Borkai and Borkai

[2008] FamCA 713

FAMILY COURT OF AUSTRALIA

BORKAI & BORKAI [2008] FamCA 713

FAMILY LAW – PROPERTY - Settlement in relation to marriage
FAMILY LAW – SPOUSAL MAINTENANCE

Family Law Act 1975 (Cth)

Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355
Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414

APPLICANT: Ms Borkai

RESPONDENT: Mr Borkai

FILE NUMBER: SYC 8457 of 2007

DATE DELIVERED: 22 August 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Judicial Registrar Johnston

HEARING DATE: 13 June 2008

REPRESENTATION

SOLICITOR FOR THE APPLICANT:  Mr Twigg, Solicitor of Adrian Twigg & Co

COUNSEL FOR THE RESPONDENT: Ms Picker

SOLICITOR FOR THE RESPONDENT: John De Mestre & Co

Orders

The orders will be as follows:

1. That the husband and wife do all things and sign all documents necessary to place the former matrimonial home at G on the market for sale and to sell it at the best price reasonably able to be obtained and for this purpose:

   1.1Each party shall forthwith do all things and sign all documents necessary to list the said property for sale by public auction with an auctioneer agreed between the parties and at a reserve price agreed between the parties or failing agreement as determined by the President from time to time of the New South Wales Division of the Property Institute of Australia or his nominee as an expert not as an arbitrator on the following conditions:-

   a)That each party pay one half of the fees payable to such auctioneers immediately upon request by such auctioneers;

   b)That the parties shall attend the auction sale and in the event that the reserve price is not achieved negotiate with the highest bidder;

   c)That each party co-operate in every way with the auctioneers in relation to the auction of the said property;

   d)That each party execute all documents necessary to complete the sale.

2. That the proceeds of sale be paid as follows:

   2.1To pay agent’s commission and costs of the sale including legal costs on the sale;

   2.2To discharge the mortgage;

   2.3To pay $90 000 to the wife’s parents in full repayment of all monies owing by the husband and wife to them;

   2.4To pay the balance, if any, to the wife.

3. That the husband and wife do all things and sign all documents necessary to cause the M Unit Trust to pay the proceeds from its development at M, New South Wales as follows:

   3.1To pay $78 000 to the Australian Taxation Office, and

   3.2To pay to the wife such amount which when added to any balance paid to the wife pursuant to order 2.4 above and the surplus of assets referred to at paragraph 78 of the reasons for judgment will achieve 76 percent of the available property and superannuation as referred to in the reasons for judgment, and

   3.3To pay the balance to the husband.

4. That upon compliance by the husband with these orders the wife resign as director and secretary of the company C Pty Limited and transfer her shares in the company, any credit loan accounts and her interest in the business S Business to the husband.

5. That the husband indemnify the wife for all liabilities past, present and future of the company and the business and discharge any debit loan account owed by the wife or by the wife and the husband to the company.

6. That the husband shall have sole responsibility for all debts of the parties to his parents.

7. That otherwise each party is declared the owner of all other property and superannuation in their possession and / or control respectively.

8. That by consent the husband will continue to pay the lease payments for the Honda CRV motor vehicle used by the wife for the remaining period of the lease.

9. That the wife’s application for spousal maintenance is dismissed.

10. That both parties have leave to re-list these proceedings on 7 days notice in relation to implementation of these orders.

11. That the above orders not commence operation until 19 September 2008.

12. That both parties have leave to re-list these proceedings for the purpose of making further submissions in relation to the form of the order only at any time until 18 September 2008.

13. That all exhibits be released.

IT IS NOTED that publication of this judgment under the pseudonym Borkai & Borkai is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC8457/2007

MS BORKAI

Applicant

And

MR BORKAI

Respondent

REASONS FOR JUDGMENT

Introduction and Applications  

1. The applicant is Ms Borkai and for convenience I shall refer to Ms Borkai as “the Wife”. The respondent is her former husband Mr Borkai and for convenience I shall refer to Mr Borkai as “the Husband”. The parties have approached this Court for orders to finally determine their financial relationship in circumstances where they have been unable to do so. They remain in dispute about the division of their property and also spousal maintenance.

2. The Wife seeks orders to the following effect

   i)That within 30 days the husband transfer to her his interest in the former matrimonial home known as G property, subject to the existing encumbrance and, subject to order (ii) below the wife indemnify the husband in relation to the mortgage and all outgoings and liabilities in relation to the property as and from the date of such transfer

   ii)That the husband pay to the Wife $250 000 or in the alternative cause the amount owing under the security presently over the former matrimonial home to be reduced by $250 000 within 6 weeks

   iii)That upon the Husband complying with orders (i) and (ii) the Wife transfer to the Husband her interest in the M Unit Trust and any interest she may have, directly or indirectly, in the venture known as M project.

   iv)That within 30 days the Husband pay out and discharge any debit loan account owed by the wife or by the Wife and the Husband, to C Pty Limited

   v)That upon the Husband’s compliance with Orders (i), (ii)  and (iv) above

   a)The wife transfer to the Husband any shares or credit loan accounts with C Pty Limited

   b)The Wife resign as director, secretary, and any public officer of the company

   c)The Husband indemnify the wife and save her harmless in relation to her ever having been a director, secretary, shareholder, or public officer of the said company

   d)The Husband indemnify the wife and save her harmless in relation to any taxation, superannuation guarantee charge, or other liabilities of the company however arising.

   vi)That the Husband pay to the Wife for a period of 2 years, the sum of $400 per week by way of spouse maintenance such sum to be in addition to any child support paid by the Husband to the Wife.

   vii)That the wife be declared to be the owner of, and to the extent necessary the Husband transfer to the Wife, any interest he may have in the furniture and contents situated in G property.

   viii)That the Husband do all acts and things necessary to cause to be transferred to the wife Honda CRV motor vehicle to the wife, free of encumbrance (including, without limiting the generality thereof, purchasing the vehicle from the company at market value and transferring the same to the wife).

   ix)That the Husband pay the Wife’s costs of and incidental to these proceedings.

   x)Such further or other orders which to this Honourable Court seem appropriate.

   xi)That the wife remain responsible for the debt to her parents and that the Husband remain responsible for the debt to his parents.

3. On the other hand the Husband seeks orders to the following effect

   i)That the Wife relinquish any claim in the investment in the M Project and transfer all right, title and interest to the Husband.

   ii)On compliance by the wife with order (i), the Husband will indemnify the wife for all past, present and future debts and liabilities in relation to the M Project.

   iii)The wife resign as director from the company C Pty Limited and from the business known as S Business and transfer her interest in the company to the Husband.

   iv)The Wife transfer all her shares in C Pty Limited to the Husband.

   v)On the wife complying with orders (iii) and (iv) above, the husband agrees to indemnify the wife for any debts and liabilities past, present and future in relation to the company and the business.

   vi)The Husband transfer to the Wife his interest in the property known as G property (“the matrimonial home”) for the Wife to deal with as she wishes.

   vii)On compliance by the Husband with order (vi), the Wife indemnify the Husband for all debts and liabilities past, present and future in relation to the matrimonial home.

   viii)Each party is responsible to their parents for the respective loans that their parents provided to the parties during the period of the marriage.

   ix)That each party pay their own costs.

Background

1. The Husband was born in August 1971 and he is therefore 37 years of age. The Wife was born in July 1972 and she is therefore 36 years of age. The parties married in August 1995 and they separated on 28 December 2006. There are two children of the marriage a daughter born in October 2000 and a son born in January 2003. The children are therefore 7 years and 5 years of age respectively.

2. At the commencement of the marriage the Wife’s property consisted of a then recent model Suzuki motor vehicle, $25 000 savings, some superannuation and her personal property. The wife was working at a telecommunications company.

3. At this time the Husband owned a Ford utility motor vehicle subject to a loan and some personal property. The Husband was employed as a tradesman.

4. From the time of the marriage until 1998 apart from 4 months living with the Wife’s brother the parties lived rent free in an investment property owned by the Husband’s parents.

5. In October 1995 the parties purchased a home at H for $159 000. This purchase was funded using the Wife’s savings of $25 000, a loan on mortgage from Aussie Home Loans of $105 000 and the balance of $33 000 was from wedding gifts.

6. The parties rented this property out. The Wife’s parents made an interest free loan to the parties of $80 000 and subsequently increased this by an advance of a further $5000. This money was used to reduce the mortgage to $24 000.

7. In mid 1998 the parties renovated their home.  The total cost of the renovations was $60 000. The Husband’s parents loaned them $24 000.  The wife’s parents loaned them a further $16 000 of which $11 000 has been repaid.  The balance of this cost was funded from savings.  Much of the work involved was done by the parties and in particular by the Husband and various friends and associates of the Husband. The parties moved into their renovated home in September 1998.

8. The husband had a knee reconstruction operation in 1999 and did not work for approximately 4 months.  At this time the wife was working as a teacher and also as a casual sales assistant.

9. The parties continued living at H until they sold this property in July 2001 for $335 000.

10. The parties used some of the proceeds of sale to purchase a business, S Business, for approximately $82 500 including GST.  The business was operated through a corporation which the Husband had established some years previously called C Pty Limited.

11. In August 2001 the parties purchased the property at G for approximately $220 000. The existing house on the land was demolished and after some time a new house was constructed by the parties again using a considerable amount of labour provided by associates and friends of the Husband and to some extent relatives of the parties. But in relation to this project, the tradespersons who were friends of the parties were paid for their work, although at a discounted rate.

12. During the construction period the Husband continued to run S business. Construction costs were met by a loan on mortgage of $200 000 and by $50 000 borrowed from the business. During the construction period the parties lived with the Husband’s parents. They paid the cost of utilities and some of the food.

13. Their new home was ready for occupation in January 2003 and the parties and their daughter took occupation.  This was very shortly before the birth of the parties’ son.

14. In 2004 the parties invested $100 000 in the M Unit Trust which involved a property development in M. They did this on the advice of their business accountant Mr N.

15. As indicated above, the parties separated on 28 December 2006. In June 2007 the Husband moved out of the former matrimonial home and commenced living at his parents’ home. His parents had travelled overseas for a holiday. The Wife continued to occupy the former matrimonial home. In late August 2007 the Husband commenced renting an apartment at Y. The rent is $460 per week although I understand that the twelfth month of the period of the lease would be rent free. The Husband spent an amount of between $8000 and $10 000 to purchase furniture and equipment for the apartment including some clothing and toys for the children.

16. Prior to this, in February 2007, the Husband discontinued provision to the Wife of a credit card and mobile telephone. A few weeks later the Wife commenced to withdraw monies from the business bank account.

17. In November 2007 the Husband closed the business bank account and transferred the funds to what he described as a subsidiary account. The subsidiary account could only be operated on the signature of the Husband. The Husband said that he did this in circumstances where he had been hopeful that the parties’ financial dispute would be resolved at their second mediation in October 2007 and when this did not resolve, the business could no longer afford the level of withdrawals by the wife on the business account.

18. In early December 2007 the Husband borrowed $8000 from a friend Mr K to pay legal costs.

19. The wife subsequently brought proceedings before this Court for a range of interlocutory orders.  On 19 December 2007 this Court made orders to the following effect:

    (i)That the Husband pay the wife $400 per week by way of interim spousal maintenance.

    (ii)      That the husband cause the mortgage repayments to MASU to be paid

    (iii)That the Husband cause the company C Pty Limited to pay the running and finance costs of the Honda vehicle used by the wife and children

    (iv)That the Husband be restrained from permitting the said company to dispose of, or encumber, any of its assets

    (v)That a single expert, Mr W be appointed to undertake an informal audit of the company C Pty Limited for the financial years ending 30 June 2006 and 30 June 2007 and to value the company. That each party will pay half the costs of this.

    (vi)That the husband forthwith transfer all funds from his (newly established subsidiary) account with the Commonwealth Bank to the account of the company.

20. These orders were extended to continue until further order by orders made on 25 February 2008.

21. The Husband made five payments of the spousal maintenance which was a total of $2000 then ceased paying in accordance with the order. He paid approximately $12 000 in respect of the mortgage payments and then ceased compliance with the order. The husband has not complied with the order to transfer funds from the subsidiary account to the business account.

22. The wife filed an enforcement application in this Court to enforce the interlocutory orders. The Husband filed for orders to the effect that the company C Pty Ltd be placed in liquidation and the former matrimonial home be sold. Those applications came before me but after hearing some evidence I declined to make any orders because I had formed the view that it was more appropriate for the Court to hear the parties’ substantive applications as urgently as could be arranged.

The Applicable Law  

1. The Court must be satisfied that in all the circumstances it is just and equitable to make an order. This is provided by s.79(2) of the Family Law Act 1975.

2. The Full Court of this Court in its decision in the case of Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355 said as follows:

   “The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79.  That approach involves four inter-related steps.  Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing.  Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties.  Thirdly, the Court should identify and assess the relevant matters referred to ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two.  Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case:  Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335 (and various other well known authorities).”

3. Despite some criticism of this decision by the majority of the Full Court in Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414, see for example paragraphs 36 and 37 at page 79,641 and paragraph 63 at page 79,646, in my view it is not incorrect to take the approach to the hearing of property proceedings as described in Hickey above.

Business, C Pty Limited 

1. The area of greatest contention in these proceedings involves the parties’ business and how the Court should deal with it.

2. As indicated above, the parties purchased a business called S Business in approximately 2001. They paid $75 000 for the goodwill and they also had to pay GST of $7500 bringing the cost to a total of $82 500. Presumably there were some other acquisition costs. In any event, they used part of the proceeds of sale of their home at H to fund the acquisition.

3. There is no question that the husband is the person who has operated the business.  The business is operated through the company C Pty Limited.  This was a shelf company owned by the husband prior to the marriage.

4. The husband said that at the time of its acquisition the business had a gross turnover of approximately $320 000 per annum.  He said that this was “roughly” the same as its current turnover.  Having said this, the husband went on to say that the trading position of the business is worse now than it was in 1996.  In particular, the husband said that in October 2008 the business will lose a major client.  The husband said that as a consequence, the business will lose gross income of $3400 per month.

5. This business has been the major source of income for the family since 2001.  Over the years, household expenditure has been funded by each of the parties drawing on the business account.  There have also been benefits to the parties flowing from the business operation such as some private use of motor vehicles provided to the parties by the business.  Some utilities and telephone facilities have also been provided to the parties.  Some time after the conclusion of each financial year the Husband would present his accountant Mr S with cheque butts, invoices and other relevant documents and the accountant would attribute certain expenditure as business expenditure and other expenditure as household expenditure, for the purposes of tax. 

6. In approximately April 2007, Mr S informed the husband in effect that if business operations continued as they had been, the company would be trading as insolvent.  The Husband said that Mr S indicated that the only reason the company was not then insolvent was because debts were being accrued to the Australian Taxation Office and the business was not paying compulsory superannuation in respect of its employees.  The Husband said that Mr S said technically the business was insolvent.

1. In these circumstances the Husband said that he reduced his personal drawings, that is what he described as his wages, to $450 per week.  The Husband said that he asked the wife repeatedly not to withdraw funds from the company account.  This was, of course, a period well after the parties’ separation.  The Husband said that the Wife had withdrawn monies from the business account at a rate which the business could not sustain.  He said that over the period from separation in December 2006 until November 2007 the Wife withdrew in excess of $27 000.  The Husband said that despite his requests the wife continued to draw heavily from the business account.

2. The Husband says that on 18 December 2007 he borrowed $15 000 from a friend Mr Z and this was deposited to the C Pty Limited account. The Husband said that this occurred in circumstances where he was hopeful that the parties would be able to resolve their property dispute through mediation. The Husband said that he closed the business account in circumstances where the Wife declined to cease drawing on the business account.

3. On 20 November 2007 the Husband opened a personal bank account which he then used to operate the business.  This was the subsidiary account.  The Husband said he did this in circumstances where he says the Wife was not cooperating in the operation of the business.  The Husband said that he paid 60 percent of the business income to this account.

4. The Husband said that despite this action by him the business continued to trade at a loss.  He said that in February 2008 Mr S advised him to consult a liquidator.  The Husband said that by mid February 2008 business cash flow had virtually ceased.  He said that staff were not being paid on time, supplies and sub-contractors invoices were not being paid, the Australian Taxation Office were making enquiries about tax liabilities and monies owing to employees in respect of superannuation.

5. The Husband said that on 27 February 2008 he approached Mr D of X firm who assessed the business as then trading as insolvent and informed the Husband that he did not regard the business as being able to trade out of debt.  The Husband says that on or about 14 March 2008 he informed the Wife of this and said that the debt was $180,000 and accruing.  The Husband said that he then asked the Wife to sign a document for appointment of a voluntary administrator for the business and that the Wife declined to do so.

6. A substantial difficulty with this case is the fact that the Court does not have the benefit of any business valuation.  As indicated above, an order was made by consent of the parties on 19 December 2007 to the effect that Mr W be appointed single expert for the purpose of auditing the business accounts and preparing a business valuation.  Despite having agreed to this order the Husband subsequently took the view that in circumstances where he regarded the business as having a value of $75 000 dollars, expenditure on such a valuation which he understood would cost in the vicinity of $20 000 was not justified.  Apparently the Husband based his view that the business goodwill had a value of $75 000 on the fact that this is what the parties paid for the goodwill of the business originally.

7. This has placed the Court in very considerable difficulty.  The only evidence of any value is in the draft business accounts.  A draft balance sheet for the financial year ending 30 June 2007 described the business as having total equity of $41 030.  This was on the basis of goodwill at cost of $75 000 and the other major assets were the motor vehicles.  The profit and loss statement for the same financial year showed a net profit of $73 730.  As I understand the Husband’s contention, this takes no account of outstanding taxation liability and the problems described above namely that the company has not paid compulsory superannuation for employees.

8. In all these circumstances it is impossible for the Court to make a finding about the actual value of this business.  Doing the best I can in all the circumstances, in my view, clearly this business has a value in the hands of the Husband.  Clearly he derives an income from the business.  He said that such income has been $960 some weeks but he also said that there have been many weeks when he has only been able to draw $450 because the business has not had the cash flow to enable him to draw $960 per week.  But there are other benefits to the Husband in this business as indicated above.  In a general sense he lives from the business.  

9. There is an admission against interest by the husband that the business has a value of $78 000.  I accept this for the purposes of these proceedings but I have the view that the business has a value to the husband well in excess of this amount.  After all, he wishes to retain the business and I draw the inference that this is because, if the outstanding liabilities were significantly reduced, he would be able to operate the business in a manner which would deliver a satisfactory income to him.

10. The wife has alleged that the husband has not made a full and frank disclosure, at least not in relation to the business.  The wife has been trying for a long time to obtain details of the income of the business and of how such income has been expended.  In my view, the husband has been uncooperative in this regard.  The husband has failed to arrange for the business accounts to be finalised in recent years with the consequence that income tax returns have not been filed for some years.  His explanation has been that he has not had the funds to pay his accountant to prepare the required documents.

11. The husband’s attitude in response to the wife’s requests for relevant information has been to suggest that she discuss matters with his accountant Mr S.  The wife has been reluctant to do this because she says that the husband and Mr S are friends, the inference being that she has not been confident that Mr S would not be partisan in any information he provided.

12. The wife has also alleged that the husband has used significant company funds for his own purposes and that he has been deliberately running down the business.  I cannot be certain that either or both of these allegations is not the case.  But I must say the wife has not persuaded me to a finding to the effect of either allegation.

13. As to the former, in my view the evidence does not support this, certainly not prior to March 2008.  I say this because, with a couple of exceptions, the husband arranged for the company to pay the mortgage payments on the former matrimonial home.  These were substantial, being approximately $42 000 per year.  In addition, the husband was paying $460 rent each week which was an additional approximately $16 000 for the relevant period to March 2008.  This was $58 000.  This was his expenditure before he spent any money on his other living costs and those of the children.  At this rate of expenditure, the business would have had to have been making a lot of money for there to be much left for the purposes of the husband spending significant amounts on himself.

14. In relation to the allegation that the husband was running down the business, the available evidence tends not to support this.  The husband said that the business is trading much as it always has.  I referred to his assertions about its turnover being approximately $340 000 per year.  A month’s invoices were tendered on behalf of the wife for April 2008.  These came to the total of $32 074.71.  Projected over 12 months, the amount would be $384 897, which is more than suggested by the husband.  But when GST is deducted therefrom, the invoices so projected would indicate approximately $346 000 which is close to the husband’s assertions.

15. But there is an area where the wife’s assertions might have some validity.  This is the fact that neither the wife nor this Court are aware what the current indebtedness of the business and the husband is.  The husband said that substantial amounts are owed to the Australian Taxation Office for unpaid tax and also to employees of the company for compulsory superannuation which the company has not paid.  I understand that the wife accepts that approximately $78 000 is owed to the Australian Taxation Office.  This will be paid under orders I propose.  But the husband will have to accept responsibility for whatever other liabilities remain.  He says that he has a personal tax liability of approximately $23 000 and that significant amounts of compulsory superannuation are owed in respect of company employees, these having never been paid by the business.  In the absence of material setting out what these liabilities are, the responsibility for these liabilities will have to be accepted by the husband.

Property available for division

1. The property available for division is as follows:

$
1.         Former matrimonial home at G	610,000
2.         C Pty Limited	78,000
3.         M Unit Trust	205,863
4.         Loan to the wife’s brother	7,500
5.         Husband’s bank accounts	3,900
6.         Wife’s bank account	130
7.         Wife’s jewellery	1,250
8.         Husband’s jewellery	1,000
9.         Wife’s superannuation	34,254
_________
$941,897

1. The liabilities are as follows:

$
1.         Mortgage on home	511,466
2.         Debt to wife’s parents	90,000
3.         Wife’s debt to her parents	4,230
4.         Debt to husband’s parents	24,000
5.         Business tax liability	78,000
6.         Husband’s credit cards	16,000
7.         Husband’s debt to Mr Z	7,500
_________
$731,196
Surplus assets	$210,701

Contributions

1. As indicated above, at the time of marriage the wife had more property than the husband.  This consisted of her Suzuki motor vehicle, $25 000 savings, superannuation and personal property.  The husband owned a Ford utility subject to a loan and some personal property.

2. As also indicated above the husband was employed as a tradesman and the wife was working for a telecommunications company.

3. The wife undertook study for a period to become qualified to work as a school teacher.  Then she worked as a school teacher.  She also undertook some part time sales assistant work.

4. The husband continued to work as a tradesman until the parties purchased their business.  Then he operated the business and he has continued to do this to the present time.

5. So both of the parties have made direct financial contributions.  But the husband has made more of such contributions than the wife.  He has been the major breadwinner for the family.

6. On the other hand, the wife was the party who was more responsible for the care of the children.  This reflects the way the parties arranged their responsibilities.  But the husband was also a responsible parent and was very much involved with the children.  He had less time to do this than the wife because he spent a very considerable amount of his time attending to the needs of the business.

7. The husband also conceded that it was the wife who took care of the inside of the home although he said that he did the majority of the work on the outside of the home including its grounds.  The wife said that she did weeding and other gardening and maintenance work.

8. There is no doubt that the wife made a greater contribution as parent of the children than did the husband. 

9. The parties also undertook the renovation of their first home and the building of their second home.  There can be no doubt that the husband made the greater contributions in this regard.  He is a tradesman and he has many friends who are tradesmen or sufficiently skilled to have assisted the parties in undertaking the necessary work.  When H property was renovated, various friends assisted with the work.  By way of repayment for their services, the husband undertook jobs for them subsequently.  This effort saved the parties the labour costs which otherwise would have been involved in the work done on the parties’ property. 

10. The renovation work involved some demolition, waterproofing, tiling, rendering, building retaining walls, landscaping, painting, concreting and building a timber deck and pergola.  The wife assisted with cleaning up work and in the selection of, and purchase of, materials.  But the major work was undertaken by the husband.  The husband continued to work in his full time job and undertook the renovation work after hours and on weekends. 

11. In relation to the G property, the husband and his friends demolished the old house.  They built a new house on the land.  The husband’s friends provided their labour at a discounted rate.  The wife and her father also assisted with this project.

12. As also indicated above, the parents of the husband and of the wife have also made significant contributions.  The wife’s parents made the initial loan of $80 000 shortly after the parties purchased H property.  Then they loaned a further $5000 as I have said.  And later they loaned another $5000.  There is no issue that the parties owe the wife’s parents $90 000.  I propose to make orders which will ensure that this is repaid.  The interest saved by the parties over many years has been of great assistance to them.  It has been an important contribution and it comes in on the wife’s side of the ledger. 

13. On the other hand the husband’s parents loaned the parties $24 000.  But they made an even more significant contribution in that they provided rent-free accommodation to the parties over many years.  This has enabled the parties to have funds to acquire and develop their homes.  These contributions are regarded as being on the husband’s side of things.

14. But in weighing these contributions by the respective parents I have no doubt that those made by the wife’s parents have been greater than those made by the husband’s parents.

15. In relation to post-separation contributions, the wife’s contributions have been greater than those of the husband.  But this has mainly been during the current year.  Following separation until March this year, the husband arranged for the company to pay the mortgage on the former matrimonial home apart from two payments which were made by the wife with funds borrowed from her parents.  As also indicated above, from the time of separation until approximately November 2007 the wife withdrew money from the business account to a total of approximately $27 000.  This is not being critical of her.  Clearly she needed money to live on.  But during the period from February 2007 to February 2008 the wife also earned income in excess of $25 800.  This was used for household purposes.  And, as indicated above, the husband was paying the children’s school fees, rates, utilities, telephone, security monitoring and the business was meeting the major part of motor vehicle costs.  So, as the husband has said, the wife had the use of considerable funds, certainly during 2007.  I accept the husband’s submission that the rate of withdrawals by the wife was at a level which the business, and inferentially the parties, could not afford.  This would have been even more the case after August 2007 when the husband started paying rent for his own accommodation.

16. But the husband has not paid the mortgage since March 2008 nor has he been paying any child support.  Accordingly, the wife’s contributions certainly in 2008 have been greater than those of the husband.

17. Weighing all relevant contributions by, and on behalf of, each of the parties, in my view the contributions overall have been greater by the wife.  In my view they have been 58 percent by the wife and 42 percent by the husband.

s 75(2) matters

1. The husband is 37 years of age and he is in good health.  It is not clear to me what his current income is.  He said that the business has not had sufficient cash flow to pay him properly and that he is owed more than $15 000 in salary.  As also indicated above, the husband has not had the accounts prepared for the business and has not lodged tax returns for some years.  But, the draft accounts for the business for the financial year ending 30 June 2007 show profit for that year of $73 730.  I would be surprised if the husband was not able to achieve at least this level of profit from the business.  And, as also indicated above, the business provides him with other benefits.  In my view, the husband should continue to have the capacity to operate the business for many years.

2. On the other hand, the wife is 35 years of age and she also enjoys good health.  Her income consists of her salary of approximately $1286 from her full time teaching position (see Exhibit 1) and approximately $167 per fortnight from her casual job.  This is a total of approximately $1369 per week gross.  In my view, the wife should continue to have the capacity to earn income at this rate for the foreseeable future.

3. The husband has been the major breadwinner for the family, as I have said.  He has been able to operate the business successfully over many years.  The business has been able to provide a reasonable standard of living for the family.  Despite the husband’s assertions about lack of cash flow and suggesting that the business should be liquidated, he wishes to retain the business.  I draw the inference that this is because he knows that the business is profitable.

4. In my view, the husband’s capacity to earn income is greater than that of the wife and, on all present indications, is likely to continue to be greater in the future.

5. As I have said, the wife has been the children’s primary parent.  The children live primarily with the wife.  They reside with their father regularly spending four evenings each fortnight with him as well as part of the school holidays.  But on all present indications, and barring unforseen circumstances, it is likely that the wife will continue to have the primary responsibility for the children.  This is a significant responsibility.  It was submitted on behalf of the wife that the husband is unlikely to provide mush support for the children in the future.  In my view, he will have to pay child support in accordance with the requirements of the law and this should provide a reasonable level of child support.

6. The most significant matters pursuant to s 75(2) of the Act are the fact that I regard the husband as having a greater income-earning capacity than the wife and the likelihood that the wife will have a considerably greater responsibility for the children in the future than will the husband.

7. In order to achieve a just and equitable order as required by s 79(2) of the Act it will be necessary to set-off some of the available property in favour of the wife.

8. The pool of property is a modest one.  Accordingly, in my view, it would be appropriate to make a set-off of property at the higher end in percentage terms to take account of the s 75(2) matters rather than at the lower end.  But account also needs to be taken of the fact that the wife would enjoy a greater amount of the available property based on contributions.  In my view, the appropriate set-off is 18 percent of the available property.

Conclusion

1. The wife is to have 76 percent of the property available for division.  This is property with a value of $160 133.  The wife has the following:

$
1.        Loan to her brother	7,500
2.        Bank account	130
3.        Jewellery	1,250
4         Superannuation	34,254
_________
$43,134

1. But the wife has a debt to her parents of $4230.  Therefore, the wife has surplus assets compared with liabilities of $38 904.

2. Accordingly, to achieve property with a value of $160 133 the wife would require additional property with a value of $121 229 ($160 133 - $38 904 = $121 229).

3. The wife is very desirous of being able to retain the former matrimonial home.  But I doubt whether she has capacity to borrow the very substantial funds which would be required to do this.  So it will have to be sold.  The $121 229 additional property to be enjoyed by the wife will have to come from the M Unit Trust.

1. Upon sale of the former matrimonial home the mortgage will have to be paid leaving equity of $98 534 ($610 000 - $511 466 = $98 534).  From this amount the wife’s parents will be paid the $90 000 which the parties owe them.  This would leave $8534 ($98 534 – $90 000 = $8534).  But in reality this amount might be consumed by the costs of sale.

2. On the other hand, the husband is to have 24 percent of the available property.  This is property with a value of $50 568.

3. The husband has the following property:

$
1.        Bank accounts	3,900
2.        Jewellery	1,000
_________
$4,900

1. But the husband also has the following liabilities:

$
1.        Credit cards	16,000
2.        Debt to Mr Z	7,500
_________
$23,500

1. This is a deficiency of $18 600.  To achieve property with a value of $50 568 the husband would require additional property with a value of $69 168

   
   

   (-$18 600 + $69 168 = $50 568). 

2. The proceeds of the M Unit Trust development will be used firstly to pay the amount of $78 000 owing to the Australian Taxation Office.  This should leave an amount of $127 863 ($205 863 - $78 000 = $127 863) available for division between the parties.

3. From this amount the wife will be paid such amount which, when added to any balance of funds available from the proceeds of sale of the former matrimonial home, will achieve 76 percent of the available property and superannuation.  If the proceeds of the Unit Trust are $205 863 and the balance of the proceeds of sale of the former matrimonial home after paying costs of sale and the $90 000 to the wife’s parents would be $8534, the wife would be paid $112 695 ($121 229 - $8534 = $112 695) from the Unit Trust.

4. The husband will be paid the balance.

5. On the above scenario, this would be $15 168 ($205 863 - $78 000 - $112 695 = $15 168).

6. But the husband will also have the business which has a value of $78 000 which would be total property worth $93 168 ($15 168 + $78 000 = $93 168).

7. And the husband will have to pay his parents the $24 000 which they loaned the parties.  This would reduce the $93 168 to $69 168.  This is the additional property which would be required to achieve for the husband his 24 percent ($50 568) of property.

The fourth step

1. The wife would have the property and superannuation in her possession and/or control ($38 904) and the additional payment of $121 229, or similar depending on the sale price and costs involved in the sale of the former matrimonial home and the quantum of the proceeds of the M Unit Trust.  This is a modest amount of property.

2. But the wife said during the course of the hearing that she hoped her parents would loan her the $90 000 they had loaned the parties.  If this was the case, the wife should be able to borrow sufficient funds to enable her to purchase a modest home to accommodate herself and the children.

3. On the other hand, the orders I propose will affect the business and the husband’s capacity to earn income.  The retirement of $78 000 of indebtedness to the Australian Taxation Office should reduce the indebtedness of the business and the husband to the point where the husband should be able to manage the remaining debt.  In time he should be able to save the deposit for a home for himself and the children.

4. If I am wrong and the husband is not able to operate the business successfully, he is sufficiently healthy to be able to earn income from his skills and experience as a tradesman.

Spousal Maintenance

1. As indicated above, the wife seeks an order to the effect that the husband pay to her for a period of two years the sum of $400 per week by way of spousal maintenance.

2. Sub-section 72(1) of the Act provides in effect that a party to a marriage is liable to maintain the other party to the extent that the first-mentioned party is reasonably able to do so if, and only if, that other party is unable to support herself or himself adequately for one of the reasons stated in the sub-section.  One of such reasons is by reason of having the care and control of a child of the marriage who has not attained the age of 18 years.

3. In my view, the wife is unable to establish the threshold matter.  This is that she is unable to support herself adequately within the meaning of the provisions.  As I have said, in my view, the husband has a stronger capacity for earning income than the wife.  But the wife’s capacity in this regard is strong.  In any event, pursuant to the property order I propose the wife will have property with a value of $160 133.  Taking account of this, and the income-earning capacities of the parties, in my view the wife is not able to demonstrate that she is unable to support herself adequately.

4. Accordingly, her spousal maintenance application will be dismissed.

The wife’s motor vehicle

1. The company has made a Honda CRV motor vehicle available for the wife’s use.  The husband said that he is prepared to cause the company to continue to pay the lease payments in respect of this vehicle.  I shall make an order to this effect.

I certify that the preceding one hundred (100) paragraphs are a true copy of the Reasons for Judgment of Judicial Registrar W P Johnston.

Associate:     

Date:              22 August 2008