Dixon and Dixon
[2011] FMCAfam 1244
•2 December 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DIXON & DIXON | [2011] FMCAfam 1244 |
| FAMILY LAW – Property dispute – long marriage – wife’s Kennon argument – husband dissipating large amounts on drink, drugs and gambling – unregistered agreement at time of separation in 2004 – whether parties should be held to agreement – consideration of just and equitable outcome. |
| Family Law Act 1975, s.75(2) |
| Kowaliw & Kowaliw (1981) FLC 91-092 AJO v GRO (2005) FLC 93-218 Polito [2009] FMCAfam 511 Farmer v Bramley (2000) FLC 93-060 Kennon v Kennon (1997) FLC 92-757 |
| Applicant: | MR DIXON |
| Respondent: | MS DIXON |
| File Number: | MLC 3234 of 2011 |
| Judgment of: | Burchardt FM |
| Hearing dates: | 4 & 6 October 2011 |
| Date of Last Submission: | 6 October 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 2 December 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr G. Glover |
| Solicitors for the Applicant: | Galbally & O’Bryan |
| Counsel for the Respondent: | Mr P. Davis |
| Solicitors for the Respondent: | Wainwright Ryan Eid Lawyers |
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of Federal Magistrate Burchardt delivered this day will for all publication and reporting purposes be referred to as Dixon & Dixon.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 3234 of 2011
| MR DIXON |
Applicant
And
| MS DIXON |
Respondent
REASONS FOR JUDGMENT
Introductory
This is a property dispute between a couple who were married for a long time. The applicant husband’s position is that there should be a 55/45 division of all assets of the relationship including the parties’ superannuation, the adjustment reflecting greater needs on his part.
The respondent wife’s position, by way of contrast, is that in effect each party should retain the property they either own and/or occupy as the case may be, and retain their superannuation. The net effect of the wife’s position would be that she retain the former matrimonial home in [D] together with its associated mortgage and that the husband retain his superannuation and that each party retain chattels in their possession.
For the reasons that follow, neither of these proposals would produce a result that is just and equitable. It is only possible to articulate a just and equitable outcome at the conclusion of the four step process by which property disputes are resolved.
The Facts
The husband was born [in] 1958 in Italy, but has lived almost all his life in Australia. The wife was born [in] 1959. The parties married [in] 1982 (not 1981 as the husband asserted in his first affidavit) and separated in mid-2004.
They have four children: [W] born [in] 1984, [X] born [in] 1987, [Y] born [in] 1988 and [Z] born [in] 1992. [W] and [Y] live independently but [Z] is still at home. Her sister [X] has what her mother describes as a very volatile relationship with the father of [X]’s young child and [X] spends, as the mother asserts, about 95 per cent of her time living with the mother.
It appears to be common cause that the husband’s parents loaned the parties either $80,000 (his version) or $50,000 (her version) in the early 1980s. Not much is said about the use to which these funds were put save that they appear (according to the husband’s first affidavit) to have been applied to repay a mortgage over a property in [B] that was owned by the parties at that time.
The husband asserts that $50,000 was still owing as long thereafter as 2006 when he says he repaid that balance following the sale of a property in [E].
The wife’s version, as set out in her first affidavit, is that the loan was in about 1992 for $50,000, being interest free and with no repayment date. She says the money was used to purchase a new car and to reduce the mortgage on the property in [B]. She says the loan was reduced by about $30,000 at separation.
Whatever may have taken place beforehand, the parties bought the former matrimonial home in [D] (the [D] property) for $183,000. It is held by the parties as joint tenants.
At separation the mortgage on the [D] property was down to $30,000 but it is now about $100,000.
In May 2001 the parties purchased the [E] property to which I have made reference. It was registered in the husband’s name alone and I accept the wife’s assertion that this was done to minimise his tax liability as 100 per cent of the purchase price and costs was borrowed.
At that time, and indeed for many years before and some years after, the husband had a very good job with [omitted] which, although it involved substantial working hours, paid him a very good income. At the time of separation it was in excess of $100,000 a year.
The wife has asserted that apart from time spent off work when the children were very young she basically worked at least part-time throughout the currency of the relationship and I accept that assertion.
The history of the parties’ relationship up until separation was troubled. The husband admitted in evidence very substantial and regular alcohol consumption and use of marijuana. It is clear from the husband’s own material that his continued drug and alcohol abuse has seriously affected his health. I have no doubt that the wife is correct to say that this made his moods during the relationship extremely volatile and that he subjected the wife and the children of the relationship to considerable amounts of abuse when intoxicated and/or under the influence of drugs.
It is perhaps appropriate at this stage to say a few words about the credit of the witnesses.
The husband gave evidence first and proved extremely combative under cross-examination. This was in part due to the extremely aggressive way in which he was cross-examined but clearly it was also in part his own personality. The husband’s answers were often aggressive in tone and unreasonably unresponsive to the questions put.
The husband impressed me as an honest witness but one whose recollection was necessarily affected by the very many years of very significant alcohol abuse and drug abuse that he had undergone.
From the answers he gave it is clear that the husband by and large consumed somewhere between six and a dozen stubbies of beer every night and smoked marijuana on a daily or almost daily basis. Whether this was throughout the entirety of the relationship is not perhaps wholly clear, but I do accept the evidence of the wife that she first separated for a brief while from the husband after only a few months of marriage. This being so, and having been caused by behaviour which subsisted on and off throughout the relationship, it is more probable than otherwise that this sort of behaviour effectively lasted throughout the relationship save for brief periods when the husband tried to reform his ways.
The wife was a singularly impressive witness. She presented as a sincere, honest and reliable witness who answered the questions put to her very directly. Her evidence to the effect that it was a difficult matter for her to separate after so long a marriage was entirely credible and given with a sincerity that was all too obvious.
Where the wife was found to have made an error, as she plainly did in describing a visit to hospital from work by ambulance, she readily conceded the mistake. This mistake was plainly one arising out of the stress of the proceedings and the process of giving instructions.
I repeat, the wife was a quite excellent witness, careful in her answers and transparently honest.
It should be noted that I have had regard to some aspects of the evidence of the three children, who were put on affidavit. Much of their material is plainly inadmissible and objectionable but the evidence does go to support the picture painted of the husband’s behaviour during and after the relationship in terms of his substance abuse.
Likewise I should note that the husband’s mother was called to give evidence. She was obviously telling the truth but it is equally obvious that she had no direct knowledge of the question of the loans advanced by the husband’s parents and I accept the wife’s evidence about this aspect of the matter.
The 2004 Agreement
It was the wife’s case that when the parties separated in 2004 they came to an informal agreement as to the disposition of their property which they intended to be binding on them even though they plainly did not seek legal advice or otherwise seek to formalise the agreement in a binding way. According to the wife the agreement was that the husband keep the investment property in [E] together with his superannuation which was then worth marginally over $100,000. He also kept a car. She retained the matrimonial home together with its mortgage, her small amount of super and likewise a car and chattels.
There is no evidence, other than the wife’s estimates in her affidavits, to support the assertion made in the wife’s case outline that the value of the [D] property as at separation was $300,000, and the mortgage was $70,000. Nonetheless, and as a matter of very superficial impression, the alleged 2004 agreement would perhaps have been thought, had there been curial consideration of it at the time, to have been within the appropriate range.
The husband, however, denied that there was any settlement in 2004, or agreement. This is so notwithstanding that his affidavits never asserted this in terms.
Accepting, as I have, that the wife was an excellent witness, I have no doubt that the parties discussed their separation and its financial implications in 2004 and came to the agreement asserted by her. It should be noted, however, that this agreement was never formalised.
It was not entered into on the basis of legal advice and there is no suggestion that it is binding as a matter of law. The most one can say about the agreement is that it was what the parties thought was fair at the time and it did, in fact, inform the way in which they behaved thereafter.
Events after Separation
Having heard the evidence and considered the answers given by the husband in particular, there is no doubt that following the separation his life went into something of a tailspin. Although he sought to minimise matters under cross-examination, it is clear beyond doubt that his alcohol consumption, if anything, increased as did his drug consumption. More particularly he started to gamble.
To his great credit, the husband managed to stop drinking in September 2006 and has not consumed alcohol since. This decision appears to have been strongly influenced by his contracting [medical conditions omitted], from which he continues to suffer, at that time.
Furthermore, and most unfortunately, the husband’s long-standing job with [omitted] came to an end and following legal proceedings, he received a further net payment of some $7,000-$8,000, all of which has now disappeared.
The husband conducted his affairs so inefficiently and negligently that he was made bankrupt in November 2009, albeit that a cousin of his apparently paid out his bankruptcy in the sum of $30,000 in total thereafter. The husband asserts that he now owes that sum to his cousin but I note that the cousin was not called to give evidence.
The [E] property was sold in 2006. It is not wholly clear but the husband appears to have paid the remainder of his parents’ loan from the proceeds of sale. Although the evidence is incomplete and unsatisfactory, I think it more probable than otherwise that he has paid about $20,000.00 leaving a net figure of $74,500.00. One of the striking features of the evidence is that the wife in fact assisted the husband with his mortgage payments in a total of approximately $13,000 over time. This kind of self-sacrifice speaks very highly of her personality and the endeavours she made to assist the husband in circumstances where one might reasonably have thought she would be reluctant to do so.
The husband paid the mortgage on the [D] property until February 2006 and made a number of payments of $400 per pay period by way of child support until March 2005 (see exhibit A5).
The wife, as she said in evidence, endeavoured to maintain the family’s living arrangements and lifestyle. Although all the children are now adults, this was not the case when separation took place. The mother gave money to [X] to help her buy a home and also assisted [W] and [Y] as they became older. As the mother rightly pointed out, school and the like was expensive.
It is sufficient to say in this regard that the contrast between the two parties’ positions could scarcely be more stark. The husband unfortunately descended into a mire of depression and substance abuse and gambling difficulties. He dissipated very substantial amounts of money. The wife worked hard to maintain the family’s circumstances, including even those of the husband to whom she advanced a total of $15,307 by way of assistance.
With the extra difficulties associated with the husband’s trustee in bankruptcy coming onto the scene and the associated possibility of the loss of the matrimonial home, it comes as no surprise that the wife’s health deteriorated. She had a serious panic attack in May 2011 and although she was not taken to hospital in an ambulance, she clearly had to be taken home by her children on that occasion. Her health remains precarious and the prospects of her return to work are uncertain. The best one can say for these purposes is that it is more likely perhaps than otherwise that she may be able to return in about a year’s time. Although it appears she has unlimited sick leave with [employer omitted], at present she is unable to access this and is locked in what I described during the proceeding as a battle with Human Resources to try to get it paid. The outcome of that struggle remains wholly uncertain.
I have not dealt in detail with issues like the parties’ cars, nor with the asserted controversy as to who did how much work on the various renovations of property that the parties effected from time to time.
It is sufficient to say that the parties’ cars are not valued. The wife has given a car to [Z] and in the circumstances that does not strike me as a frivolous dissipation of assets. The bottom line is that each party has a car.
Likewise, to the extent that it may be relevant, I find that both parties contributed as best they were able to the renovations.
We have now advanced to a point where it is possible to embark upon the four-step methodology required in property cases.
The Pool
The [D] property has an agreed value of $700,000 and there is a mortgage over it presently in the sum of $150,000 (albeit that it subsists in two accounts). The mortgage total was conceded by counsel for the husband to be probably correct.
Each party, as I have said, has a car. Although these are not the subject of valuations they appear in my opinion to be insufficiently disparate to be worthy of any note.
The husband’s superannuation is presently valued at just over $125,000 and that of the wife at $33,700.
The wife has a car loan of $24,500, and neither party has any savings or other credit card debt of any moment.
The wife has been assisted by her children by some $15,000 with her legal fees but there is no evidence that those debts are enforceable and in my view they should not be included in the pool. It is reasonable to suppose that the children are happily repaying, as one might think they ought, their mother for her earlier assistance.
The husband says he owes his cousin $30,000 and it is asserted that he has a number of traffic fines and other debts amounting to some $10,000. That latter proposition is not challenged and indeed is included in the list of assets and liabilities in the wife’s case outline. I accept it.
The alleged debt to the husband’s cousin, a Mr C, while undoubtedly owing, has not been the subject of any evidence as to whether it is required to be repaid and if so, when. I find that it is a debt that the husband will be required to repay only as and when he may readily be able to do so. It is not appropriate to include it in the pool.
This leads to the question of the add-backs sought by the wife. It is clear that the husband has completely dissipated the approximately $94,000 received from the sale of the [E] property (of which some went to repay his parents) and the approximately $8,000 net received from his redundancy payment.
It appears that the origin generally accepted for add-backs in these situations is that of Kowaliw & Kowaliw (1981) FLC 91-092. In that case Baker J approached the matter on the footing at p.76,645 that:
“evidence of wantonness or recklessness having economic consequences is clearly a matter which the court may take into account pursuant to the provisions of section 75(2)(o).
If a party has acted in the manner to which I have referred earlier by:
(b) acting recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value,
then such conduct in my view and the economic consequences which flow therefrom are clearly matters to which the court may have regard pursuant to the provision of s 75(2)(o).”
That approach is one way of doing it but I note that the Full Court in AJO v GRO (2005) FLC 93-218 quoted with apparent approval at [28] the observations of Nicholson CJ in Townsend v Townsend to the effect that:
“The correct way to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
It is clear that Kowaliw is still good law subject to the sort of qualifications expressed in AJO v GRO and I note that AJO v GRO has been recently applied by Baker FM in Polito [2009] FMCAfam 511.
I am inclined to accept the submission of the wife’s counsel that in an appropriate case, dissipation of assets can be dealt with either by add-back into the pool under the first step or as a matter of contribution or under s.75(o) or indeed even in the fourth step of deciding what is just and equitable.
In the particular circumstances of this case, the proper approach is that indicated by Nicholson CJ and approved by the Full Court in AJO v GRO, and that is to add back the $74,500 into the pool.
I should further say that I fully accept the submission of counsel for the wife that the assets of the parties should be assessed now, including the post-separation contributions (see Farmer v Bramley (2000) FLC
93-060 per Finn and Kay JJ). Indeed, counsel for the husband did not seriously argue the contrary.
Accordingly the pool consists of:
a)[D] home $700,000.
b)Husband’s superannuation $125,000.
c)Wife’s superannuation $33,700.
d)Add-backs of sums dissipated by the husband $74,500.
Less liabilities:
e)Mortgage on the [D] property $150,000.
f)Wife’s car loan $24,500.
g)Husband’s traffic and other debts $10,000.
It should be noted that I have excluded the wife’s shares as they have been sold to meet living expenses.
Contribution
In a long marriage of this kind where the husband has been the primary breadwinner but the wife has brought up four children and worked part-time, it might ordinarily be presumed that the contributions of the parties on a day to day basis should be accepted as equal. Both counsel expressly or implicitly adopted this position.
The loan provided by the husband’s parents in the early 1990s was, of course, of significant benefit to the parties but it is now so long ago that it is in my view properly regarded as having been subsumed by the parties’ subsequent input.
What is, however, relevant here is the wife’s Kennon argument. (Kennon v Kennon (1997) FLC 92-757). In Kennon Fogarty and Lindenmayer JJ approached the matter in this way at pages 84-294:
“Put shortly, our view is that where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79. We prefer this approach to the concept of “negative contributions” which is sometimes referred to in this discussion.”
Fogarty and Lindenmayer JJ continued at page 84-295:
“To be relevant, it would be necessary to show that the conduct occurred during the course of the marriage and had a discernable impact upon the contributions of the other party.”
In this case, there is no possible question that the conduct of the husband, effectively throughout the entirety of the marriage, made the wife’s contributions far more onerous than they ought to have been. His efforts also undoubtedly had an effect over and above the dissipation of assets that took place following the separation.
Although the cases to which I have been referred by counsel show that whether or not drug use is merely within what might be described, however curiously, as social norms, the fact is that the husband’s purchasing of alcohol and marijuana must have cost a very substantial amount of money over a very long time. It is not possible to say exactly how much this impacted upon the financial outcome with any certainty but its effect must have been significant. The purchase of a dozen stubbies of beer per night would cost a lot of money as would the regular consumption of marijuana which, being an illegal drug, might reasonably be thought to be expensive.
It should be noted that I completely reject the husband’s assertion that all the alcohol he consumed was given to him at work. I accept the evidence of the wife that the husband was given beers at Christmas but not otherwise. It is consistent with common sense and in any event, as I have already said more than once, the wife was an excellent witness. I accept her evidence.
It is of course not appropriate to make any allowance to the wife under this heading of the moneys dissipated post-separation because they have already been included in the pool.
These sorts of matters are necessarily matters of impression and judgment. In the circumstances, taking into consideration both the dissipating effect of the husband’s excessive use of alcohol and drugs and the very considerable burden that it imposed upon the wife in performing her contributions to the marriage, it is in my opinion appropriate that there be a 20 per cent loading in the wife’s favour under this heading.
The Section 75(2) Factors
Regrettably, both parties face considerable difficulty. The husband’s health is poor. I note the unchallenged evidence of Professor D that the husband will not be able to work in the future. He is an invalid pensioner and is likely to remain on a very limited income. He does, however, have the benefit of the devoted assistance of his mother who cooks all his meals and the ongoing help of a cousin who provides him with what in effect is cheaper and subsidised rental accommodation. Both of these benefits seem likely to continue for the foreseeable future.
The husband’s health, apart from his mental health, continues to remain poor and his future prospects are grim. Very sadly, he is presently completely alienated from all his children, all of whom gave telling evidence against him in their affidavits and were not required for cross-examination.
The wife’s health likewise is parlous. She has had what she herself described as a breakdown in May of this year and her future employment is uncertain. Even were she to return to work she would only be making a relatively modest salary. She will continue to assist [X] and [Z] notwithstanding they are adults.
In the end, in my opinion, the future needs issues between the parties balance one another out.
Just and Equitable
To apportion 30 per cent of the pool to the husband would be to give him a figure in a round sum of about $224,700. Of that he has had sole use of $74,500 already and would obtain, were he to keep it, $125,000 worth of superannuation.
The husband has sought to split his superannuation and the clear effect of such a split would be that he would get more cash.
Counsel for the wife submitted that the husband might be presumed more likely than otherwise simply to dissipate such sums as he has dissipated so much other money in the past. I fear that that submission may well be correct.
Nonetheless the evidence does not go so far as to say that the husband will, as a certainty, simply dissipate moneys he receives. He may well repay his cousin who after all has, if I understand the matter correctly, some hold over him given that he provides him with subsidised rental accommodation.
Furthermore, and however useless it might be thought to be in one sense, the fact is that the Court is required to do what is just and equitable. In my opinion the just and equitable outcome in this case is that the husband retain his superannuation and receive from the wife a sum sufficient to pay him 30 percent of the pool of the matrimonial property as I have described it. I calculate the resulting additional payment as $25,110. I note that in view of his health there is every prospect that the husband, notwithstanding his age, will be able to access at least some of his superannuation now, on hardship grounds.
While counsel for the wife submitted in the strongest terms that the Court should, so to speak, enforce the bargain made by the parties in 2004, the fact is that their positions have changed radically since then. The husband is no longer in well-paid, secure employment. He is unemployed and is likely to remain so indefinitely.
The parties simply did not foresee the very unfortunate march of events that has transpired and to hold them to their bargain as a matter of justice and equity at this stage would plainly be unconscionable.
I have dealt in terms with the husband’s dissipation of assets by adding those assets known to have been dissipated back into the pool. I have also paid due regard to the husband’s behaviour during the marriage, both in terms of the difficulties he imposed upon his wife (and indeed his children) and the financial wastage that he caused.
In all the circumstances, in my opinion the application of the four step methodology in what might be described as its simplest form does indeed in this case produce an outcome that is just and equitable.
For the sake of completeness, I should make it clear that the 70/30 division I have arrived at is in my view just and equitable in the circumstances of this case even if my calculation of contribution and s.75(2) matters were to be otherwise. It gives proper weight to the conduct of the parties as I have described it.
Since I am not aware whether the wife will be able to pay the husband the sum I have indicated, I will give the parties an opportunity to consider these Reasons and will hear from them further as to the form of orders to be made.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 2 December 2011
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