Faden & Faden (No 2)

[2011] FamCA 895

FAMILY COURT OF AUSTRALIA

FADEN & FADEN (NO 2) [2011] FamCA 895

FAMILY LAW – PROPERTY – capacity of each party to earn income – actual income and resources available to each party - who should pay mortgage for the former matrimonial home – disposition of surplus funds in family trust

Family Law Act 1975(Cth)

APPLICANT: Mr Faden

RESPONDENT: Ms Faden

FILE NUMBER: SYC 8240 of 2007

DATE DELIVERED: 11 November 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 3 November 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Blackah

SOLICITOR FOR THE APPLICANT: Ms S & Associates

COUNSEL FOR THE RESPONDENT: Mr Schonell SC

SOLICITOR FOR THE RESPONDENT: Barkus Doolan Kelly

Order

Orders made by consent:

1. I make an order pursuant to paragraph 7 of the husband’s response to an application in a case filed 3 August 2011 as set out hereunder:

   7. The wife shall facilitate an inspection within twenty eight (28) days of the property at H Street, J Town by a building consultant retained by the husband.

2. I order that the parties, within 28 days, jointly instruct the President or his nominee of the Building Industries Association to appoint an expert to attend at the former matrimonial home to prepare a report as to necessary repairs and maintenance.

Orders pending further order of the Court:

1. Each of the husband and wife are to pay one half of the mortgage instalments required by the Westpac Bank in relation to the home loan, account number …, the equity loan 1, account number … and equity loan 2, account number ....

2. The husband is restrained from drawing down on the following Westpac loan accounts held in the name of the husband and for which the wife is the guarantor:

   a)Home loan, account number …;

   b)Equity loan 1, account number …; and

   c)Equity loan 2, account number ...

3. The parties are to forthwith cause the sum of $15,000 to be drawn from the account held by the Faden Family Trust with Macquarie Bank and to be applied in equal proportions to reduction of the mortgages referred to in order 3 hereof.

4. Upon receipt by the husband of the Financial Statements for K Pty Ltd and L Pty Ltd for the financial year ended 30 June 2011 and/or upon receipt of the income tax returns for those entities for the same period he is to forthwith provide copies of same to the wife.

5. The husband is to provide to the wife, within 7 days of receipt by him, copies of all statements of account and all other written communications received by him from Westpac Bank in relation to the three loans secured upon the title of the property located at H Street, J Town.

6. Whenever the account of M Pty Ltd, as trustee for the Faden Family Trust, held with Macquarie Bank, reaches a figure of $25,000 in credit, the parties are to do all things necessary to cause the sum of $7,500 to be distributed to each of them.

IT IS NOTED that publication of this judgment under the pseudonym Faden & Faden  (No 2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8240 of 2007

Mr Faden

Applicant

And

Ms Faden

Respondent

REASONS FOR JUDGMENT

1. Before the Court are competing applications by the husband and wife in relation to property matters. The orders sought by the husband are contained in his Response to an Application in a Case filed 3 August 2011. The wife responded to that application by an Amended Application in a Case filed 22 September 2011. In the hearing however, she relied on Minute of Order which was filed in Court.

2. In the initial stages of the hearing I was advised that the wife consented to an order being made pursuant to paragraph 7 of the husband’s Response to an Application in a Case filed 3 August 2011. The parties further agreed that an order could be made pursuant to part of paragraph 8 of the husband’s response. The agreed order will be “The parties shall within 28 days jointly instruct the President or nominee of the building industry association to appoint an expert to attend at the former matrimonial home to prepare a report as to necessary repairs and maintenance.”

3. The husband does not press paragraphs 4, 5, 6 and 10 of his response.

4. The remaining issue then arising from the husband’s response document is contained in paragraphs 3 and 9. These issues relate to who should meet the mortgage commitments to the Westpac Bank which are secured over the former matrimonial home. The property at H Street, J Town is currently occupied by the wife and her partner Mr J, together with the children when they are in the wife’s care. Additionally there is an issue as to the disposition of surplus funds standing to the credit of the Faden Family Trust Macquarie Bank. In respect of that issue the husband filed a further Minute of Order during the course of the hearing which was marked as exhibit H6. That minute provides for a distribution of surplus funds in the account in the future and immediately.

5. In his case outline document the husband identified that he relied on the following documents:

   a)Husband’s Affidavit filed on 5 May 2010 (paragraphs 1-30);

   b)Husband’s Affidavit filed on 3 August 2011(paragraphs 37 to the conclusion of the affidavit together with annexures D1, D2, D3, E, F1, F2 and G);

   c)Husband’s Affidavit filed on 28 September 2011; and

   d)Husband’s Financial Statement filed 28 September 2011.

6. The wife relied on the following documents:

   a)Wife’s Affidavit filed on 22 September 2011; and

   b)Wife’s Financial Statement filed on 22 September 2011.

Payment of the Mortgages

1. It is common ground that the parties separated on 18 February 2006. At that time the wife remained in the former matrimonial home at H Street, J Townand the husband moved elsewhere. The parties have four children who are E aged 12, F age 10, G aged 8 and D aged 5. The children live with the wife, spending five nights per fortnight with the husband.

2. The wife lives in the former matrimonial home. The husband controls a company, K Pty Ltd (“K”), which company conducted business for the benefit of the parties during the course of their cohabitation. That company owns a business titled N Pty Ltd and also receives dividends from N Associates Pty Ltd (“N Associates”).

3. The Faden Family Trust is administered by the trustee M Pty Ltd (“M Pty Ltd”). The trust owns shares in N Associates and receives an income from that source.

4. Following separation the husband commenced a business owned by a corporation L Pty Ltd (“L”). That corporation is owned by the husband. The business has a growing income stream. There are other businesses in which the husband has an interest.

5. The wife controls the O Trust and the P Trust.

6. Since the separation the wife has used her funds, in part, to meet mortgage payments in respect of three loans secured against the former matrimonial home. Those loans are with Westpac Bank and are as follows:

   a)Westpac home loan account number …;

   b)Westpac equity loan 1, account number …; and

   c)Westpac equity loan 2, account number ...

7. Exhibit H1 sets out the balances of those mortgages as at 2 November 2011:

   a)Home loan $135,817.61;

   b)Equity loan 1 $229,187.17; and

   c)Equity loan 2 $257,024.15.

8. In paragraph 74 of the wife’s Affidavit dated 22 September 2011 she sets out the monthly instalments in respect of each loan. The monthly payment in respect of the home loan is $1,096. The monthly payment on the equity loan 1 facility is $1,372 per month and the payment in respect of the equity loan 2 facility is $1,550 per month. The total monthly payments are $4,018 per month or $927 per week. The wife has been meeting those payments since about May 2007.

9. Between September 2006 and May 2007 the husband withdrew sums from the Westpac equity loan 2. Those sums total $46,000. The wife says the withdrawals occurred without the consent or knowledge of the wife.

10. The parties agree that the Court’s approach to determining the dispute is to be akin to the approach taken in a spouse maintenance claim. For practical purposes, in this case I need to consider the matters set out in ss 72 and 75 of the Family Law Act 1975(Cth) (“the Act”). Again the practical application of those sections to this case require consideration of the capacity of each party to earn income, the actual income available to each party and/or the resources available to each party to meet their weekly commitments and the reasonable expenditure for each party on a weekly basis. Determination of those matters should then give rise to the Court being able to determine in what proportions each of the parties should contribute to the mortgages.

11. It is important to have regard to the fact that whatever sums are paid by each of the parties at this time towards the mortgage payments will need to be considered by the Court as their post cohabitation contributions in the hearing of the section 79 applications which still remain extant and which might reasonably be expected to be determined in the first half of 2012.

12. The evidence and submissions of the parties in this case have focused on their available income and resources, their necessary expenditures and their capacities to work. There is an issue about the wife’s capacity to work arising from her alleged ill-health.

The Income and Resources of the Parties

1. The husband’s financial circumstances are encapsulated in his Financial Statement filed 28 September 2011. He states an income of $4,000 per week. This is derived from a salary of $3,750 received from L Pty Ltd and K Pty Ltd. In addition, the husband receives a stated benefit by way of payment from his employers of home telephone, computer, motor vehicle and petrol valued at $250 per week.

2. The husband’s partner is Ms Q. She has a stated income of $961.53 per week. The husband does not provide details of the contribution made by her for his benefit. During the hearing it was the husband’s evidence that Ms Q is no longer in the employment she was at the time he swore his financial statement.

3. The husband has stated expenditure of $3,164 per week. Included in that is a payment of $551 per week as child support paid to the wife. The husband estimates that $1,110 of his expenditure relates to the support of the children in his household.

4. The husband’s only liquid asset is comprised in a Macquarie Bank account held in his name with a stated balance of $14,249.

5. The husband’s liabilities include a stated debt to the Australian Tax Office of $27,000 which was due on 25 August 2011. He has credit card debts of $9,000. He has liabilities for legal fees and expenses of approximately $24,000 and another debt to Eagle Finance Pty Limited of $1,500. He also has a liability to K Pty Ltd of $271,786.

6. The wife’s financial position is set out in her Financial Statement sworn 9 September 2011 and filed 22 September 2011. She has a stated income of $768 per week. The income is sourced from the husband’s child support, dividends and the P Trust.

7. The wife’s partner Mr J is 53 years of age and has an income of $3,206 per week before tax. He contributes $440 per week to the household expenses including contribution to living and accommodation expenses.

8. The wife’s liabilities predominately relate to her liability as a guarantor or borrower of funds from Westpac and Macquarie Bank and her borrowings from the O Trust and the P Trust. She is also said to have a debit loan account with K Pty Ltd.

9. The only other liability listed by the wife is her Citibank MasterCard which had a liability of $14,000 in August 2011.

10. In part N of the Financial Statement the wife lists the expenses for herself and the children as $3,730 per week.

11. In relation to the wife’s interest in the O Trust, she is said to have an interest valued at $693,351. Her liability to that trust is $689,174. In relation to the P Trust the wife is said to have a liability to that trust of $80,000 and its value is $234,087.

12. The wife receives no income from personal exertion and describes her occupation as “home duties.”

13. The husband in his Affidavit sworn 26 September 2011 says that his average income after tax each month is $5,000 from K Pty Ltd and $5,000 from L Pty Ltd.

14. The wife says that the April 2010 child support agency assessment in respect of the husband is based on his 2009 taxable income. That was $370,996. The husband in response to that assertion agrees that his taxable income was as asserted. However, he alleged that $140,000 of that income was attributed to deemed dividends assessed by the tax office pursuant to division 7A.

15. The husband submits that the evidence discloses the wife lives a lavish lifestyle.

16. The husband alleges he has no real capacity to be able to contribute anything to the cost of the mortgage instalments.

17. In his Affidavit filed 5 May 2010 the husband says the Faden Family Trust receives dividends from N Associates of about $4,000 per month.

18. The parties agree the Faden Trust has a credit balance in its bank account of approximately $24,000. They also agree it needs to maintain a particular level in order to meet commitments for payment of mortgages.

19. The parties have identified the sum of $15,000 of the credit balance of the Faden Family Trust (M Pty Ltd as trustee) account with Macquarie Bank as surplus to requirement. This fund could be used to meet the current arrears on the mortgages. It seems that the arrears are in the order of $17,000.

20. The husband in exhibit H6, being a minute of order relating to the Macquarie Bank account for the Faden Family Trust, seeks that the $15,000 be divided equally between each of the parties at this time and thereafter whenever the account reaches $25,000 credit, the sum of $15,000 be distributed by equal portion to each of the parties. The wife seeks an order as contained in paragraph 6 of her Minute of Order that $15,000 of the Faden Family Trust monies be applied in reduction of the mortgages so that each of the parties is attributed with a contribution to that mortgage payment of one half of the sum of $15,000.

21. This fund is a clearly identified fund which could be applied, as the wife submits, in reduction of the arrears on the mortgage.

The Wife’s Case

1. It is the wife’s case that the husband’s income is greater than he asserts in his evidence. In support of that submission the wife draws the Court’s attention to exhibit W6. This exhibit consists of Macquarie Bank Limited statements in respect of the account standing in the name of Mr Faden. The records commence on 1 July 2009 with a credit balance of $8,699. They conclude on 1 November 2011 with a credit balance of $11,923. During that period credits to the account totalled $553,720 and debits $550,495.

2. In particular my attention is drawn to entries as follows:

   a)8/3/11 – electronic debit payment to R Club $2,047.90;

   b)3/5/11 – electronic transfer payment to Ms S (husband’s solicitor) $4,265;

   c)9/5/11 – payment R Club $1,217;

   d)8/8/11 – payment to the husband’s solicitor Ms S $7,777;

   e)9/8/11 – payment to the husband’s yacht club $1,001;

   f)19/9/11 – payment to R Club $1,106; and

   g)23/9/22 – payment to the husband’s solicitors $5,500.

3. The wife submits that none of the above expenses were included in the husband’s financial statement.

4. The wife submits that in the husband’s Financial Statement sworn 26 September 2011 at item 21, he set out a rental payment of $1,250 per week. Yet in the Macquarie Bank accounts (exhibit W6) the fortnightly payment of rental which appears regularly is $1,808.60. That equates to $900 per week. It is therefore submitted that the husband’s expense at item 21 in his Financial Statement is overstated by $350 per week.

5. Since the separation, the husband has established the business L Pty Ltd. It is the husband’s case that this business enables him to draw $5,000 per month from it. The Macquarie Bank account was opened for that entity on 5 February 2010. In relation to those accounts the wife points to a payment of $16,500 by electronic debit to “S Q, Aspire Consulting”. “S Q” is the husband’s partner.

6. The wife also directs the Court’s attention to a payment on 22 December 2010 to R Club for sporting equipment of $864. There are also significant payments made to Ms Q on 24 December 2010, 27 April 2011, 28 July 2011 and 19 September 2011. Those payments add up to $19,650.

7. Nowhere in the evidence of the husband does he refer to any business relationship between himself and his partner. It is submitted on behalf of the wife that these transactions indicate, in the absence of any evidence to the contrary, that the husband is splitting income with his partner. The wife submits that, as the husband has not explained such payments, an adverse inference should be drawn against him.

8. The wife draws the Court’s attention to exhibit H3. This is a page from the K Pty Ltd account bank statement with Macquarie Bank. On 17 October 2011 the husband caused K Pty Ltd to pay to his solicitor Ms S the sum of $10,000.

9. The wife makes a submission in relation to exhibit W4, which is the husband’s tax return for the year ended 30 June 2010. This illustrates that the husband’s taxable income for that year was $328,769. The wife says that when the Court takes into account the tax payable on the husband’s income, as illustrated on the last pay of exhibit W4, his income for that year was $3,866 per week. There is no suggestion from the husband that during the last 12 months his income has reduced. The wife says that in addition to his income from K Pty Ltd the husband now has an income from L Pty Ltd. I note, in relation to the husband’s tax return in exhibit W4, it is the assertions of the husband that part of his income for that year included a sum of money which was a deemed dividend received by him from K Pty Ltd. That assertion is not immediately apparent in exhibit W4. The Court’s attention was not drawn to any particular entry in exhibit W4 that may have illustrated the husband’s assertion.

10. The wife submits the husband has provided inconsistent evidence in relation to his income. In his Financial Statement sworn 2 August 2011 the husband said that his income was $15,430 per week. In a subsequent affidavit the husband said that was a mistake and that rather than a weekly figure that was a monthly figure. In the Financial Statement filed by the husband on 28 September 2011 he states his income at $4,000 per week. The wife submits that $4,000 per week stated as a monthly sum is $17,333. The wife submits no explanation has been provided by the husband as to why his income has increased substantially between a monthly figure of $15,430, said to be applicable as at 2 August 2011, and a monthly figure of $17,333, said to be applicable as at 26 September 2011, the date of swearing his last financial statement. It is submitted on behalf of the wife that taking the husband’s figures at their highest, as expressed in his Financial Statement of 26 September 2011, he has an $800 per week surplus. This does not allow for the disparity in the rental payment which he had claimed and which has referred to earlier in these reasons.

11. In relation to the wife’s financial capacity, it is submitted that the wife receives $500 per week child support. She receives some support from her partner. It is submitted that the wife’s expenses are not excessive. The wife has been using capital to meet the mortgage payments and sustain herself for a considerable period of time now. Her available balance to draw on, in relation to her resources, is now limited.

The Husband’s Case

1. The husband in his submission denied any failure to disclose relevant information and in fact relied on exhibit H7 which illustrated that on 2 November 2011 the wife had only disclosed a number of significant documents herself.

1. In relation to the rental disparity between the husband’s Financial Statement and the records in his bank statements, the husband’s counsel pointed to entries in exhibit W2, the bank statements for K Pty Ltd, which showed entries of payment of $750.85 titled “rent”. It was asserted in submission, although there was no evidence of this, that this was a payment of part of the husband’s rental. In relation to the 2010 tax returns the husband asserts that $140,000 of his income was a deemed dividend from K Pty Ltd and related to drawings on loan accounts. As stated earlier, it is difficult to see where in the return that information can be found. There was no evidence before the Court to establish when the funds were actually drawn which gave rise to this assessment. 

2. In paragraph 96 on page 6 of the husband’s Affidavit sworn 26 September 2011 he said “My average income (after tax) per month is $5,000 from [K Pty Ltd] and $5,000 from [L Pty Ltd].” That equates to $2,307 per week. The husband submits that if the tax figure claimed by the husband at item 19 of his Financial Statement, namely $596.15, is deducted from the stated income of $4,000 per week then there is no inconsistency within his evidence. In my opinion, mathematically, that is not a correct submission.

Conclusion

1. In my view, each of the parties has an ability to contribute to the mortgage payments in respect of securities held against the former matrimonial home. In the wife’s case she does have funds available as disclosed in note 41 to her Financial Statement. I am also not satisfied, at this time, that the wife has no ability to generate income from her own personal exertion. She really made no attempt to address this issue in the evidence before the court. I note the husband asserts the wife’s health concerns ought not adversely affect her ability to earn some income. In addition, I consider, based upon the current state of the evidence, that the contribution being made by the wife’s partner, Mr J, to the expenses of the household, bearing in mind that he occupies the former matrimonial home with the wife, is insufficient and he should be contributing a considerably larger sum. I do nonetheless consider the wife has established a need for payment towards her maintenance in the form of a contribution to the mortgage payments as referred to earlier. If the payments are not made then the mortgagee can be expected to take action with the likely result that the property currently comprising the wife’s residence will be sold. The wife in her application for final orders seeks that she have the property transferred to her.

2. On the husband’s side I consider the income he is earning and which he has available in his household is larger than that which he has stated in his evidence. I am of the view that he has capacity to contribute to the mortgage payments.

3. These are interim proceedings and I have not had the benefit of seeing cross examination of the parties. Additionally, it may transpire that there are good reasons why the wife’s partner, Mr J, is unable to contribute more than the $440 per week to the wife’s household.

4. At the end of the day, the payments made by the parties against the mortgage on the former matrimonial home will be counted as contributions made by them in the assessment of contribution overall pursuant to section 79 of the Act.

5. I propose to make orders which will require the husband to contribute to the mortgage payments in respect of the mortgages secured against the former matrimonial home. Whilst acknowledging that such an order will be made in circumstances where many of the facts relied upon by each party has not been tested, I do so sure in the knowledge that any injustice imposed on a party by these orders is capable of being remedied in the hearing which concludes the property disputes between the parties.

6. Doing the best I can, I consider the following orders are appropriate. Some of the orders to be made, as stated earlier, are not opposed by the parties.

I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench

Associate: 

Date:  11 November 2011