GARIBALDI & GARIBALDI
[2014] FamCA 527
•16 July 2014
FAMILY COURT OF AUSTRALIA
| GARIBALDI & GARIBALDI | [2014] FamCA 527 |
| FAMILY LAW – PROPERTY – Long marriage - Where the parties have a negative asset pool – Where the majority of the parties’ assets are superannuation entitlements not currently available to pay outstanding debts – Where the husband has used company funds to pay expenses and has accrued a taxation liability – Whether certain items should be included in the pool of matrimonial assets and liabilities for division between the parties – Where contributions to date of separation are considered equal – Whether contributions of the husband’s father should be considered as contributions in favour of the husband - Where a small adjustment is to be made in favour of the wife having regard to section 75(2) of the Family Law Act 1975 (Cth) and just and equitable considerations |
Family Law Act 1975 (Cth) ss 79(4), 75(2)
| Bevan & Bevan [2013] FamCAFC 116 | ||
| APPLICANT: | Mr Garibaldi | |
| RESPONDENT: | Ms Garibaldi |
| FILE NUMBER: | PAC | 924 | of | 2012 |
| DATE DELIVERED: | 16 July 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Hannam J |
| HEARING DATE: | 8 – 9 April 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Stenhouse |
| SOLICITOR FOR THE APPLICANT: | Ws Folbigg Pty Limited |
| COUNSEL FOR THE RESPONDENT: | Mr Cairns |
| SOLICITOR FOR THE RESPONDENT: | McCabe Partners Lawyers |
Orders
Within fourteen (14) days of the date of these Orders the husband do all things and sign all documents to transfer his interest in the jointly owned IAG shares to the wife.
Within fourteen (14) days of the date of these Orders the wife transfer to the husband any interest she has in the company S Pty Ltd.
The husband be solely liable for repayment of the outstanding monies owed to T School and the husband is to indemnify the wife in respect of this liability.
Other than as provided for in these Orders:
(a)Each party is to retain and be solely entitled to all property in his or her possession or control as at the date of these Orders, including but not limited to money held in bank accounts, superannuation entitlements and items of personalty; and
(b)Each party is solely liable and is to indemnify the other party against any other liability to which they are solely responsible for.
All outstanding property applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Garibaldi & Garibaldi 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: PAC 924 of 2012
| Mr Garibaldi |
Applicant
And
| Ms Garibaldi |
Respondent
REASONS FOR JUDGMENT
Introduction
For much of their long marriage Mr Garibaldi and Ms Garibaldi lived beyond their means. When their marriage ended after 25 years they were left with significant debts and virtually no assets.
The parties seek orders in relation to their joint property. I am required to decide what, if any, property is available to be distributed between the parties, whether it is just and equitable to make a property settlement and if so how the property interests should be altered.
Background
Circumstances during the marriage
The parties were married in 1986.
The husband, who is now 52, is qualified as an accountant. At the date of the marriage he was earning an annual income of around $20,000, which increased to $30,000 from September 1988.
At the time of the marriage the husband owned a house in Suburb Q and had a $20,000 term deposit.
At the time of the marriage, the wife, who is now almost 51, was employed at IBM and had an annual income of $20,000, which increased to $47,000 by 1989.
Initially, the parties lived in the home in Suburb Q, which had been purchased by the paternal grandfather, but was registered in the husband’s name. The property was un-encumbered so they received the benefit of living in a home provided by the husband without having to pay a mortgage. In 1989 the husband sold this property to his father for $150,000.
The parties moved to Country U in around September 1989. Just prior to leaving Australia the husband and wife jointly purchased a home at O Street, Suburb P for $240,000. The funds for the purchase were made up of $150,000 from the sale of the Suburb Q home, the $20,000 from the husband’s term deposit and a loan of $70,000 secured by a mortgage. While in Country U the parties rented out the O Street property and the rent was used for mortgage repayments.
While in Country U the husband was employed as an accountant earning an annual salary of $45,000. A car, accommodation, electricity, house staff and expenses were also included in his income package.
Following some significant difficulties in conceiving, including the birth of a stillborn baby, the parties’ first child, V was born in 1990. After V was born the wife began working at a local international school in Country U.
The parties returned to live in Australia in mid-1991 and the husband received $40,000 in contract payments at the end of his Country U contract.
The family settled in the Suburb P area of Sydney for the remainder of the marriage.
Upon returning to Australia the husband initially worked in an engineering company and earned $48,000 annually and was provided a vehicle.
At around the time of the birth of the second child, W in 1992, the wife left her former employment and received the sum of $25,000 as a voluntary redundancy payment.
The wife then started working three days per week from home and earned an average of $1,500 per week.
In 1992 the husband started consulting and selling software though his income is unknown.
In 1994 the husband registered a company known as X Pty Ltd.
In May 1995 the parties borrowed a further $10,000 and took out a new mortgage. This money was used for the payment of family debts and some small home improvements.
In 1995 the third child of the marriage, a daughter, Y was born.
All of the parties’ three children were born prematurely and had health problems in the first seven years of their lives, including hospital admissions. Due to these health issues a non-means tested allowance from Centrelink was paid to the parents based on the number of hours of additional care required for the children.
The wife was responsible for the day to day care of the children throughout the marriage. The husband attended special events at pre-school and provided some transport for the children and attended special school events and weekend sport. In addition to caring for the children, the wife carried out household tasks including laundry, cleaning, garden maintenance, most of the grocery shopping and preparation of meals. The wife was also involved in activities associated with the children’s school and was a member of the Board at the children’s private primary school.
In 1997 the parties sold the O Street property and received $240,000 after deducting the costs of the sale. They purchased a property at R Street, Suburb P for $420,000 according to the husband or $392,500 according to the wife. This property was paid for by the proceeds of the O Street property and a loan secured by a mortgage over the property.
Between about 1999 and 2001 the husband worked in a family business on a full-time basis and earned an annual salary of around $130,000 and was provided with a vehicle.
In 1999 the parties borrowed an additional $175,000, with the entire loan of $460,000 secured by a mortgage to a new lender. Around $100,000 of this amount was spent on the installation of a pool and associated improvements.
In 2000 the wife returned to study at university and completed a graduate certificate at the Z University.
In 2001 the husband left the family business. The husband sold his shares in the company operating that business for $100,000 to be paid at $1,000 per week plus interest at the company’s overdraft rate. The departure from the family business was also the subject of litigation and, as a result, the husband received a judgement for $60,000.
The husband purchased a business franchise known as AA Pty Ltd for approximately $70,000. The franchise went into liquidation a few months after the purchase.
Each of the three children attended private primary and high schools. Accounts for the two high schools, BB School and T School, were regularly not paid when they fell due and arrears accumulated over many years.
The parties lived beyond their means
From at least 2000 it appears that the parties were incurring expenses beyond their capacity to repay their debts, though the wife’s knowledge of their financial position is in dispute and is dealt with later in these reasons.
In 2000 the parties borrowed a further $100,000, bringing their total debt secured by the mortgage to $560,000.
In September 2003 the husband registered another company, S Pty Ltd, through which he commenced to operate a business. The husband continues to operate this business.
In 2004 the wife worked full time and earned approximately $52,000 in that year. Subsequently, she worked part time.
In 2006 the parties borrowed a further $100,000, increasing their mortgage to $640,000.
In 2007 the parties obtained a loan of $25,000, which was secured by a second mortgage.
In 2008, the parties refinanced again, increasing their loan to $750,000 from which they discharged the existing loans and accrued interest and paid for various fees associated with the loan and mortgage.
The parties sold the R Street property in August 2010 for $981,000, from which all costs associated with the sale were paid.
The separation
The parties separated on 13 December 2010 and were subsequently divorced. After separation, the wife moved to a rented house with the three children. The wife at this stage was still working only part time and earning approximately $400 per week, which was insufficient to cover the rent, so the husband assisted the family financially. The husband paid around $20,000 in rent for the home in which the wife and children lived during 2011.
At the time of separation the youngest child, Y was 15 and still at school. The older two boys were adults, studying at university.
After separation
The wife began working full-time in November 2011. From 2013 she worked as an assistant manager earning $78,000 per year. From January 2014 she has had a permanent appointment as an assistant manager and has earned $104,000 per year since that date.
The wife and the children continue to live in a rented property. The wife has paid all rent from early 2012, together with all household expenses including utilities, insurances, food and the household’s day to day expenses. She generally receives a contribution of $100 per week from each of the older children.
The husband has paid child support since separation, though he had an outstanding debt of $5,045 at the time of the hearing.
In addition to the rent for 2011 the wife agrees the husband has also paid for health insurance for the children (and for herself up until mid-2012) and approximately $14,000 for Y’s expenses after separation. The payments made by the husband for family expenses other than school fees total approximately $44,000.
The husband claims other amounts, which are disputed by the wife, but there was no evidence in his trial affidavit or adduced orally to support the disputed payments.
The husband is the sole director of the companies S Pty Ltd (which he continues to operate) and X Pty Ltd, which is deregistered, (“the husband’s companies”). The husband’s companies both have a significant tax liability as PAYG and GST have not been paid as required for a number of years.
T School debt
The parties’ daughter Y attended T School. In accordance with the enrolment application each of the parents is responsible for payment of school fees. However, these were not always paid as they fell due. At the date of separation in December 2010 around $7,000 was owing to T for school fees.
According to an exchange of emails between the parties, the wife told the husband in July 2011 that she could not afford to pay the school fees and if the husband did not pay them she would withdraw Y from T in 2012. The husband agreed that he would pay for the school fees so Y could remain enrolled at the school. The husband’s child support liability was reduced as a result of some payments towards the school fees. In the email exchange the husband did not suggest that he was experiencing any financial difficulty at the time related to the payment of school fees or generally. Documents from T School indicate that at the time of correspondence the fees were $7,790 in arrears. In the course of the proceedings the husband conceded through his counsel that he had agreed to assume responsibility of payment of school fees for Y from mid-2011. The husband has made payments of $41,631 to T since the date of separation and the majority of this amount ($34,331) was paid after the July 2011 agreement.
BB School debt
The parties’ sons attended BB School. Both parents signed the application for enrolment and were equally responsible for the payment of school fees. The records of the school, which date from 2005, indicate that at all times there were significant amounts in fees outstanding. An entry of 1 March 2010 indicates that the balance outstanding then was $59,892.70.
On 12 May 2010 the husband told the wife that the marriage was over and that they needed to sell the house. He also informed her that the debt to BB was over $65,000. The parties signed a Deed of Release between the school and themselves on 4 June 2010. Under this Deed the parties agreed to pay a debt of $72,000 to BB School by instalments of $4,000 within seven days of the execution of the Deed and the balance by payments of $1,400 per month.
The repayments were not made in accordance with the Deed and the school brought proceedings against the parties and obtained a Judgement debt against them in the Local Court on 5 August 2010 for the sum of $76,665.
A Bankruptcy Notice was issued against each of the parties on 27 February 2012 for the sum of $89,356. As a result of the receipt of the Bankruptcy Notice the husband “engaged in settlement negotiations with [BB]” for him to pay the debt.
There is no evidence of the payment agreement between the husband and BB School and it is unknown whether it affects the Judgment entered against both parties. The wife was not aware of the further payment arrangement entered into by the husband made after the Judgment was entered on 5 August 2010.
The BB School account history records indicate that the only payments received by the school since February 2012 for were one for $15,500 in September and $500 in October of that year. There is no evidence of any other payments having been made since that date. In total the husband has paid $18,800 in payments since the date of separation.
Matters in dispute
Should the husband’s companies’ tax liabilities be the included in the balance sheet?
At the time of the hearing the husband’s companies owed $235,054 in unpaid tax. The husband is the sole director of S Pty Ltd through which he continues to operate his business. X Pty Ltd has been deregistered. The companies it is agreed have no value. According to the expert valuer, the reason that the companies have no value is because the principal asset of X was a loan to S and the principal asset of S is a loan of $625,200 to the husband and these loans, in the expert’s opinion, are largely unrecoverable.
The husband includes his companies’ tax liabilities in the joint balance sheet. Although in his proposed orders he will bear responsibility for the payment of these liabilities, he only arrives at that position by first including the tax liabilities as part of the matrimonial pool of property.
It is central to the husband’s case, that from at least the time of separation, the family’s income was insufficient to meet the family expenses and that the wife was aware of this. Rather than pay superannuation and tax in respect of his business and its employees it is contended by the husband that he borrowed money from his companies and used it for family expenses. He also contends that as a Director he will be ultimately responsible for the companies’ tax liability. He argues that for these reasons the tax liability of his companies should be included in the balance sheet.
The wife’s case is that she was not aware of the husband’s companies unpaid tax liabilities and loans from the companies to the husband. It is her position, as I understand it, that these liabilities relate to the companies alone and that she should not be responsible for the husband’s poor business decisions.
The first factual matter that I must resolve is whether the husband did obtain loans from his companies to pay the family expenses in the post-separation period.
There is no specific evidence in the husband’s affidavit that he borrowed from either of his companies during the period the parties were married. He asserted for the first time under cross-examination that he began borrowing from S in “say 2006 or 2007”. Later in cross-examination he said that he did not have a recollection of advancing himself directors loans in 2006. Critically, there is no evidence concerning the amount of the loans at the date of separation.
The husband said in his affidavit that he funded family expenses that he could not afford from his income during the marriage through refinancing the parties’ joint loans and mortgages on numerous occasions. It also appears that on occasions the reverse occurred, in that money borrowed by the parties and secured by a mortgage on their home was used to benefit S. For example in May 2008 in a letter from the husband to a lendor, CC Pty Limited, he says that some of the money to be borrowed by the parties will be used to “provide working capital to my business (S)”. Further, the husband says in his affidavit that he paid some of the S business debt from funds received from the sale of the parties’ home in August 2010.
It is not until after the parties separated that it appears the husband used the company funds as a regular way of paying private expenses and submissions in relation to the loans are directed at this period. Even then, the husband does not actually say in his affidavit that he borrowed from his company but refers to “falling behind” on the payment of tax and superannuation and making payments for his wife and children, rather than making payments to the ATO.
The other evidence in relation to the loans from the companies to the husband is contained in the expert valuer’s report and financial statements annexed to the report. Although there is no schedule of loans, the valuer sets out the shareholder loans made to the husband from S detailed in the table below.
Shareholders loans made to S
Period
Total loans
Actual in year
Year ended 2011
$503,668
Not known
Year ended 2012
$586,129
$82,461
Year ended 2013
$625,500
$39,371
Overall, the general tenor of the husband’s evidence in relation to using his company’s money to fund personal expenses is that he treated the company’s money as if it were his own rather than as money lent to him by the company which will be repaid by him. The funds he received were not loans in a formal sense in that they were never documented. The husband has not repaid any of the interest (which has been capitalised), or principal, though he insists he has an intention to do so. The husband also does not list the loan from the company as a liability in his financial statement.
The financial statements of the companies indicate that loans were not repaid by the husband in the past. For example, the financial statements of X Pty Ltd, which is now deregistered, indicate that in 2009 there was a non-current loan to the husband of $359,741.85 and a loan to S of $185,709.10 (total of $545,450.95) and there is no evidence that these loans have ever been repaid.
Although the husband makes a general statement that he, in effect, was required to use money from his business for joint expenses in the post-separation period, as the expenses were so great, I am not satisfied that he was only able to meet family expenses by using the companies money in this way. This arrangement was, in my view of the evidence, something he chose to do.
In the same way that the husband says that he and the wife lived beyond their means during the marriage, I am satisfied that the husband lived beyond his means in the post-separation period in the sense that the salary he paid himself was insufficient to meet his expenses. The S financial records indicate that the husband drew $52,000 as a salary for the year ended 2011, $62,000 for the year ended 2012 and $75,000 for the year ended 2013. However, according to the expert valuer, a commercially commensurate salary package for the husband would have been $97,383 in the year ended 2011, $100,395 in the year ended 2012 and $103,500 in the year ended 2013. In other words, the husband drew a lower salary over these years and topped up his income by making significant drawings on the companies’ money.
It is a central plank in the husband’s argument that he was required to draw on the companies’ money to the extent that he did to pay family expenses, with the result that the company had insufficient funds to meet its tax liabilities. I do not accept this submission for the following reasons.
Although the husband’s salary was insufficient to meet his total expenses, this is because he choose to draw a less than commercially commensurate salary. I am satisfied that the amount he drew from his company in total was more than sufficient to meet his total expenses. That which is known about the husband’s post-separation income and expenses is set out in the table below:
Husband’s post-separation income and expenses
Period
Salary paid from S
Drawings from S
Income from other sources
13 December 2010 to year ending 30 June 2011
$29,000
(29 weeks of total $52,000)
Unknown
Unknown
Year ending 30 June 2012
$62,000
$82,461
$15,000 (loan from aunt)
Year ending 30 June 2013
$75,000
$39,371
Unknown
1 July 2013 to date of hearing (from financial statement)
$58,400
($1,460 per week x 40)
Unknown
Unknown
Subtotal:
$224,400
$121,832
$15,000
Total
$361,232
In total, the husband received at least $361,232 from all sources in the post-separation period, though this sum is likely to be significantly more as the drawings from S from 13 December 2010 to 30 June 2011 are unknown, as are the drawings from 1 July 2013 to the date of the hearing.
The family expenses which have been paid by the husband from the date of separation to the date of hearing are $104,431 ($44,000 miscellaneous expenses, $18,800 BB School and $41,631 T School), an average of $600 per week throughout the period. The husband’s personal expenditure throughout the whole of the period is unknown, though his Financial Statement filed in March 2014 states that his total personal expenditure is $1,468 per week. His weekly expenditure includes a small amount ($50) for Y’s expenses and health insurance, which he also treats as family expenses. He declares a total weekly average income of $1,460, which amounts to a yearly salary of $75,000, consistent to the salary paid to him from S in the year ended 30 June 2013. However, he fails to declare in his financial statement any drawings from S.
The total amount known to be available to the husband from all sources just exceeds the $600 per week needed for family expenses and the personal expenditure set out in his financial statement. There are also the unknown drawings for the two periods indicated. If these amounts are similar to the drawings which are known, the total amount available to the husband would have well exceeded his total expenditure.
The husband’s contention that the companies’ tax liability be included in the joint balance sheet is firstly based upon the Court finding that the wife’s position after separation improved due to the availability of funds that should have been paid towards the companies’ tax liability. It is submitted that it would be a just outcome for her to “take the good with the bad”. In my view, there is no scope for this principle to operate in the post-separation period for the following reasons.
There is no evidence that the wife at any time was aware of the tax liability of husband’s companies. The husband only gives evidence of one conversation with the wife regarding the topic of tax liability in his affidavit. It is as follows:
41. … I said to the wife on several occasions during the marriage “look, [Ms Garibaldi] I have got this tax bill building. The day of reckoning is going to come. We can’t keep putting this off.” She replied, “what do you want me to do. I cannot do anything about it.”
The husband says in his affidavit that tax debts for his companies “accrued during the course of the marriage or while I was supporting the wife post separation from my business income”. He provides no other evidence to indicate when the tax liabilities first arose.
Balance sheets for the husband’s companies which are annexed to the valuer’s report indicate a significant increase in PAYE and GST tax liability from 2011 to 2013, that is, after separation. These records support the contention that the company continued not to meet its tax liability during that period.
The husband gives no evidence of any conversations he had with the wife in the post-separation period about his use of company money and the wife was not cross-examined to suggest that she was aware of any of the financial arrangements concerning the companies at any time. When the wife was cross-examined about her knowledge of the parties’ finances during the marriage, she remained firm that as the husband was an accountant she left financial matters to him and trusted him and assumed he knew what he was doing. She remained firm that she was not even aware that the family was in financial distress until the husband told her he wanted to end the marriage. In any event the cross-examination concerning financial matters related to the wife’s understanding of the refinancing of the mortgage loans and there was no cross-examination concerning the husband’s use of company funds, or the tax liability.
The only evidence covering communication between the parties about payment of expenses in the post-separation period is the exchange of emails concerning the T fees where the husband agrees to pay them and does not indicate he is in any financial difficulty.
Ultimately, the husband had control over the way in which he paid himself. I am satisfied that he chose to do it in such a way that the tax liability of his companies increased due to him paying himself an inadequate salary to meet his expenses and he used the companies’ money to top up his income to an extent that exceeded his total expenses. The remaining expenditure is unexplained. On this basis there is no justification to require the wife to contribute to the companies’ tax liabilities after separation by including this sum in the matrimonial pool.
The husband’s other contention that the companies’ tax debt should be included in the balance sheet is based upon the assumption that the husband as director of the companies will be personally liable to discharge the tax debt. The only evidence in relation to this issue was the oral evidence of the valuer who said that the husband would only be personally liable for the companies’ tax liability if the Tax Office moved to make it the case. Although it was submitted on behalf of the husband that the scheme of the tax legislation imposes personal liability on directors, there is no evidence that any steps have been or will be taken by the Tax Office with the result that the husband in this case will be personally liable for the companies’ tax debts.
For these reasons the husband’s companies’ tax liability will not be included in the balance sheet for the purposes of property settlement orders.
The Law & Discussion
The approach to the determination of an application for property settlement orders is set out in Stanford & Stanford[1], which was considered in detail by the Full Court in Bevan & Bevan[2].
[1] (2012) 247 CLR 108
[2] [2013] FamCAFC 116
The starting point is a consideration of “whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles the existing legal and equitable interests of the parties in the property”.
This involves identifying the existing interests and then considering whether having regard to the particular circumstances before me, it would be just and fair to make orders for the alteration of property interests.
I should next consider the matters set out in s 79(4)(a) to (c) of the Family Law Act 1975 (Cth) (“the Act”), that is, the financial and non-financial contribution made by the parties to the property and to the welfare of the family constituted by the parties.
I must then consider the remainder of the matters in s 79(4), including the matters referred to in sub-section 75(2) so far as they are relevant, and determine on this basis whether there should be a further adjustment to the parties’ contribution-based entitlements.
Finally, I must then consider the justice and equity of the proposed orders. As was said in Bevan (supra) at [86], the just and equitable requirements are “not a threshold issue, but rather one permeating the entire process”.
What are the existing interests of the parties?
There is agreement between the parties as to a number of assets and liabilities and I have made findings concerning certain discrete other issues.
On the basis of those findings, the current interests of the parties are set out in the following table:
LIST OF ASSETS AND LIABILITIES
ASSET HUSBAND WIFE JOINT Joint IAG Shares $5,000 X Pty Ltd Nil S Pty Ltd Nil Wife’s household items $1,500 Wife’s car $8,500 Wife’s bank account $900 Husband’s NIB Shares $8,992 Husband’s car $5,500 Subtotal Assets $14,492 $10,900 $5,000 Total Assets $30,392
LIABILITIES HUSBAND WIFE JOINT Debt to BB School $21,500 $21,500 Debt to T School $15,000 Husband’s loan from aunty $15,000 Husband’s credit cards $8,250 Husband’s child support liability $5,054 Wife’s borrowed superannuation $13,000 Subtotal Liabilities $64,804 $34,500 - Total Liabilities $99,304 Subtotal Net Assets - $50,312 - $23,600 $5,000 Total Net Assets (excluding superannuation) - $68,912
SUPERANNUATION HUSBAND WIFE JOINT First State Super $76,672 Superannuation $88,000 Media Super $5,656 Subtotal superannuation $93,656 $76,672 Total superannuation $170,328 Subtotal Net Assets (including superannuation) $43,344 $53,072 $5,000 Total Net Assets (including superannuation) $101,416
The question to be determined is whether it would be just and equitable to leave the property rights intact having regard to there currently being total assets to the value of $101,416, with the husband’s interests totalling $43,344 and the wife’s interests totalling $53,072.
As was indicated in Stanford (supra) the requirement that it would be just and equitable to make an order is in many cases readily satisfied by observing that at [42]:
… as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. … any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marriage relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the Court make a property settlement order. …
In this case, the parties were married for almost 25 years before separating. Each brought property and/or financial resources to the marriage. Assets were accumulated throughout this time for the common purpose of providing for their life together in their future. That arrangement came to an end upon separation.
Although there is now a very small pool of assets left to be distributed and each parties’ liabilities exceed the assets (other than superannuation), as both parties seek adjustment orders but are unable to agree to the adjustment, I am satisfied that it is just and equitable to make orders under s 79 of the Act.
The Balance Sheet
Although I made findings as to the current interests of the parties, which are set out in the table in paragraph 86, there are other matters which require resolution to determine the matrimonial assets and liabilities for the purpose of the property adjustment.
A number of the liabilities, in my view, cannot be regarded as matrimonial liabilities and should be removed from the balance sheet.
The wife has included in the liabilities in the joint balance sheet a sum of $13,000, which she contends was lent by her to the husband from her superannuation fund for the payment of their mortgage. Although the husband does not dispute the wife’s version of the events, as the sums in the wife’s superannuation fund were accumulated during the period of the marriage and were used to pay joint liabilities nothing turns on this advance and this item will not be included in the balance sheet.
The husband has included in the liabilities of the joint balance sheet a $15,000 loan from his aunt. There is no evidence that this loan is repayable and for this reason will not be included in the balance sheet.
There is no evidence that the husband’s credit card debt included in the balance sheet relates to any matrimonial expenses and will be removed for that reason.
The husband’s child support liability of $5,054 is his alone and the wife should not be required to, in effect, contribute to its payment by including it as a matrimonial liability.
Accordingly, the matrimonial interests for the purposes of the property settlement are set out in the following table:
LIST OF ASSETS AND LIABILITIES
ASSET HUSBAND WIFE JOINT Joint IAG Shares $5,000 X Pty Ltd Nil S Pty Ltd Nil Wife’s household items $1,500 Wife’s car $8,500 Wife’s bank account $900 Husband’s NIB Shares $8,992 Husband’s car $5,500 Subtotal Assets $14,492 $10,900 $5,000 Total Assets $30,392 LIABILITIES HUSBAND WIFE JOINT Debt to BB School $21,500 $21,500 Debt to T School $15,000 Subtotal Liabilities $36,500 $21,500 - Subtotal Net Assets - $22,008 - $10,600 $5,000 Total Net Assets (excluding superannuation) - $27,608
SUPERANNUATION HUSBAND WIFE JOINT First State Super $76,672 Superannuation $88,000 Media Super $5,656 Subtotal Superannuation $93,656 $76,672 Total superannuation $170,328 Subtotal Net Assets (including superannuation) $71,648 $66,072 $5,000 Total Net Assets (including superannuation) $142,720
Add backs
The wife had originally included in the joint balance sheet “unexplained mortgage expenditure” which she valued at $300,000 as an “add back” item. In the course of submissions it was conceded that this position could not be maintained and that item has not been included in the balance sheet.
Contributions
Under s 79(4) of the Act, in considering what order should be made in property settlement proceedings, I must take into account the financial and non-financial contributions directly or indirectly made to the acquisition, conservation or improvement of any of the property of the parties and the contributions made to the welfare of the family and the child, including contributions as a homemaker or parent.
There is no dispute that the husband owned a home in Suburb Q, which was unencumbered, at the time the parties were married. Although there is no evidence of the value of the home, the husband sold it to his father for $150,000 three years after the parties were married. The husband also had a $20,000 term deposit, being a total initial financial contribution of around $170,000. When the parties were first married they lived in the husband’s property for about three years and as the property was unencumbered, this provided a significant financial advantage to the parties.
The wife came into the marriage with no assets. Obviously, the initial contribution of the husband exceeded that of the wife.
There is an absence of evidence in relation to the parties’ income throughout much of the marriage. Although at the commencement of the marriage each party was earning a similar annual income, the wife’s income had more than doubled by 1989 and the husband’s had increased by $10,000.
The parties moved to Country U in September 1989 and initially only the husband was employed and earned an annual salary of $45,000, though many other items were included in his income package. During the first year in Country U the wife did not work as the parties experienced significant difficulties in conceiving a child including the birth of a stillborn baby.
After the child V was born in September 1990 the mother began working as a teacher at a local international school, though there is no evidence of her income.
When the parties returned to live in Australia in mid-1991 the husband received $40,000 in contract payments and the wife received a voluntary redundancy payment of $25,000. These sums were used to pay family expenses and indirectly contributed to the accumulation of joint assets.
After the parties returned to Australia the husband initially worked in an engineering company and earned $48,000, but from about 1992 there is no evidence of his income until between about 1999 and 2001. At that stage, the husband worked in a family business on a full time basis and earned an annual salary of around $130,000 and was provided with a vehicle.
There are some periods when the wife’s income was considerable, such as during the unspecified period when she worked three days per week from home writing training programs and earned an average of $1,500 per week. In 2004 the wife also worked full time and earned approximately $52,000 in that year and subsequently it appears she worked part time.
The husband’s salary from 2001 when he left the family business is unable to be determined. He gives no evidence of his income from around 2001 throughout the rest of the marriage or after separation except his income and expenditure, set out in his financial statement and the information that can be gleaned from his companies’ financial statements. Whether the husband applied the entirety of his income during the marriage to family expenses and the accumulation of joint assets is not capable of being determined on the evidence. I am satisfied that the wife’s income was applied to family expenses.
The parties purchased their first joint home for $240,000 in September 1989. They sold this home and used the proceeds together with a loan to purchase their second family home at R Street, Suburb P for $420,000 according to the husband or $392,000 according to the wife. This property was sold in August 2010 for $981,000, an increase in value of over $550,000. Although the property increased significantly in value, the parties’ equity in it did not increase at the same rate as they borrowed and refinanced their loan five times between 1999 and 2008, increasing their debt on each occasion. Each of the loans was secured by a mortgage over the jointly owned property.
Having regard to all of these matters, I am of the view that the financial contribution of the husband throughout the marriage slightly exceeded that of the wife.
There appears to be no dispute between the parties that the wife’s non-financial contribution to the welfare of the family, her contribution as homemaker and in parenting their children, who had somewhat greater needs throughout the first seven years of their lives due to their premature births, exceeded that similar contribution made by the husband.
In addition to being primarily responsible for the day-to-day care of the children throughout the marriage the wife also carried out household tasks including laundry, cleaning, garden maintenance, most of the grocery shopping and preparation of meals. She was also involved in activities associated with the children’s school. The husband did make some non-financial contributions, particularly associated with the attendance at children’s school events and weekend sports.
Taking into account the financial and non-financial contributions, I assess the total contribution made by each party to be roughly similar at the date of separation.
Contributions after separation
So far as contributions after separation are concerned, I have found that the husband made payments other than school fees in support of his children and, to a lesser degree, to his wife of up to around $44,000. These payments included rent for the premises occupied by the wife and children in 2011, health insurance and payments for expenses in relation to Y, who was only 15 years at the time of separation.
In November 2011 the wife gained full time employment and from early 2012 has paid for the rent of $558 per week on the premises occupied by herself and the children. From the date of separation she has paid for all household utilities, food and the children’s day to day expenses. She only receives a small contribution for expenses from her adult sons.
The debts to BB School and T School would ordinarily be regarded as joint responsibilities. However, in the case of T the husband agreed to assume responsibility for the payment of fees from mid-2011. At the time of separation the outstanding debt to T was $7,700 and was $7,790 at the time that the husband assumed responsibility for it. The $34,331 paid by the husband after the July 2011 agreement should not, in my view, be regarded as a contribution to a joint liability as it was a sum he agreed to assume and he received a credit on some of his child support debt due to paying some of these fees.
The balance of $7,300 paid by the husband prior to his agreement to assume responsibility for the debt alone should be regarded as a contribution towards a joint liability.
The BB School debt arose during the currency of the marriage and at the time of separation had reached about $80,000. A Judgment debt was obtained against each of the parties on 5 August 2010 for $76,665, a few months prior to separation. I have found that the husband has paid $18,800 contribution towards that debt since separation, which should be treated as a contribution towards a joint liability.
The husband has also paid child support as required but at the time of the hearing had a child support liability of $5,054.
Having regard to the foregoing, in my view, the parties have made roughly similar financial contributions post-separation but the wife’s non-financial contributions towards the welfare of the family exceeds the husband’s, particularly as she has had the care of Y, who was a dependent school child for three years of that period.
Are payments made by the paternal grandfather contributions to assets?
In his affidavit the husband refers to the paternal grandfather assisting the parties with advances of money throughout the relationship. The husband does not say that the wife was aware of this assistance but states generally that “the monies advanced were used to pay day to day living expenses for the family”.
The husband says that $934,400 in total was advanced by his father and wishes to have all of this sum treated as a financial contribution to the matrimonial assets. However, the documents he annexes appear to indicate that many of the sums may have been advanced for other purposes. For example, the husband refers to one loan from his father of $51,900 to pay to the Tax Office, which appears to relate to the payment of the husband’s companies’ outstanding tax liability. Another sum of $110,000 is said to have been advanced directly to a firm of solicitors to meet the legal costs of a dispute between the husband and his uncle. Other large amounts said to be from the paternal grandfather appear from the records to have been paid directly into the husband’s business account.
Financial records annexed to the expert valuer’s report include a summary of the X balance sheet at 30 June 2009. This included as a liability a loan of $337,200 from the husband’s father. There is no evidence to explain what this loan relates to or how the money was used.
In relation to monies said to have been advanced by the paternal grandfather, the husband annexes various extracts from ledgers said to have been made by his father and deposit slips which he says evidence the advances. Many of the deposit slips do appear to relate to accounts in the parties’ joint names, though others are in the husband’s sole name. Many of the deposit slips also bear the words “DG drawings” or “from Nanna” and a number also bear the word “repaid” and a date. The husband says that these records are in his father’s handwriting.
The husband has not filed an affidavit from the paternal grandfather so it is not clear what was intended to be recorded in the ledgers. In particular, it is not clear that these documents record advances to the parties. It appears that at least some of these records, for example annexure M, relate to payments to the husband alone and most records appear to relate to payments made to the husband’s companies.
The wife gives no evidence of monies provided to the parties from the paternal grandfather, nor was she cross-examined on this issue.
I cannot be satisfied that the paternal grandfather advanced $934,400 or any other quantifiable sum to the parties during the marriage such that this sum should be treated as a financial contribution of the husband. There is no evidence concerning the ledgers from the person who created them and their meaning is unclear. Further, the ledgers seem to a large extent to relate to payments made to the husband’s companies, as do many of the deposit slips. I can be satisfied on the basis of the husband’s uncontradicted evidence that he or his company received considerable sums of money in the order of several hundred thousands of dollars and he personally also received sums of money from his father during the period of the marriage. However, there are no loan account schedules and there is no evidence of how any sums advanced were applied, so they are not regarded by me as contributions to matrimonial assets.
Section 75(2) Factors
Age and state of health of the parties
The wife is 50 and the husband is 52 years old. There is no evidence to suggest that the parties suffer from any ill health and it is reasonable to expect that they both are capable of continuing to earn an income for a number of years.
Income of the parties
The wife is employed as an assistant manager and earns an annual salary of $104,000. The husband operates the business known as S and, while it is agreed that the business has no value due to the outstanding tax liability, the husband continues to operate it, though his total current income is unknown. According to his financial statement, his average weekly income is $1,460, which is an annual income of around $76,000, but he has not included drawings from the company which, on his evidence, he continues to receive. His total salary and drawings in the last two financial years have been $144,461 and $114,371 respectively.
The wife’s superannuation balance at the date of hearing is $76,672 and the husband’s is approximately $95,000.
Financial Resources
The wife says that as the husband is the primary beneficiary of the Garibaldi Family Trust, which as at 30 June 2012 had assets of over $1,000,000, this matter should be regarded as a significant financial resource available to the husband alone. However, the wife’s own evidence demonstrates that the Trust had net assets of only $11,166 as at 30 June 2012. This sum was the same as at 30 June 2011 and the current net assets are unknown. I regard this as a modest prospective entitlement at some indeterminate time. Given the value of the net assets, its significance in the context of this case is negligible.
The wife also submits that a sum of $600,000, described as “balance of super on death of father” in the balance sheet, should be considered as a financial resource of the husband. The wife annexes the balance sheet for the superannuation fund as at 30 June 2011, which shows that there is an accrued benefit to Mr C Garibaldi, the husband’s father, of $571,644.78 being taken as a pension. It was submitted on behalf of the wife that it is reasonable to infer that the husband will be the beneficiary of his father’s estate. The existence and terms of the paternal grandfather’s will is not in evidence. I accept the submission of the husband that the husband has no more than an expectancy under a will and as there is no evidence that the husband’s father has made a will in the husband’s favour and has the incapacity to make any further will, this will not be treated as a financial resource of the husband.
The wife is the primary beneficiary of a testamentary discretionary trust to the value of $21,000, which is a financial resource available to her.
Other facts and circumstances
In light of the generosity of the paternal grandfather in the past in advancing large sums of money to the husband with apparently no expectation for them to be repaid, I am of the view that some consideration should be given to the likelihood that this generosity by the paternal grandfather will continue.
Under s 75(2)(o), although the children of the marriage are over 18 years, they are partially dependent upon the wife and only the two older sons make a small contribution to their expenses. The small amount she receives from her sons helps to defray expenses, but the wife continues to rent a suitable house for herself and children and pays the vast majority of their expenses, though the father does make some small contribution to Y.
The parties are of a state of health and each has a capacity to earn a reasonable similar income. The husband will continue to draw the salary from the company and use the company’s funds to pay private expenses. It is also likely that he will continue to be the beneficiary of his father’s generosity. It is likely that the husband will have a total income greater than the wife’s, even having regard to her additional financial resource, and the wife will continue to have a greater responsibility for the family.
Having regard to all of these factors, I am of the view that a small adjustment should be made in favour of the wife.
Just and equitable
I assess the contributions of the parties during the marriage to be roughly equal and I regard post-separation financial and non-financial contributions towards the welfare of the family as slightly in the wife’s favour. Having regard to the s 75(2) factors, I am of the view that there should be a further slight adjustment in the wife’s favour.
As previously indicated in the table at paragraph 95, the total liabilities exceed the total assets of each of the parties. When superannuation is taken into account the husband’s total net assets exceed the wife’s by $5,500, which is a negligible amount in this matter. In effect, the only asset owned by each party is their respective superannuation funds. These funds were accumulated as a consequence of the parties’ employment throughout their working lives and even if a splitting order were to be made, funds would not be available to pay current outstanding debts.
I am satisfied that it would be just and equitable to make only a small alteration of the current property interests in the wife’s favour.
The orders that I propose making are for the husband to do all things necessary to transfer his interest in the jointly owned IAG shares to the wife within 14 days. This is to satisfy the small adjustment to be made in the wife’s favour.
I will also make an order for the husband to continue to have sole responsibility for the outstanding T School debt, which he agreed to assume, and indemnify the wife against any liability in respect of that debt. Finally, as the husband is to be solely responsible for the business operated by S Pty Ltd, I will order that the wife’s interest in that company, being shares of no value, be transferred to the husband.
Otherwise, the parties are to each retain all other assets in their possession, be responsible for all sole liabilities and are to each retain their superannuation entitlements.
The orders that I make are as set out at the forefront of these reasons for Judgment.
I certify that the preceding one hundred and forty-four (144) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hannam delivered on 16 July 2014.
Legal Associate:
Date: 16 July 2014
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Fiduciary Duty
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Constructive Trust
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Res Judicata
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