Field and Basson
[2012] FMCAfam 188
•15 March 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FIELD & BASSON | [2012] FMCAfam 188 |
| FAMILY LAW – Property – parties not represented by lawyers – payment of private school fees that the parties cannot afford – parties’ perilous financial state – just and equitable. |
| Family Law Act 1975 (Cth), Part VIIIA, ss.75, 79, 81 |
| Bigelow & Reuter [2006] FamCA 1455 Bremner and Bremner (1995) FLC 92-560 Clauson (1995) FLC 92-595 Coghlan (2005) FLC 93-220 Ferraro (1993) FLC 92-335 Hickey (2003) FLC 93-143 Lee Steere (1985) FLC 91-626 Money and Money (1994) FLC 92-485 OSF and OJK (2004) FLC 93-191 Pierce v Pierce (1999) FLC 92-844 Russell v Russell(1999) FLC 92-877 |
| Applicant: | MR FIELD |
| Respondent: | MS BASSON |
| File Number: | LNC 126 of 2011 |
| Judgment of: | Roberts FM |
| Hearing dates: | 7 and 8 February 2012 |
| Date of Last Submission: | 8 February 2012 |
| Delivered at: | Launceston |
| Delivered on: | 15 March 2012 |
REPRESENTATION
| Counsel for the Applicant: | Not represented by a lawyer |
| Solicitors for the Applicant: | Not represented by a lawyer |
| Counsel for the Respondent: | Not represented by a lawyer |
| Solicitors for the Respondent: | Not represented by a lawyer |
ORDERS
That MS BASSON (“the wife”), either personally or in her capacity as a shareholder and director of (omitted) (Australia) Pty Ltd (“the company”) must forthwith transfer and deliver up to MR FIELD (“the husband”) the following:
(a)all existing stock of the business formerly known as “(omitted)” (“the business”) in order that that the husband may dispose of that stock in any manner that he chooses; and
(b)the Jeep Grand Cherokee motor vehicle formerly used in the operation of the business (“the Jeep”) subject to the loan obtained to purchase the Jeep.
That the wife retains her interests in the following properties (“the real estate”) free from any claim by the husband:
(a)Property B in Tasmania, more particularly described in Certificate of Title Volume 45592 Folio 1;
(b)Property E in Tasmania, more particularly described in Certificate of Title Volume 41683 Folio 1 and Certificate of Title Volume 221727 Folio 1;
(c)Property N in Tasmania, more particularly described in Certificate of Title Volume 91917 Folio 16
That the wife must henceforth pay and indemnify the husband in relation to all outgoings with respect to the real estate referred to in Order No. 2 hereof, including but not confined to mortgage payments, rates, land taxes and insurance premiums.
That the wife must forthwith make all reasonable attempts to obtain a discharge of the husband’s obligations with respect to any mortgage secured over any of the real estate referred to in Order No. 2 hereof, including but not limited to Mortgage C970922 to the Commonwealth Bank of Australia
That subject to Order No. 1 of these orders the husband must relinquish all his right title and interest in the partnership known as (omitted) (“the partnership”) and do all such things and sign all such documentation as may be reasonably required to transfer his interest in any asset of the partnership (other than stock and the Jeep) to the wife including but not limited to the property at Property K in Tasmania more particularly described in Certificates of Title Volume 21158 Folios 12 and 13 (Property K).
That nothing in Order No. 5 hereof prevents the husband from joining with the wife to transfer Property K to a bona fide purchaser without first transferring his interest to the wife.
That contemporaneously with a transfer of Property K pursuant to either Order No. 5 or Order No. 6 hereof the wife must obtain a discharge of the husband’s liability to the Commonwealth Bank of Australia pursuant to Mortgage C888291.
That contemporaneously with the transfer of Property K as referred to in Order No. 5 hereof (or a sale as referred to in Order No. 6 hereof) the husband must do all things and sign documents as be reasonably necessary to resign as a director of the company and to transfer to the wife or her nominee his entire shareholding in the company.
That save for the loan obtained in relation to the Jeep the wife must pay and indemnify the husband in relation to any debts incurred by the partnership or the company including but not limited to any business loans, lines of credit, accountancy fees, security costs, any monies owed to suppliers and all current and future liabilities to the Australian Taxation Office.
That, provided that the wife complies with Order No. 1 hereof without any delay, the husband must pay and indemnify the wife in relation to the Jeep loan in the approximate sum of $13,800.
AND THE COURT NOTES
That pursuant to section 81 of the Family Law Act 1975 these Orders are intended to finally determine the financial relationships between the parties and avoid further proceedings between them.
IT IS NOTED that publication of this judgment under the pseudonym Field & Basson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT LAUNCESTON |
LNC 126 of 2011
| MR FIELD |
Applicant
And
| MS BASSON |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant is MR FIELD (“the husband”) and the respondent is MS BASSON (“the wife”). The matter involves their competing applications for property orders.
By his Initiating Application, drawn by his former solicitors and filed in March 2011, the husband sought orders for the following:
·a transfer of a property at Property B in Tasmania to him;
·transfers of other real estate to the respondent;
·a transfer to him of a business and business premises to him (subject to him being responsible for the business debts);
·payment by him of one credit card debt; and
·payment by the respondent of all other credit card debts.
However, when he addressed the Court in February 2012, he appeared to be simply seeking an allocation to him of a reasonable percentage of the net value of the asset pool. He was not specific about what orders would achieve that, but it was clear that he was hoping to salvage something from the disaster that their financial situation has become.
The wife’s Response, drawn by her former solicitors, sought orders that the husband transfer all the assets to her, with her being liable for all the debts. However, at the hearing she was seeking orders that would provide the husband with none of the assets but still have him liable to meet some of the parties’ debts. In other words, she was seeking orders that would give the husband a minus percentage of the net value of the assets.
Unfortunately, neither party had legal representation at the hearing. The High Court of Australia has said that a “frequent consequence of self-representation is that the court must assume the burden of endeavouring to ascertain the rights of parties …”[1] and that proved to be the case in this matter.
[1] Neil v Nott and Another (1994) 121 ALR 148 at page150
The Evidence
The husband relied upon only one Affidavit,[2] and his oral evidence. The wife relied upon two Affidavits[3] and her oral evidence.
[2] Filed 26 August 2011
[3] Filed 5 September 2011 and 31 January 2012
An Affidavit was also provided by the wife’s father, but he was not cross examined.
I had the opportunity to observe the parties while they were giving their evidence, and I find that they are both generally honest. However, I also find that their differences are generally differences of perspective. Unfortunately their perspectives appear to have changed with time and I will refer to that in more detail below.
While the parties do not necessarily share the same perspective in relation to many things, where I refer to any fact in these Reasons, it should be regarded as a finding of fact unless a contrary intention is clear from the context.
Background
The parties commenced cohabitation in September 1991 and they married in March 1994. They separated in mid 2009 but lived under the same roof until early 2010.
There is one child of the relationship. She is aged 13 years and lives with the wife.
The day before the parties got married they signed a prenuptial agreement which set out their intentions in the event of a marriage breakdown (“the prenuptial agreement”). The wife’s lawyer had sent the prenuptial agreement to the wife only three days before the parties were married, so I accept the husband’s evidence that he first saw it on the day before the wedding. I also accept his evidence that he considered the prenuptial agreement to be a binding document at the time that he signed it.
However, the law is clear that it is not a document that binds the Court or fetters its discretion in any way. Part VIIIA of the Family Law Act 1975 (“the Act”) deals with financial agreements but the sections in that Part were not added to the Act until 2000 and did not have retrospective effect. Notwithstanding that, agreements under Part VIIIA require both parties to receive independent legal advice and it is clear that the husband did not seek or receive any independent legal advice about the prenuptial agreement.
Having said that, the prenuptial agreement is still a useful document, in that it gives some information to the Court about assets brought into the marriage and the parties’ intentions at that time. However, as I commented during the hearing, a lot has happened since then, not the least of which is that the parties are the parents of a 13 year old daughter.
I am wary, however, of blindly accepting the values of assets as set out in the prenuptial agreement because it would clearly have been a document prepared on instructions from the wife alone.
In his Affidavit the husband concedes that the wife introduced significant assets at the start of their marriage, and for convenience I will use shorthand terminology to describe the real estate, because the parties will understand what I mean.
The wife’s assets at the time of marriage were:[4]
[4] See the prenuptial agreement.
Property N Road $110,000 Property R (net of mortgage) $46,675 No.1 Property E (net of mortgage) $43,510 No. 2 Property E (net of mortgage) $15,286 Property B $31,000 Furniture (including antiques) $40,000 Nissan $62,000 Cash $25,000 Total $373,471
It is common ground that the wife’s ability to introduce those assets resulted from her having a lottery win of more than $400,000 in 1991.
The husband’s assets at the time of marriage were:[5]
[5] See the prenuptial agreement and paragraph 18 of the wife’s first affidavit.
Property R (net of mortgage) $30,000 Falcon $2,000 Half interest in stock car $10,000 Furniture $5,000 Total $47,000
The husband says that he also had a superannuation interest that would have had a greater value than the sum of $2,000 mentioned in the prenuptial agreement. Although he is unsure of the value of that superannuation at that time, Exhibit “H2” shows clearly that he had an entitlement exceeding $106,000 by August 1998. Consequently, I accept that his superannuation entitlement in 1994 was substantially greater than $2,000.
At the time that the parties commenced cohabitation the husband was employed full time as a (omitted). He later changed to a 40 week per annum roster. The wife now complains about that, but I am satisfied that the change would have been to their mutual advantage at that time, because the wife then had a school aged child from a previous relationship and the change in roster enabled the husband to have all school holidays off work.
The parties started a business and the husband subsequently resigned from his employment. The parties now dispute the circumstance of the husband’s resignation, but I accept that it was a joint decision at that time because it allowed the husband to work in the business and access his superannuation which had a gross value of nearly $107,000. I accept that some tax was paid on the superannuation payments received by the husband but, unfortunately there is a dearth of documentation to assist me about the net amount received.
I also accept that the husband was engaged in carrying out maintenance and renovations on the wife’s properties and his resignation from full time employment also gave him more opportunity to do that.
The parties borrowed money to be able to buy the business premises at Property K, those borrowings were secured by mortgages over Property N Road and one of the Property E properties.
It is a sad fact that in recent times the business has not been able to meet all the parties’ financial obligations. Virtually all of their borrowings are in arrears and creditors are pursuing legal action. Unfortunately, the wife has adopted a “head in the sand” attitude to their financial plight, and she volunteered that for months she had not even been opening business mail. It therefore does not come as a surprise to me that she appeared not to know why there was a GIO judgment debt in the approximate sum of $1,400.
In early 2010 the husband again obtained outside employment and he remains so employed.
Relevant Law
Section 79 of the Act sets out the matters that the court must take into account when considering what orders should be made for the alteration of the property interests of parties. They include:
a)the financial and non-financial contributions made directly or indirectly by or on behalf of each party or by a child to the acquisition, conservation or improvement of any property of the parties;
b)the contribution made by a party to the welfare of the family including any contribution made in the capacity of homemaker or parent;
c)the effect of any proposed order upon the earning capacity of either party; and
d)the matters referred to in sub-section 75(2) as far as they are relevant.
The general approach to the determination of a property settlement application has been well established by authority[6]. It is essentially a multi-step process. The first step is to identify the property, liabilities and financial resources of the parties (generally at the time of the hearing). The second step is to evaluate the contributions made by the parties as defined in section 79(4) of the Act and the third step is to consider those matters contained in section 75(2) that are relevant.
[6] See Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and Coghlan (2005) FLC 93-220
In determining what order the court should make under section 79, the court must be satisfied in all the circumstances that it is just and equitable to do so.[7] It is the justice and equity of the actual orders that the court must consider and this has sometimes been referred to as “the fourth step”.[8] In Russell v Russell, the Full court said:
Furthermore, it must be remembered in this regard that under s79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered. [9]
[7] See Sub-section 79(2)
[8] See Hickey (2003) FLC 93-143 and Russell v Russell(1999) FLC 92-877
[9] (1999) FLC 92-877 at page 86,439
However, I agree with Federal Magistrate Walters that “the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and there is no fourth step in that sense.”[10]
[10] OSF and OJK (2004) FLC 93-191 at paragraph 16
The asset pool
The assets of the parties are:
Asset Ownership Value Property K Joint $475,000 Property N Wife $470,000 Property B Wife $290,000 Property E Wife $240,000 Furniture (including antiques) Wife $40,000 Nissan Wife $6,500 Business stock Company $80,000 Jeep Company $14,000 Suzuki Husband $500 Superannuation Husband $4,000 Total $1,620,000
In relation to those asset values that were not agreed, I make the following comments:
a)The wife conceded that her furniture including antiques had a value of $40,000. However, she commented that the antiques were given to her and I gained the impression that she felt they should be excluded from the asset pool. In my view, they should be included but the fact that they were given to her prior to marriage will be taken into account in my assessment of the parties’ contributions below.
b)The acceptance by the wife of the value of the Nissan at $6,500 is an admission against her interests, so I accept that as a fair value. Similarly, I accept that the jeep is worth $14,000.
c)I have accepted the wife’s value of the business stock, which is significantly lower than the figure suggested by the husband. While I accept that stock figure is “at cost”, I note that:
i)Both parties appeared to concede that some of the stock is “dead stock” which has been difficult to sell; and
ii)There will be some cost in disposing of the stock in any event. It seems likely from the parties’ evidence that the best way to dispose of the stock will be by internet sales and, if the wife is to dispose of it, she may need some technical assistance to get that up and running.
The agreed liabilities are as follows:
Liability Debtor Amount Mortgage – Property K Joint $298,822 Mortgage – Property E & Property N Wife $488,100 Westpac Credit Card Husband $23,083 Jeep loan Joint $13,819 Westpac Mastercard Wife $4,087 GE Line of Credit Wife $12,500 ANZ Mastercard Wife $16,500 GE Mastercard Wife $12,500 Myercard Wife $10,000 Citibank Gold Card Wife $5,000 Citibank Line of Credit Wife $10,000 Water Bill – Property K Joint $4,293 Rates - – Property K Joint $9,490 Accountancy fees Joint $2,029 Security costs Joint $629 ASIC Joint $800 ATO Joint $29,165 Land tax Joint $4,275 GIO - Judgment debt Joint $1,404 Business creditors Joint $33,033 Arrears of school fees Husband $5,498 Total $985,027
As at 24 January 2012 there were school fees owing to the private school that the parties’ daughter attends. I have only included the arrears at that date in the table above, and not the anticipated fees for this school year. I shall comment about the child’s attendance at that school below.
Consequently, the net value of the asset pool is $634,973. However, given that the parties’ financial plight is deteriorating day by day, it is likely that the real net value is in the order of $600,000.
Contributions
As can be seen from paragraphs 17 to 20 above, the wife’s initial contributions were significantly greater than those of the husband.
After the parties started living together, the husband was employed as a (omitted) and the wife worked for various employers from time to time.[11] I accept the husband’s unchallenged evidence that there were significant periods when the wife did not work for an external employer. However, I note that the wife would still have been receiving income from her investment properties during those periods.
[11] See paragraph 6 on page 10 of her second affidavit.
In early 1998 the parties started a business known as “(omitted)” (‘the business”).[12] It was initially run from their home as an “in home” (omitted) business. The wife organised the buying of stock and people to sell it. After a short time the business started to grow and, because the husband was working split shifts at times, he was also able spend time between his shifts packing boxes, attending to paperwork and doing other things on behalf of the business.
[12] The business appears to have been conducted by a partnership and by a company, but because the parties were not represented by lawyers, the line between the activities of those entities is a little unclear.
Later in 1998 the parties expanded the business by moving it to one of the wife’s investment properties. The wife now disputes that it was agreed that the husband would cease working as a (omitted) at about that time, but I am satisfied that it was a mutual decision that allowed the husband to put more effort into the business and into assisting with the upkeep of their various properties.
The parties dispute how much they each contributed financially during their relationship. While I accept that each of their incomes fluctuated from time to time, I am satisfied that they each applied those incomes to their mutual benefit. In this regard, that is an appropriate inference to make and I adopt the view taken in Parshen & Parshen by their Honours Ellis, Finn and Purdy JJ, where they said:
In our view, in the absence of evidence to the contrary, it should be inferred in proceedings pursuant to the provisions of s79 that moneys howsoever received by a party during the course of the parties’ cohabitation, are used by that party for the benefit of the family unit. Such moneys, in those circumstances, thus constitute a financial contribution by the party who received the moneys. [13]
[13] (1996) FLC 92-720 at page 83,665
In his affidavit at paragraphs 36 to 46, the husband sets out non-financial contributions that he made during the relationship. In her response to those paragraphs in her second affidavit, the wife clearly sought to belittle his contributions. I do not choose to reproduce all of his and her comments here, but say that I am satisfied that the husband did do what he said he did. It is clear that he did much in relation to maintenance and renovation of the various properties. However, that is not to say that the wife was not also making significant non-financial contributions; clearly she was.
Unfortunately, the parties’ contributions after separation have not been enough to “keep the wolf from the door”.
The wife clearly blames the husband for a failure to contribute to the parties’ debts post-separation. She appears to imply that his failure is why “the debt has spiralled out of control”.[14] However, during an earlier mention of this matter on 4 November 2011, the wife made it clear that she did not want him to stop paying their child’s expensive school fees, notwithstanding that the husband had indicated that he could not afford to pay both debt and school fees.
[14] See page 13 of her second affidavit, under the heading “The future”.
Like the husband, I am a bit bewildered about why the wife would close the business shortly before Christmas 2011. I accept his evidence that it was normally the busiest time of the year for the business. It seems logical that if she had kept the business open during a traditionally busy time in the retail industry, she may have been able to reduce the level of unsold stock and pay off some of the debt. Instead, the parties now have business premises that are not producing the income that they should, and they have creditors who naturally want to be paid what they are owed.
Unfortunately, the wife does not appear to accept any personal responsibility for the perilous financial state in which the parties now find themselves. In addition to blaming the husband, she blames the local council for a zoning difficulty in relation to the business premises in Property K. It is not the function of this Court to even assess those claimed zoning difficulties. The simple fact is that the parties’ financial situation is worsening by the day because they do not have the incomes to meet their debt repayments.
However, neither party is completely blameless for the situation in which they find themselves. In this regard, it is clear that they have both been willing to let their debts mount up, but they have not been prepared to accept the reality that they cannot afford to keep their child enrolled at an expensive private school. The husband took over sole responsibility for the payment of those fees in March 2010 and his current periodic liability is $1,742 per month.[15] While I appreciate that attendance at a State school is not completely without cost, if the parties were to enrol their daughter in a State school, a significant proportion of that $1,742 per month would be available to pay off debt.
[15] See Exhibits “H3” and “H1”
Overall, I find that up until quite recently[16] the parties were each “pulling their weight” in terms of effort and endeavour,[17] and their contributions during their relationship should be given equal weight (apart from the significantly greater initial contributions by the wife detailed above).
[16] Late 2010 or early 2011
[17] See Bigelow & Reuter [2006] FamCA 1455 at paragraph 25
Some past decisions of the Family Court of Australia have suggested that initial contributions can be “eroded” over time. In Money and Money [18] the dissenting judge, Fogarty J had said:
In an appropriate case, in my view, an initial substantial contribution by one party may be ‘eroded’ to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party. [19]
[18] Money and Money (1994) FLC 92-485
[19] At page 81,054
The Full Court in Bremner and Bremner [20] approved that approach of Fogarty J. However, in Pierce v Pierce [21] the Full Court said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all the other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. [22]
[20] Bremner and Bremner (1995) FLC 92-560
[21] Pierce v Pierce (1999) FLC 92-844
[22] At page 85,881
In my view, it is appropriate to give a weighting to those greater initial contributions by the wife in the order of 25%. In this regard, I note that three of the properties brought into the relationship by the wife are still part of the asset pool.[23]
[23] Property N, Property E and Property B
Sub-section 75(2) factors
The husband is nearly 48 years old. His evidence was that shortly prior to the hearing he had received a promotion at work, lifting his salary to $66,800 per annum.
The wife is 47 years old. She is in receipt of Centrelink benefits.
The parties’ teenage daughter lives with the wife but the husband is paying her school fees. As a result, the Child Support payable by the husband has been reduced by $100 per week, so effectively the wife is contributing $433 per month towards those school fees. Clearly, the wife can ill-afford to lose that $100 per week, so that provides yet another good reason for removing the child from the expensive private school that she is currently attending.
In my view, there should be a further 12.5% adjustment in favour of the wife. That is mainly because the husband has the greater income and the wife has the greater burden of caring for their child,
Discussion
I have stated above that there should be adjustments in favour of the wife totalling 37.5% of the net value of the assets. On that basis, the wife would receive 87.5% and the husband would receive 12.5% of that net value.
I have also stated above that the likely net value of the asset pool is in the order of $600,000. If the husband is to receive 12.5% of that, he would retain assets with a net value of $75,000.
The husband retains his Suzuki and his superannuation worth a total of $4,500, but he also has a personal credit card liability of approximately $23,000. That means that he is approximately $18,500 “in the red”. Consequently, he would need to receive assets with a net value of $93,500 if he is to retain 12.5% of the net value of the asset pool.
Unfortunately, there is no simple solution to the difficulties in which the parties find themselves. Clearly, their creditors will not wait forever, and at least one has already taken legal action to recover what is owed. Although it is quite clear to me that the only real solution is for real estate to be sold within a reasonably short time frame, I gained the clear impression that the wife will not willingly sell any real estate in her sole name and it is unlikely that she will be very cooperative in relation to a sale of the jointly owned business premises. I do not understand her attitude, but it is symptomatic of the “head in the sand” approach that I referred to above.
I am therefore of the view that the only way to do any justice between the parties is to immediately transfer all the business stock to the husband to allow him to sell it. I have already concluded that the stock should realise approximately $80,000. If it only realises that sum, it would only give the husband an approximate total of $61,500 after deduction of his credit card liability. That would give him only slightly more than 10% of the total net value of the asset pool.
I therefore consider it appropriate for the Jeep to be transferred to the husband, subject to its loan liability. The husband can then sell it and pay off the loan for which he is jointly liable. That may result in him making a small profit.
I note that the husband was of the view that both the stock and the Jeep were worth more than the figures that I have attributed to them. If he is right, he might be able to realise the 12.5% that I consider to be appropriate.
The wife should then retain all the real estate and be responsible for all liabilities other than the husband’s personal credit card debt and the Jeep loan.
Conclusions
The settlement that I have proposed above is likely to fall short of providing the husband with 12.5% of the net value of the assets. However, I cannot see any better way of achieving a just and equitable outcome. If something is not done quickly to resolve the parties’ own “debt crisis”, the parties will both be overwhelmed by it.
While I have no confidence that the wife will sell real estate in time to prevent her being overwhelmed, all I can do is make that suggestion.
Section 81 of the Act provides that, as far as practicable, I should make orders that will finally determine the financial relationships between the parties and avoid further proceedings between them. It is with that section in mind that I will make orders to provide for what I have set out above.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Roberts FM
Date: 15 March 2012
0
2
1