Dannello and Conti

[2009] FamCA 419

FAMILY COURT OF AUSTRALIA

DANNELLO & CONTI [2009] FamCA 419

FAMILY LAW – PROPERTY – Settlement in relation to marriage

Family Law Act 1975 (Cth) ss 75(2), 79

Lee Steere and Lee Steere (1985) FLC 91-626
Ferraro and Ferraro (1993) FLC 92-335
Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355
Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414
Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693

APPLICANT: Ms Dannello

RESPONDENT: Mr Conti

FILE NUMBER: SYF 2939 of 2004

DATE DELIVERED: 22 May 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston JR

HEARING DATE: 2 & 3 February 2009

REPRESENTATION

APPLICANT: Ms Dannello, wife in person

RESPONDENT: Mr Conti, husband in person

Orders

1. That the husband forthwith do all things and sign all documents to cause to be paid from the interest bearing controlled monies account in the name of Albert A Macri solicitor being part of the proceeds of sale of the former matrimonial home at N, New South Wales the sum of $35 000 to the wife and any balance is to be paid to the husband.

2. In the event that the husband fails to comply with the above order or there are insufficient funds in such account to meet such payment and the husband fails to pay the shortfall by 7 June 2009 he shall forthwith do all things and sign all documents necessary to sell his home at M for the best price reasonably able to be obtained and to pay the proceeds as follows:

   (a)       In payment of agents commission and legal costs of the sale;

   (b)In payment of all monies required to discharge the mortgage on such property;

   (c)In payment to the wife of the amount owing pursuant to the above orders together with interest at the rate prescribed by the Family Law Rules, such interest to commence from 8 June 2009 and to conclude on the day of payment and;

   (d)       In payment of the balance to the husband.

3. That the interim spousal maintenance order made on 22 December 2004 be discharged.

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

5. That both parties have leave to relist these proceedings on 7 days notice in relation to the implementation of these orders.

6. That all exhibits be released.

7. That in the event that that the husband should fail to sign any document required for the purposes of these orders within 10 days of presentation of such document to him for signature the Registrars of this Court are appointed pursuant to s 106A of the Family Law Act 1975 to sign such document in the name of the husband and to do all things necessary to give validity and operation to the document.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2939 of 2004

MS DANNELLO

Applicant

And

MR CONTI

Respondent

REASONS FOR JUDGMENT

Introduction and Applications

1. These are contested property proceedings.  The applicant is Ms Dannello, to whom for convenience I shall refer as “the wife”. The respondent is Mr Conti and for convenience I shall refer to Mr Conti as “the husband”.

2. The wife seeks an order to the effect that within 6 weeks the husband pay to her the sum of $400 000.  The wife seeks other orders in effect to secure such a payment.  On the other hand, the husband seeks an order that the wife’s application be dismissed.

Background

1. The husband was born in August 1963. The wife was born in November 1967.  They met in June 1998.  They commenced cohabiting in March 2000.  They married in August 2003 and they separated on 9 February 2004.

2. There are no children of the marriage.  But the wife has a daughter from her previous marriage, X, who was born in January 1995.  The child lived with the parties for most of the time that they cohabited.  But for a significant period the child and the wife lived during weekdays with the wife’s mother at her home at C and spent weekends at the husband’s home at G.  I shall refer to this again below.

3. Within a couple of months of the parties meeting, the husband entered into a lease on a home unit at A, New South Wales for the wife and her daughter.  The wife and her daughter commenced to live in this unit.  The husband continued to pay the rent on this unit.  The husband owned a home at G subject to a mortgage.  He continued to reside at his home although he spent several nights each week sleeping at the A home unit.

4. The husband also owned a restaurant business at E.  The wife assisted him by working at the business.  In April 1999 the husband informed the wife that the business was losing money and that if she wanted to operate the business then he would agree.  The wife then operated the business although the husband continued to assist.

5. In late 1999 the husband sold the business back to the landlord for $15 000.  The husband wanted to start a new business and the wife wanted to assist him in this.

6. In late October 1999 the wife and her child X went and lived with the wife’s brother for more than 3 months when his wife was overseas.

7. In late 1999 or early 2000 the husband signed a lease for premises which the parties converted into a service business.  This involved alterations to buildings on the premises to establish a café and a service depot.  It also involved the building of planter boxes and some landscaping.  The husband engaged tradesmen to do the work although the wife often found the tradesmen.  The husband did some of the labouring work and, as a former professional tradesman, he built the planter boxes himself.  The wife found a town planner and assisted during the development process by visiting the local council, the engineer and the architect for the project and in many other necessary tasks including marketing the business in relation to which she was heavily involved.

8. There is an issue about how much money was spent in establishing this business S Business.  The husband said this cost him $400 000 in start up costs.  The wife said it cost $270 000 initially.

9. It was common ground that the husband borrowed $90 000 initially to cover the lease payments and fund the building and development processing costs.  The $15 000 proceeds of sale of the business at E were also spent on the development.  The husband subsequently borrowed at least a further $160 000 secured by mortgage to fund the business.  I say at least because the wife said it was $160 000 and the husband said it was $190 000.  After considerable work had been undertaken further funds were still required to complete the project to the point where it could open for trading.  It was common ground that a Mr L was engaged to prepare a business plan.  This was used to persuade the bank to loan an additional $120 000 towards the project.  These additional funds enabled the parties to complete the work and open S business.

10. On 24 November 2000 S Business opened.  It operated successfully.

11. In 2002 the parties also assisted a regular client of their business, Mr P, in operating a franchise business at K.  They differed markedly in their respective versions of how much time they spent in this.  In any event this had little relevance in the proceedings.

12. Also in July 2002 the wife enrolled her daughter X at school at C.  This was closer to her mother’s residence so that her mother could collect the child from school and deliver her to school.  From this time, the wife would live with her mother during the week and then take the child to the husband’s home on Friday evenings and live with him for the weekends.  The husband gave a different account of this.  He said that the wife commenced living with her mother after the parties had had an argument.

13. Whichever of these versions is correct, it matters little because the parties continued their relationship on the weekends and the wife kept making contributions to the business. In any event, these living arrangements continued until just before the parties married in August 2003.

14. The husband sold S Business in December 2002 for $750 000.  He sold his home at G at about the same time for $500 000.  The mortgage of $390 000 was discharged.

15. By this time the parties had decided to marry.  They went looking for a home and found it at N.  This property was purchased in the husband’s name for $710 000.  This was funded from the proceeds of sale of S Business and the husband’s G home, and a mortgage of approximately $120 000.

16. The husband also purchased a franchise business, V Business. The parties had been informed by their customer, Mr P, that the business was in difficulty.  The husband had also been informed by Mr O, his hairdresser, that the business was in difficulty.  Mr O owned the land on which the business was conducted.  The husband and Mr O purchased the business in early 2003 from its Administrator for $100 000.  After a few months the husband purchased Mr O’s interest for $50 000.  Mr O had been owed $20 000 in rental arrears by the previous owner of the business.  The husband negotiated an arrangement with Mr O that the arrears would be forgiven upon payment by the husband of $10 000.  This was paid off over time.

17. The husband and wife made some improvements to the business.

18. As indicated above, the parties married in August 2003.  The husband gave the wife a diamond engagement ring.  The wife spent in excess of $30 000 on the wedding.  At an earlier time the husband had paid for the parties to go on an overseas holiday.

19. Unfortunately the marriage ran into real difficulty within a short time and the parties separated in February 2004.  There have been difficulties between the parties since then.

20. In July 2004 the husband purchased a 2001 luxury motor vehicle for $190 000.  He traded in a 1997 motor vehicle for $85 000.  He still owed $33 000 on the 1997 vehicle and borrowed $35 000 to pay the lease out.

21. The difficulties continued.  Each party has had locks changed on the former matrimonial home.  A matter which has particularly upset the husband is the fact that the wife entered the home after having left there and removed some household items including a valuable lounge suite.  She subsequently sold the lounge suite for what the husband says was a fraction of its value.

22. On 22 December 2004 this Court made an order that until further order the husband pay to the wife or as she may direct the sum of $200 per week first payment within 7 days and weekly thereafter.  The husband has not paid the wife in accordance with this order.

23. At that time the position in relation to the parties’ property was that the husband owned the former matrimonial home, the business, some motor vehicles and some other personal property including furniture and contents of the former matrimonial home.  The wife owned a Holden Vectra motor vehicle which the husband had purchased for her previously, her diamond ring and the lounge suite referred to above.

24. In 2005 the husband traded in the 2001 model vehicle on an $80 000 BMW motor vehicle.  The husband still owed approximately $43 000 on the 2001 vehicle which was added to the outstanding amount on the lease of the BMW.  He borrowed a total of $123 000 from Capital Finance to purchase the BMW.

25. On 28 May 2007 the husband sold the V franchise business for $100 000 to a company called W Pty Limited.  This company is owned by a Mr R who is a business associate of the husband.  The purchase price has been paid over time to the husband.

26. The wife commenced working as a sales representative.  She has recently been promoted to the position of sales leader.

27. From May to December 2007 the husband worked for W Pty Limited on a contractual basis.  Since January 2008 the husband has been employed by this company.

28. On 20 November 2008 the husband exchanged contracts to sell the former matrimonial home at N for $705 000.  This sale should have been completed by 19 January 2009.  But the wife had a caveat lodged against the title to the property.

29. The husband has exchanged contracts for the purchase of a home at M for the purchase price of $450 000.  He arranged for the purchaser of the former matrimonial home to release sufficient funds from the deposit to enable him to pay the $45 000 deposit on the M Property.  He drew down $17 500 on his National Australia Bank credit card to pay the stamp duty on the purchase.

30. There have been considerable difficulties in these proceedings being made ready for hearing.  Hearing dates have been allocated and then subsequently vacated on more than one occasion.  Both parties are now self represented having been legally represented at a much earlier stage of the proceedings.

31. At the hearing on 3 February 2009 I made orders permitting the husband to complete the sale of the former matrimonial home at N and requiring the wife to withdraw her caveat.  But I also made an order requiring the husband to ensure that the proceeds of sale after payment of agent’s commission and legal costs on the sale and discharge of the mortgage be paid to an interest bearing controlled monies account in the name of the conveyancing solicitor Mr Albert A Macri pending further order.

The franchise business, V Business

1. This business was valued as at 31 March 2007 at $665 000 by the single expert Ms D, Chartered Accountant.  Ms D considered financial statements for V Business as at 30 June 2005.  Ms D adopted the capitalisation of future maintainable earnings as the appropriate valuation methodology because she said the husband conducted an actively trading business.  Ms D based her consideration of estimated future maintainable earnings for the business as at 30 June 2005 on the reported results for the financial years ended 30 June 2004 to 30 June 2005 adjusted for the goods consumption to turnover ratio of comparable businesses in the industry.

2. Ms D estimated the earnings before interest and tax as at 30 June 2005 to be $156 000, assuming that business turnover was a function of goods consumption.  Ms D attributed a commercial salary package of $35 368 to the husband and applied an earnings before interest and tax multiple of 3 to arrive at capitalised maintainable earnings of $468 000.  Using this amount, Ms D took account of the tangible business assets and its liabilities and determined the value for goodwill as being $439 000.  She then adjusted this to take account of assets and liabilities, added her estimate of profit after tax derived over the period from 1 July 2005 to 31 March 2007 of $174 000 and this came to $665 493.  Ms D rounded this off to $665 000 and opined that this was the value of V Business as at 31 March 2007.

3. But I have serious reservations about this valuation.  As the husband submitted, he was never able to persuade the landlord, Mr O to give him a lease.  In these circumstances, and in the absence of any evidence that Mr O had changed his mind about this matter, in my view it would be inappropriate to accept such a high valuation.

4. As indicated above, the husband purchased the business for $100 000 and sold the business for $100 000.

5. As also indicated above, the wife is very suspicious about the bona fides of this sale.  But the fact is that she has been unable to put evidence before this Court to put any flesh at all on the bones of her assertions in this regard.  Although the Court cannot dismiss entirely the possibility that the husband is in reality still the owner of the business, the Court is limited in its findings by the evidence before it.  In this case, in my view, the evidence does not enable the Court to make the finding sought by the wife to the effect that the husband still owns the business.  But the husband sold the business for $100 000.  I propose to add this back to the pool of property available for division between the parties.

The Applicable Law

1. Sub-section 79(1) of the Act provides that in property settlement proceedings, the Court may make such order as it considers appropriate.

2. Sub-section 79(2) provides that the Court shall not make an order under the above sub-section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

3. There is a long-standing preferred approach to the determination of an application brought pursuant to the provisions of s 79.  This involves four inter-related steps.  Firstly, the Court should make findings about 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 in ss 79(4)(d), (e), (f) and (g), 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. 

4. This approach has been confirmed in numerous cases in this Court including for example Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355; Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414 and Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693.

Property available for division

1. The property available for division between the parties consists of the following:-

$
1.         Deposit on M property	45,000
2.         Balance of deposit paid by purchaser of former matrimonial home at N	25,500
3.         Balance owing by purchaser of former matrimonial home	634,500
4.         V Business (add back)	100,000
5.         Husband’s BMW motor Vehicle	40,000
6.         Husband’s Ford motor vehicle	10,000
7.         Husband’s household contents	2,000
8.         Wife’s Commonwealth Bank savings	300
9.         Wife’s HESTA superannuation	3,600
10.      Wife’s other superannuation	2,400
_____________
$863,300

1. The liabilities are as follows:-

$
1.         Husband’s mortgage over former matrimonial home	550,000
2.         Husband’s Capital Finance	70,000
3.         Husband’s National Australia Bank Visa credit card	25,000
4.         Husband’s legal fees to Photios Varoudis solicitors	13,000
5.         Husband’s legal fees to Stoikovich Macri solicitors for family law	40,000
6.         Husband’s AGC loan account	120,000
7.         Wife’s Flexirent debt	16,800
8.         Wife’s David Jones credit card	4,200
9.         Wife’s family law solicitors costs	35,000
10.      Wife’s share of single expert’s costs	10,000
_____________
$884,000

1. On this basis there is a deficiency of assets compared with liabilities of $20 700.

2. But there is some flexibility in relation to the liabilities.  For example, the husband’s AGC liability arises from a lease by the husband of a motor vehicle taken out many years ago.  The husband is involved in proceedings in the District Court of New South Wales in which he is claiming damages in respect of faulty workmanship on the vehicle.  He is also in the process of negotiating with AGC in respect of his liability to them.  What the outcome of these matters will be is far from clear at this time.

3. The $70 000 owing by the husband to Capital Finance is in respect of the lease of the husband’s BMW vehicle.  The husband has been able to pay the lease payments on this and the other vehicles referred to above.  There is no suggestion that the $70,000 needs to be paid urgently.

4. The husband’s NAB credit card liability of $25 000 includes approximately $17 500 which the husband used to pay stamp duty on the contract for his M home.  There is no reason why he will not be able to manage this liability in the future.

Contributions

1. During the latter part of 1998 and through 1999 until the husband sold his business at E there is no issue that the wife was working with the husband in the operation of the business.  It is also clear that at one point the wife was, in effect, managing the business although the period of such management was very much in issue.  But the fact is that during this period the husband paid the rent on the home unit at A in which the wife and the child X lived.  Clearly the husband also had a benefit from the unit because he often stayed there with the wife and X.

2. These are relevant contributions.  But they did not have much significance in terms of providing or maintaining or improving property because the husband sold the business at E for approximately what it cost him to buy the business.  Nevertheless, during this period, each of the parties made contributions to the welfare of the other.

3. At the time they commenced their relationship the husband owned his home at G subject to a mortgage.  He also owned the restaurant and a motor vehicle.  The husband has made the entirety of the financial contributions to the various loans on both the G and N homes and in respect of the business.

4. Over the relevant period the wife has not worked other than in the various businesses.  But she has undertaken important work in relation to each of the businesses including the business at E.  There is no question that the wife undertook a lot of the organisational and developmental work to set up the S Business project.  After this business commenced operation the wife worked hard with the husband in the business particularly in the operation of the café assisted from time to time by her mother and other relatives. These were significant contributions. The wife also contributed to the V Business enterprise.

5. As indicated above, the wife paid the costs of the parties’ wedding.

6. Both parties have made contributions to their welfare as a family unit and as homemakers.

7. In my view, it is inappropriate to make findings about the parties’ overall contributions in percentage terms.  Suffice it to say that it is clear that the husband’s contributions overall have been much greater than those of the wife.  As against this, however, is the fact that the husband has increased indebtedness on the former matrimonial home since separation very substantially and several times what this was at separation.

8. He has endeavoured to explain this as a consequence of a serious downturn in the trading of V Business due to increased competition in the area.  But he has never put appropriate material to the Court to provide substance to his claims.

9. In my view, the much more likely explanation is that the husband indulged his passion for having the use of very expensive luxury motor vehicles and he was not as restrained in expenditure on his lifestyle as might have been in all the circumstances reasonable.  He conceded that he spent too much money on luxury motor vehicles and sought to explain this as flowing from the emotional stress following the breakdown of his marriage.

10. In my view, the wife has made a modest contribution overall which should be reflected in a modest payment to her.

s 75(2) matters

1. Both parties are still relatively young, the husband being 45 years of age and the wife being 41 years of age.  They are both in reasonable health and both are working full time.  In my view, the husband’s income-earning capacity is more than that of the wife but not by a considerable margin.

2. This was a short cohabitation and marriage.

3. The wife has the responsibility for her daughter X.  Her former husband pays $250 per week to the child’s school and the wife takes responsibility for the balance of the child’s needs.

4. The child X has lived with the parties for the major part of the time of their cohabitation and marriage.

5. The other significant s 75(2) matter is the fact that the husband has had the confidence of being able to purchase a home.  This suggests to me that he is confident that he will be able to manage his liabilities.  On the other hand, the wife has virtually no property and will be left with significant debt at the conclusion of the proceedings.

Conclusion

1. This is really a case about liabilities and to what extent it is fair for the parties to bear their liabilities.

2. There will be funds available from the proceeds of sale of the former matrimonial home after payment of costs and discharging the mortgage which can be used to pay liabilities.

3. The wife made significant contributions especially in relation to the establishment and maintenance of the S Business enterprise.  The husband has had almost the whole benefit of this as I have said.  In my view, he acted unreasonably in increasing the indebtedness against the former matrimonial home following separation.

4. It would be most unfair to the wife not to assist her to reduce some of her indebtedness and to permit the husband the benefit of the entirety of the proceeds of sale of the home.  Having said this, for every dollar ordered in favour of the wife there would be one less dollar available for the husband’s creditors.

5. Doing the best that I can in these difficult circumstances in my view the wife should receive payment of $35 000 from the husband.  This will only go part of the way towards paying her liabilities.

I certify that the preceding sixty-eight (68) paragraphs are a true copy of the Reasons for Judgment of Judicial Registrar W P Johnston.

Associate:     

Date:              22 May 2009