Crittenden & Crittenden
[2022] FedCFamC1F 892
Federal Circuit and Family Court of Australia
(DIVISION 1)
Crittenden & Crittenden [2022] FedCFamC1F 892
File number(s): SYC 5895 of 2015 Judgment of: BAUMANN J Date of judgment: 18 November 2022 Catchwords: FAMILY LAW – PROPERTY – Assessment of contributions – Consideration of future earning capacities of the parties and add backs – One pool approach – further submissions required as to what form of orders achieve justice and equity Legislation: Family Law Act 1975 (Cth) s 75, 79 Cases cited: Best & Best (1993) FLC 92-418
Black & Kellner (1992) FLC 92-287
Hickey & Hickey (2003) FLC 93-143
Jabour & Jabour [2019] FamCAFC 78
Jones & Dunkel (1959) 101 CLR 298
Kowaliw & Kowaliw (1981) FLC 91-092
Mayhew & Fairweather (2022) 64 Fam LR 633
Stanford & Stanford (2012) 247 CLR 108
Townsend & Townsend (1994) 18 Fam LR 505
Weir & Weir (1993) FLC 92-338
Division: Division 1 First Instance Number of paragraphs: 90 Date of last submission/s: 8 September 2021 Date of hearing: 24 & 25 June 2021 Place heard: Sydney Place delivered: Brisbane Counsel for the Applicant: Mr Dura Solicitor for the Applicant: W.G. McNally Jones Staff Lawyers Counsel for the Respondent: Mr Rosic Solicitor for the Respondent: Manning Lawyers ORDERS
SYC 5895 of 2015 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CRITTENDEN
Applicant
AND: MR CRITTENDEN
Respondent
order made by:
BAUMANN J
DATE OF ORDER:
18 NOVEMBER 2022
THE COURT ORDERS:
1.That these proceedings be adjourned for further submissions at 9.30am (AEST) on 2 December 2022 in the Federal Circuit and Family Court of Australia (Division 1) at Brisbane, by telephone.
2.That by no later than 4.00pm on 30 November 2022, the wife’s solicitors provide to the husband’s solicitors by email and to …@... a form of order consistent with the Reasons for Judgment delivered 18 November 2022.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Crittenden & Crittenden has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
INTRODUCTION
To a large extent, this litigation concerning property adjustment orders has been fuelled by high levels of suspicion and mistrust. The Applicant wife Ms Crittenden simply finds it difficult to accept that the parties’ solid financial position at the time of separation in January 2013, turned so sour and so quickly thereafter.
The trial, where the parties were the only witnesses cross-examined, was consumed mostly by the cross-examination of the husband Mr Crittenden about various financial transactions post separation – particularly the liquidation of the parties’ trade business and the sale and purchase of motor vehicles.
That the parties had, at the time of trial, incurred or spent over $400,000 in total in legal costs (see Exhibits 1 and 2) on a relatively modest pool of assets, reflects the number of Court events since the wife commenced proceedings in September 2015 and the continual claims by the wife that the husband failed to make full disclosure. Although the wife’s tender bundle extended to 328 pages, in the end, only a few documents were relevant and formally tendered.
For the reasons which follow, the Court has determined what orders achieve justice and equity for both parties – although it is unlikely either party will be satisfied with the result.
PRINCIPLES
Shortly stated, but more concisely and elaborately described in the Full Court decision in Hickey & Hickey (2003) FLC 93-143, in a property settlement case, the Court must adopt a well-known four-step process, essentially:
(a)to identify the pool of assets and liabilities generally, and usually at the time of hearing;
(b)to assess the relative contributions of both the financial, non-financial, direct and indirect nature as specified by s 79(4) of the Family Law Act 1975 (“the Act”);
(c)to consider the factors as are relevant contained in s 75(2) of the Act; and
(d)finally, consider the ultimate analysis to determine whether the order the Court proposes to make is just and equitable to both parties.
Both Counsel, Mr Dura for the wife and Mr Rosic for the husband, contended it was just and equitable with the meaning of s 75(2) of the Act to make property adjustment orders, and I agree (see Stanford & Stanford (2012) 247 CLR 108).
The parties disagreed on what should constitute the pool of interests – much of the dispute relating to alleged “add backs” and to various motor vehicles said to have been owned by the parties and either sold or transferred to other persons.
By the conclusion of the final written submissions on 8 September 2021, the parties’ positions were essentially:
(a)the wife seeks to retain the former matrimonial home at Suburb B and make a payment to the husband which reflects, on her estimate of the pool, a 70/30% adjustment in her favour and on the husband’s estimate of the reduced pool, a 85/15% adjustment in her favour; and
(b)the husband contends for a pool which is approximately $400,000 less than that asserted by the wife, and on that pool seeks adjustment of interests as to 55/45% in the wife’s favour. As I understand his case, he has no objection to the wife retaining the former family home, although he expresses doubts about the wife’s capacity to do so when she is required to borrow the sum he calculates is necessary, to satisfy his claim.
The Court expresses its regret to the parties that these Reasons were not provided earlier.
Of course, the evidence relied upon in the Court’s determination was completed on 25 June 2021. With the major asset (the family home) having an agreed value at trial, and in the absence of either party (both competently represented) seeking to reopen proceedings whilst the judgment has been reserved since September 2021 (on completion of written submissions), the Court is bound to assess the interests on the agreed value of the home at the time of trial.
CREDIT
The wife submits that this Court would approach the husband’s evidence, in its totality, with extreme caution and not accept a proposition advanced by the husband unless it is agreed by the wife and/or supported by independent evidence. The basis for this submissions is outlined at paragraphs 9 to 13 of the wife’s written submissions.
In response, the husband, at paragraphs 46 to 53 advances “six propositions of law which we respectfully submit apply to the Court’s treatment of the Respondent’s evidence in chief and his testimony during cross examination regarding the motor vehicles”. I do not cavil with the propositions, supported by authority, advanced by Counsel for the husband, which in final submissions in reply are summarised as it being “a serious matter for a court to disbelieve a party who gives evidence under oath”.
Much of the relevant facts in this case are not in dispute. Certainly the circumstances surrounding the liquidation of the business; the husband’s continued trading as a tradesperson and transactions relating to the motor vehicles were areas of controversy.
This Court is well aware of the capacity of parties, who have been emotionally connected through an intimate relationship, to find it difficult to always view events other than through their own prism, which is often shaped by their hurt, disappointment and anger that extends often for years post separation, as it has in this case. This will generally manifest in the way they assess the value of their contributions to the relationship (at times exaggerated) and the contributions of the other party (at times minimised).
Ultimately, I do not, in this case, make a general adverse credit finding about the husband, although, as will be seen in some respects, I have not accepted his evidence where, for example, documents raise suspicions not adequately explained by him or where, it is open to find the husband could have provided corroboration of his evidence, but did not do so.
In short, I accept the proposition by Counsel for the husband at paragraph 3 of the submissions in reply that:
It is open to the Court to find the Respondent is a fundamentally truthful person and to make further findings regarding the truthfulness of his various separate statements given in respect of different aspects of the evidence in this case.
CONTEXTUAL BACKGROUNd
Statements of fact hereafter shall be constituted as findings of fact.
The wife is now 48 years of age and the husband is 47 years of age and when the parties commenced cohabitation in 1996 (both aged around 21 years), they lived as a couple for a period with the husband’s parents before undertaking six months of travel overseas.
In 1998, the parties purchased the family home at C Street, Suburb B for $269,000, with a limited deposit, and after some renovations to the property they moved into the residence in 1999. They married in early 2000. The couple’s first daughter Ms D was born in 2001 with their second daughter X following in 2006. At the time of the hearing Ms D was aged 20 years and living independently, whilst X, then aged 14 years, was living with the wife.
The husband is a tradesperson and worked at times in a family business originally commenced by his parents years before he became the owner of the business effective mid-2004. He says he purchased the business, known by the trading name of “E Company” for $30,000 but actually never paid that sum to his parents. Within 12 months of acquiring the business, the operations of the business moved to C Street, Suburb B.
It appears, as a wealth creation strategy and at least to take advantage of negative gearing tax benefits, the parties purchased an investment property in Suburb F, Queensland using the equity in the family home to provide additional security for the costs of acquisition totalling around $337,000.
A decision was made to move the business operations to a commercial building on G Street, Suburb H which was purchased in late 2009 for approximately $517,000 (including expenses) with significant borrowings. The business moved into the Suburb H property in around May 2010. Although the evidence suggests (at least until mid-2014) the business was running profitably with a turnover exceeding $1,000,000 per annum, difficulties in the parties’ personal relationship were emerging – with the wife saying, and I accept, from her perspective the parties separated “under one roof” in December 2011.
Final separation occurred in January 2013 (after a relationship to that time of nearly 17 years). The husband left the family home and moved ultimately to live in Queensland where he remained at the time of the hearing.
There are a number of transactions around the time of separation and shortly thereafter where funds were accessed from available bank accounts, and some time at the hearing was devoted to these transactions.
What is not disputed is that in 2015, the business operated by the husband was placed into liquidation. Exhibits 3 and 4 are two reports of the liquidators to creditors dated 27 March 2015 and 27 August 2015. Later in these Reasons I conduct some analysis of these reports when dealing with the wife’s contention that the husband improperly “placed” the business into liquidation and that his conduct falls within that narrow category of cases which enliven the principles in Kowaliw & Kowaliw (1981) FLC 91-092. The wife asserts the husband’s actions were reckless, wanton and/or negligent causing a loss of capital and assets available for distribution. Part of the argument advanced includes an assertion that after causing the business to be placed in liquidation, the husband commenced a new business as a sole trader and thereby “took over” the old business clients for no real consideration.
In September 2015 the wife commenced proceedings. At this stage little point arises from setting out the multitude of interlocutory applications which the parties were engaged although some contextual orders are referred to in this Judgment.
In February 2016, a sale of the Suburb H property was effected for $755,000 resulting in a profit and some funds being held in a controlled monies account pending trial. At a time when there was a balance of $271,000 in the account, the husband’s application to received $150,000 of those funds to allow him to pay legal expenses was successful before Rees J on 3 March 2017. Subsequently on 6 November 2017, a Senior Registrar ordered by consent that the remaining funds held in the controlled monies account be divided equally between the parties. These interim property distributions are reflected in the balance sheet later in the Reasons.
After the corporation operating the business was formally deregistered in 2016, the husband moved to J Region, Queensland in early 2017 where he has continued to undertake contracts as a sole trader.
On 29 April 2020, Henderson J made final parenting Orders in respect of X which provided for the child (at that time aged 13 years) to live with the mother and spend time and communicate with the father as agreed between the parties, taking into account the views expressed by X.
In February 2021, the competing property applications were listed for trial before me, commencing 24 June 2021 and after evidence closed, the exchange of written submissions concluded on 8 September 2021. The Court again expresses its regret for the delay in delivering these Reasons.
POOL OF INTERESTS
Exhibit 19 was a joint balance sheet tendered by the parties on 25 June 2021, which is a convenient template to the areas of agreement and disagreement, further the subject of cross-examination and then written submissions. A number of interests, particularly current bank accounts and credit card liabilities were, by agreement not pressed for inclusion. Considering separation occurred more than eight years before the trial, I adopt the parties’ sensible approach.
I now deal with the items in dispute as follows.
Husband’s tools and equipment
The wife says that the husband’s self-certifying “declaration” to Queensland Building and Construction Commission (QBCC) to obtain a Category 2 classification begins with the statement that:
My revenue in the reporting year WILL NOT exceed $800,000. I have at least $46,000 Net Tangible Assets.
(Emphasis added)
Exhibit 7 (the QBCC declaration) shows plant and equipment in the Balance Sheet as at 31 March 2020 as “$44,650”. In cross examination, the husband says he included in the items of plant and equipment, Motor Vehicle 1 (which I deal with later in these Reasons). I am not persuaded on the evidence that the husband has tools at a value of $44,650 as the wife contends. The husband concedes tools worth $5,000 and I will adopt that figure as a statement against interest in the absence of any probative evidence. In finding this view, I also take into account that if, as seems likely, some tools and equipment have been purchased by the husband post separation from his income, it would not be just and equitable to include those items.
Memorabilia
The wife concedes I have no valuation for memorabilia which, I accept, was purchased during the relationship. Such purchases are notoriously difficult to value and are often acquired during charity events where the purchaser has an interest (or at times bordering on a passion) for an item and is prepared to pay more than a commercial value. The husband in his trial affidavit at paragraph 192 responds to the allegations made by the wife at paragraphs 267 to 269. This memorabilia was the subject of correspondence between the lawyers in March/April 2016 with the husband asserting, at that time, that “the majority of items were broken, lost, stolen or a “complete denial” that he still possess many items. Sadly it seems that the parties’ daughter Ms D may have been engaged to photograph some items (see paragraph 269), but the husband’s response at paragraph 192 to those items was not seriously challenged. On the evidence I am unable to attribute any reliable value to the items, but accept the husband does hold some items, and accept his assertion of value of $500, again as a statement against interest.
Motor Vehicle 1
At the time of the liquidation of the company, the husband utilised Motor Vehicle 1 as his work vehicle. As the husband still uses the vehicle and, on his evidence, included it in his estimate of plant and equipment for the QBCC declaration, the wife contends for a finding that in reality the vehicle is the husband’s property retained by him.
The husband took the Court through a rather confusing, and in my view, unconvincing assertion that it may have been his brother who purchased the vehicle from the liquidator for $16,000 and allowed him to use the vehicle to operate his business. Then he says the vehicle registration was transferred to his mother’s name (because his brother lived in New South Wales), and she has allowed him to use the vehicle. Yet he insured the vehicle in his name from 10 September 2015 (Exhibit 17).
The husband did not call evidence from either his brother or mother about this strange combination of transactions. A Jones & Dunkel (1959) 101 CLR 298 inference is available – namely that neither his brother nor mother could provide evidence that would assist to corroborate his version of the facts.
I find that the vehicle should be regarded as the husband’s property in reality. As it seems the husband refused to allow a market valuation of the vehicle to be undertaken, and accepting (as I do) that $16,000 was paid to the liquidator, I include Motor Vehicle 1 in the balance sheet at $16,000. It is mere speculation whether that vehicle has increased in value or decreased in value since it was purchased from the liquidator.
Motor Vehicle 2
I begin the analysis of the evidence in this matter, with one agreed fact. At separation, the husband owned this vehicle. I am satisfied he purchased the vehicle in mid-2012 for approximately $29,500 (see Exhibit 14). I accept it is a vehicle attractive to car enthusiasts. The extent of the husband’s response to the wife’s allegations at paragraphs 270 to 279 is found at his paragraph 193 where he says that “[t]his was purchased after separate [sic] and sold for $9,500 in an unworthy state.”
Although it is true that the parties separated in January 2013, the husband, I am satisfied, utilised the funds and I regard the withdrawal as a premature disposition for the husband’s sole benefit in a Townsend & Townsend (1994) 18 Fam LR 505 sense.
Having so found, it is not strictly necessary to analyse the following exhibits, namely:
(a)Exhibit 13 – a poor copy (almost unreadable) said to be signed by a Mr K and dated “18-4-2015” asserting he paid $9,500 to the husband for the car where the document asserts that the “vehicle unregistered” and “gear box damage which requires total replacement. Differential and steering require major work”;
(b)Exhibit 15 – a tax invoice of a new insurance policy dated 2 October 2018 by L Insurance for the vehicle with an “agreed valued of $80,000”; and
(c)Exhibit 16 – a tax invoice (by way of endorsement) dated 24 December 2018 by L Insurance from the same vehicle but suggesting that on 20 December 2018 the registration for the vehicle revealed the husband’s mother as the owner.
The husband made no attempt to reconcile the inferences available from the documents that notwithstanding the asserted sale in April 2015 of a car in poor condition, he is insuring the vehicle some years later. Furthermore, there is no evidence he offers as to how the condition of the vehicle so described in Exhibit 13, deteriorated in two (2) years. The wife says (at paragraph 274) without particularisation, that the husband has “also driven the car after its date of sale by him and entered the car in car shows”. The wife was not challenged on this assertion in her brief cross-examination.
I am not prepared to attribute a self-claimed (even if agreed) insurance value for the vehicle of $80,000. In my assessment, the husband’s failure to adequately explain the transactions after its purchase, support my determination that the husband obtained a benefit of $29,500 and it should be “added back”.
Motor Vehicle 3
At paragraph 280 and 281 of her affidavit, the wife says, inter alia that:
(a)in or about 2015, the husband and his then girlfriend Ms M together purchased this vehicle and thereafter entered the car in car shows; and
(b)after the husband’s relationship with Ms M ended in mid-2016, Ms M listed the car for sale on Gumtree for $32,000; and
(c)the husband says he “bought [Ms M] out of her share of the car and paid her $13,000” (see Exhibit 18 dated 6 August 2016).
On the evidence the wife says the vehicle should be included in the balance sheet at a figure of $32,000.
The husband (at paragraph 194) says he purchased the motor vehicle “with money from his late father just after the company was liquidated. Our intention was to ‘do it up’ ‘and sell it later’”. He gave an estimate of “approximately $16,000” for the cars value but says it is in several pieces.
The wife asks me to infer that the purchase of the car by the husband came from joint funds and that the husband’s evidence of using funds from his late father should not be accepted. I accept that the Husband did not adequately explain how Ms M became a joint owner – entitled to any payment for her interest. She was not called on as a witness.
However, on balance, where the wife is not able to satisfy me (unlike the purchase of Motor Vehicle 2) that the purchase of the vehicle was achieved with joint funds, I see no basis to include the vehicle in the pool of assets or further analyse the transactions associated with the vehicle or its current state of repair.
Husband’s shares
The wife does not accept the husband’s direct evidence that any shareholding is an asset of the self-managed superannuation fund. She says the husband’s failure to ensure that the self-managed superannuation fund has filed tax returns, leads to the inference that the shares are his personal property.
I am unpersuaded by the wife’s evidence that the husband holds shares personally.
Exhibit 20, which shows a value for a share portfolio (at 28 February 2020) for the self-managed superannuation fund of $71,474 appears to be the approximate value for the husband’s member benefit in the self-managed superannuation fund (see item 37 of Exhibit 19). Although such a concession might represent a pragmatic approach by the wife, (considering that the husband will bear the responsibility for ensuring his self-managed superannuation fund is a complying fund), I accept the husbands evidence that any shareholding is within the self-managed superannuation fund. I note that the husband concedes that share sale proceeds of $70,336 should be added back – as I understand the evidence, because the proceeds were used in part to meet legal expenses (see paragraph 162) of criminal and domestic violence proceedings.
Further “add backs”
As I now discuss, the wife seeks to include in the balance sheet a number of additional “add backs”. The claims relating to the “loss” of the business upon its liquidation appears to be based on a submission that the husband “caused” the business to be liquidated as a result of his “reckless, wanton or negligent behaviour” (in a Kowaliw sense).
I have already dealt with one premature disposition earlier and the wife makes another claim to be assessed.
It bears reminder, that notionally “adding back” funds is the exception to the overarching oft stated principle, that the Court assesses and identifies the interests of the parties at the time of trial. The Court is therefore not bound to “add back” any amount, however although some may argue to do so is more transparent, in an effort to achieve justice and equity, at times consideration of behaviour that might lead to an “add back” is best achieved by taking the matter into consideration under s 75(2)(o). Before exercising a range of available discretions, it is necessary to give careful consideration to the facts.
Loss of value of business due to liquidation
Before turning to the broad complaints and suspicions of the wife, and the responses by the husband, it is valuable to make some findings that arise from the liquidation reports tendered in these proceedings (marked Exhibits 3 and 4). No party sought to call the liquidator so I am relying on their reports as being an accurate assessment, accepting as I do, their statutory and fiduciary duties. In that regard, I find that:
(a)the first report recorded that at the shareholders meeting in early 2015 of N Pty Ltd (“the said company“) a resolution was passed that the company “be wound up voluntarily”, and that Mr P be appointed liquidator. The statement of affairs signed by the husband revealed creditors exceeded assets by $120,205;
(b)The three major creditors were the Australian Taxation Office (“ATO”) ($83,000); the husband ($46,665) and the husband’s parents ($30,000). The $30,000 debt to the husband’s parents represents the purchase price of the business;
(c)The second report of the liquidator dated 27 August 2015 reported to the creditors inter alia that:
(i)In mid-2015 a “related party” offered to purchase Motor Vehicle 1 and “remaining plant and equipment” for $16,500 which was accepted as the sum was greater than the “auction realisable value”;
(ii)an “independent third party” made the only offer to purchase the business name, domain name and telephone lines and the offer of $2,750 was accepted;
(iii)the report set out the trading results and balance sheet for the company for the years to 30 June 2012; 2013; 2014 and to 19 March 2015, and the liquidators’ preliminary observations were the company operated at a net loss during the period 1 July 2014 to 19 March 2015 “attributable to a decrease in revenue with no corresponding reduction in overheads”;
(iv)although investigations revealed the husband’s loan account had reduced from $127,147 (at 30 June 2013) to $48,165 (at date of appointment) and represented a potential party preference claim for $78,981, it was uncommercial to pursue the claim for the reasons expressed;
(v)investigations revealed that the company “may have traded insolvent from at least 30 June 2012”;
(vi)as related party creditors (the husband and his family) account for over 55% of creditor proof of debts, more than half of any recoveries from an insolvent trading action would therefore be distributed to the husband and his relatives; and
(vii)after liquidator remuneration totalling $40,221 was paid, there was no dividend or recovery to creditors available – noting the ATO debt, in the end, of $38,602 was not recovered.
The wife acknowledge that during the relationship she was not involved in “business decisions”. The evidence supports a finding that the husband operated the business as he wished – supported at times by his parents – but that as the qualified tradesperson, the profitability of the business critically relied upon his efforts. The liquidators reports revealed that as the business began to falter, the husband withdrew available funds for his own use (by example, his salary for the 2012/2013 year was $135,846) and also reduced his loan account. I am satisfied that during the relationship it is likely the husband exaggerated the profitability of the business to the wife – for example, in the year ended 30 June 2014 the turnover was only $1,063,605 and not as high as the wife claimed.
At paragraphs 65 to 74 of the wife’s written submissions, an argument is advanced that culminates in a contention that based on a report by Mr Q, a single expert pursuant to Orders made 4 April 2016, at 31 December 2014 (being approximately three months prior to liquidation) the business had a value of $119,000. This is despite the husband’s evidence, both in his affidavit and during thorough cross-examination, that there were circumstances which arose in respect of the business operation to cause its profitability to decline quickly.
Mr Q was not the subject of cross-examination, however the valuation set out at paragraph 166 of Mr Q’s report included an opinion of what I understand to be a “midpoint intangible value” of $30,000. This is the business “goodwill” however, with the company liquidated, such an achievable outcome in the commercial market is simply not possible. Furthermore, the husband’s loan accounts of $63,754 (which includes his parents) is balance sheet neutral – that is to say if the husband owed the company money then it would be a debt on his personal side of the ledger.
At paragraphs 113 to 114 of the husband’s submissions, it is contended that:
(a)Mr Q does not go behind any of the liquidators reports, nor does he challenge the finding that in early 2015 the company was trading whilst insolvent; and
(b)there is no evidence the liquidation was not lawful or that voidable transactions occurred, such that the liquidator (as required by law) reported to ASIC behaviour of the husband that could lead to possible offences.
I am far from satisfied that the husband’s conduct amounted to a “wasting” of a valuable asset. As I will refer to below, I accept the wife and the husband made both direct and indirect contributions to the business, but that ultimately the husband was the key man and his skills as a tradesperson enabled the business to provide a modest income but some benefits to the family. It can be seen that the husband did withdraw funds from the business when other expenses should have been given priority. However, rather than seeking to attribute a notional value and “adding it back”, the proper way to deal with the matter is to recognise that the husband (despite the ultimate liquidation of the company), continued to earn an income and withdraw funds from cash flow, to some extent, was able to retain some connection with previous customers. These are appropriate matters to take into consideration under s 75(2) as the wife’s submissions a paragraph 74 acknowledge.
Funds accessed post separation
Considering the particularity of the allegations (and supporting documents) set out in the wife’s trial affidavit, I am prepared to accept that it is likely the wife devoted significant time and effort personally to analysing hundreds of transactions around the time of separation and thereafter. This is a reasonable inference when the legal costs incurred by the wife (Exhibit 1) are compared to the legal costs incurred by the husband (Exhibit 2).
However the precise attention given by the wife to so many transactions, many not challenged by the husband, misunderstand the Court’s function. The Court is not required to conduct an audit, and more importantly when a relationship breaks down, the parties’ lives are not suspended. Absent injunctions, they are perfectly entitled to spend money they have access to – including post separation income – as they wish.
The overall requirement by a court exercising power under the Act is to make orders which are just and equitable. I appreciate that the wife (at paragraphs 180 to 223 of her trial affidavit) makes complaints about the failure of the husband to make “full and frank” disclosure. The husband contests those allegations, and sensibly little cross-examination of either party was devoted to the issue.
After identifying, at paragraph 107 of her written submissions, difficulties with the husband’s disclosure in various aspects, it is contended at paragraph 108 that:
The deficiencies in the Husband’s disclosure, including but not limited to his lack of disclosure of documents to support the numerous transactions engaged in by him disposing of matrimonial assets post-separation, must leave the Court in a position where it would not be unduly cautious in finding what the Husband’s financial position is at the present time [see Weir & Weir (1993) FLC 92-338 and Black & Kellner (1992) FLC 92-287]
Whilst I will take up this submission when discussing the s 75(2) factors, it can be seen that I have already made findings above relating to a number of vehicles where the husband’s lack of disclosure has resulted in the Court not being unduly cautious about the husband’s evidence. Furthermore, although the husband could have been more compliant with directions for discovery, I am satisfied the pool of interests were relatively clear at the conclusion of the evidence. It is not consistent with authority to “punish” in some monetary way a party under s 75(2), and even treating the husband’s evidence with more robustness does not, in this case, lead to a finding that there are undisclosed assets of any significance (see the discussion by the Full Court in Mayhew & Fairweather (2022) 64 Fam LR 633 at [13–[14]).
Of course behaviour may have some relevance when considering any discretion to make a costs order (s 117(2A)).
It is apparent that monies between the company accounts and joint accounts were regularly intermingled by the husband and I am not ultimately persuaded, to the requisite standard, that I can quantify the transactions which the husband had the benefit of at a figure of $53,624 as the white contends is the certain amount. In the exercise of my discretion, I chose later in these Reasons to take the husband’s access to funds as a matter to be considered under s 75(2)(o).
As a result of my findings, I conclude with an assessment of the parties’ interests at the time of the hearing should be found to be as set out in Appendix One to those Reasons.
Before any alteration of those interests by Court order is made, I find the total nett pool of interests currently held to be as follows:
Husband Half share of home less debts $403,527 Partial property payments $233,720 Tools and equipment $5,000 Memorabilia $500 Motor Vehicle 4 $4,250 Motor Vehicle 1 $16,000 Motor Vehicle 2 $29,500 Recreational Vehicle 1 $1,100 Recreational equipment $1,500 Add backs Recreational Vehicle 2 $4,500 Shares sold $70,336 Self-managed superannuation fund interest $71,837 $841,770 Wife Half share of home less debts $403,527 Partial property payments $83,720 Motor Vehicle 5 $11,000 Superannuation $122,098 $620,345 TOTAL $1,462,115
The parties say the superannuation interests should be incorporated in the one pool of all interests. I agree.
Contributions
Although the parties both contend that contributions until the date of separation in January 2013 should be assessed as equal, it is of course necessary to consider the myriad of contributions over the whole of the relationship until the time for trial – a period of 25 years (see Jabour & Jabour [2019] FamCAFC 78).
Having so noted, I find that when the parties commenced cohabitation in 1996 they were both aged 21 years and had no assets of significance. During the period of their relationship they did not benefit from any financial windfalls in the form of personal injuries awards, lottery wins or significant gifts or inheritances. The parties did have rent free accommodation with the husband’s parents for six months at the commencement of cohabitation.
It is not possible, on the evidence, to make a finding whether the purchase by the husband (through the company) of his parents’ business for $30,000 in 2003 represented a transfer for less than market value, however the evidence does demonstrate the husband’s parents from time to time gave support to the husband.
To the time of separation it is fair to assess that the husband was the primary source of income through his work as a tradesperson, although the wife was also employed when able to do so, bearing in mind her primary commitment (by arrangement with the husband), as a primary carer to the children and the person responsible as homemaker. I do not suggest the husband did nothing in these roles, however it is clear (and acknowledged fairly by the wife), that he worked long hours and was not as available for the household duties as she was able to be. The wife says she supported the business and the husband in the business when she could do so. I accept her submission.
Since the time of separation the wife says, and I accept, her direct and indirect contributions included:
(a)she has been the primary carer of the children, which includes extra obligations supporting the children who initially were demonstrating anxiety around their parents’ separation;
(b)whilst X has always remained in the wife’s care, Ms D’s involvement as a witness in criminal charges against the father strained her relationship with her father, although Ms D moved to J Region with the husband in early 2017 before returning to the wife’s home in mid-2018 during her grade 12 exams. Ms D started university in 2019 and turned 18 years in 2019, when the parents’ legal duty to support her ceased. I accept, in her adulthood, the wife continues to provide emotional support to Ms D;
(c)the wife has had the benefit of residing in the family home since separation which is a contribution made by the husband (as joint owner) for her benefit. During her occupation, she has made payments to the modest mortgage totalling $101,973 which has resulted in a reduction in the mortgage balance of around $45,000. I accept these payments allowed the home to be preserved and, whilst so preserved, it is likely that capital gains to the property have occurred. The wife also attended (often with assistance from her brother – also a tradesperson) to maintenance and repair tasks;
(d)the difficulties in the parties’ relationship (I finding easily made by considering the history and particularly the wife’s evidence in chief), contributed to many difficulties in the payment of child support by the husband to the wife. There were a number of child support assessments ranging from as low as $61.58 per month to as high as $2,209.17 per month. I find the way the husband’s income was assessed led to some fluctuations in his liability – the result being that often the wife received little financial support from the husband and was required to bear the usual expenses for nearly eight years until the hearing. I accept the husband was in arrears of assessed child support at the trial of around $21,000; and
(e)making, through employment, contributions to her superannuation.
The husband says, and I accept that his contributions included:
(a)permitting the wife (and the children) to remain living in the home whilst he was required to pay rent elsewhere;
(b)the husband did make a modest contribution to the mortgage payments until about 30 May 2014; and
(c)with the business falling into liquidation, the husband says he had to recreate an income stream from his skills as a tradesperson, and variations to his taxable income meant at times minimal child support was paid by him.
Taken over the entirety of the relationship, I regard the contribution based entitlements of the parties to be 55% to the wife and 45% to the husband – a differential of 10%, or approximately $140,000 on the pool as assessed by me.
Section 75(2) factors
The parties are of a similar age and no probative evidence was offered as to any significant health issues likely to impact upon them in the foreseeable future.
The wife works in a healthcare facility approximately 28 hours per week at a rate of $26 per hour. She also works a few hours a week in an allied health facility. In her Financial Statement, she estimated her gross income from wages to be about $762 per week. I accept she has over 20 years’ experience as an allied health worker. The wife does have the full-time care of X, which is likely to continue during her infancy until late 2024. I accept at that time she may be able to increase her hours of employment.
On the evidence, the husband’s income is said by him to be modest. Exhibit 12 are copies of the husband’s income tax returns from 2014 to the year ended 30 June 2020. The last return reveals a net income of $26,795. The husband, as a sole trader, is able to offset expenses against his income for his vehicle, phone etc. Although the husband says his income is not greater than the wife’s, I have concluded on the evidence that his earning capacity as a tradesperson is superior to the wife. I cannot easily avoid a finding, which I make, that the husband to some degree manages his taxable income with an eye to his child support obligations for X – a child sadly who he has no relationship with at this time. This finding takes into account the earlier submission by Counsel for the wife, that I should accept the husband’s evidence cautiously. His evidence around the motor vehicle transactions supports a finding he is capable of designing an outcome in the shadow of this litigation. As has been recognised for a long time in family law jurisprudence, often the most valuable “asset” that a person retains from a marriage is the capacity to earn an income (see Best & Best (1993) FLC 92-418).
The parties will each obtain an order that will give the wife the opportunity to retain the home, whilst paying to the husband a reasonable adjustments sum. It should not be ignored of course that the husband has already received a greater share of the nett sale proceeds of the Suburb H property.
I regard the husband’s use of funds in the company, not all totally accounted for and the uncertainty as to the real value of his memorabilia, as factors that should be considered under s 75(2)(o).
In my final assessment, I regard a further adjustment to the contribution based entitlements of 10% to the wife is proper – again an adjustment to the wife equivalent to the husband paying the wife around $140,000.
What orders achieve justice and equity?
It is not the comparative percentages which are to be considered to ascertain whether justice and equity is achieved for both parties, but the effect of the actual orders.
In this case, the wife seeks to retain the former matrimonial home at Suburb B where she has resided since separation. That would be fair provided the wife is able to borrow sufficient funds to satisfy the husband’s entitlement. The wife’s bank “pre-approval” (Exhibit 5) at the time of its issue on 30 March 2021 suggested the wife was eligible for a bank loan of up to $265,000 – which would permit a payment to the husband in the range of $140,000. The pre-approval certificate was subject to a number of conditions and whether the funds are still available now is not certain. However, if the husband was to receive 35% of the nett pool of $1,462,115 that computes to a sum of $511,740 made up as follows:
Partial property payments $233,720 Tools and equipment $5,000 Memorabilia $500 Motor Vehicle 4 $4,250 Motor Vehicle 1 $16,000 Motor Vehicle 2 $29,500 Recreational Vehicle 1 $1,100 Recreational equipment $1,500 Add backs Recreational Vehicle 2 $4,500 Shares sold $70,336 Self-managed superannuation fund interest $71,837 $438,243 Plus payment by the wife $73,497 $511,740
The wife’s 65% share would amount to $950,375 made up as follows:
Suburb B property $1,000,000 Partial property payments $83,720 Motor Vehicle 5 $11,000 Superannuation $122,098 $1,216,818 Less Liabilities $192,946 Payment to the husband $73,497 $266,443 TOTAL $950,375
In the preparation of these Reasons the following two issues arose for contemplation, upon which I will seek further submissions as to the form of order, being:
(a)although the joint balance sheet (Exhibit 19) at item 36 appears to reflect both parties accept a “GST return on sale of the [Suburb H] property”, there is no evidence about the assessment of such taxation liability. Noting the property was jointly owned and the property was sold in 2016, I assume after six years any liability should by now have crystallised – likely in the parties’ personal taxation liabilities. The calculations above are based on the wife taking full responsibility for the debt – it being incorporated in the calculation of the balance sheet interests. However that may not be fair to the parties if the debt, at that level (either more or less) will not be payable or has been paid. An order for any liability, if assessed in the future, to be paid in proportions might be more equitable. Also if a debt has been raised by the ATO some years ago, penalties and interest may have been imposed; and
(b)At the end of submissions in September 2021, it was the wife’s desire to retain the home and, to a certain level of borrowing, she produced evidence of a capacity to do so (conditional on final bank approval). I do not need to incorporate orders for sale of the home if the wife is able to pay the required sum to the husband – which sum may require adjustment depending on the situation relating to the asserted GST liability.
In the circumstances (noting as well that neither party sought a superannuation splitting order), I propose to list this matter before me at 9.30am (Queensland time) on 2 December 2022 for further submissions.
I invite the solicitors for the wife by 4.00pm on 30 November 2022 to provide to the husband (by email to my chambers for the attention of my Associate), a form of order consistent with these Reasons, which incorporate time limits the wife needs to raise to pay any settlement sum to the husband.
I certify that the preceding ninety (90) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 18 November 2022
APPENDIX ONE
Ownership
Description
Value
Assets
Joint
C Street, Suburb B
$1,000,000
Husband
Partial property payments made in favour of the husband
$233,720
Wife
Partial property payments made in favour of the wife
$83,720
Husband
Tools and equipment
$5,000
Husband
Memorabilia
$500
Wife
Motor Vehicle 5
$11,000
Husband
Motor Vehicle 4
$4,250
Husband
Motor Vehicle 1 with brand new custom fit out
$16,000
Husband
Motor Vehicle 2 with specialty plates and custom sound system
$29,500
Husband
Recreational vehicle 1
$1,100
Husband
Recreational equipment
$1,000
Husband
Recreational equipment
$500
$1,386,290
ADD BACKS
Husband
Recreational Vehicle 2
$4,500
Husband
Shares sold
$70,336
$1,461,126
LIABILITIES
Joint
R Bank (secured over Suburb B property)
$119,568
Joint
GST return on sale of G Street property
$73,378
$192,946
NETT NON-SUPERANNUATION INTERESTS
$1,268,180
SUPERANNUATION
Husband
Self-Managed – Super Fund 1
$71,837
Wife
Super Fund 2
$122,098
$193,935
TOTAL NETT POOL
$1,462,115
3
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