DEMARA & MONTIJO
[2013] FamCA 612
•23 August 2013
FAMILY COURT OF AUSTRALIA
| DEMARA & MONTIJO | [2013] FamCA 612 |
| FAMILY LAW – PROPERTY – Application by the wife for property settlement orders pursuant to s 79 of the Family Law Act 1975 (Cth) – Whether just and equitable to alter property interests and rights – Stanford v Stanford [2012] HCA 52 considered – Consideration of factors under s 79 and s 75(2) of the Family Law Act 1975 (Cth) – Where the outcome of the assessment of contributions resulted in the husband receiving 54 per cent of the assets compared to the wife’s 46 per cent – Where an adjustment, pursuant to s 75(2), of 16 per cent in the wife’s favour is appropriate. FAMILY LAW – SPOUSAL MAINTENANCE – where the wife sought an order for spousal maintenance – where the husband submitted that he does not have present capacity to pay any sum – where it is difficult to determine the husband’s income – where it is possible, if not likely, that the husband will have capacity to pay the shortfall between the wife’s reasonable needs and her income in the near future due to him improving the businesses – where it is appropriate to capitalise the spousal maintenance and for it to be paid as a lump sum - where it is proper that an order for lump sum spousal maintenance be made. FAMILY LAW – CHILD SUPPORT DEPARTURE – where the wife sought an order for child support departure – where the evidence demonstrated that the income disclosed by the husband in his income tax return did not completely record the funds available to him from his employment – where the wife submitted that a special ground for departure order pursuant to s 117(2)(c)(ia) of the Child Support (Assessment) Act 1989 (Cth) is established – where the evidence was sufficient to establish special circumstances and the ground for departure pursuant to s 117(2)(c)(ia) has been established – consideration of whether it is just and equitable to make an order for child support departure – where non-disclosure by the husband entitles the court to be sceptical about the husband’s income and the completeness of his disclosure but does not go further than that – where the evidence does not enable an inference that the husband has sufficient income or earning capacity that would make it just and equitable to require him to pay a particular sum for child support – where the wife’s application for a child support departure order is dismissed. |
| Family Law Act 1975 (Cth) ss 74, 75(2), 75(3), 79, 81 Child Support (Assessment) Act 1989 (Cth) s 116(1)(B); 117(2)(c)(ia); 117(4) |
| Bevan & Bevan (1995) FLC 92-600 Black & Kellner (1992) FLC 92-287 Dwyer & Mcguire (1993) FLC 92-420 Grey & Grey [2012] FamCA 389 Gyselman (1992) FLC 92-279 Kowaliw & Kowaliw (1981) FLC 91- 092 Mayne & Mayne [2011] FamCAFC 192 Mitchell & Mitchell (1995) FLC 92-600 Stanford v Stanford [2012] HCA 52 Weir & Weir (1993) FLC 92-338 |
| APPLICANT: | Ms Demara |
| RESPONDENT: | Mr Montijo |
| FILE NUMBER: | SYC | 3159 | of | 2010 |
| DATE DELIVERED: | 23 August 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Aldridge J |
| HEARING DATE: | 13 – 16 May 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Christie |
| SOLICITOR FOR THE APPLICANT: | Watts McCray Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Gillies |
| SOLICITOR FOR THE RESPONDENT: | KDB Holmes Solicitors |
Orders (as amended pursuant to rule 17.02 of the family law rules)
That the wife’s Application for a Child Support Departure Order is hereby dismissed.
Pursuant to s 79 of the Family Law Act:
That, within 14 days of the making of these orders the funds in the parties’ joint CBA MISA Account (…603) AND CBA rental account (…396) are to be divided between the parties with 62 per cent payable to the wife and 38 per cent payable to the husband with the accounts then to be closed forthwith.
That the husband is to retain his interest in the following:
(a)C Street, Suburb J in the State of New South Wales (“the C Street property”);
(b)M Pty Limited;
(c)the X Family Trust;
(d)the 2007 Honda … motor vehicle; and
(e)the funds in the bank accounts presently standing in his name.
The wife is to receive the following:
(a)the 2006 Toyota … motor vehicle; and
(b)the funds in the bank accounts presently standing in her name.
That each party shall be entitled to retain all superannuation entitlements presently in the possession or control of that party.
That the wife is to take all necessary steps to transfer her interest in the X Family Trust (including loan accounts for her benefit) to the husband and to resign as a Trustee of the X Family Trust and to remove herself as a beneficiary of that Trust.
That in the event that the X Family Trust, or the husband, receives any funds from or in relation to shares held by N Pty Limited (the husband, on his own account or as Trustee of the X Family Trust is to take all necessary steps forthwith to transfer to the wife 62 per cent of the funds received from or in relation to N Pty Limited.
That in the event that the wife pays the husband the sum of $388 229 within one hundred and twenty (120) days of the making of these Orders the husband is to take all necessary steps forthwith to transfer to the wife all his right, title and interest to H Street, Suburb E (“the H Street property”) in the State of New South Wales to the wife and the wife is to take all necessary steps available to her to refinance the loan to her parents so as to remove the husband as a debtor and to indemnify the husband in respect of any claims the wife’s parents may have against him in respect to the loan referred to herein.
That the husband is to take all necessary steps to refinance the borrowings in respect of the C Street property so as to remove the wife as a borrower and, in any event, to indemnify the wife in respect of any indebtedness or liability she may have with respect to that loan.
That the husband is to assume sole liability for his income tax payments and outstanding levies and rates on the C Street property and to indemnify the wife in respect of any indebtedness or liabilities she might have in respect to them.
That the husband is to take all necessary steps whether personally or as a Director of M Pty Ltd to transfer to himself, or to cancel, the wife’s loan account with that company and, in any event, to indemnify her in respect of any claim it might make against her.
That the husband whether on his own account or as Trustee of the X Family Trust, is to take all necessary steps to transfer to himself or to cancel any loan account pursuant to which the wife is liable to the X Family Trust and, in any event, to indemnify her in respect of any claim the Trustees of that Trust may make against her in relation to the Trust.
That in the event that the wife does not pay the husband the sum as referred to in Order 8 above then:
(a)the parties are to take all necessary steps to sell the H Street property;
(b)that for purpose of implementing the sale referred to in Order 13 (a) the parties shall do the following:
i. list the property for sale by public auction at the earliest possible date at a price to be agreed between the parties and failing such agreement, at a price nominated by the President of the New South Wales Division of the Australian Property Institute or/his nominee;
ii. with such agent as the parties may agree to appoint and failing agreement as to the agent within fourteen (14) days to any such agent nominated by the President of the New South Wales Division of the Australian Property Institute, (“the Agent”), the costs of and incidental to such appointment to be borne equally by the parties as and when sale fall due;
iii. the parties shall each co-operate in every way with the Agent including (without limiting the generality of the foregoing):
a. making the keys available to the Agent;
b.allowing inspection of the properties at all reasonable times requested by the Agent;
c.doing or saying nothing to hinder or prevent a sale being effected;
d. ensuring that the property including the grounds are in a neat and tidy condition at the time of the inspection by the Agent and prospective purchasers;
e.signing all documents as requested by the Agent in relation to the listing for sale of the home except contracts or agreement for sale which have not been authorised by the parties’ solicitors.
iv. the parties shall each execute contracts for sale on the forms prepared by the solicitors having the conduct of the sale at a price agreed upon by the parties or, in the absence of any agreement, at or above the price as nominated by the President of the New South Wales Division of the Australian Property Institute;
v. the parties shall do all things and sign all documents necessary to instruct a solicitor or licensed conveyancer within seven (7) days of the date of the date of these orders to have the primary conduct of the sale on behalf of both parties and failing agreements such solicitor or conveyancer as nominated by the President of the New South Wales Division of the Australian Property Institute and any costs properly payable to the solicitors will be and form part of the legal costs of the sale to be deducted from the proceeds of sale;
vi. neither party may confer on any Agent without the consent of the other party any right, any sole or exclusive agency in respect of the property or to any commission; and
vii. (if the Agent shall certify in writing to the parties’ solicitors that it is reasonably necessary for the work specified and a notice for repairs to be carried out to the property so as to assist in effecting a sale and provided the cost of any such work is less than $500 either party may cause such work to be carried out and the cost shall be recoverable by that party from the proceeds of sale (upon production of receipts to verify the expenditure);
(c) the proceeds of the sale of the property shall be disbursed as follows:
i. in payment of usual sale costs;
ii. in discharge of any mortgage or other encumbrances over the property;
iii. the balance be divided between the parties so as to cause the wife to receive 62% of the net assets as identified in this Judgment and the husband to receive 38%, taking into account the assets to be retained by them and add-backs the benefit of which has been retained by them as identified in this Judgment.
That pursuant to section 74 of the Family Law Act 1975 (Cth) the Husband shall pay to the Wife the sum of $50,000 by way of lump sum spousal maintenance ("the spouse maintenance payment").
That by way of implementation of paragraph 14 of these Orders, the Husband shall pay the spouse maintenance payment to the Wife as follows:
(a)In the event the Wife retains the property situate at and known as H Street, Suburb E in the State of New South Wales ("the H Street property") as is provided for in paragraph 8 of the Orders made by the Court on 23 August 2013, the spouse maintenance payment shall be deducted from the sum payable by the Wife to the Husband pursuant to paragraph 8 of the Orders made by the Court on 23 August 2013 such that the sum the Wife shall then be required to pay to the Husband will be reduced to $338,229; or
(b)In the event the Wife does not retain the H Street property and the H Street property is sold as is provided for in paragraph 13 of the Orders made by the Court on 23 August 2013, the spouse maintenance payment shall be paid to the Wife by the Husband simultaneously with the Husband receiving his share of the net proceeds of sale of the H Street property as is provided for in paragraph 13(c) iii of the Orders made by the Court on 23 August 2013.
That unless otherwise specified in these Orders each party is solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders.
That in the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these Orders, then the Registrar of the Court shall be appointed pursuant to s 106A of the Act to execute such deed, document or instrument in the name of the said defaulting party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
That any application for costs may be made by notifying the other party of the costs order sought, and the basis for any such order together with any evidence to be relied upon within twenty-eight (28) days of today and by approaching my Associate within a further thirty-five (35) days to arrange the further listing of the matter for a costs hearing.
That in the event the children should be enrolled at and attend an independent school the husband shall be solely liable to pay the whole of the school fees and associated costs.
That all applications and cross applications be and are hereby dismissed.
That all issues be removed from the Active Pending Cases List.
That all material produced on subpoena shall be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same not before fifty-six (56) days from the date of these Orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Demara & Montijo has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 3159 of 2010
| Ms Demara |
Applicant
And
| Mr Montijo |
Respondent
REASONS FOR JUDGMENT
In these proceedings Ms Demara (“the wife”) seeks orders pursuant to s 79 of the Family Law Act in relation to her property and that of Mr Montijo (“the husband”). The wife also seeks an order for spousal maintenance and a child support departure order.
The parties have three children: L, born in 2001, currently 11 years of age, Y, born in 2005, currently seven years of age and R, born in 2007, currently six years of age (“the children”).
Background
The wife was born in 1969 and is 43 years of age. The husband was born in 1965 and is 47 years of age.
In 1990 the parties married and commenced cohabitation. At that time the husband was working as a real estate agent employed by his father. The wife worked in the personal services field.
In 1992 the wife opened a business, D Business, in Suburb J. This business was sold in 1996 for approximately $15 000 and the funds applied to property purchases.
In 1995 the parties purchased P Street, Suburb E (“the P Street property”) for $371 000. This was the family home. It was purchased with the proceeds of properties owned by the parties which will be discussed below.
Also in 1996 the husband became the sole shareholder and director of M Pty Limited which had been a business previously operated by his father. From that time the husband has continued to work as a real estate agent in the local area. From 1996 the wife worked at least three days per week in the husband’s business as book keeper and office manager until 2001 when she reduced her hours of work. She ceased work in 2007 after the birth of the parties’ third child.
In 2004 the parties purchased H Street, Suburb E (“the H Street property”) for $1 850 000. It was acquired using proceeds of the sale of investment properties owned by the parties and a loan from the wife’s parents in the sum of $650 000. The H Street property became the family home.
In February 2009 the parties separated under the one roof. In July 2009 the husband moved out of the former matrimonial home.
Throughout the marriage the parties bought and sold a number of properties. It is not necessary to recount the individual sales and purchases. I shall deal with those properties when I deal with the issue of financial contributions.
Property, Liabilities and Financial resources
Q Pty Limited
Q Pty Limited is a business in which the parties own a one third interest. There was a dispute as to its valuation which turned upon the effect of “non-competition” and “clawback” clauses in any contract for its sale.
In 1996 M Pty Ltd acquired a G Company franchise at Suburb J. In or about May 2007 M Pty Ltd also began trading as G Company Suburb W.
In May 2007 Q Pty Limited was formed and, in the words of the husband, became the umbrella for the merging of three businesses. These were G Company Suburb O, DD Company Suburb W and G Company Suburb J. In 2008 G Company reclaimed the Suburb J franchise.
From May 2007 until October 2012 Q Pty Limited was owned by three shareholders each owning a one third share. One was the X Family Trust of which the parties are the trustees and beneficiaries. The other two thirds were owned by DD Pty Limited and S Pty Limited. In October 2012 DD Pty Limited sold its one third share in Q Pty Limited to S Pty Limited for $307 358.
The husband said that the sales agreement included restraint of trade or non- competition provisions and retention or clawback clauses. The first restrain the vendors from conducting business in the same field and location as the purchasers. The second were said to be clauses applicable to sales of rent rolls which require an adjustment of the purchase price after a certain period to take account of lost management fees for rental properties lost from the roll to other agencies. The purpose is to protect the business acquired by the purchasers from being eroded by competition from the vendors.
The present position is that the parties, through the X Family Trust, own one third of Q Pty Ltd and S Pty Ltd owns the remaining two thirds of the shares. The business Q Pty Ltd provides staff and facilities to M Pty Ltd. For a number of years M Pty Ltd paid a percentage of the income it received from its rent rolls and sales commission to Q Pty Ltd. In mid 2009 a monthly fee of $17 500 and 7.7 per cent of sales commission became the agreed fee. Presently M Pty Ltd pays a monthly management fee of $15 000 to Q Pty Ltd and 10 per cent of sales commissions.
The husband said that all new business rentals are now acquired by Q Pty Ltd and sales are accounted for directly back to the individual companies. He says that none of the shareholders has ever received a dividend from Q Pty Ltd.
Mr A was appointed by the court as a single joint expert to prepare a valuation of Q Pty Ltd and M Pty Ltd. In his report he valued the parties’ one third interest in Q Pty Ltd owned by the X Family Trust at $351 092.
The wife sought the inclusion of this interest in the balance sheet at that value.
Mr A valued Q Pty Ltd on a fair market value basis.
In cross-examination, he was asked to assume that, on any sale of the business Q Pty Ltd or its shares, the vendors would not enter into a restraint of trade clause and a clawback or retention clause. He accepted that such clauses were common in the real estate business.
In his report, for the purpose of arriving at his fair market evaluation, Mr A used a multiplier of 3.5 per cent. He said that, on the basis of the assumption that the vendors would not enter into a restraint of trade or clawback clause, a lower multiplier would be appropriate and he opined that a multiplier of 2.5 per cent was probably appropriate.
This gives a value to the interest of the X Family Trust in Q Pty Ltd of $268 758. The husband sought to rely on this value.
The husband said that, unless the court so ordered, he would not enter into a restraint of trade clause in relation to the sale of Q Pty Ltd.
In his Financial Questionnaire dated 13 September 2010 the husband said:
Pursuant to the orders made on 23 July 2010, the interest in [Q] Pty Ltd will be sold. This will significantly impact upon my earning potential – it is probable that there will be a restraint of trade clause in the Contract for Sale of Business and I will therefore be required to work in an area outside of the [area] (where I have worked exclusively since 1984).
The husband did not give evidence as to whether he would or would not enter into a clawback clause unless ordered to do so. There was no evidence from the owners of S Pty Limited, the two thirds owner of Q Pty Ltd as to whether it, or the people standing behind it, would be prepared to enter into a restraint of trade or clawback clause, or indeed, had any intention of cooperating in a sale.
In those circumstances, the wife submits that the assumptions put to Mr A have not been established and that the higher value is, therefore, appropriate. However, Mr A gave evidence that the seller has to meet the market in the terms of sale offered and that, in reality, this means a restraint of trade clause. He also said that a prudent arms length buyer would also insist on a clawback provision as earlier described. I accept that evidence.
The wife submits that it would be open to me, if a sale of the parties’ interest in Q Pty Ltd was to be ordered, to order the husband to enter into a restraint of trade clause and clawback clause as part of its sale. I could do so. However, the unchallenged evidence is that the husband has worked as a real estate agent in the local area from the age of 18 years, which is some 30 years. I accept his evidence that to make such an order would significantly and adversely impact upon his ability to earn an income and the order sought will not be made.
Taking all of these things into account it is more likely than not if a sale of Q Pty Ltd or the parties’ interest in the X Family Trust was to take place it would do so without a restraint of trade clause and, I infer, a clawback clause. I make that inference because the husband, given his attitude to a restraint of trade clause, would not enter into such a clause unless so ordered. In those circumstances the appropriate value to adopt is the value determined by Mr A taking into account the assumption that the business would be sold without those clauses, namely $268 758.
Nevertheless, pursuant to the orders I will make, the husband will receive the parties’ interest in Q Pty Ltd and it will have, in his hands, a potentially higher value to him, if and when he becomes prepared to dispose of his interest and would enter into a restraint of trade and clawback clause on its sale. That is a factor I will take into account under s 75(2) of the Act.
M Pty Limited
MRE is solely owned by the husband. In his report Mr A valued it at $217 513. On the basis that the vendor would not enter into a restraint of trade clause or a clawback clause he opined that it had no value as the business would be unsaleable.
For the same reasons I have outlined in relation to Q Pty Ltd I would not order the husband to enter into restraint of trade or clawback clauses in relation to any sale of M Pty Ltd. It will thus not appear in the balance sheet.
The husband will retain M Pty Ltd. It provides a significant portion of his income and it will continue to generate that income for him. It will be appropriate to take that income into account when looking at the factors under s 75(2). As with Q Pty Ltd he will be able to sell it for a considerable sum if and when he is prepared to enter into restraint of trade and clawback clauses on its sale and this is also a factor to be taken into account under s 75(2).
Husband’s Stadium Membership
The husband acquired a lifetime membership of a sports stadium. The wife asserts that the membership is an asset of the parties.
In 2009 the husband acquired a lifetime membership of the stadium which entitles the husband and the three children to watch events at the stadium, swim at the aquatic centre and use its gym, tennis courts and squash courts. The membership cost $17 000. He says, and is not challenged, that such memberships cannot be sold. If it cannot be sold it has no value on the open market.
The wife then submitted that the $17 000 should be added-back to the list of assets as it is an asset that the husband will retain and that if he had not purchased the membership that sum would have been available to the parties for their use.
There is no evidence that the membership was purchased by realising an asset of the parties and that it is thus a premature disposition of the property of the parties. For the reasons I gave in Raine & Creed [2013] FamCA 362 at [38]-[51] I will not add it back as an asset.
The husband will retain its benefit, as will the children. It will be appropriate to take into account the husband’s use of this membership under s 75(2).
The Parties’ Loan Accounts with M Pty Ltd
According to the books and records of M Pty Ltd it owes each of the parties $148 477. The wife asserts that the loans are assets of value. The husband disagrees.
In his report valuing M Pty Ltd Mr A said:
Included in the determination of the value of the net assets of [M Pty Ltd] were loans owing to the husband and the wife of $296 954. These represent valuable assets of the wife and the husband and therefore each party should disclose an amount of $148 477 in their respective personal financial statements.
The accounts of M Pty Ltd show the amount of the loan accounts has fluctuated over time. There was a reduction of the loan accounts by approximately $35 000 between 2011 and 2012.
If M Pty Ltd has no market value, as has been found, then it is difficult to see how these loan accounts have a value. There is no asset of value against which the loan accounts could be recovered.
On the other hand, there is some demonstrated ability of M Pty Ltd to reduce its loan accounts with the parties.
The husband seeks an order that if he is to retain M Pty Ltd the wife is to transfer to him the whole of her right, title and interest in the loan account. This would be an appropriate order because if it were not made the court would not be doing all that it could to end the financial relationships between the parties as required by s 81. The consequence of that order is that the husband would have the benefit of M Pty Ltd without the consequent obligation to pay the outstanding loan account to him or the wife. The latter would be a clear benefit to him.
Because M Pty Ltd is not being taken into account on the balance sheet as having no value it is not appropriate to take into account the loan accounts. In this regard Mr A’s evidence that the loan accounts were of value was based upon a value given to the business without having regard to the difficulties arising from a failure to provide a restraint of trade or clawback clause in any agreement for sale. Thus he ascribed a significant value to M Pty Ltd at that time.
In the same way that the value to the husband of M Pty Ltd will be taken into account under s 75(2) the enhanced value of obtaining M Pty Ltd without a loan account payable to the wife in the sum of $148 477, or such other as would have been otherwise realisable, will also be taken into account under that section.
Loan Account (X Family Trust)
The husband is owed $142 125 by the X Family Trust. The wife asserts this is an asset to be taken into account. The husband asserts that the evidence does not establish that the debt is likely to be repaid.
The X Family Trust owns two assets. The first is the parties’ interest in Q Pty Ltd which is being included in the balance sheet with a value of $268 758. The second is a 14.5 per cent interest in N Pty Limited. That company operates a function centre. The shares in N Pty Limited were acquired in 2006 for a cost of $126 000. Although that business continues to operate, it was accepted by the parties that no return had been received from this investment for at least the last six years. In submissions the wife accepted that it was not known what value could be put upon or ascribed to the shareholding in N Pty Limited given that the business is presently listed for sale and that the chef/manager is seriously ill. The wife sought an order that the husband receive her interest in the X Family Trust but that in the event this trust received any proceeds from the sale of its interest in N Pty Limited or the sale of its business those proceeds should be divided between the parties as otherwise determined in these proceedings. The husband did not oppose that order.
This means that the husband’s loan account with X Family Trust is payable only out of its interest in Q Pty Ltd. That interest is sufficient to repay the loan. However, the trustees of the X Family Trust are the parties themselves albeit, as trustees, they are entitled to be indemnified out of trust assets for that liability.
The proposal by the wife frees her from any obligation, as Trustee, to repay the husband and leaves him, if he chooses, to recoup the debt from the interest in X Pty Ltd. That is an appropriate course and this debt will not appear in the list of assets but the thus enhanced interest of the husband will be taken into account under s 75(2).
Add-Backs
The parties sought a number of add-backs to the list of assets which will be discussed below.
Proceeds of Insurance Claim
In March 2010 the husband’s motor vehicle, which had been acquired during the marriage, was involved in an accident and written off. He received a cheque from the insurance company for $44 970. The husband used $30 000 of the proceeds to purchase a new motor vehicle. The balance $14 970 was transferred into his personal bank account on 28 May 2010. On that day $13 500 was paid to reduce the husband’s Mastercard debt.
On 12 January 2010 the husband made a payment to the parties’ joint CBA and Mastercard debt and extinguished its liability. In those circumstances the wife submits that I should infer that the credit card debt paid with the balance of the insurance claim relates to the post separation expenses of the husband and it should be added-back as him using an asset of the parties for personal expenditure.
The husband said the subsequent Mastercard debt had “accrued to meet mine and the children’s general living expenses”. The expenses on the Mastercard that were paid by using the insurance proceeds were therefore the husband’s post separation expenses.
The motor vehicle was an asset that ordinarily would have been included in the list of assets of the parties. The proceeds of an insurance claim for its loss are in the same position. The payment of $14 970 to the husband’s post separation expenses was therefore a premature distribution of the parties’ property and it is appropriate to add-back this sum.
$14 000 withdrawn by the wife on 4 January 2010
On 12 January 2010 the husband withdrew $32 000 from the parties’ joint savings account. The balance remaining was $14 000 which the wife withdrew and used for the payment of a number of expenses. Included in those expenses was her taxation liability for the years 2007 - 2009 ($2 961.40 for 2010 and $4 396.30 for 2008 and 2009) and a credit card bill of $8 556 which related to jointly incurred expenses. These three sums total $15 913.70.
I find that the $14 000, although representing the parties’ property, was reasonably applied to pre-separation expenses and it is not appropriate to add it back.
$32 000 withdrawn by the husband on 4 January 2010
From the $32 000 withdrawn by the husband, referred to in paragraph 160 of his affidavit filed 22 April 2013, he paid a number of expenses. The parties agreed that the appropriate way to deal with this was to add-back the sum of $14 000 to the account of each of the parties. It is therefore unnecessary to enquire as to how this figure was derived.
Withdrawals from the Joint MISA Account from the Date of Separation until January 2010
The wife alleges that from the date of separation until January 2010 the husband withdrew sums totalling $26 276, from the parties’ joint MISA Account. The wife submits that this sum should be an add-back.
In response to questions from the husband’s counsel the wife prepared a schedule of the amount said by her to have been taken from the account. That schedule totals $26 277.13. The wife then conceded that the amounts in this schedule did not in fact represent the withdrawals from the joint MISA account. What the amounts listed in the schedule in fact represented were items that had been paid using the husband’s credit card which the wife said she paid by making withdrawals from the joint MISA account in round sums and applying those withdrawals to the credit card. When asked to identify the relevant withdrawals the wife said that she could not presently identify them.
The evidence does not satisfy me that the joint assets of the parties were applied to the post separation expenses of the husband. This sum will not be included in the balance sheet.
Proceeds of the Motor Cycle and Motor Scooter
At the time of separation the husband owned a motor cycle and a motor scooter. He sold the motor cycle in August 2011 for $8 000. In September 2011 he sold the motor scooter for $3 750. The sale proceeds were applied to reduction of the husband’s Mastercard. I have already found that those expenses on that card after January 2010 consisted of his post separation expenses. Given that the husband has had the benefit of this property for his personal purposes it is appropriate to add-back the proceeds of those two vehicles.
Rental Income Applied by the husband October 2009 to April 2012
The wife asserts that the husband has received the benefit of rental income from a property at C Street, Suburb J (“the C Street units”) which should be treated as an add-back. It is noted the property is variously referred to by the parties as being situate in Suburb V as well as Suburb J.
In May 2009 the husband purchased the C Street units in his sole name for the sum of $1 775 000. The entire purchase price and stamp duty was met by a loan secured by way of a mortgage over that property and the H Street property.
The C Street units consisted of four units, three of which had existing tenants. The husband moved into the fourth unit. Between June 2011 and April 2012 the remaining three units were sold. Prior to the sale of the units’ rent was collected from the tenants and paid into a rental account. The wife alleges and the husband did not dispute that these units and the rents from them were matrimonial property.
The wife alleges that the husband used $20 020 from the rental account to meet his personal expenditure for the period October 2009 to April 2012 and that this sum should be added-back to the property pool.
The wife produced two schedules the first of which showed total expenses of $27 870.13 which she said were personal expenses of the husband. The second showed deposits made by the husband back into the account of $7 580 leaving a net shortfall of $20 020.13.
Included in the first schedule were costs for cleaning, re-keying the front door, construction of a new deck, strata insurance fees and council rates.
The wife agreed that she could not say with certainty that the references to cleaning in the schedules were for cleaning the interior of the husband’s unit as opposed to the common areas as asserted by the husband.
The wife agreed that items relating to the re-key of the front door and the installation of the deck were items that needed to be completed in order to have the Strata Plan registered. However, she asserted that, as the husband had obtained a benefit from them, the front door and deck being part of the unit the husband occupied, the amount used from the rental account should be added-back. Whilst the husband no doubt benefited from this work, the work needed to be completed for the Strata Plan to be registered. The expense, therefore, is to be categorised as a strata expense.
The strata insurance fees and council rates on their face appear to be strata expenses. There was no evidence to the contrary.
I find that the repairs, the insurance strata fees and council rates for unit three are all expenses of the strata. This means that the sum of $6 458 needs to be deducted from the claim.
The wife agreed that a further payment of $8 920 was made by the husband into the account thus reducing the amount further.
The position is thus:
Funds removed as per schedule $ 27 870.13
Less
Repayments originally conceded by the wife $7 580.00
Repairs, rates and strata costs $6 458.00
Further repayments conceded by the wife $8 920.00
Total $ 4 912.13
The amount spent from the rental account on personal expenditure by the husband, and not reimbursed, is $4 912, rounded down. This will be included in the balance sheet as an add-back.
Liabilities
Husband’s Personal Income Taxation Liability
The husband presently owes the Australian Taxation Office $240 845, of which $146 934 is the primary tax and the balance penalties and interest. The wife asserts that the penalties and interest ought be born by the husband solely and not by them both.
The bulk of the outstanding tax is capital gains tax.
In mid 1990 the husband’s parents gave him a 25 per cent shareholding in U Pty Limited (“the U shares”). That company owned a block of apartments and a two bedroom unit on the Central Coast. In the early part of 2007 the husband sold those shares back to his parents receiving $625,000 upon which he had to pay capital gains tax.
In 2005 the husband and his brother inherited a property at Suburb K (“the K property”) from his late father. The property was sold in July 2007 with the husband receiving $350,000.00. Capital gains tax was payable on this amount.
In June 2011, September 2011 and April 2012 units one, three and four of C Street, Suburb J were sold. Capital gains tax was payable on those sales.
The tax assessments of the husband were:
Financial Year
Amount
Year ending June 2007
$139 105.95
Year ending 30 June 2008
$7 828.19
Year ending 30 June 2009
$2 396.00
Year ending 30 June 2011
$4 361.65
Year ending 30 June 2012
$7 175.70
For the financial year ending 30 June 2010 a refund of $9 363.84 became payable.
At the time when the assessment for the 30 June 2007 tax year was received the parties had sufficient cash on hand to be able to pay both the outstanding tax debt and a loan from the wife’s father. The husband agreed that he did not do so because he preferred to invest those funds in a rising property market rather than pay the debts. Thus the bulk of the outstanding tax debt remains outstanding.
It is appropriate to include the full amount of the tax liability in the balance sheet for two reasons.
The 30 June 2007 income tax liability arose primarily from the capital gains tax payable on the sales of the U shares and the K property. The wife conceded that she was aware of the possibility of capital gains tax being payable on the proceeds of sale of, at least, the U shares. She, therefore, must have known of the sale, the profit and the possible liability.
The husband first said that the capital gains tax was not paid because there were insufficient funds on hand to pay both the capital gains tax and the debt to the wife’s father with the wife insisting that her father be paid first. The husband then conceded there were sufficient funds on hand to have paid both, that neither was paid and that the funds were invested in a rising property market. Thus, although the wife was aware of the potential liability, I do not readily accept his evidence that, to use his words, “it was a joint game plan to invest in the rising market rather than pay their debts”.
Secondly, in Mayne & Mayne [2011] FamCAFC 192 Faulks DCJ said at [78]:
It is not the Court’s function to conduct an audit of the marriage or of the relationship finances. The parties’ remedies for resolving disputes about expenditure while they are together centred upon them and them alone. Choosing one transaction from many prior to separation for different treatments, specifically “to be added-back” or notionally included the pool of property may make doing justice and equity between the parties difficult.
The decision made to invest in a rising property market, whether it be a decision of the husband alone or as a result of a joint decision by the parties, was but one of many transactions that the parties undertook throughout their marriage of buying and selling properties. The benefit of those transactions, including the ones the subject of capital gains tax, is available for both of the parties in these proceedings.
The evidence does not establish that the failure to pay the tax leading to the incurring of penalties and interest is wanton, reckless or negligent conduct of the husband (Kowaliw (1991) FLC 91- 092).
The full amount of the liability will be included in the balance sheet. Most, if not all, of the tax for the year to June 2012 was capital gains tax.
Outstanding Strata Levies, Rates for C Street, Suburb J
The sum of $3 308 is outstanding in relation to outstanding strata levies, council rates and water rates for C Street, Suburb J (“the C Street property”). That property is an asset of the parties being taken into account in the balance sheet notwithstanding that the husband lives there. These are expenses of that property and should be taken into account on the balance sheet.
Outstanding V College School Fees
The parties’ eldest child L commenced attending V College in 2012. The fees in the sum of $3 733 for the second term of 2013 were due on 13 May 2013 and remain unpaid. The wife said that, as she agreed to L’s enrolment at V College only on the basis that the husband be solely responsible for all of his school fees, these outstanding school fees should not be brought into account on the balance sheet. The husband said that his view was that, in the event that L goes to V College, the fees should be shared equally between the parties and that if the wife did not contribute to the V College fees L would have to be withdrawn from the school.
On 24 November 2011 the lawyers for the husband wrote to the wife’s lawyers as follows:
In relation to [L’s] attendance at [V] College, we are instructed that both parties do wish for [L] to attend [V] College and that our client’s parents have offered to meet those school expenses until such time as our client is able to.
Our client is hopeful that at some point in the future, your client will contribute towards those fees.
According to the husband, the husband asked his parents to obtain a loan which they did. Part of the sum borrowed by the parents was used to pay the V College fees. The husband said that this loan was repayable by him (I take that to be him being obliged to repay his parents as opposed to having incurred an obligation to the lender) and that he pays the interest on the loan as it becomes due.
When taken to the letter above the husband described it as an interim measure only. He also said that the borrowing occurred without the wife’s knowledge. When taken to what would appear to be some incongruity in his position the husband observed that he managed to get L to V College and that he would do what is necessary to have him stay.
The husband clearly represented to the wife that his parents would pay the school fees if L went to V College. On that basis the wife agreed. She should not now be responsible for those fees because she agreed relying on husband’s representation that his parents would be paying the school fees. Consequently, the outstanding V College fees will not be taken into the balance sheet.
Outstanding M Pty Ltd Management Fees
The husband said that M Pty Ltd owes Q Pty Ltd $86 571 in outstanding management fees and unpaid Business Activity Statement for the period October to December 2012. Self evidently, that is a liability of M Pty Ltd and not the parties. The liabilities of M Pty Ltd have been taken into account in its valuation. It is not appropriate to include this in the balance sheet.
Wife’s Loan Account with the X Family Trust
The parties as trustees of the X Family Trust owe the wife $39 974. The two assets of the X Family Trust are being taken into account in the balance sheet (to the extent that they have a value). The indebtedness of the X Family Trust to the husband is not being taken into account in the balance sheet. Because the order that will ultimately be made is that the parties’ interest in that trust be transferred to the husband (subject to an order being made that the wife receive an appropriate share of whatever is ultimately received in relation to N Pty Limited) it is not appropriate to take this liability into the balance sheet.
Superannuation
The wife has superannuation in the amount of $29 635 and the husband in the amount of $30 939. It was agreed between the parties that it was appropriate for the superannuation to be taken into the overall asset pool.
The balance sheet, including undisputed assets, at the date of hearing, is therefore thus:
| ASSETS | ||
| Ownership | Description | |
| Joint | H Street, Suburb E NSW (“the H Street property”) | 2 200 000.00 |
| Husband | C Street, Suburb J NSW (“the CStreet property”) | 675 000.00 |
| X Family Trust | 1/3 share in Q Pty Limited (trading as G Company Suburb W) | 268 758.00 |
| Husband | 2007 Honda motor vehicle | 19 550.00 |
| Wife | 2006 Toyota motor vehicle | 18 800.00 |
| Wife | St George Bank account | 2 654.00 |
| Wife | CBA bank account | 201.00 |
| Wife | CBA bank account | 7 459.00 |
| Joint | CBA MISA account (Account number …603) | 8 162.00 |
| Husband | CBA bank account | 267.00 |
| Joint | CBA rental account (Account number …396) | 34 750.00 |
| Total: | 3 235 601.00 | |
| ADD-BACKS | ||
| Ownership | Description | |
| Husband | Balance of net proceeds of comprehensive insurance claim paid to the Husband in respect of the written off motor vehicle. | 14 970.00 |
| Husband and wife | $32 000 withdrawn by the Husband from the parties’ joint account on 4 January 2010 without the wife’s knowledge and/or consent, and expended by the Husband. | 28 000.00 |
| Husband | Proceeds of sale of motor cycle | 8 000.00 |
| Husband | Proceeds of sale of the motor scooter | 3 750.00 |
| Husband | Husband’s share of proceeds of sale of Suburb O, Suburb J and C Street investment properties (after deduction of legals) | 18 109.00 |
| Wife | Wife’s share of proceeds of sale of Suburb O, Suburb J and C Street investment properties (after deduction of legals). | 11 000.00 |
| Husband | Portion of rental income received in respect of jointly owned rental properties and applied by the husband to meet personal expenditure in the period October 2009 to April 2012. | 4 912.00 |
| Totals: | $88 741.00 | |
| LIABILITIES | ||
| Ownership | Description | |
| Joint | Unsecured loan to wife’s parents. | 379 167.00 |
| Joint | CBA loan in respect of C Street, secured by mortgage over Suburb E property. | 272 954.00 |
| Husband | Personal income taxation liability | 240 845.00 |
| Husband | Outstanding Strata Levies, Council Rates and Water Rates for C Street, Suburb J | 3 308.00 |
| Totals: | $896 274.00 | |
| SUPERANNUATION | ||
| Ownership | Description | |
| Wife | RR Superannuation – Accumulation | 29 635.00 |
| Husband | RR Superannuation – Accumulation | 30 939.00 |
| Totals: | $60 574.00 | |
Assets $3 235 601
Add Backs $88 741
Superannuation $60 574
Total Assets $3 384 916
Liabilities $896 274
Total Net Assets $2 488 642
Applicable Principles
According to guidelines established through a series of authoritative decisions, the court is required to determine the following matters:
·having regard to the breakdown of the marriage, if any, is it just and equitable to consider whether the alteration of the parties interests in their property is just and equitable
·the assets, liabilities and financial resources of the parties to the marriage
·all relevant contributions of each of the parties, within the meaning of paragraphs (a) to (c) of section 79(4) must be identified and weighed against each other
·the matters in paragraphs (d) to (g) of section 79(4), particularly paragraph (e) which takes up by reference the provisions of section 75(2) must be considered and a determination made as to what, if any, alteration should be made to the entitlements of the parties earlier assessed on account of contribution
·an order under section 79 must not be made unless the Court is satisfied that, in all the circumstances, it is just and equitable to make the order.
Sub-section 79(2) of the Act
I must first determine whether it is just and equitable that there be an alteration in the property rights of the parties. This must be done by consideration of the relationship, its breakdown, if any, the property held by the parties and the basis on which it was held and used by them. The determination is not to be conflated with the consideration of matters arising under section 79(4) (Stanford v Stanford [2012] HCA 52).
In the present case I am satisfied that it is just and equitable to make orders altering the interests of the parties to the marriage to the property held by them. They are no longer living in a marital relationship. The basis on which the ownership of their property and the use of it by reason of them being in a married relationship and living together has ended and it is appropriate that their property interests are altered so as to meet their new needs and circumstances. The parties join in seeking such an order.
Contributions
It was the wife’s case the parties’ contributions to their property, financial and non financial, and to the welfare of the family were equal.
There is no doubt that the parties each worked throughout the marriage. They renovated a number of properties. The husband put greater time and effort into his work and the property investments than did the wife but she, in turn, took on the primary care of the children. Subject to the matters discussed below their contributions should be seen as equal.
The husband’s position was that he had made a greater contribution than the wife for five reasons.
The first was that of the properties owned by each of the parties at cohabitation his brought in more when sold. The second was that the parties resided for three years in rent free accommodation provided by his parents. The third was that the husband acted as the agent buying and selling the parties’ properties without commission and this was in addition to his work as a real estate agent. Fourthly, $250 000 received by the parties from the wife’s parents was not in fact a gift. Finally, he submitted that the gifts and inheritances he had received from his parents were more substantial and more recent than the gifts and inheritances received by the wife. It will be necessary to deal with each in turn but prior to that some background is required.
In 1984, prior to meeting the wife, the husband purchased LL Street, Suburb KK (“the LL Street property”) for $170 000 borrowing the entire purchase price from a family friend. The property was then tenanted with the rental received being applied to the expenses of the property.
In 1989 the wife acquired OO Street, Suburb J (“the OO Street property”). The parties could not agree on what was the purchase or sale price of this property. They were agreed that the sum of $20 000 applied to the purchase price had been received by the wife from a family trust associated with her family. In either 1992, or 1994, the OO Street property was sold realising $55 000 or $25 000 (according to the wife and the husband respectively).
The LL Road property was sold in 1994 and realised some $169 000. The husband estimated the equity in this property at the time of marriage as $130 000 and the OO Street property at $20 000.
The evidence does not enable me to determine which of the parties’ versions is correct. Given the passage of time and the amounts of money involved I do not think that that resolution would be of any great significance. That said, it is clear that at the time of the marriage the husband had a greater interest in property than the wife.
The proceeds of sale of both properties were used to acquire the former family home at P Street, Suburb E where the parties lived until 2004.
Between 1994 and February 2009 the parties, either directly, through a family trust or companies controlled by them, purchased, renovated and sold a number of properties. In so far as each of those purchases and sales required a real estate agent to act the husband so acted without charge.
The fact that the husband did not charge commission cannot be seen as a financial contribution. Whilst the husband not charging commission enabled the parties to receive more from the sale of the property than they otherwise would have received had the husband charged commission that would have benefitted the parties by increasing the family income at the expense of reducing the proceeds of sale.
It is not disputed that the parties lived for over three years in rent free accommodation provided by the husband’s father.
In addition to receipt of $20 000, already referred to, the wife received an inheritance of $30 000 in 1992. The wife said that in 1998 and 1999 she received, from her parents, $250 000 in two payments being an “early inheritance”. This was used towards the purchase of two investment properties as well as renovations to the family home. In December 2008 the wife received a further $15 000 from her parents.
Throughout the course of buying and selling the investment properties the parties borrowed funds from time to time from the wife’s parents and from time to time significant repayments were made. As can be seen from the list of assets the parties were agreed that at the date of the hearing the unsecured loan of the parties to the wife’s parents was $379 167.
It was the husband’s case that the $250 000 was not in fact an “early inheritance” but a loan and thus should not be taken into account as a contribution by the wife. His position was not entirely clear but it appears to be that the $250 000 was part of the $650 000 loan and is thus included in the debt of $379 167 which is being taken into account and therefore should not be treated separately.
In his Financial Statement filed on 2 July 2010, being Exhibit 24, the husband said.
The wife’s Father provided the Wife and I with $650,000.00 when the [Suburb E] property was purchased in or around 2004. This loan was unsecured. Approximately $300,000 was repaid in 2006 by me. From late 2006 to approximately January 2010, monthly repayments were made of $1,166. No repayments have been made by me since January 2010.
In his Financial Questionnaire filed on 13 September 2010, being Exhibit 17 the husband said:
In 1988 and 1999, [the wife’s] parents gifted to us the sum of $250,000 which was put towards purchasing more real estate to renovate and sell.
He then said:
In 2004, [the wife] and I purchased [H] Street, [Suburb E] for $1,850,000.00. The purchase price was funded by way of gross profits of $1,280,000.00 which we had realised from selling every investment we owned at the time and the balance by way of an unsecured loan from [the wife’s] Father for approximately $650,000. Interest was payable on this unsecured loan at a rate of 1% less than the commercial rate.
In cross-examination the husband accepted that the first time that he had denied that the provision of $250 000 was a gift was at this hearing. He denied the suggestion put to him that he had accepted it was a gift in 2010.
Having regard to those answers and to the earlier statements of the husband I accept the wife’s evidence that she received a gift from her parents in 1988 and 1999 in the sum of $250 000.
In mid 1990 the husband’s parents gave him a 25 per cent shareholding in U Pty Limited. In July 2006 the husband sold those shares for $625 000. I take the relevant date of the contribution made by the parents to be the date of the gift and not the date the gift was realised. Thus the contribution is not as recent as was submitted by the husband it having been made in 1990 and is, in fact, a pre-cohabitation contribution made by him. The evidence does not disclose its value at the date of cohabitation.
In 2005 the husband and his brother inherited the Suburb K property which was sold in July 2007 from which the husband received $350 000. Capital gains tax was payable on the proceeds of the sale of the shares and the K property. The capital gains tax referred to earlier needs to be taken into account to assess the net contribution.
Thus the particular financial contributions made by the wife were an inheritance of $20 000, two inheritances of $15 000, a gift of $250 000 and the provision of $650 000 loan at 1 per cent below market rates. The lenders have not insisted on payments of interest since January 2010 - this has enabled the wife to remain in the premises rent free.
In addition to these the wife had some equity in the OO Street property at the time of marriage (although part of that equity is represented by the gift of $20 000 used to assist with its purchase).
The husband’s particular financial contributions were his equity in the LL Street property which, on any view on the evidence, was significantly greater than the equity in the wife’s property, the rent free accommodation from his parents for three years and the U shares and the net proceeds from the Suburb K property. I take into account that M Pty Ltd, as originally acquired was a gift from the husband’s father.
It was not suggested by the husband that there were any other factors relating to financial or non financial contributions to be given particular weight. Taking all of these matters into account I find that the financial and non financial contributions of the parties are as 54 per cent to the husband and 46 per cent to the wife.
Section 75(2) Factors
The State of Health of Each of the Parties
Each of the parties is relatively young and of relatively good health. The wife said that she had to cease working in her trade in 1996 due to pain in her hands and wrists which was then requiring monthly cortisone injections. The pain is now better but she still gets it when undertaking activities such as chopping vegetables for a long time or using the lawn edger. After she ceased working in her trade she worked three days a week as a bookkeeper in M Pty Ltd until 2007. She is currently working as a part-time bookkeeper. The husband continues to work as a real estate agent.
Income, Property and Financial Resources of Each of the Parties, etc
As a result of these proceedings the husband will retain his interest in M Pty Ltd and Q Pty Ltd. He will continue his occupation as a real estate agent. He has the appropriate mental and physical capacity to earn a significant income as a real estate agent. It is his evidence that his income is and has, for some time, been very low – of the order of $350 per week.
The husband managed to go to restaurants on occasions although it cannot be said that it was either particularly frequent or extravagant. He has paid personal expenses directly out of the M Pty Ltd account including the sum of $5 000 which was described in the M Pty Ltd records as being for a computer. In cross-examination the husband maintained that it was a genuine business expense, denying it was a sham entry, until confronted with his credit card and personal bank card statements. The husband then conceded that it was just a way of transferring money to him.
The husband has had the benefit of having many parking fines paid for him from M Pty Ltd funds as well as his telephone and car expenses.
The business of M Pty Ltd seems to be improving. Between July 2012 and March 2013 its gross earnings were approximately the same as for the full year previously.
The Q Pty Ltd accounts are in evidence. Its labour hire costs, which are listed in the accounts in addition to wages, increased significantly in 2011 and 2012. Although he is a director of that company, when first asked, the husband had no idea why those high costs had been incurred in those two years in addition to the wages. After making some enquiries he said that those funds were spent on three additional employees as they were trying to grow the business. This indicates that the two businesses are believed by the directors to be doing sufficiently well, and to have sufficiently good prospects, to justify that expenditure.
As a result of the orders I will make the husband will have the benefit of M Pty Ltd and the X Family Trust unencumbered by any debts to the wife which will enhance their value to him. The husband will derive significant income from them in the future.
The husband will have the benefit of the full value of M Pty Ltd which, when and if he is prepared to sell entering into restraint of trade and clawback clauses, will be a substantial amount. On its present value, on that basis, this would be $217 513. For the same reasons he could sell the interest in Q Pty Ltd for an enhanced value. It is difficult to give these matters much weight, however, because it is not presently likely that the husband would give up his employment as a real estate agent in the local area in the short term.
The wife is qualified in REST, a computing program used in the management of rent rolls by real estate agents. She presently works part-time but, subject to the care of the children, there seems to be no reason why she could not work full-time. It is likely that her income in the future will be derived only from employment. Unlike the husband she will not be left with assets that generate an income.
Taking these matters into account the financial resources and capacity for gainful employment of the husband after this case will significantly exceed those of the wife and will require a significant adjustment in her favour.
Care and Control of the Children of the Marriage
There are three children of the marriage who are currently 11, seven and six years of age. They live with the wife. They spend time with the husband five nights per fortnight during school terms plus other special days. The wife therefore has the primary care of the children but they spend a significant amount of time with the father who will be liable for their expenses when they are with him. This requires some adjustment in the wife’s favour.
Commitments of the Parties
It is not likely that either of the parties will be left with any significant financial commitment after the making of the orders in this matter.
Standard of Living of the Parties
Prior to separation the parties lived in a comfortable home, eating out regularly and going on regular holidays. They had the benefit of a cleaner. They had a comfortable standard of living. This calls for no particular adjustment.
The Need to Protect a Party who Wishes to Continue that Party’s Role as a Parent
Each party wishes to continue that party’s role as a parent. The wife worked part-time until 2007 when the youngest child was born. From that time until separation she worked at home one day per week. The parties were clearly happy for the wife to devote a significant part of her time to being a parent and homemaker and she wishes to continue to do so. Having regard to the way the parties structured their family arrangement whilst they were married that is not unreasonable. This means that she will continue with part-time work for some time. The orders to be made should reflect this and this will require an adjustment in the wife’s favour. It will be necessary to bear in mind that she will have the benefit of a spousal maintenance order.
Either Party Cohabiting with Another Person
Neither party is cohabiting with another person. The husband has entered into a relationship with another person but they are not cohabiting.
Any Other Matter
The wife submits that where there has been a failure to disclose and as a consequence the court should err on the side of caution in favour of the party to whom proper disclosure was not given.
The wife relies upon the evidence of the husband to which I have already referred in relation to the benefits that he receives from M Pty Ltd not all of which were disclosed. It is submitted that his expenditure suggests that the husband has access to other income, or that he is reckless regarding his expenditure, or both.
There are some unsatisfactory features of the husband’s evidence in relation to his income such as his use of a sham entry in the accounts of M Pty Ltd to disguise a payment to him, his unawareness of the labour hire costs of Q Pty Ltd and his income tax return disclosing his income for the year up to 30 June 2012 as being only $752. I am not satisfied, however, that the evidence discloses that there has been non-disclosure of significant income.
I have, however, taken into account that the husband has the benefit of a good capacity to generate significant income. He is also retaining M Pty Ltd which is not being taken into the balance sheet for the reasons given earlier. It is of course however of significant value to the husband as it is the vehicle through which he earns his income. Having taken these matters into account as matters relating to the income, property and financial resources of the parties it is not appropriate to do so again here.
Each of the parties has lived post separation in matrimonial property without paying rent. This does not call for any adjustment.
I take into account that I will be making a limited order for spousal maintenance of the wife. The wife has received none to date.
The husband has paid limited child support. As at 29 March 2013 he was $9 978 in arrears. Whilst the amount of child support which the Child Support Agency has determined the husband should pay has varied, only rarely has he complied with the assessment. He said that he will only pay child support as assessed by the Agency even if, as occurred for a period on 2012, that assessment is nil.
On the other hand, he has been able to engage in non-essential spending such as the Stadium membership.
Summary
Taking all these things into account the appropriate adjustment pursuant to s 75(2) is 16 per cent in favour of the wife. This puts the sum of $398 183 in the wife’s hands. It is a substantial sum. It reflects the adjustments in the wife’s favour referred to above. Importantly, it reflects that the husband will receive all the benefits of the two businesses free from any indebtedness to the wife. They have the capacity to generate significant income for him in the future. The value of those businesses in his hands could be higher than is shown in the list of assets because he can sell them at a much greater value if he chooses to sell them and enter into restraint of trade clauses and clawback clauses. It reflects the wife’s lower earning capacity as well as the other matters discussed. It also reflects that the wife has the care of the children for a greater time than the husband and is likely to spend a greater proportion of her income supporting them than the husband. The husband has, so far, paid only minimal child support.
Form of Orders
The wife wishes to retain the H Street property. The husband wishes to retain the interests in the businesses and, presumably, the C Street property.
The total of net assets available is $2 488 642. The wife’s share of that will be 62 per cent, namely $1 542 958.
The husband will retain the benefit of the parties’ interests in M Pty Ltd and Q Pty Ltd and the C Street property. He will assume sole liability for the CBA loan in relation to the C Street property, the outstanding levies and rates on that property and his income tax. He will indemnify the wife in relation to those liabilities. An order will be made as sought by the wife transferring her interest in the X Family Trust to the husband and retiring as a trustee but that, in the event, any funds received from N Pty Limited will be divided between the parties as to 62 per cent to the wife and 38 per cent to the husband.
The wife will be given the option to retain the H Street property.
Each party will retain the assets in their current possession and bank accounts in their sole name and each of their superannuation entitlements.
The sum of the amounts standing in the two joint bank accounts are to be divided as to 38 per cent to the husband and 62 per cent to the wife.
If the wife retains the H Street property she will receive the following assets (including add backs of which she retained the benefit and excluding her share of the joint bank accounts) and be liable for the following liabilities:
H Street Property $2 200 000
Toyota motor vehicle $18 800
St George Bank Account $2 654
CBA Bank Account $201
CBA Bank Account $7 459
Funds withdrawn on 4 January 2010 (half share) $14 000
Investment property proceeds $11 000
Superannuation $29 635
Total $2 283 749
Less loan to parents $379 167
Net $1 904 582
The husband, if the wife retains H Street, will receive the following assets (including add backs of which he retained the benefit and excluding his share of the joint bank accounts) and be liable for the following liabilities:
C Street property $675 000
X Family Trust $268 758
Honda motor vehicle $19 550
CBA Bank Account $267
Proceeds of insurance claim $14 970
Funds withdrawn on 4 January 2010 (half share) $14 000
Motor cycle proceeds $8 000
Motor scooter proceeds $3 750
Investment property proceeds $18 109
Rental income received $4 912
Superannuation $30 939
Total$1 058 255
Less CBA Loan re C Street $272 954
Less income tax $240 845
Less outstanding levies on C Street $3 308
Net$541 148
Of the total net assets the wife is to receive 62 per cent or $1 542 958. She will receive $26 605 from the joint bank accounts and therefore will be entitled to receive $1 516 353 from the remaining assets. The total value of the property to be retained by the wife as just set out is $1 904 582. The difference between $1 904 582 and $1 516 353 is $388 229. Thus, to give effect to the determination made in this matter, she will need to pay the husband $388 229 if she is to retain the H Street property. It is appropriate to give her 120 days to do so, failing which it will have to be sold and the proceeds distributed according to the percentage determined.
Thus the husband will receive the net assets and the benefit of the add backs identified above being $541 148, his share of the joint accounts being $16 307 and the payment from the wife of $388 229 – a total of $945 684, or 38 per cent of the total net assets.
From his net share the husband will be obliged to pay the capitalised spousal maintenance to the wife.
Section 79(1) of the Act
Taking all of the above matters into account I am satisfied that the orders I propose to make are appropriate, that is to say, just and equitable taking into account all the matters I have discussed under the heading s 79(4) and s 75(2) of the Act as set out above.
The orders meet the obligation under s 81 finally to determine the financial relationship between the parties and avoid further proceedings between them to the extent possible. The order for maintenance is limited and the payments are capitalised.
Spousal Maintenance
A court can only make an order for spousal maintenance pursuant to s 74 if the party claiming the maintenance is unable to support herself or himself adequately. Adequately is a relative concept which varies from case to case and in relation to which the standard of living the parties enjoyed prior to separation is relevant Bevan & Bevan (1995) FLC 92-600; Mitchell & Mitchell (1995) FLC 92-600.
Since separation the wife has earned $501.75 gross per week. She also receives $67.69 per week in Family Tax Benefits and the Large Family Supplement. The evidence did not disclose the breakdown of the two payments or which, if any, was income tested for the purposes of s 75(3). It appears that the first may be and the second not. Given that it is not possible to identify any portion which falls within s 75(3) the whole of the sum will be taken into account as income.
The wife says her weekly expenditure is $1 490. This sum includes $920 per week from Part N of the wife’s Financial Statement filed 16 April 2013. That includes $657 expenses for the three children and therefore must be excluded. This gives her a weekly expenditure of $833 and thus a shortfall of $263.28 per week after taking into account her income of $569.72. This represents $13 690 per year.
It was not submitted that the wife’s needs as identified were unreasonable and I find them to be reasonable.
The husband submitted that the wife could work longer hours and thus earn more. I found this to be so but I have also found that it is reasonable for the wife to work the hours that she does having regard to the children in her care and the approach the parties undertook during the marriage with respect to the parenting of the child on the basis that would be so.
Pursuant to the orders in this matter the wife will receive in these proceedings the family home, presumably subject to a mortgage, or a capital sum. It is probable that she would use a significant part of that sum to purchase accommodation for herself and the children. It will not generate an income. She may sell it to obtain capital which she could use to generate an income but she would need to accommodate herself and the children. It is speculation as to if, when or how she might do so.
The husband submits that he does not have present capacity to pay any sum. For the reasons I have given earlier it is difficult to be certain of what precisely is the husband’s income. His attitude in relation to support of his children, other than for the school fees at V College, is that he will pay only what the Child Support Agency requires him to pay. Since separation this has sometimes been nil. At no time have the assessed payments been large or anywhere near the expenses of the children.
It is possible, if not likely, that the husband will have capacity to pay this shortfall between the wife’s reasonable needs and her income in the near future due to him improving the business of M Pty Ltd and Q Pty Ltd, if he does not possess it already.
The husband has asserted that the business of M Pty Ltd is such that he has been limited to drawing $350 per week from it for his wages. He has, however, been able to purchase the stadium membership, with no suggestion that capital, as opposed to income, was used for its purchase. M Pty Ltd pays a number of his expenses including a large number of parking fines as well as car and phone expenses. He has transferred $5 000 from M Pty Ltd for his benefit and sought to disguise it as a genuine expense. His apparent income seems at odds with the income from earnings of $752 he has disclosed to the ATO. There are thus questions over the accuracy and completeness of the husband’s disclosure.
A similar doubt arises from the increased expenditure of Q Pty Ltd on labour costs. As I have said, at the least, it shows the directors believe the business has a solid future. There is also, at least, a suspicion that the increased expenditure reflects increased, but undisclosed, income.
Nevertheless, having regard to what the husband says his present capacity is and having regard to what seems to be a reasonable apprehension on the part of the wife that there will be difficulties of recovering it, it is appropriate to capitalise the spousal maintenance and for it to be paid as a lump sum at the time these orders are made.
It is not appropriate to make an open ended order for spousal maintenance. The youngest child is presently six years of age and her older sister is seven. It is appropriate for spousal maintenance to be paid until they go to high school as then there will be fewer demands by them upon their mother’s time and they will be of an age when the mother can exercise her earning capacity and work for longer hours. It will also enable the wife, at the time, to adjust to and look for and if necessary obtain qualifications to obtain full time employment.
Allowing five years at $13 960 gives a sum of $68 450. Taking into account this sum is intended to represent five years maintenance it is necessary to take account of the fact that the wife is receiving the present value of an income stream and for the sum to be received to be discounted accordingly.
Taking all these matters into account and without intending to conduct a precise arithmetical analysis it is proper for there be an order for spousal maintenance in the sum of $50 000 payable forthwith.
Child Support Departure Order
The wife seeks a child support departure order in order to assist with the upkeep of the children. This does not include the private school fees it being agreed between the parties that the appropriate order to make in that regard is an order that in the event the children attend an independent school the husband is to pay the school fees.
Jurisdiction
The husband, the liable parent, is a party to the present application. It is in the best interests of the husband and the wife (the carer entitled to child support) for the court to consider whether an order should be made for a child support departure order because there has been a thorough examination of the property and affairs, income and liabilities of the two parties in these proceedings. The evidence has also demonstrated that the income disclosed by the husband in his income tax return in 2012 did not completely record the funds available to him from his employment.
In those circumstances the court has jurisdiction to entertain the application pursuant to s 116(1)(B) of the Child Support (Assessment) Act. At no time was there any opposition by the husband to the court hearing the wife’s application and the case proceeded on that basis.
The Applicable Law
I take the following statement of the law to be applied from the decision of Ryan J in Grey & Grey [2012] FamCA 389 at [25]-[27]
25.The obligation to pay child support is created by the provisions of the CSAA. Section 3 contains the obligation that parents maintain their children. The objects of the Act are found in s 4. Each of the objects needs to be borne in mind when deciding an application under the Act. Section 4(3) of the Act recognises the desirability of parents reaching agreement for the financial support of their children. Sections 114 and 121identify that the further objects of Divisions 4 and 5 of Part 7 include:
(a)That the children have their proper needs met from reasonable and adequate shares in the income, earnings capacity, property and financial resources of both of their parents; and
(b) That the parents share equitably in support of the children.
26.The Full Court of the Family Court in Gyselman (1992) FLC 92-279 set out a three step process that Courts must follow in determining an application for a departure order under s 117. The first is whether one or more of the grounds in s 117 is established. If so, the next step is whether it is just and equitable within the meaning of s 117(4) to make a particular order. The final consideration is whether it is otherwise proper within the meaning of s 117(5) to make a particular order.
27.So that it is clear, once a valid application for departure has been made the question of departure from the administration assessment provisions of the Act in respect of any future years may be considered. (Dwyer v Mcguire (1993) FLC 92-420).
Grounds for Departure
The wife submits that having regard to the husband’s declared income from his employment as opposed to his weekly income disclosed in evidence a special ground for departure order pursuant to s 117(2)(c)(ia) of the Child Support (Assessment) Act 1989 (Cth) is established. In his income tax return for the year ended 30 June 2012 the husband identified his income from sources other than investment income and capital gains income as $752.
In the husband’s Financial Statement filed 24 April 2013 he described his average total weekly income as $350 per week.
The husband has the benefit of personal expenses being paid by M Pty Ltd which includes his telephone and car expenses and a large number of parking fines. There is evidence that he has disguised lump sum payments from M Pty Ltd to himself as genuine business expenses.
Whilst it may be true that M Pty Ltd could pay the husband’s expenses as part of his employment without those payments forming part of his taxable income that is not necessarily the case. In his Financial Statement the husband described the benefits he received from M Pty Ltd as nil.
It is also true that drawings from a business do not necessarily equate to taxable income. It is also possible that the sums received by the husband may not exceed the tax free threshold for the purpose of income assessment.
The husband, however, did not seek to explain how the taxable income of $752 disclosed in his income tax return was derived or how that sum might be reconciled with his receiving a weekly wage of $350, and the other benefits he receives.
Taking into account the elements of non-disclosure referred to, the husband’s misleading evidence as to that disclosure described earlier and his failure to explain how the figure of $752 is arrived at the court cannot be satisfied that it is an accurate reflection of his income.
Reliance upon that figure therefore results in an unjust and inequitable determination for a level of financial support to be provided by the husband because of his income, property and financial resources in that the husband’s income, property and financial resources are not accurately reflected in the income disclosed in his income tax return. That is sufficient to establish special circumstances and the ground for departure pursuant to s 117(2)(c)(ia) if the Child Support (Assessment) Act 1989 (Cth) has been established.
Is it Just and Equitable to Make an Order
In considering whether it is just and equitable to make a child support departure order the court is required to take account to the matters set out in s 117(4) of the Child Support (Assessment) Act 1989 (Cth).
There are three children of the marriage aged 11, seven and six. Each is at school and entirely dependent upon their parents. They have no income earning capacity, property or financial resources.
The wife says that the children’s expenses are $657 per week.
The wife has earned $501.75 gross per week and received $67.69 per week in Family Tax Benefits and the Large Family Supplement.
When one takes into account the other weekly expenditure of the wife the total weekly expenditure is $1 490.
The wife is not able her to meet her expenses and the children’s expenses from her present income. Pursuant to these proceedings the wife will have a significant sum. Whether she will use that sum to acquire the matrimonial home is not known. It is likely that she will be able to use those proceeds to repay the loans to her parents thus removing those commitments.
The wife will also receive $50 000 by way of capitalised lump sum maintenance.
The husband will also receive a significant sum from these proceedings. Again it is not known whether he will use that sum to retain his present accommodation or not. He will retain the benefit of Q Pty Ltd and M Pty Ltd and the income that will be derived from them.
The husband says that at present that income is some $350 per week. There is evidence that he has been receiving other benefits. There is evidence of non-disclosure of income.
The evidence, however, does not enable me to determine precisely what income the husband has or what benefits he receives other than the income of $350 per week and the benefits received from M Pty Ltd set out in this judgment. The evidence does not enable a finding to be made that, having regard to sums spent by the husband or other property that he owns, he would have sufficient income or capacity, at least, to pay the appropriate amount of child support. The evidence in this case discloses the husband’s relatively low income and low amount of benefits paid for by his employer. The exact quantum of them is not known. The non-disclosure that was established was of the order of $7 500.
This case is therefore different from a case where substantial income can be inferred from, for example, deposits into a bank account or significant spending.
Whilst the non-disclosure entitles the court to be sceptical about the husband’s income and the completeness of his disclosure it does not go further than that. The evidence does not enable an inference that the husband has sufficient income or earning capacity that would make it just and equitable to require him to pay a particular sum for child support. Whilst it is true that where there has been non-disclosure the court need not be overly cautious in its determination about the Husband’s financial position (Weir & Weir (1993) FLC 92-338 and Black & Kellner (1992) FLC 92-287) there must still be evidence from which the court can infer that the husband has sufficient income or economic capacity that would make it just and equitable to make a departure order. I am not so satisfied.
Accordingly, the wife’s Application for a Child Support Departure Order will be dismissed.
The orders I make are set out at the beginning of my Reasons for Judgment.
I certify that the preceding two hundred and five (205) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Aldridge delivered on 23 August 2013.
Associate:
Date: 23 August 2013
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