Carlow and Carlow

[2010] FamCA 839

FAMILY COURT OF AUSTRALIA

CARLOW & CARLOW [2010] FamCA 839

FAMILY LAW – INTERIM – Children and property

Family Law Act 1975 (Cth)

APPLICANT: Mr Carlow

RESPONDENT: Ms Carlow

FILE NUMBER: MLC 7377 of 2010

DATE DELIVERED: 21 SEPTEMBER 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 17 SEPTEMBER 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR KIRKHAM QC

SOLICITOR FOR THE APPLICANT: WESTMINSTER LAWYERS

COUNSEL FOR THE RESPONDENT: MS WHEELER

SOLICITOR FOR THE RESPONDENT: HOGG AND REID

Orders

1. That the husband and wife have equal shared parental responsibility for the children C born … July 1997 and D born … January 1999.

2. That the children live with the husband from the conclusion of school on the first Friday of the school term after these orders until the commencement of school on the following Wednesday morning and for a similar period in each alternate week thereafter until further order.

3. That the children live with the wife until further order at all other times other than those set out in paragraph 2.

4. That the husband and wife forthwith do all things necessary to sell the real property at G, Western Australia on terms and conditions to be agreed and failing agreement, upon orders of the court.

5. That upon the settlement of the sale of the said real property, the net proceeds of sale be applied as follows:

   (a)       first, to pay all commissions, costs and other expense of the sale;

   (b)secondly, to discharge any encumbrance affecting the G property;

   (c)thirdly, to hold the balance of proceeds then remaining in an interest bearing account in the joint names of the parties to be set up by agreement and in default of agreement by the solicitors for the husband.

6. That all interim parenting applications be otherwise adjourned to 16 December 2010 at 10.00am.

7. That save for the outstanding interim parenting applications, all other interim applications be dismissed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7377  of 2010

MR CARLOW

Applicant

And

MS CARLOW

Respondent

REASONS FOR JUDGMENT

1. Mr Carlow (“the husband”) and Ms Carlow (“the wife”) lived together from 1995 until June 2010.  Their marriage in 1997 has produced two children who are caught in the middle of the dispute not only about parenting time but also the use and retention of the parties’ wealth. 

2. The factual basis upon which to make interim parenting and property orders in this case is very much in dispute.  The evidence could not be tested at this time but each party sought a resolution of the two major disputes. 

3. The two children are C who was born in July 1997 and therefore 13 years of age and D who was born in January 199 and therefore 11 years of age.

4. In respect of the children, the husband wanted orders for an equal sharing of time on a week-about basis.  The wife wanted orders for the husband to have alternate weekend time with the children and one extra night overnight, in the “other” week.

5. Despite the vague assertions of both parties and the lack of particularity as to both past and present arrangements for the children, I am in position to order a holding position to give the children some certainty and routine in their lives.

6. Neither parent will find these orders acceptable but it is my finding that it is in the best interests of their children to spend five nights in each fortnight in a block period with their father. 

7. The wife’s position is not likely to permit or foster a genuine involvement of the husband in the lives of the children.  Whatever may have been the past caring arrangements, the wife has sufficient confidence in the husband’s parenting ability to offer three nights overnight along with a block period during the school holidays which is apparently 12 days. 

8. For his part, the husband said the children wanted more time with him and notwithstanding the lack of significant sole care in the past, he could or would organise his time away from work on a week about basis.  The husband’s position ignored the fact that the children had never had a school time regime away from their mother for so long.  The husband’s preliminary position was therefore in my view, impractical.

9. Each party would have me accept that their parental/child relationship is such that the children will have a view about the parenting role consistent with theirs.  The views of children are important but not such that they should be slavishly followed.  Many questions need to be considered about parenting capacity and responsibility in this case before some permanent orders can be made.  To that end (hopefully) the parties agreed to attend upon psychologist Mr P to assist them to work out what was good for their children and for Mr P to provide a report in November 2010 for the Court.  I am not entirely sure what Mr P will be looking for but hopefully, all parties will see some wisdom in listening to his advice and opinion as to what best suits the needs of their children for the future.

10. I shall set out below why I consider that these orders are in the best interests of the children.

11. The financial issues between the parties were (and are) equally shrouded in mystery. 

12. The husband sought orders that a home in G in Western Australia be sold and after discharging the mortgage, the proceeds be divided as to $866,000 to enable him to take up share options in a company in which the various family entities have a significant shareholding.  He also sought an order that $300,000 be allocated to him as a partial property settlement.  There is not sufficient evidence upon which I could determine the latter issue.

13. The wife sought orders that the options exercise only be undertaken if she could be satisfied that the company could meet its financial obligations in the current financial year and increase its income over and above its expenses.  In addition, she would agree to the acquisition of the shares only if the injection of capital was required to enable the company to meet its financial obligations and expenses.  However, even then, the wife said that the options exercise should only be undertaken not from the sale of G property but upon the basis of the sale of two properties in S and one property in K in Victoria.

14. There were other issues in the applications of both parties but they were not pursued and I propose to treat them as not being sufficiently urgent that they cannot wait for a final hearing.  As part of the orders I propose, all interim proceedings other than the parenting matter will be dismissed save for the orders that I propose to make.

15. Whilst the husband’s position blended the various steps, it was argued by Mr Kirkham QC that whatever happened about the share options, the sale of G property had to go ahead.  As he put it, the family could not afford to keep the property.  I agree.

16. Two fundamental facts seem clear.  First, on the pool of assets as portrayed and perceived by the parties, it would seem unlikely, based on a reluctant concession by Ms Wheeler of counsel for the wife, that the wife could keep the G property in the future. 

17. The equity in the G property is and will be, the major equity in the parties’ asset pool.  The husband wanted to argue that the injection of the capital of $866,000 in the public company would give rise to a future increase in the equity of the parties in that company but ironically, the wife’s position was that the shares were of very little value now and that was the basis of her objection to the injection of capital.  Under those circumstances and based on some other facts to which I shall refer, it is reasonable to infer that the major asset in the future will be the equity in G property. 

18. There are contribution issues in dispute between the parties but they seem to be more about what the husband provided at the commencement of the relationship than did the wife.  An outcome in which the wife received the vast majority of the equity seems unlikely.  The wife referred to the prospect of moving to live in Perth in the future but there was no suggestion of any such relocation in her application for final parenting orders.  The wife is currently earning a limited income and the prospect of taking over a $1.6 million liability encumbering G property, must be seen as remote.  The G property was damaged by fire and there is a litigious dispute with the insurer.  A sale is said to be likely to prejudice the claim against the insurer but at the same time, work needs to be done and costs will be incurred for the litigation.  The only existing source of those expenses appears to be rent from G property.  The wife is currently living on that money which would obviously disappear if the wife moved to live in the property.  Alternatively, to borrow capital which has already occurred once would simply increase the debt encumbering G property.

19. The second issue is that even if the three real properties suggested by the wife were sold, the current financial dilemma would not necessarily be resolved.  Counsel for the wife did suggest that “in the event” that a further West Australian property was sold, that could be used to reduce the debt which encumbers G property.  There was no suggestion by either party that that property was going to be sold nor what impact its sale would have on the impasse. 

20. Accordingly, I first turn to the background and then to the facts.

21. The husband is the managing director and founder of H Limited.  The shareholding appears to be owned by the husband and various entities.  H Limited is a publically listed company and has a significant annual turnover.  The husband is 53 years of age.

22. The wife is a professional who works part-time. She has predominantly throughout the relationship, been the person who was responsible for the daily management of the children.  She is 50 years of age.

23. Each party filed a financial statement.  The husband showed that his annual income was approximately $286,000 made up of a salary together with some rent from one of the properties in S.  His expenses however total approximately $448,000 much of which was made up by tax, superannuation, rent and the mortgage on the G home.  The husband’s financial statement showed that approximately $160,000 per year was spent paying two mortgagees.  That arose because he borrowed against G property to acquire the shares.  The wife knew that because as sole proprietor of G property, she signed the loan documents.  Just exactly what else he did with $1.3 million remains an issue of dispute. 

24. G property earns approximately $100,000 per year rent.  All of that is paid to the wife and used by her for living expenses.  The  $1.3 million encumbrance incurs an expense of $96,000 per year or thereabouts and that is all paid by the husband.  It seems that there is little if any income from the S and K properties and they were described by the husband’s accountant as revenue neutral. 

25. It will be clear therefore that on the husband’s income, he cannot make ends meet.  He could solve the problem by selling the S and K properties which would then free up significant income but it would do little to reduce the parties’ level of debt.  Even if that ameliorated the position, it does not address the issue of the major debt on G property.

26. The wife uses her income to support herself.  Curiously, she described herself as receiving $308 per week “net” rent but that was hard to follow because it was common ground between the parties that she received all of the rental whilst the husband paid the mortgage on G property.

27. To add to the complexity, the wife personally extended the $1.3 million encumbrance by taking a further $300,000 without consultation with the husband.  That particular increase in the debt is something which she is responsible for and paying.  The wife gave evidence that the $300,000 was used to pay legal fees associated with the G property insurer dispute, living expenses, school fees and general living expenses.

28. The dilemma for both parties is that regardless of what has happened to all of these funds, there is now $1.6 million encumbering G property and on their incomes, as set out in their financial statements, neither appears in a position to be able to cover the totality of the debt.

29. The wife pointed to the fact that her legal advice was that if she sold the home “prior to issuing or in the alternative prior to paying for the reinstatement works” she would not be able to recover the cost of reinstatement from the insurer.  That dispute amounts to approximately $323,784.  The wife’s advice was that in all probability, she would find that she was only entitled to recover the difference between the sale price she actually received and the sale price that she would have received had the insurer properly reinstated the property.  As her advice pointed out, the two variables were highly artificial and far from scientific giving rise to the lawyers saying they could not, with any certainty, say what she was likely to receive.  It would appear therefore that the amount which is being disputed is far from clear.

30. Counsel for the wife suggested that the solution to the problem about the shareholding was that rather than sell G property, the Court should order a sale of the two properties in S and K.  The wife’s evidence was that there was a range of values for those properties.  As senior counsel for the husband pointed out, taking into account estimated capital gains tax and ignoring sale costs, one might be able to obtain about $490,000 net.  That would have little impact on the $1.3 million for which the husband was responsible in respect of G property.  Whilst the husband’s shortfall in respect of the payment of the debt on the S and K properties would disappear, it did not overcome the fact that the husband was not only paying the G property mortgage but on his evidence, which is disputed by the wife, he is also paying about $50,000 of outgoings per annum on G property.

31. Much of the wife’s evidence related to the question of shareholdings.  Her position in relation to G property was untenable.  Having regard to the fact that I do not accept she can keep the property in the future, it is unreasonable to expect the current position to continue.  If the wife does want to keep G property for the future, now would be the time for her to take that liability off the hands of the husband by providing a solution as to how she could be able to keep it.  No such solution was proffered.

32. I turn then to the shares in H Ltd. 

33. The husband said that “the family” made a commitment to his company to inject further capital of $866,000 by 31 December 2010 by exercising an option to purchase further shares.  He pointed out that the company had been the primary source of income which had not only met the needs of the family but generated the family assets.  He said that without the injection of capital, the company may not be able to develop new products and hold its place in the market and as such, the investment in the company and its continued viability were in doubt.

34. The husband said that 12 months prior to the global financial crisis, the shares traded at over $0.06 each but subsequent to the crisis, the range was between .7 of a cent and 3.5 cents.  The husband said that the company was currently undercapitalised and required an injection of capital in order to benefit from new opportunities and technologies. 

35. What gave rise to the dilemma was that in June 2009, the board of directors determined a need to raise $2 million by the issue of new shares at 2 cents per share.  The shares hold an option of one extra share per share at 1.7 cents to raise a further $1.9 million in December 2010 but the option had to be exercised by 31 December 2010. 

36. Putting it simply, the husband saw that the prospect for the company’s future lay in the injection of capital and that as the family held approximately 43 per cent of the shareholding, it was important to maintain the control by acquiring the shares under the options. 

37. Counsel for the wife pointed out that the injection of $866,000 was absurd because the shares were on the market at one half of one cent now.  $866,000 meant that the husband was acquiring the extra shares at 1.7 cents each.

38. The husband’s position as expressed by his senior counsel was that the husband in the future property proceedings was prepared to put the shares into the pool of assets at the value that he was now paying for them rather than their genuine value if it was so low and any such shareholding could be credited against his entitlement.  If that were the case, and the value of G property was as it was put by the husband, there was ample equity for adjustment between the parties still. 

39. The husband’s position in relation to the value of G property was that it was somewhere between $5 million and $6 million.  The wife obtained an appraisal from an estate agent who thought that it might sell for $7 million.  No details were given by either party as to how serious the Court should take those expressions of opinion.  Certainly, there is no sworn valuation.  The agent who gave the wife an estimate seemed to be suggesting that a recent sale of a brand new five bedroom home might give rise to some optimism about the $7 million.  On the basis of that evidence, I would not share such optimism.

40. Counsel for the wife pointed to the fact that discovery had not been completed and the wife was not aware of what the husband had done with the $1.3 million such that she could be confident in saying it all went into the acquisition of the shares that gave rise to the options.  Furthermore, counsel for the wife had pointed to a company financial report which was apparently signed off by the husband on behalf of H Ltd to the Australian Stock Exchange indicating a different position to that set out in his affidavit.  The wife’s position was that the husband was portraying the company’s position as dire without the injection of capital.  On a careful analysis of the words used by the husband, I prefer to say that I find that he was suggesting that the future of the company would be better if the injection went ahead rather than that there would be dire consequences.

41. The husband’s application was issued in August 2010 and the wife responded with material as late as only 48 hours prior to the hearing before me.  She had had time to make inquiries and to call evidence that completely contradicted the husband’s evidence about the capacity of the company in the future. 

42. In the same vein, the husband had ample time to show that there was some urgency about the deadline of 31 December 2010 and despite his major shareholding, the interests of the parties would be prejudiced.  I agree with counsel for the wife that it is hard to see that there is an obligation upon the husband to take up the options and I do not think that that is what he was saying.  The husband’s position was that he was trying to protect the asset in the future. 

43. On the material before me, I could not say that I am satisfied on the balance of probabilities that the position of either the husband or the wife is right.  I do not know whether the current financial position of the company is such that the injection of $866,000 will in fact improve not only the productivity of the company but also the value of the shares.  Similarly, I do not know from the wife’s evidence whether her pessimism about investing that amount of money whilst the share value was so low is well founded.  Accordingly, on the basis of this information, I could not order that the proceeds of the sale of G property being put into H Ltd by way of an exercise of options would be an asset-protection exercise.  That is not to say that a further application could not be made in the foreseeable future and certainly prior to 31 December 2010 if the picture was much clearer and there was some expert advice that the exercise was a sensible option for either the husband and/or both parties.

1. It is equally implausible on the evidence for me to find that the sale of the S properties and the K property would make any difference to the asset position of the parties and in particular, for the protection of the asset pool.

2. In the circumstances, I do not think that it is appropriate for me to make an order at this stage that the sale proceeds even if they were available from the G property could be used for asset protection purposes.

3. I turn then to the children’s issues.

4. Section 60CA of the Family Law Act 1975 (Cth) (“the Act”) provides that in deciding whether to make a particular parenting order, a court must regard the best interests of the child as the paramount consideration.  The paramount consideration must mean that it is not the only consideration but it must certainly be ahead of other considerations. 

5. In determining what is in the best interests of a child, s 60CC sets out a number of factors.

6. The first of the primary considerations is the benefit of the children having a meaningful relationship with both of their parents.  The husband’s evidence was that subsequent to separation, the wife has endeavoured to be proprietorial about the children and prevent him from spending time with them.  The wife for her part however said that she had been the primary carer of the children and what she was desiring for them was stability.  One of the difficulties for the children in this case is that they had been living in rented accommodation and it was their mother who first moved them to one of the parties’ own investment properties, then back to the rented home and then later, back to the investment property again.  These children since separation have had a number of moves.  The husband too has now moved out of the rented accommodation because he said he was having difficulties with the wife’s interference with his privacy and he too has now a separate rental accommodation. 

7. Each party therefore has done little to provide the children with a stable routine.  The evidence of the wife was that the school had mentioned a number of times during the year about problems of the children but it must be said that the evidence was so vague on that subject that I should ignore it.  The parties have only been separated since June and no doubt in the dying stages of the relationship of their parents, they witnessed some very unpleasant arguments and disjointed parenting.  On that basis, it is not surprising that the children have had problems at school and were unsettled but that may not necessarily be attributable to one of the parties.

8. What seems clear is that both parties say that the children want to spend time with them and as I pointed out earlier, the wife was prepared for the husband to spend significant periods of holiday time with the children.

9. There is no evidence other than the fact that the children had a meaningful relationship with both parents.  It seems clear on the wife’s evidence and not disputed by the husband, that during the earlier years of the children’s life, the husband was significantly absent from their daily routine whilst he was away on business.  That is not unusual in circumstances where people lead busy lives.  The husband now says things will change.  No doubt that can be examined in some detail when the evidence is clearer in the future. 

10. Another primary consideration is the need to protect the children from physical or psychological harm by being subjected to, or exposed to, abuse, neglect or family violence. The evidence in this case does not enable me to make any finding about what the children witnessed. One incident referred to by the wife was that there was a scene witnessed by the children but both versions of the parties differ so much that the evidence needs to be tested. Trying to be objective about what I read left me in a situation where I would not find that the parents had covered themselves with glory but neither could be accused of family violence as defined in the Act.

11. The separation of the parties seems to have removed the children from the dysfunctional family environment.

12. Each of the parties referred to the views of the children.  I propose to ignore those on the basis that it is only a short period of time until Mr P gets an opportunity to see and speak with the children and to watch their respective relationships.  Each parent said that the children told them what they wanted but I am not sure that I could give those indications much weight.

13. It is very contentious as to the exact role that each party has played in the lives of the children.  The husband said that he was involved in the children’s lives but it would seem clear that the wife was the major carer of the children as they grew up.  Importantly, the husband was away on business which gave rise to the parties’ current wealth.  It is not the question of whether one parent was a primary carer so much but the nature of the relationship of the child with each parent.  The nature of the relationship will vary with each child and change as they age.  The evidence in this case does not tell me anything about the nature of the relationship such that I could make any finding.

14. One of the considerations in s 60CC of the Act is the willingness and ability of the parents to facilitate and encourage a close and continuing relationship between the children and the other parent. The husband accuses the wife of endeavouring to exclude him from the lives of the children. The evidence is untested but the wife denies what the husband said. I do not know what the wife’s view is about the role of the husband in the future lives of the children but when I challenged her counsel to tell me what was the basis to maintain a restricted relationship between the husband and the children, she said that the children needed a stable routine and the husband was always away and therefore unable to carry out what he was wanting to do. Accordingly, I am not able to make a finding as to what the wife’s position is about the role of the husband. If she sees his role as simply a weekend father and one night overnight during the week, the expert evidence would need to show the children only want to spend that amount of time with him and that anything other than that would be disruptive of their best interests. The evidence does not enable me to make that finding at this stage.

15. Just exactly what the children would cope with in terms of being away from each parent is impossible for me to say on this evidence.  Much of the parties’ affidavit material related to their respective views of what went on during the marriage.  None of those matters assists me.

16. As for the capacity of each of the parents to carry out the needs of the children, I accept that it would seem that the wife was not only the major carer of the children but that the husband was absent for a number of periods.  Just what role he did play is a matter to be tested. 

17. I am not in a position to make any findings about the attitude of the parents to the role of parenting but the evidence suggests at this stage that neither has serious concerns about the ability to provide the children with their daily needs as well as future planning.

18. I am not in a position to make any finding about family violence nor should I on the evidence which is highly contentious.  Counsel for the wife pointed to recent research which shows that shared care does not work in the best interests of children in highly conflictual families.  The depth of the conflict in this case is still hard to fully understand without the evidence being so tested.

19. Section 60CC(4) and (4A) requires a court to consider the various roles that the parties have played in the lives of the children subsequent to separation. The gauntlet has been laid down by the husband accusing the wife of endeavouring to keep him out of the lives of the children. The wife denies that. Just exactly what the truth of that will be requires testing on the evidence.

20. Ultimately as I pointed out to counsel during the hearing, I do not have sufficient evidence to say how the children would cope with a significant change in their lives to the position adopted by the husband.  As counsel for the wife correctly pointed out, I should not experiment with that situation.  On the other hand, the husband has indicated a very strong desire to be a significant parent in the lives of the children.  He suggested that he was able to taper his work activities to enable him to fulfil has parenting obligations.  Whether that is possible or not remains to be seen.

21. Having regard to the fact that the children were to spend three nights of a weekend as well as a block period of school holidays with the husband, I am entitled to conclude that the wife at least thought that the children would stay for considerable periods of time and that the husband would be able to care for them.  Doing the best I can, it seems to me that five nights is the appropriate block period which is not going to stress the children nor damage their school routine because there will only be one change during the week.  The capacity of the parents to be able to manage that change will give some indication as to their intentions as parents of these children in the future.

22. On the evidence before me, it would seem that five nights rather than a broken fortnightly period would be best for these children. 

23. Section 61C of the Act says that each of the parents of a child who is not 18 has parental responsibility for the child. The husband sought an order for equal shared parental responsibility and the wife was silent on that subject. The silence of the wife suggests to me that she has no desire to move away from the accepted position that the law provides for parents in this situation. I see therefore no reason why the husband should not have an order that the parents formally have equal shared parental responsibility.

24. An order for equal shared parental responsibility then gives rise to the matters set out in s 65DAA.  That provision requires that the Court must consider whether the child spending equal time with each of the parents would be in the best interests of the child and then whether the child so spending equal time with each parent is reasonably practicable.  In this case, it would not be in the best interests of the children to spend equal time for the reasons that I have set out.  Having regard to the lack of evidence in relation to how such an order would operate, it is equally not possible for me to find that it would be practicable for the children to spend equal time. 

25. Having rejected equal time for the reasons I have set out above, s 65DAA(2) requires a court to consider whether the child spending substantial and significant time with each parent would be in the child’s best interest.  That consideration applies before the consideration about whether such time is reasonably practicable.

26. Substantial and significant time is defined as being days that fall on weekends and holidays as well as days that do not fall on weekends and holidays as well as time allowing the parent to be involved in the child’s daily routine and occasions and events that are of particular significance to the child and the parent.  To simply make an order for alternate weekends, would not be in the best interests of these children and certainly would not be significant and substantial time as it is defined in s 65DAA(3).  It is reasonably practicable in this case for such an order to be carried out because of the distance between the homes of the parents, the closeness of the parent’s residences to the schools of the children and the fact that both parents have the necessary financial capacity and vehicles to be able to care for the children and drive them around.

27. In my view therefore, this is a case in which the children should spend significant and substantial time with the husband and that five days in each 14 is such an appropriate period of time. 

28. As I earlier mentioned, a variety of orders including injunctions involving the husband and his adult son were not pursued in argument and I do not propose to deal with those issues.

29. In the reasons I have set out above, I have not canvassed all of the evidence.  I was critical of the parties for the fact that the evidence did not set out in any particular detail many of the matters that may have enabled me to make findings.  Many of the statements were broad and vague.  Most of those statements were responded to by the other party with a general denial.

30. For the purposes of any person reading these reasons, I say that I have taken into account the two affidavits of the husband, his financial statement, the affidavit of E Carlow and the affidavit of the wife filed 17 September 2010 and her financial statement. 

31. I propose to dismiss all interim applications save for the parenting dispute between the parties and propose that I review that after the parties have provided a report from Mr P.  In the event that the parties are unable to come to a sensible resolution about the future of their children and they continue to dispute the time between each of them and the children, I would seriously contemplate having the children’s voices heard independently by an Independent Children’s Lawyer on the next occasion.

I certify that the preceding Seventy Four (74) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 September 2010.

Associate: 

Date:  21 September 2010