute of New South Wales from time to time and that the net proceeds of the sale be divided as follows:-
5.1.payment of the costs of sale including agent’s fees and legal fees;
5.2.68.9 percent to the wife;
5.3.31.1 percent to the husband.
Whenever a splittable payment is payable in respect of the superannuation interest of the wife in the D Superannuation Fund:
6.1.The husband is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001, using a base amount in the sum of $6,821.00 at the operative time of four (4) days from the date of this order; and
6.2.there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for this order.
Order 6 binds the trustee from time to time of the superannuation fund.
Both parties forthwith do all things and sign all necessary documents to cause D Pty Ltd to transfer the wife’s member’s benefit in the D Superannuation Fund in the sum of $45,000.00 to the trustee of a superannuation fund which the wife nominates in writing.
Contemporaneously with the payment to the wife referred to in Orders 2 or 4, the wife transfer to the husband her right, title and interest in D Pty Ltd and the husband thereafter indemnify the wife in relation to any liability that the wife might have to D Pty Ltd or in relation to any business conducted by D Pty Ltd.
Each party be solely entitled, to the exclusion of the other, to all other property, chattels and superannuation in their respective names or possession as at the date of these orders and that each party indemnify the other in relation to any debt associated with any asset that is kept by each of them respectively.
The parties each pay one half of the outstanding joint liability for expert witnesses as set out in the Reasons for Judgment.
If either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to effect the terms of these Orders, the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s.106A FLA to execute such documents on behalf of such party.
Either party have liberty to restore the matter on seven days notice in relation to the implementation of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Beatty &Beatty is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: PAF 796 of 2005
| Ms Beatty |
Applicant
And
| Mr Beatty |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This matter was originally set down before me for the determination of:
1.1.Parenting orders in relation to S born in July 1992 and J born in May 1994.
1.2.Orders against P Beatty, the second respondent and brother of the husband.
1.3.Alteration of property interests between the parties.
On 16 June 2008 orders were made by consent in relation to the parenting issues and the issues involving the husband’s brother.
There remained outstanding issues in relation to the alteration of the property of the parties.
APPLICATIONS
The wife sought in her opening that there be a 70/30 division in the wife’s favour of the assets of the parties.
The husband’s position was that the assets apart from the assets in the superannuation fund be divided evenly and that the superannuation fund be divided as to 54 percent to the husband and 46 percent to the wife.
The division of the superannuation sought by the husband is on the basis that the husband claims that he has made the following contributions to his superannuation after separation:-
30 June 2005 $2,250
30 June 2006 $6,690
30 June 2007 $1,581$10,521
Counsel for the husband submitted that this represented about 8 percent of the $121,000 currently in the superannuation fund and consequently would lead to an adjustment between the parties of a division of the superannuation fund of 54 percent to the husband and 46 percent to the wife.
During final submissions counsel for the husband conceded that there should be a 5 percent adjustment in the wife’s favour for post separation contributions referrable to the husband’s occupancy of the matrimonial home whilst the wife was renting and the wife’s contributions towards the three older children of the marriage post separation.
DOCUMENTS READ
There was a considerable amount of material to read, including:-
9.1.The affidavit of the wife sworn 31 January 2008;
9.2.The wife’s financial statement filed 12 February 2008;
9.3.The husband’s affidavit (which ran to six volumes and 687 pages) sworn 11 March 2008;
9.4.The husband’s financial statement filed 5 May 2008;
9.5.The affidavit of Mr V sworn 6 June 2008.
SHORT HISTORY
The husband was born in December 1955.
The wife was born in July 1957.
The husband’s brother, who was the second respondent in the proceedings, was born in May 1966.
The parties were married in April 1984.
The parties’ eldest son was born in June 1985.
The parties’ eldest daughter was born in January 1987.
The parties’ middle daughter was born in April 1989.
The parties’ youngest daughter, S, was born in July 1992.
The parties’ youngest son, J, was born in May 1994.
The parties separated under the one roof on 25 January 2004 (or 26th; the date is different in different parts of the evidence) and physically separated on 23 April 2004 when the wife left the matrimonial home.
D Pty Ltd is a shelf company which employs the husband as a tradesman. It’s preferred work is jobs in the range of $150,000, although the husband says that he is hopeful of shortly obtaining a contract with a contract price of $300,000.
BACKGROUND FACTS
There was an agreement at the hearing that there was equality between the parties in respect of contributions to the date of separation.
Consequently, the history of those contributions was not explored in cross examination.
However, the affidavit material demonstrates a myriad of contributions that both parties made financially and non financially towards the acquisition, conservation and improvement of property and in the role of homemaker and parent.
In 1984 the parties purchased the current matrimonial home at F (“the [F] property”). It was registered in the husband’s name.
As discussed in more detail below, shortly after separation that property was transferred to the husband’s brother. This was the focus of some contention until consent orders were made on the first day of the hearing, the effect of which was that the former matrimonial home without encumbrance came back into the pool to be divided between the husband and wife.
The parties brought a property at B in the mid 1980s and sold it for a profit in 1993.
The husband was involved in property development with Mr V.
During the marriage the husband set up a company D Pty Ltd. The husband and wife were its shareholders. The company provided a vehicle for the husband to conduct his business as a tradesman.
In addition, during the marriage both the husband’s parents were diagnosed with illnesses and the wife assisted in the care of the husband’s mother and the care of the husband’s father during the marriage.
CREDIT
There was one passage of evidence where the husband’s credit was brought into question. He was asked questions about the Commonwealth Bank cash management account and withdrawals from that account in October 2004 of $7,000 and $8,000. Originally, he said that the $7,000 withdrawal was in relation to a payment to a plumber and the $8,000 was in relation to the payment for pool supplies provided by a friend over the years and purchasing material for the children’s rooms. When tested about that he changed his evidence to say that the plumber was $3,000, the payment to the friend for pool supplies was $4,000 - $5,000 and the balance was used to buy the material for the children’s rooms. When his attention was drawn to evidence that he had given about carrying out plumbing work at the property himself, he said that he wished to withdraw his oral evidence about the plumber and said none of the cash management monies had been used to pay a plumber. This evidence impugns the husband’s credibility.
However, the cross examination about the use of the cash management account was irrelevant to any issue apart from credit because it was agreed that the monies from the joint account (the sum of $19,487 which is to be counted against the husband on the balance sheet) was deposited into the cash management account. Consequently, therefore, to count against the husband monies that were unaccounted for in the cash management call account that were less than the sum of $19,000 would be a double counting and consequently I do not have to consider what happened to the cash management call account.
I do not accept the husband’s explanation as to his motivation for transferring the former matrimonial home to his brother shortly after separation.
The wife was asked only a few questions in cross examination. Her credit is not impugned in any way. However, the only matters that are really in issue in this case are matters where the husband was tested in relation to the accuracy of what he was saying in circumstances where the wife was unable to give any evidence one way or the other about those matters.
There is a large volume of material that has been presented in this case and in respect of those matters that remain in issue unless I indicate otherwise, conclusions can be drawn by looking at documentation.
The sale of 417 L property and Judicial Registrar Halligan’s order
There was cross examination of both parties in relation to whether or not the husband had given any indication to the wife that he intended to sell this property. An order had been made by Judicial Registrar Halligan on 7 November 2005 in the following terms:-
1.That the husband be restrained from disposing or otherwise encumbering the parties’ share in the property known as and situated at [L] in the State of New South Wales unless agreed between the parties in writing.
3.The husband be restrained from disposing of or otherwise encumbering any of the assets in the superannuation fund known as the [D] Superannuation Fund unless he gives the wife fourteen (14) days written notice of his intention to deal with the assets of the superannuation fund.
The husband quite frankly agreed that he had not, in accordance with Order 1, obtained the wife’s agreement in writing for the sale of L property.
L property was an asset of the superannuation fund. The husband contended that he gave the fourteen days notice required under Order 3 by way of a letter written to the wife’s solicitors dated 26 April 2007. The wife’s case was that they had received another letter on that day. The husband subsequently wrote a letter saying there were two letters written on 26 April 2007, the first of which informed the wife of the possible sale by the superannuation fund. The husband has given sworn evidence in his affidavit that the second letter was sent. The wife did not choose to call her solicitor to verify the implication made in the letter written by him on 25 June 2007 (that is, that he only had received one letter dated 26 April 2007).
Given the candid admission by the husband that he had not complied with Order 1, little turns on the discussion as to whether or not the husband had given any notice at all of the potential sale before it happened.
On balance however given the state of the sworn evidence, I am unable to conclude that the husband did not send two letters on 26 April 2007.
Conclusion on credit
Apart from his evidence in relation to payments from the Commonwealth Bank cash management account, the husband seemed to give his other evidence in a straight forward way. He was able to refer on a number of occasions to parts of the voluminous material that he had filed in order to explain a transaction in respect of which he was being tested.
APPROACH TAKEN
In this matter my task is to:
41.1.Identify and value the property, assets, financial resources and liabilities of the parties;
41.2.Identify relevant contributions and assess them;
41.3.Consider relevant matters referred to in s.79(4)(d) – (g) Family Law Act 1975 (“FLA”);
41.4.Ensure my order adjusting the property, assets and liabilities of the parties is just and equitable.
Both parties submitted that I should adopt a global approach in endeavouring to arrive at a just and equitable division of their property. I agree that it is appropriate to deal with their assets on a global basis (see Norbis & Norbis (1986) FLC 91-712; Lenehan & Lenehan (1987) FLC 91-814; Zyk & Zyk (1995) FLC 92-644).
BALANCE SHEET
There was agreement between the parties as to what the current assets are. That agreement is set out as follows:-
1. H F property $360,000.00 2. J D Superannuation Fund $121,705.00 3. H D Pty Ltd $3,457.00 4. H Stamp duty on the transfer of F property $11,240.00 5. H Contents of F property $5,000.00 6. W Contents of the wife’s residence $5,000.00 7. W State Superannuation $8,747.00 8. H Funds received from joint account $19,487.00 Total assets $534,636.00
Wife’s motor vehicle
Originally it was proposed that the wife’s motor vehicle in the sum of $8,000 would be put on the balance sheet. However, it was conceded by counsel for the husband during submissions however that there was a $15,000 liability by way of a personal loan that the wife took out in order to acquire the motor vehicle. Consequently, it was agreed that the most appropriate course was to remove the wife’s motor vehicle from the balance sheet.
Liabilities
Neither party pressed for any current personal debt to be added to the balance sheet. The only liabilities to be put on the balance sheet are joint liabilities for expert witnesses and they are as followings:-
DT $1,100
DT $880
Mr B $1650
A (valuation of K property) $2,750
Mr E (estimate) $3,000
$9,830.00
The net assets are $524,806 ($534,636 - $9,830).
I note that the husband will have to pay a debt that he owes the Child Support Agency in the sum of $13,593 and that those monies will be available for payment to the wife.
I further note that the husband will also indemnify the wife in relation to any liability that may continue to exist on the F property. The second respondent has agreed to an order that he arrange for a discharge of the current outstanding mortgage debt on the F property which is in the sum of about $65,000.
Husband’s legal fees
The husband has provided his lawyer with $15,000 but all of that money has been borrowed on a credit card and consequently nothing is to be added to the balance sheet in respect of the husband’s legal fees.
Wife’s legal fees
The wife has a grant of legal aid for the property application and as a consequence has incurred no legal fees.
ORDERS AGREED TO BY THE SECOND RESPONDENT
Shortly after separation the husband transferred to his brother the whole of his interest in the matrimonial home at F. Both the husband and brother gave an explanation as to why this took place. The explanation is irrelevant (except as a matter going to the husband’s credit). By consenting to an order under s.106B FLA, the second respondent acknowledged that the effect of this transaction would be to defeat a claim that the wife would otherwise rightfully have under the Act.
The matrimonial home was used as security for the obtaining of a line of credit which was in turn used for the acquisition of two properties at K and the development of those properties. The line of credit was used to an amount of $156,000 for the purposes of acquiring the two lots in K but that line of credit was subsequently reduced so that by June 2005 there was in fact virtually nothing owed to the bank referrable to that line of credit. However, at the date of hearing it became clear that the amount outstanding by way of current mortgage secured against the K development exceeded the value of the properties as at the date of hearing by about $100,000. It was in those circumstances, when the second respondent offered to discharge the mortgage on the F property, all parties agreed to consent to the orders which disposed of the second respondent’s involvement in these proceedings.
On 25 June 2005 the second respondent used $50,000 of the line of credit on the F property to purchase 50,000 shares in D Pty Ltd. Those funds were deposited into the D Pty Ltd account and used by the husband.
Again, the consent orders made against the second respondent mean that the second respondent will take over responsibility in relation to the discharge of the current mortgage on the F property in the sum of approximately $65,000, which sum has its genesis in the borrowing of $50,000 on 25 June 2005 referred to in paragraph 53 (the current sum is accounted for by interest which has subsequently accrued upon the original borrowing).
CONTRIBUTIONS
In final submissions, counsel for the wife said that based on contributions there should be a 60-65 percent division in her client’s favour.
Counsel for the husband originally submitted the division should be 50/50 but finally suggested a 55/45 split in the wife’s favour.
Wife’s contributions after separation
Support of children
At the time of the separation the eldest children of the marriage were19 years of age, 17 years of age and 15 years of age.
It is appropriate to take into account the support that the mother provided the three older children of the marriage after the separation.
I accept the wife’s submission that she has not received an adequate level of child support from the husband for the children since separation.
The husband has accepted the current assessed outstanding liability for child support and has agreed to pay it. Orders were made by Stevenson J on 21 December 2006 that the current assessment be stayed on the basis that the husband pays $50 per week. It is clear from a document issued by the Child Support Agency that that $50 per week has been debited against the husband’s child support assessment account each week. The overall debt in the account was approximately $17,000 and has come down to about $13,000. The husband says that he makes non agency payments in addition for things such as J’s tennis coaching and S’s music lessons. Those non agency payments are credited. I infer therefore that those non agency payments have been running at a rate of more than $50 per week given that the overall debit in the Child Support Agency’s account against the father has come down.
The two younger children, S and J spent significant and substantial time with their father after the separation. The husband owes a debt for child support. Counsel for the husband indicated during the trial that the husband accepts that this debt has to be paid to the wife and he undertakes to do so. His track record in relation to repaying this debt is not great. However, the wife in these proceedings made no application that any enforcement order be made in relation to that debt as part of these proceedings. In the event the husband does not do what he tells me he will, it will be a matter for the Child Support Agency to attempt to either recover that amount as a lump sum and repay the wife or to reach some other arrangement with the husband for this to be paid off on a periodic basis over time.
It was not suggested by the husband that the child support debt should be placed on the balance sheet.
Occupancy of matrimonial home
After the physical separation of the parties the husband continued to live in the matrimonial home. The wife has been renting. This has been the situation now for four years. The benefit that the husband has had by way of occupancy of the matrimonial home is a matter to be given some meaningful weight.
Control of bank accounts
The husband conceded that from the date the wife left the home, which was 23 April 2004, the wife did not draw any money from the company. The wife ceased to be a signatory of the company accounts, including as trustee of the superannuation corporate trustee, from May 2004.
Expenditure of assets by the husband after separation
Counsel for the wife highlights how the husband used various assets after the separation. In doing so she does not suggest that amounts should be added back onto the balance sheet against the husband but rather says they should be taken into account when assessing contributions that both parties have made to the property pool after separation.
The husband, in his case outline document, asserts that there were the following assets at the date of separation:-
66.1.House at F - $350,000;
66.2.D Superannuation Fund – (husband says $136,000; wife says $180,000);
66.3.Funds in D Pty Ltd (the wife says $38,000; the husband says nil);
66.4.Equity in D Pty Ltd (the wife says $38,000; the husband says it was $716);
66.5.Contents of F property (the wife provides no figure; the husband says the wife had $5,000 worth of contents in the F property);
66.6.Cash in PCU joint account. The agreed figure is $19,487.00;
66.7.Cash in the wife’s Commonwealth Bank account. In his case outline document the husband estimates it was $6,500; however the wife was not asked any questions about this during cross examination and I am unable to make findings about this, nor did counsel for the husband make any submission about this.
The liabilities at the date of separation were not significant. There was no reference made to them in final submissions by counsel for the husband.
In her submissions, counsel for the wife in her submissions originally said that the husband received approximately $100,000 worth of benefits from assets that existed at the date of separation.
These were detailed as follows:-
Money that was in a joint bank account of the parties at the $19,487.19
date of separation
Asserted value of company $38,000.00
This amount was paid by the husband’s brother for 50,000 $50,000.00
shares in D Pty Ltd
$107,487.19
It is difficult to see how the monies paid by the husband’s brother could be said to be a use by the husband of monies to which the wife could make a claim. As a result of an agreement with the husband’s brother for him to be able to be discharged from any further involvement or liability in this matter, the husband’s brother agreed to transfer the 50,000 shares that he received from his brother for the $50,000 back to his brother without receiving any repayment of those monies and in fact discharging the debt that he borrowed in order to give the $50,000 to his brother.
Counsel for the wife’s final position was to compare the important assets at the date of separation:
Matrimonial home
$350,000.00
D Pty Ltd
$38,000.00
Joint bank account
$19,487.00
Superannuation
$180,000.00
$587,487.00
With their values on the current balance sheet:
Matrimonial home
$360,000.00
D Pty Ltd
$3,457.00
Joint bank account
$19,487.00
Superannuation
$121,705.00
$504,649.00
This is about a $83,000 shortfall. The difference in the value of the matrimonial home is of no significance. I will discuss the other three items.
Joint bank account
It was agreed that the amount of $19,487 had to be added back against the husband onto the joint balance sheet.
Reduction in the value of the husband’s company from date of separation to date of hearing
The husband conceded that from the date the wife left the home, which was 23 April 2004, the wife did not draw any money from the company. The wife ceased to be a signatory of the company accounts, including as trustee of the superannuation corporate trustee, from May 2004.
It was agreed between the parties, as a result of the independent valuation by Mr E, that the current value of D Pty Ltd was in the sum of $3,457.
Counsel for the wife’s position changed somewhat as to what the asserted value of the company was at the date of separation. Originally, counsel for the wife said that it was the value of the company’s bank account at the date of separation in the sum of $38,000.
As I indicated to counsel for the wife during submissions, taking one asset of a company and ignoring all the other assets of the company and all the other liabilities of the company is not an appropriate way of assessing the value of the company.
Counsel for the wife then seemed to recalculate the amount of the loss sustained by the company in the husband’s hands after the separation.
Counsel for the wife’s final position seemed to be:-
79.1.The balance sheet of D Pty Ltd as at June 2004 (part of Exhibit H) shows that the net assets of the company were $715.72.
79.2.The profit and loss statement of the company from 1 July 2003 through to 30 June 2004 shows that the husband in that financial year took director’s fees of $37,500 and wages of $25,000. There was also a superannuation contribution of $2,000.
79.3.On 5 September 2005 it was agreed that the company had paid to the husband’s bankcard an amount of $21,688.04. This September 2005 payment was retrospectively entered on the June 2004 accounts as a liability that the company owed. In that sense therefore the director’s fees recorded on the 2004 balance sheet, at least to an amount of $21,688, could be seen as a value that the company had as at the date of separation.
On this basis the loss sustained was $18,231 ($21,688 – $3,457).
Counsel for the husband submitted that there was nothing particularly sinister in D Pty Ltd decreasing in value over a four year period. It was submitted that a devaluation of this nature over a four year period was not one which was outside the realms of normal commercial loss.
Counsel for the husband submitted that I should infer that it was inherently unlikely that the husband would deliberately run up credit card debt to the tune of $32,000 to live on in order to position himself for the purposes of these proceedings. I am unable to draw an inference one way or the other arising from the husband’s credit card debt.
Counsel for the wife referred to the gross profit of D Pty Ltd as support for her contention that the husband was not currently properly exercising his earning capacity and this has had an effect on the value of the company. An analysis of the financial accounts of D Pty Ltd (Exhibit H) provides the following information:
Financial year
Gross income
Profit/Loss
Received by the husband from the company
2002
$506,140.00
($18,254.00)
$31,910.00
2003
$319,491.00
$647.00
$30,026.00
2004
$212,561.00
$66.00
$27,011.00
2005
$71,111.00
$752.00
$16,902.00
2006
$168,771.00
($10,430.00)
$25,995.00
2007
$17,035.00
($37,580.00)
$16,920.00
This table does demonstrate that after the separation the money the husband received from the company almost halved in 2005 and 2007. The lack of turnover in 2007 is a dramatic fall from previous years. The husband’s explanation for his lack of turnover in 2007 was less than convincing. Counsel for the wife invited me to conclude that the husband may not have been trying as much as he could to obtain income because of the pending court case. I find that, on balance, it is likely that the husband has not exercised his full earning capacity during 2007. He has not attempted to obtain any employment or do any other work apart from attempting to secure building work.
In this sense the husband has diminished the value of the company.
As I commented during the trial to counsel for the wife, the company is in fact the husband’s alter ego in any event and in some senses the wage that he is paid by the company is artificial. I am not satisfied that there are any significant overall benefits apart from the declared amounts of director’s fees, salary and superannuation contribution that the husband receives by way of benefit from his personal exertion activities which he undertakes under the umbrella of D Pty Ltd.
Having said that, I place some weight on the submission that the husband’s post separation behaviour has somewhat devalued the company and I agree there should be some acknowledgment that the husband has had the use of that asset since separation.
During cross examination, counsel for the wife tested the husband about various entries on various accounts. During a break the husband was given an opportunity to provide to the wife documents verifying amounts relating to withdrawals that were the subject of questions. No further questions were then asked by the wife following the provision of that material.
There was cross examination of the husband about his use of company credit cards but nothing in that examination revealed that the husband had obtained personal benefit.
There was one example of the husband using the company’s petrol account for the purposes of travelling to K. He did, however, give evidence that he was paid by his brother for that work and that work was conducted through the company.
The husband said he only used the personal credit card for living expenses, food, electricity and rates and the like. He said he used it for “survival” purposes.
The husband’s use of the superannuation fund after separation
Counsel for the wife points to the online investment account statement annexed to the husband’s affidavit at page 133. It shows that on 19 January 2004 there was a balance in that account of $180,000. It is agreed that the current value of the superannuation fund is $121,700. The difference is $58,300 ($180,000 - $121,700). Again, counsel for the wife does not assert that $58,300 should be added back to the balance sheet against the husband, but rather that it should be taken into account when assessing contributions that both parties have made to the property pool after the separation.
I will now consider those documents which are in evidence in more detail.
At page 133 of his affidavit, the husband as part of Annexure R includes an online investment account statement from ANZ relating to the E-trade account of the superannuation fund. The opening balance of that account on 19 January 2004 is $180,000. The husband thereafter deposited into that account an amount of $35,000 on 23 February 2004. The husband said he did that because that was the only E-trade account that he had available to him at that time and he parked the money there from the company in order for it to earn a better interest rate. This money is said to have come out again by way of a withdrawal on 10 June 2004.
By the end of June 2004 this account had only $3,415 left in the superannuation fund’s E-trade account. There are three major withdrawals. An amount of $137,500 on 26 February 2004 and amounts of $5,000 and $40,000 on 11 March 2004. At paragraph 80 of his affidavit the husband deposes to the fact that the $137,500 that was removed from the account went towards the purchase of the first property at L and the payment of a GST debt owed to the Australian Taxation Office by a partnership he had with Mr V.
In his final submissions, counsel for the husband referred to the copy of the cheque butt contained at page 146 of the husband’s affidavit. That cheque butt is in the following terms:-
Date:28/2/04
To:ATO
BAS
GST payable
Amount $78,317.
That cheque is drawn upon the account of [the husband] & [Mr V], a partnership account with P Credit Union Ltd.
Page 145 of the husband’s affidavit contains the statement of account from P Credit Union which shows that on 27 February 2004 an amount was deposited into that account of $39,500. The cheque drawn on 28 February 2004 was recorded on the statement on either 1st or 2nd March 2004.
It seems on that documentation therefore that the deposit of $39,500 into P Credit Union went towards the payment of BAS and GST to the Australian Tax Office on behalf of the partnership.
It is the husband’s case that that sum of $39,500 came from the parties’ superannuation fund and more specifically came from the online investing account statement which is annexed at page 133 of the husband’s affidavit. There is a withdrawal of $137,500 from that account on 26 February 2004. It is possible that the payment of $39,500 in some way came from that withdrawal, although the husband’s oral evidence was that that payment came from a withdrawal of $40,000. The difficulty with that evidence is that the withdrawal of $40,000 was on 11 March 2004 and was after the date of the deposit into the P Credit Union.
The husband has not clearly provided the missing paper links that would account for all withdrawals from the superannuation E-trading.
It is the effect of the submission by counsel for the wife that given that the husband was doing other things at the date of separation that would have me conclude that he had a clear intention at that time to try and alienate as much property from the wife as possible, I should not make any inferences which were favourable to the husband. The specific matters to which counsel for the wife refers is firstly the transfer of the matrimonial home to his brother and secondly the taking of the joint account entirely for himself. There is some strength in those submissions. However, it was either the husband or Mr V who put the money into the P Credit Union. Counsel for the wife did not suggest to Mr V in cross examination that it was he who had deposited the $39,500 into the P Credit Union on 27 February 2004. On balance, I am prepared to accept that it was the husband who made that deposit and that it by some undisclosed route came from the amount of $137,500 which was drawn from the superannuation fund on the day before the deposit was made into the P Credit Union.
Conclusion in relation to movements from the superannuation fund after separation
Given that I accept that the husband used $39,500 for the purposes of contributing towards a liability to the Australian Taxation Office that existed to the trading partnership with Mr V, the balance amount that is unaccounted for is in the sum of $18,800 ($180,000 - $121,700 - $39,500). I conclude that the husband has not properly accounted for $18,800 of the superannuation monies and I take that into account when assessing post separation contributions.
The purchase and sale of L property
Counsel for the wife has asserted that transactions between the husband and Mr V should be treated as suspect.
The husband and Mr V were tested about the figures in the reconciliation account. There was a difference between the husband and Mr V as to whether or not he had been provided with a rental statements for the property. The property had been tenanted by arrangement of Mr V (who lives at L) and an agent or managed the letting of the property. I found nothing unusual about the method of accounting. A paper credit had been given to the husband in the sum of $3,461 because of the fact that all of the rent had been sent to Mr V and the husband had not actually seen any of the rent. There was nothing to indicate that that rental adjustment in the husband’s favour should be assumed to be inadequate.
I accept the husband’s evidence that the amounts in relation to blinds, dishwasher, gates and fences and the maintenance of lawns were all reasonable amounts.
The husband at page 219 and 220 of his affidavit sets out in table form the contributions made by Mr V on the one hand and D Pty Ltd Superannuation Fund on the other in relation to the acquisition and development of the property at L. At page 136 of his affidavit the husband deposes to the fact that on purchase the superannuation fund provided $97,867. The house was subsequently put on this property and D Superannuation Fund paid for certain items as they went along. The total money put in by the superannuation fund to this project $103,911 which represented approximately 25 percent of the overall monies put into the development of the property. On sale D Superannuation Fund got back 25 percent of the net profit. The net profit received by D Superannuation Fund was $100,240. D Superannuation Fund therefore lost almost $4,000 on the project.
Applying the principles in Kowaliw (1981) FLC 91-092, had the husband through his control of the superannuation fund made a significant profit from this venture, then it is likely the wife would have held out her hand and asked for half share of that profit. There is nothing in the evidence that would indicate to me that the venture undertaken at L was reckless and therefore the principles in Kowaliw (supra) do not apply. It seems that the sale took place in breach of the order made by Judicial Registrar Halligan but the wife did not suggest that the sale took place at anything other than market value.
Conclusions in relation to contributions
The parties have agreed that there has been equality of contributions to the date of separation. Weighing the matters discussed above and taking into account the length of the marriage and the myriad of contributions made prior to separation, I think it is appropriate that there be recognition of the following matters:-
109.1.The husband’s occupancy of the matrimonial home for the last four years;
109.2.The wife has had a greater financial burden in supporting the children of the marriage since separation;
109.3.The reduction in the value of the superannuation fund by the sum of $18,800 has not been fully explained;
109.4.The husband has had the use of the assets of D Pty Ltd since separation and has not made the best use of those assets
These considerations lead me to make an assessment that the overall assets of the parties have been contributed as to 57.5 percent by the wife and 42.5 percent by the husband.
SECTION 79(4)(d) – (g) MATTERS
In final submissions, counsel for the wife said that depending on what decision was made based on contributions, the s.75(2) adjustment should be either 10 percent (if the contributions were assessed at 60 percent to the wife) or 5 percent (in the event that the contributions were assessed as to 65 percent by the wife).
I take into account the debts both parties have that have not been added to the balance sheet.
The wife gave evidence that in addition to the $500 per week set out in her financial statement, she now has a weekend job every alternate Sunday. This employment provides her with $600 - $700 net per fortnight. She no longer receives any pension payment. She still receives $50 per week rent assistance by way of FTB through Centrelink.
The wife has an earning capacity of about $750 net per week.
At paragraph 144 of his affidavit the husband describes what he has done as an employee of D Pty Ltd since the separation. His evidence is that there has been a steady decline in the building industry, making opportunities to obtain work increasingly more difficult. He describes the 2007 financial year as being “particularly quiet”. Based on the financial statements of the company that is an understatement. His version is that he spent most of 2007 doing quotations but was totally unsuccessful.
It is the husband’s position that he has had to rely on his credit cards to live and he points to an existing debt (which isn’t to be put on the balance sheet) in the sum of $32,409.
The husband’s evidence is that he is currently working as a sub contractor tradesman for one of his friends. He says that he has some minor renovations works ready to commence in the near future and that he is confident that the company will operate at a slight profit for the year ending June 2008.
Benefits the husband otherwise receives from the company
Counsel for the wife submitted that I should conclude that the husband received benefits from the company that were otherwise paid as company expenses. Counsel for the wife referred to the husband’s financial statement. However, item 14 on the husband’s most recent financial statement records benefits from his business as nil. He was asked various questions in cross examination on this topic and no answer nor any other material would lead me to accept that the husband’s accountant has done anything other than properly account for any private benefit that the husband receives from running the company.
Conclusion in relation to earning capacity
I conclude that the wife has been frank about her earning capacity. The husband said during his evidence that he was presently hopeful that he would succeed in winning a $300,000 contract which would give him work for the next six months. As counsel for the husband pointed out, it is unclear as to what profit might flow to the husband as a result of him successfully obtaining a contract of that value. Notwithstanding that, I am not confident that the husband has been frank in relation to his ability to earn money. I think the case he presents to me has been significant affected by an apprehension of what would happen in the current proceedings. On balance, I conclude that the husband’s future earning capacity is somewhat greater than the wife’s future earning capacity.
The three older children of the marriage all still live at home. They are in full time employment. As I commented during submissions, it is a matter for their mother to reach an arrangement with them so that they are no financial burden to her moving into the future. Certainly, I do not intend to make an adjustment against the husband on account of any monies that the three elder children are costing the mother at the current time.
Child Support
The orders made in relation to the younger children S and J mean that they themselves will control the amount of time that they spend with each of their parents. The history up until now has been that whilst this time has varied somewhat, the time J has spent with each parent has been roughly equal (although the wife in her oral evidence was of the view that they spent more time with her than they spent with their father). S usually spends weekdays with her mother and weekends with her father.
I have no specific evidence as to what the likely arrangements for child support might be between the parties under the new parenting arrangements. It is clear in recent years that the husband has not declared income sufficient to attract any significant liability for child support and I need to take into account that track record in predicting future payment of child support. Having said that, the children are going to be with each parent for significant periods of time and it might be that any assessment for one to pay the other child support was not great. As previously noted, the husband will have to pay the current outstanding child support debt in the sum of $13,593 to the wife and the wife will have those monies available to her.
If the assets are distributed in accordance with my assessment in respect of the respective contributions of each of the parties, then the wife will receive 15 percent more of the assets than the husband will receive.
Conclusion in relation to s.79(4)(d) – (g) matters
Taking the matters that have been discussed above into account, I do not consider that there is any need to make any further adjustment in this matter for s.79(4)(d) – (g) matters.
JUST AND EQUITABLE
Counsel for the wife in final submissions maintained the position in her case outline document, namely that on an overall basis the wife should receive 70 percent of the current available assets and the husband should receive 30 percent of the current available assets.
The husband’s position was that there should be a 55/45 division of the assets in the wife’s favour.
D Superannuation Fund is a self managed superannuation fund. The members of the fund are the husband and the wife and the trustee company is controlled by them.
Appendix VIII to the valuation of Mr E incorrectly states that the total member’s balances are $201,705 which Mr E divides as to $115,820 (57.42 percent) to the husband and $85,885 (42.58 percent) to the wife. It was agreed however that there was an error of $80,000 and the total on the members’ statements needs to be corrected by that amount.
The correct net assets as per the balance sheet should be $121,705. Although it was indicated at the beginning of the hearing that an amended document would be provided from Mr E, none was tendered.
Assuming that the proportion in the members’ balances remains the same, then the corrected net asset figure would lead to a correction on the member’s statement so that the husband’s member’s benefit is $69,883 ($121,705 x 57.42 percent) and the wife’s member’s account will be $51,822 ($121,705 x 42.58 percent).
There is $45,000 in cash in the superannuation fund which could be rolled out without any risk that the real property owned by the superannuation fund would need to be liquidated.
This would mean that the wife would need to provide to the husband $6,821 in respect of her super and a splitting order in the amount of $6821 will be made in the husband’s favour to effect that result. This will reduce the wife’s member’s account to $45,000. I will direct that both parties do everything necessary to cause D Pty Ltd as trustee of the D superannuation fund to provide to the wife $45,000 by way of superannuation so that she can invest that amount of money in a superannuation fund of her own choosing.
Based on my findings in respect of contributions and s.79(4)(d) – (g) matters, the division would be 57.5 percent to the wife and 42.5 percent to the husband.
That division could be achieved by the following distribution:-
H gets - 42.5% Assets Item No. Description Percentage Value 1 F property 100% $360,000 2 D Superannuation Fund 63% $76,705 3 D Pty Ltd 100% $3,457 4 Stamp duty on the transfer of F property 100% $11,240 5 Contents of F property 100% $5,000 8 Funds received from joint account 100% $19,487 Liabilities Item No. Description Percentage Value 9 Outstanding expert witness fees 50% $4,915 Husband pays wife $247,931 Net Assets $223,043 W gets - 57.5% Assets Item No. Description Percentage Value 2 D Superannuation Fund 37% $45,000 6 Contents of the wife's residence 100% $5,000 7 State Superannuation 100% $8,747 Liabilities Item No. Description Percentage Value 9 Outstanding expert witness fees 50% $4,915 Wife receives $247,931 Net Assets $301,763
Standing back, I consider a distribution of the assets and liabilities as set out in the above table to be a just and equitable distribution of the assets.
In the event that the husband cannot raise the sum of $247,931 then the matrimonial home would need to be sold.
In those circumstances the wife would receive 68.9 percent ($247,931 ÷ $360,000) and the husband would receive 31.1 percent of the net proceeds of sale.
I certify that the preceding one hundred and thirty seven (137) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts
Associate:
Date: 2 July 2008
Key Legal Topics
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Family Law
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Equity & Trusts
Legal Concepts
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Consent
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Costs
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Remedies
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Statutory Construction
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Constructive Trust
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