Harry and Harry

[2010] FamCA 16

FAMILY COURT OF AUSTRALIA

HARRY & HARRY [2010] FamCA 16

FAMILY LAW – PROPERTY – Alteration of property interests – application of s 79(4) of the Family Law Act 1975 (Cth) – weight to be given to financial contributions of the husband and homemaker and parental contributions of the wife – orders that are just and equitable

Family Law Act 1975 (Cth) s 79(4)

Black & Kellner (1992) FLC 92-287
Hickey & Hickey & Attorney-General for the Commonwealth (2003) FLC 92-144
Kowaliw & Kowaliw [1981] FLC 91-092
Weir & Weir (1993) FLC 92-338

APPLICANT: Mr Harry

RESPONDENT: Ms Harry

FILE NUMBER: SYC 1928 of 2007

DATE DELIVERED: 21 January 2010

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 23 - 24 February 2009

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Rossi Simicic Lawyers

SOLICITOR FOR THE RESPONDENT: Autore & Associates

Orders

1. Pursuant to s 79 Family Law Act1975 (Cth), an order be made in accordance with paragraphs 2 to 5 below.

2. Within two (2) months from the date of these orders, the husband pay to the wife the sum of $41,911. 

3. In the event that the husband has not made the payment referred to in paragraph 2 within the time referred to in paragraph 2, then both parties shall do all things and sign all necessary documents to effect a sale of the property situated at and known as N, NSW at the earliest possible date by private treaty and that the proceeds of sale be distributed as follows:-

   3.1.Payment of the costs of sale including legal fees and agent’s fees.

   3.2.49.3 per cent to the wife. 

   3.3.Balance to the husband.

4. The husband, until the payment referred to in paragraph 2 is made to the wife, be restrained from encumbering the property at N, NSW.

5. Except as otherwise provided in these orders the husband and wife are entitled to the sole legal and beneficial ownership of all items of property including money, motor vehicles, insurances, equity, superannuation entitlements and personal effects currently in their possession or control of each of them respectively.

6. If either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to effect the terms of these orders, the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s 106A of the Family Law Act 1975 (Cth) to execute such documents on behalf of such party.

7. Either party have liberty to restore the matter on seven (7) days notice for the purposes of applying for the implementation of the orders. 

IT IS NOTED that publication of this judgment under the pseudonym Harry & Harry is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 1928 of 2007

MR HARRY

Applicant

And

MS HARRY

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. This matter was set down before me for final hearing in relation to issues between the parties in respect of the parenting of their child S and for orders in relation to alteration of property.

2. The parties were able to resolve what Dr R described as “an internecine war” that had been waging between the mother and father for some time.  I made consent orders in relation to the child’s future parenting and other orders, including orders that the father involve himself in counselling for anger management and the mother involve herself in post‑separation parenting counselling. 

3. The effect of the orders in relation to the child is that from the second term of kindergarten (2009) she will spend nine nights a fortnight with her mother and five nights a fortnight with her father and she will otherwise share equal holiday times with her parents.

SHORT HISTORY

1. The husband was born in 1965 and is aged 44 years.

2. The wife was born in 1979 and is aged 31 years. 

3. The parties agreed in final submissions that they commenced cohabitation in May 2002.

4. The parties married in 2003.

5. The child S was born in February 2004 and is currently five years of age. 

6. The parties separated on 15 October 2006. 

7. Consequently, the parties lived together for about four and a half years and the wife has fulfilled nearly two years in the primary carer role for the child.

APPLICATIONS OF THE PARTIES

1. During final submissions, it was the husband’s position that the assets of the parties should be divided based on the contributions both parties had made; being 85 per cent to the husband and 15 per cent to the wife. There should be a further 5 percent adjustment in relation to matters under s 79(4)(d) to s 79(4)(g) (of the Family Law Act 1975 (Cth)) (“FLA”) and that a just and equitable outcome would be to divide the assets of the parties as to 80 per cent to the husband and 20 per cent to the wife.

2. During final submissions, the wife’s position was that, based on the contributions the parties made, there should be a 55 per cent to 45 per cent division in the husband’s favour based on contributions made by the parties. The wife agreed that there should be a 5 per cent adjustment in her favour in relation to matters under s 79(4)(d) to s 79(4)(g) FLA and the wife suggested that a 50 per cent to 50 per cent division of the assets was a just and equitable outcome.

CREDIT

1. The husband changed his story on a number of occasions in relation to various matters.  Where there is a conflict in the evidence between the husband and the wife I prefer the evidence given by the wife.  The wife was a more impressive witness than the husband.

2. I found the husband’s evidence in relation to the Dodge unbelievable.  He agreed that he had cut the front end off the Dodge. When shown a photograph of the Dodge in a driveway at a later stage, his evidence was that he had put the front end of the Dodge back on it in order to move it from the old house to the new house.  I found that evidence inherently unbelievable and I did not accept that the husband was accurately reporting what had happened to me at that point in his evidence.

3. I have little confidence that I have an accurate picture as to what the husband did with his money after the separation.  The husband (notwithstanding that the matter is squarely raised in the affidavit of the wife which she filed in September 2008), did not attempt to account in any meaningful way for the $80,000 that he received from the proceeds of the sale of the K property until he was given an opportunity overnight to do so whilst in cross‑examination.  Even then the wife had no ability to test much of what he said and at the end of the day I was left with an uneasy feeling in relation to accepting unreservedly his sworn evidence.  The solicitor for the wife, however, submitted that he wished to make no submission that there had not been a proper accounting for the $80,000.  I do not think, however, I know fully the position as to what has happened with the income the husband has generated from his business since the date of separation. 

4. The husband also originally asserted that he had used his superannuation to pay the amount owing under the notice which is Exhibit J.  If that was so, then there would be $24,000 left out of the $33,000 that he had taken from his superannuation.  The husband however later said that his memory was defective in that evidence and he changed his evidence, producing a document to indicate that the current balance of his superannuation was $5,000.  That amount has been included in the schedule of assets.

5. The husband was originally not prepared to concede that any money had come from his former father-in-law (the feeling between the husband and the wife’s father is evidenced in Dr R’s second report).  It appeared to me that the husband was far too keen to assert that he had provided no financial assistance.  He did then admit, however, that his wife may have received money from her father to contribute towards her paying for the experience in a jet plane that he was given as a birthday present.

6. There was a high degree of bitterness and animosity between the husband and the wife and I am not entirely convinced that the husband has accurately reported his financial position to me following the separation.  These matters go to credit rather than any approach that I take applying the principles in Black & Kellner (1992) FLC 92-287 (per Nicholson CJ, Ellis & Cohen JJ) and Weir & Weir (1993) FLC 92-338 (per Nicholson CJ, Strauss & Ngyh JJ). No submission was made to me based on that line of authority.

FOUR STEPPED APPROACH

1. In this matter, my task is to:

   a)Identify and value the property, assets, financial resources and liabilities of the parties;

   b)Identify relevant contributions and assess them;

   c)Consider relevant matters referred to in s 79(4)(d) to s 79(4)(g) of the Family Law Act 1975 (Cth); and

   d)Ensure my order adjusting the property, assets and liabilities of the parties is just and equitable (See Hickey & Hickey & Attorney-General for the Commonwealth (2003) FLC 92-144, 78,386 (per Nicholson CJ, Ellis & O’Ryan JJ).

   e)Property, assets, financial resources and liabilities of the parties.

2. At the commencement of the final hearing in respect of property, the parties by agreement handed up what was then said to have been an agreed schedule of assets.  That schedule was subject to the wife reserving her position in respect of settlement monies received by the husband in relation to the sale of the property at O (which I have dealt with in my reasons above).  

3. The agreed schedule of assets handed up at the commencement of the proceedings was as follows:-

Title	Description	Value
H	N property	$85,000
J	Money in trust - Slade Manwaring	$1,647
H	Furniture and motor vehicle	$22,590
W	Nissan motor vehicle	$9,550
W	Jewellery	$10,000
Total	$128,787

1. The husband gave evidence and produced written verification that the current balance in the superannuation fund was $5,000.  This amount should be added to the schedule of assets. 

The husband’s business

1. The husband runs a business called E Business in N.  In his financial statement sworn by him in March 2008 he indicates that it was his estimate that that business was worth $30,000.  He had previously in a statement sworn in July 2007 indicated that the business was worth “nil”.  The husband agreed that he ran his business basically by being paid in cash.  He asserted that he fully accounted for the cash to the Australian Tax Office for the purpose of paying his tax and that he kept a proper set of books at all times.  When cross‑examined as to the basis upon which he made the estimate, he said he “did not have any idea.”  He said that the equipment that he had, if purchased new, would only be worth a couple of thousand dollars and that he had made most of the other fittings and benches himself.  He had previously given evidence that in an earlier year the gross profit of the business was somewhere between $70,000 and $90,000 but that his net profit had recently been affected by the fact that he had spent a large amount of time preparing material for this substantial litigation and for other court cases brought against him seeking apprehended violence orders and other orders.  He did have one conviction for assault arising from one of those cases (he was convicted of assaulting the maternal uncle). 

2. The husband asserted that another similar shop had opened in the town in the main street in a more prominent position and that competition was another reason why his net profits had been down. 

3. I had evidence that the husband had been assessed at a very low rate of child support and infer from that evidence that the husband had submitted tax returns which showed a low income.

4. I am less than confident, however, that as at March 2008 the husband did not hold the belief that he would be able to dispose of his business should he choose to do so for the amount of $30,000.  I am not convinced by his evidence that he did not have any idea as to whether or not that was a proper estimate.

5. The husband has been involved in setting up another business in a country town in NSW.  He placed a manager into that business and eventually sold to that manager for an amount that was not far less than the $30,000 that he has quoted in relation to his primary business.  The statement the husband made on his oath in March 2008 is a statement that the wife can rely upon by the husband against the husband’s interests. I accept that it was a considered statement by the husband at the time and it was a genuine belief that he held at the time in relation to the value of his business.  I intend to add to the balance sheet the husband’s business in the amount of $30,000.  That business was developed during the time the parties were together.

Proceeds of sale of K property

1. The husband stated that after the settlement of K property he had received a bank cheque for $80,000 and that that cheque was cashed and that he took $80,000 and put it in a safe that he had at his home. 

2. The husband asserted that the bulk of those monies were expended on debts that he had arising from work done to the property at O, during 2006 and 2007. 

3. The main work done at the property was the installation of a mezzanine floor in the main dwelling and the planning, council approval and acquisition of materials for the construction of an intended granny flat on the property.  Ultimately, the granny flat extension did not proceed.

4. Exhibit “C” is a document prepared by the husband overnight whilst he was in cross‑examination setting out how he says the amount of $80,000 was expended.  He was cross‑examined in relation to that document.  The solicitor for the wife does not seriously submit that these monies were not expended and I accept the husband’s evidence that the $80,000 that he put in a safe in cash went towards payment of debts that he had incurred or monies that he subsequently paid in relation to intended improvements to the O property. 

5. The husband conceded in cross‑examination, however, that some of the materials that were purchased for the granny flat extension were still in storage and still in his possession and control.  The items were as follows:-

   Roller door and fittings   $400

   Exterior down pipes and guttering   $1,500

   Bathroom fittings, taps, pipe work, toilet, vanity etc             $2,000

   Laminated beam   $600

   Total   $4,500

6. The husband is a tradesman and is adept at working with metal.  He also did a considerable amount of work on the various properties that he owned during the cohabitation and marriage.  I have got no doubt that the items nominated above are still in his possession and could be used by him for further development of property and I think it is appropriate that they be added to the agreed schedule.

The loss of the $80,000 in developing O property

1. The solicitor for the wife indicated that he thought it would be appropriate for some adjustment to be made on the basis that although $80,000 was expended on the O property, none of that money was recovered in terms of adding any value to the property when the property was sold.  The property was sold in a state of disrepair and partial renovation.  The wife bears the onus of convincing me, based on Kowaliw & Kowaliw [1981] FLC 91-092, 76,642 (per Baker J), that the husband acted in some reckless or wanton way in commencing to develop the O property the way that he did and then not finishing the job. I find that the husband, at the urging of the wife and his mother, entered upon the process of renovating the O property and building a granny flat for his mother to move into in good faith. There were considerable difficulties in the relationship at the end of 2006 and the husband did not complete the project. I am unable to say that he did that wantonly or recklessly and I am not prepared to add back as a wasted asset the balance of the $80,000 that I have not already taken into account.

Balance sheet of assets & liabilities

1. The balance sheet of assets and liabilities is set out hereunder:

   Assets  Value                  Held by

   N property  $85,000             Husband

   Money in trust - Slade Manwaring                 $1,647               Wife

   Furniture and motor vehicle  $22,590             Husband

   Nissan motor vehicle  $9,550               Wife

   Jewellery  $10,000             Wife

   Husband’s superannuation interest                 $5,000               Husband

   Husband’s E Business  $30,000             Husband

   Building materials  $4,500               Husband

   Total Assets  $168,287

   Total Liabilities   $0

2. Accordingly, the net property of the parties is $168,287.

CONTRIBUTIONS

1. It was agreed that the husband had equity in the property at D when the parties commenced to live together.  At about the time of the parties commencing cohabitation, a property at K was purchased.  The purchase price was 100 per cent financed and the mortgage on the D property was consolidated into the new loan.  It is agreed between the parties that the husband at the time of the commencement of the cohabitation had equity in the D property of about $100,000.

2. The husband says and I accept, that he also had other assets, including motor vehicles, furniture, jet skis and sporting memorabilia.

3. The wife came to the relationship without any assets and had a small debt which she paid off after she started living with the husband through income that she earned in employment.

4. Counsel for the husband did not test the wife in any major way in relation to matters set out in her affidavit in respect of contributions towards the various properties.

5. In September 2002, the parties purchased K, NSW for $238,500.  The wife states that the property was registered in the husband’s name and that there was a loan with the Illawarra Credit Union for $352,000 secured against both K property and D property.

6. In May 2003, the property at D, NSW was sold. The wife says she did not know what happened to the net proceeds of the sale.  Exhibit “E” is a collection of statements produced under subpoena by the Illawarra Credit Union.  Those statements show an amount of $161,622 being deposited into that account on 28 April 2003 and a further amount of $25,300 being deposited on 25 July 2003.  Those amounts I accept were amounts referrable to sale proceeds of the D property.  The Illawarra Credit Union debt prior to the deposit of those sums was $346,445, and, substantially as a result of those deposits, was reduced to $162,031.  I am satisfied that that accounts for the proceeds of the sale of the D property.

7. In June 2004, a property at N, NSW was purchased in the sole name of the husband for $120,000.  There is no mortgage in respect of that property.  This is the property from which the husband conducts his business.  That property has an agreed current value of $85,000. 

8. In February 2006, the parties purchased the property at O. This property was purchased in joint names with the wife being registered as a 99 per cent shareholder and the husband a 1 per cent shareholder as tenants in common.  The property was purchased by refinancing the debt on O property (as the prime security) and K property (as collateral).  The overall mortgage secured against the two properties was in the sum of $620,000.  The wife says that after the purchase of O property, the garage at K was renovated and it became a master bedroom and ensuite.  They also refurbished the front verandah.  The wife describes what she did in terms of work in respect of that refurbishment, including extensive painting, and I accept her evidence in that regard.

9. In February 2006, the husband entered into a contract to sell K property. There was a delayed settlement.  Following the sale of K property, an amount of $202,000 from the net proceeds of sale went towards the reduction of the mortgage secured on O property and that reduced the overall liability under that mortgage to $336,836.   The settlement took place towards the end of 2006 and after the parties had separated.  The husband agreed that he received $80,000 from the proceeds of that sale.  I have discussed above in my reasons how I will treat the balance of the moneys the husband received from the proceeds of that sale.

1. The wife has given evidence of gifts given to her by her father in 2003, 2004 and 2005.  The husband accepts that the wife may have received some monies from her father in 2005 but denies the assertion in relation to the other gifts.  I accept the wife’s evidence in preference to the husband’s evidence in relation to those gifts.

2. The wife completed an owner/builder course in about 2006 so that she could become the owner/builder for the renovations that were carried out to the O property.

3. The wife says and I accept that K property required major renovations and that a builder, and a carpenter, carried out the majority of the renovations.  The funding of those renovations came primarily from monies that the husband earned.  The K property was gutted entirely and new wardrobes were installed in the bedrooms with some walls moved and the bathroom renovated. 

4. Although the husband denies it, I accept the wife’s evidence that she helped paint ceilings with the husband and helped paint window frames and sliding doors and window seals.  I accept the wife organised for blinds to be fitted to the K property and organised carpet to be laid and windows to be tinted.  I accept that she planned and negotiated with a kitchen company to put in a new kitchen and that she chose kitchen appliances. 

5. In her affidavit, the wife says that she picked floor tiles, colour schemes, plants for the garden, timber for the kitchen and the colour of the house rendering.  She also states that she assisted with the building of a back verandah frame, that she gardened extensively and decorated the child’s bedroom.  I accept her evidence in that regard.

6. The husband gave the wife virtually no credit for any work done in respect of any of the properties and I do not accept his evidence where it conflicts with the wife in relation to those matters.   

7. This is a short cohabitation and marriage (about 4 and a half years).  There is another period in excess of two years where the wife has fulfilled the primary role of carer for the child of the marriage.  Both the husband and wife have worked to improve the assets during the marriage.  The wife was the primary caregiver and homemaker throughout the marriage and I accept her evidence that she was the person primarily responsible for the cooking, cleaning, washing, ironing and shopping for the family.

8. The wife worked more or less full time from shortly after the commencement of the cohabitation into her pregnancy with the child.  She then ceased work and did not work again up until the time when the parties separated.

9. I accept that during this period of time she contributed her wages towards joint household expenses.

10. I have already accepted that the wife made contributions of a physical, non‑financial nature towards the development and improvement of the properties as set out in her written evidence.

11. The husband worked full‑time during the marriage and earned a significant income at various times during the marriage. He, of course, commenced the cohabitation with assets which, in the context of the overall pool in this case, were significant.  The most significant of those assets was the $100,000 equity that he had in the D property at the beginning of the relationship.  He also had other assets that I have detailed in my reasons above.

12. After the separation, the husband remained in the former matrimonial home.  For a period of about twelve months he did not pay mortgage payments.  I do not have any real adequate explanation as to why that was so.  He continued to work in his business.

13. The husband’s evidence is that arrears were accumulated in that twelve month period, and that he received at least two notices from the mortgagee of the home in which he was living.  The first of these notices on his version led him to apply to cash in the bulk of his superannuation (in the amount of $28,000) to make mortgage repayments. The second notice, which is in evidence as Exhibit “J”, demanded a payment of $9,234.  The husband’s evidence is that that notice was satisfied from monies that he had from the proceeds of the sale of K property.  That evidence does not sit easily with the evidence given by the husband in Exhibit “C” (which was his explanation as to how the sum of $80,000 was expended), although the items as set out in Exhibit “C” only add up to an amount of $76,000.  Presumably, the husband had funds from other sources (I infer the business) to make up the balance of about $5,000 ($9,234 + $76,000 - $80,000) needed to satisfy what the husband says was the second notice. 

14. The evidence before me is that the husband did not, at least in recent times, pay any significant child support as a result of very low assessments that were issued based on his income tax returns.  Those returns were not tendered in evidence. 

15. There is some substance in the wife’s submission that I should take into account the fact that assets, including a substantial part of the husband’s superannuation interests, were expended because the husband did not continue to make mortgage payments.  At the same time the wife bore substantially the whole responsibility for financially supporting the child.

16. Considering all of the matters discussed above, I conclude that an adjustment should be made based on contributions of the available assets as to 67.5 percent to the husband and 32.5 percent to the wife.

Relevant matters under s 79(4)(d) to s 79(4)(g) of the Family Law Act 1975 (Cth)

1. Both parties submitted that an adjustment of 5 per cent in favour of the wife would be appropriate.  I agree that that should be so. 

2. The wife will continue to have the primary responsibility for the child who will be with her during school terms from Term 2 2009, nine nights a fortnight and with her father five nights a fortnight.

3. The father has an impressive array of skills that he could use to generate income.  He has a trade.  He has experience in the security industry and has run a sports business. 

4. The valuation of the Dodge was carried out by the valuer on the basis that it is currently in parts.  I have made comments about the husband’s evidence about the Dodge when dealing with the husband’s credit.  I have got no doubt that the husband possesses the skills to reassemble the Dodge if he so chose.

5. The husband said that his ability to generate an income of $70,000 - $90,000 from the business has been affected by two things. The first thing he nominated was the effect of recurrent and intensive litigation that he was involved in that centred around a war with the wife in respect of S (the child in these proceedings).  Hopefully, that will now have ceased.  The husband gave other evidence about the effect of the current global economic crisis on the expenditure of income on the business and the setting up of a prominent competitor in the town.  Notwithstanding that evidence, I concluded that the husband is a man of enterprise and will, with the array of skills that he has, be able to generate more than a comfortable living for himself in the future.

6. The wife on the other hand does not have many skills that would qualify her for employment. She has some knowledge which would allow her to work as a nail artist.  Her evidence is that she intends to obtain a position at TAFE teaching nail artistry. 

7. She is also in a new relationship with Mr Y.  She lives on Mr Y’s family’s 180 acre property.  Mr Y’s family runs a business from that property.  She believes Mr Y’s income is about $1,000 gross a week.  The wife currently carries out some duties associated with that business which involve answering the phone and taking orders.  The wife anticipates that her involvement in working in the family business will expand, perhaps in terms of doing paperwork for the business. 

8. Given that the child will be with her father five nights a fortnight, it is probable that the wife will not have an entitlement to a major amount of child support for the child.

9. Based on my assessment of contributions, the husband will have greater capital than the wife. 

10. Comparing the positions of the parties, I accept their mutual assessment that a five per cent adjustment is clearly warranted in favour of the wife.

What orders are just & equitable in the circumstances?

1. Based on my assessment in respect of contributions and matters under s 79(4)(d) to s 79(4)(g) FLA, the result would be that the husband would receive 62.5 per cent of the assets and the wife would receive 37.5 per cent of the assets.

2. Based on a pool of net assets of $168,287, this would require the wife to receive assets in the sum of $63,108. 

3. The husband should pay the wife the sum of $41,911 based upon the following calculation: 

   $63,108 - $1,647 (Money in trust – Slade Manwaring) – $9,550 (Nissan Pathfinder Vehicle) – $10,000 (Jewellery) = $41,911

4. Standing back and looking at the matter on an overall basis, I consider an adjustment in that manner to be just and equitable. 

5. If the husband is unable to organise the payment referred to within two months, then the wife will be at liberty to require a sale of the property at N.

6. The amount of $41,911 is 49.3 per cent of the agreed value of that property ($41,911/$85,000).

I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts.  

Associate: 

Date:  21 January 2010