I and B

[2009] FCWA 70

[2009] FCWA 70

JURISDICTION	:	FAMILY COURT OF WESTERN AUSTRALIA
ACT	:	FAMILY LAW ACT 1975
LOCATION	:	PERTH
CITATION	:	I and B [2009] FCWA 70
CORAM	:	THACKRAY CJ
HEARD	:	24, 25 FEBRUARY 2009
DELIVERED	:	9 JUNE 2009
FILE NO/S	:	PTW 5178 of 2007
BETWEEN	:	I
Applicant/Wife
AND
B Respondent/Husband
Catchwords:

FAMILY LAW - PROPERTY - Determination of asset pool - Contributions - Inheritances - Whether an earlier inheritance "eroded" over time - Whether an inheritance received post- separation should be "quarantined" - Section 75(2) adjustment - Where the husband is in prison and his immediate needs will be met - Where the husband's future employment prospects are impaired - Where the wife has immediate accommodation needs.

Legislation:

Family Law Act 1975

Category: Not Reportable

Representation:

Counsel:

Applicant : Mr Hedges

[2009] FCWA 70

Respondent : Mr Berry

Solicitors:

Applicant	:	Carr & Co
Respondent	:	O'Sullivan Davies

Case(s) referred to in judgment(s):

Nil

[2009] FCWA 70

1 [Ms I] (“the wife”) and [Mr B] (“the husband”) have been unable to resolve

issues relating to their property following a lengthy marriage. The dispute has been complicated by the husband’s imprisonment for offences against one of their children.

Orders sought by the wife

2 In her amended Application filed in February 2009 the wife proposed that she

keep the former matrimonial home [in the suburbs] and that the husband retain an investment property in [the country]. The wife sought a payment from the husband of $341,000, in addition to a “splitting order” pursuant to which she would receive $275,816 from the husband’s superannuation. The wife proposed that each party would otherwise keep the assets in their possession or control.

3 During the trial the wife decided she did not wish to keep the [matrimonial]

home and sought an order for its sale. She also proposed that the husband receive the
furniture that was in the home at the time the husband was imprisoned.

4 The wife submitted in her Papers for the Judge that pre-separation contributions

should be found to be equal, save for an inheritance which the husband had received in 2007. Her counsel submitted in his closing address that post-separation contributions favoured the wife. The wife proposed an adjustment of 10% in her favour on account of s 75(2) factors.

Orders sought by the husband

5 The husband proposed in the Minute of Orders contained in his Papers for the

Judge that the wife receive the [matrimonial] property, that the [investment] property should be sold and that each party otherwise keep the assets in their possession or control. He proposed that orders be made pursuant to which he would receive the first $140,000 from the sale of the [investment] property and that otherwise there be a 60:40 distribution of assets/superannuation in his favour.

6 The husband conceded during the trial that an order should be made for the sale

of the [matrimonial] property. He also agreed to the wife’s proposal that he receive
the furniture from the home.

Orders made to date

7 I have already made orders dealing with collection by the husband of the

contents of the former matrimonial home and for the sale of the [investment] property. No order was made for the sale of the [matrimonial] property as the wife was living in it at the time of trial.

Brief background

8 The wife is employed as an [manager] and the husband is a prisoner, having

formerly been employed as an [accountant]. At the time of trial the wife was 51 years
of age and the husband was 52.

[2009] FCWA 70

9 The parties commenced cohabitation at the time of their marriage in [the UK] in

1980. The wife had recently completed [a degree] and the husband had obtained his [specialist degree]. The parties lived in [the UK] before moving to South Africa and then to Australia.

10 There are two adult children of the marriage, born in 1985 and 1988.

11 The parties separated in June 2007 when the wife moved out of the former matrimonial home.

12 In 1988 the parties purchased a property in [the suburbs] for $120,000. This was the matrimonial home until it was sold in 2006 for $435,000.

13 In about 1993 the husband received an inheritance following the death of his

parents. The wife recalled this was about [30,000 pounds], whereas the husband says it was about [47,000 pounds], which he calculated was about $120,000. I accept the $120,000 figure since it was adopted by counsel for the wife in his closing address.

14 Part of the husband’s inheritance was used to pay a deposit on the [investment]

property, which the parties purchased in 1994 for $120,000. The property was registered in the husband’s name. There was a mortgage securing about $96,000 which the husband borrowed to complete the purchase.

15 In 1994 the wife inherited about $20,000 from her mother’s estate. The husband

disputed the wife’s claim that this was used to discharge portion of the [investment]
mortgage but he acknowledged the funds were used for joint purposes.

16 In June 2003 the parties purchased the [matrimonial] property for $320,000, but

continued to live in the [original suburban] property. The [matrimonial] property was
let to tenants from the time of purchase until the family occupied it in 2006.

17 The parties used the proceeds from the sale of the [original suburban] property in

2006 to discharge the mortgage on the [matrimonial] property. The remaining
proceeds from the [original] property were placed in a joint bank account.

18 In April 2007 the husband received a further inheritance equivalent to

approximately $139,000. The wife transferred these funds into an account in her name
later that year.

19 In September 2007 the husband was charged with a number of criminal offences

involving molestation of the parties’ youngest child. He was shortly thereafter retrenched from his employment and was convicted and sentenced to a term of imprisonment in September 2008. The husband was made eligible for parole after 6 ½ years.

Credibility

20 The cross-examination of the wife was (appropriately) brief and no real attack was made on her credibility. I accept her as a generally reliable witness.

[2009] FCWA 70

21 A significant attack was made on the husband’s credibility, particularly relating

to his failure to make a disclosure of the fact that he had entered into a number of contracts of employment after the separation. I accept that the husband failed to make a proper disclosure of these matters. I found his explanation for his failure to do so quite unconvincing – namely that he did not expect he would receive payment for the valuable services he performed if he was later convicted of the criminal charges he was then facing.

22 When I consider the content of the letter from the husband’s solicitors dated

12 November 2007, paragraph 18 of his affidavit filed 1 August 2008 and his trial affidavit sworn 6 October 2008 - and contrast it with the evidence that later emerged, I am satisfied the husband set out to conceal from the wife the fact that he was continuing to engage in income earning activities after losing his employment. The lack of disclosure was of considerable importance as the husband ultimately invoiced his clients a total of nearly $250,000 for the work he tried to keep secret.

23 Although I strongly deprecate the husband’s behaviour, I was not satisfied that

by the time of trial there was any work he had undertaken which had not come to light. Nor was I satisfied that he had any assets other than those which had been disclosed. Credibility therefore does not play a significant part in these proceedings, save for the costs issues that will inevitably arise after delivery of these reasons.

24 I do accept, as was submitted by counsel for the wife, that the husband’s lack of

candour would entitle me to treat with suspicion his prognosis concerning his employment prospects upon his release from prison. However, the view I have reached on that issue will be determined largely by my assessment of the probabilities rather than by the husband’s self-serving evidence.

Property settlement approach

25 I am required to follow a four-step process in dealing with applications for property settlement pursuant to the Family Law Act 1975. These are:

• identify and value the assets and liabilities of the parties;

• assess each party’s contributions to the assets;

• assess a range of factors set out in s 79(4)(d) to (g) of the Act; and

• consider whether the proposed orders are just and equitable.

26 I find the assets and liabilities at the time of trial to be as follows:

[2009] FCWA 70

The asset pool

Wife	Husband
$	$

Assets

[matrimonial]	270,000	270,000
[investment]	690,000
ANZ account	1,724
ANZ premium account	50,437
ANZ accounts	71,146
Motor Vehicle	7,000
Motor Vehicle (currently in	15,000
husband’s name but to be transferred to wife)

Furniture	and	household	10,000	8,000
contents
Prison	trust	fund	–	180,811

post-separation income

Accounts rendered by 68,949

husband but yet to be paid

Legal fees added back -	29,059	28,949
matrimonial
Legal fees added back – criminal	50,000
Total	376,220	1,374,855
Superannuation Assets

Colonial First State Super	6,718
Media (Print) Super	23,492

[2009] FCWA 70

Master Super Fund	75,679
Australian Super Fund	352,354

Total	30,210	428,033
Liabilities
[investment] mortgage	31,830
ANZ Debit Card	1,500
Capital gains tax on former	NK	NK
matrimonial home
Capital gains tax on [investment]	NK

Estimated income taxation on income received by the husband post-separation	61,152
GST on payment from Newmont and Reeves	16,250

Total	1,500	109,232
Net Assets/superannuation	404,930	1,693,656

27 Given the large measure of agreement, the only findings I need to make concerning the table are these:

[Matrimonial] property

28 The figure in the table was the agreed value in January 2008. Although the wife

was originally proposing to retain the property at that figure, I accept that the value
may have decreased. The ultimate value will be determined on sale.

[Investment] property

29 This property had been on the market at a price of $799,000 for about a year at

the time of trial and there was no indication of any interest at that figure. The husband estimated that the property was worth $650,000 and the wife suggested $730,000.

[2009] FCWA 70

There was no sound basis on which I could prefer one figure and I have adopted the mid-point. Again, the value will be determined by the market.

Husband’s bank accounts

30 Counsel for the wife noted at the commencement of the trial that he had seen

only a printout of the current balances of the husband’s bank accounts and wanted to have further information. The matter was not pursued further and I have therefore adopted the figures contained in Annexure 7 to the affidavit of the husband’s solicitor.

Household contents

31 The husband’s estimate of $8,000 as being the value of the contents of the [matrimonial] home to be retained by him was agreed.

32 The wife’s estimate of the value of her contents at $10,000 related to items she

purchased following the separation. These cost $12,000. Although I was urged by the husband’s counsel to include them at their cost price (as they were relatively new), I consider they should be brought to account at their market value at the time of trial. The wife’s estimate of $10,000 would, if anything, be generous to the husband.

Accounts rendered but not paid

33 In January 2009 the husband rendered invoices for the work he did after his

salaried employment was terminated in 2007. By the time of trial he had received payment of $180,811 for these invoices, but there were invoices totalling $68,949 which remained unpaid. The clients to whom they were rendered appear to be substantial organisations and the husband provided no reliable evidence to indicate they were unlikely to be paid. The orders should nevertheless recognise that to some extent these invoices represent a “contingent” asset.

Frequent Flyer points

34 The husband suggested that the Frequent Flyer points should be valued at

$10,000. There was no evidence on which I could ascribe any “dollar value” to the
points. The parties agreed they should be divided equally in any event.

Hyundai

35 I have not included [one of the motor vehicles] in the table of assets. Although it

is in the wife’s name, I accept the car was purchased for the youngest child and will be transferred to her in due course. The parties had previously purchased a vehicle for their other child and the husband conceded there had been discussions prior to the breakdown of the relationship that they would endeavour to buy a car for each child when they turned 21.

[2009] FCWA 70

Addbacks

36 It was common ground that the funds expended by the parties on legal costs

(including legal costs incurred by the husband in his criminal proceedings) should be added back into the asset pool provided there was no double counting. This is why the $25,000 the wife advanced to her lawyers just before trial is not shown in the addbacks as the funds used to make that payment are already in the pool.

37 The husband submitted there should also be an addback of funds the wife has

expended since separation. I do not accept this submission. I am satisfied all of the wife’s post-separation expenditure was entirely appropriate, including the expenditure for the benefit of the children. It is noted that when she was living away from the former matrimonial home the wife had to pay rent of $460 per week.

38 The wife submitted that I should add back into the asset pool the funds the

husband received on his redundancy and funds he had expended post-separation. I do not accept this submission. I am satisfied that the husband has adequately accounted for the funds which he expended since separation (much of which was on legal fees that have already been added back). Although the husband continued working after losing his salaried employment, he was not paid for that work at the time and needed money on which to live.

Contingent liabilities

39 There will be capital gains tax liabilities associated with the sale of the

[matrimonial] and [investment] properties. It will not be possible to determine these until the properties have been sold. I was informed by counsel for the husband that if the [investment] property sold after 30 June 2009 that the CGT payable would be about $123,000. Counsel also calculated that the husband’s share of the capital gains taxation on the sale of the [matrimonial] property at a price of $540,000 would be nearly $49,000, but he had not made a calculation of the wife’s capital gain on her half share. Counsel for the wife pointed out that the [matrimonial] property has been the principal residence of the parties for part of the time and that this would have an impact on the tax payable; however, he did not provide an estimate of the tax likely to be payable.

40 There will be income taxation liabilities associated with the income earned by

the husband following separation. Counsel for the husband provided calculations of this at trial and provided a corrected version of his calculations after the trial had concluded (as he had foreshadowed). He calculates that the husband’s taxation liability will be $61,152 after making allowances for taxation already withheld. His calculation was based only on the income the husband had received from invoices which had been paid. The wife’s counsel did not provide any calculations to the contrary. In these circumstances I consider it appropriate to proceed on the basis that the tax payable in the accounts already paid will be $61,152. I will, however, ascertain whether counsel for the wife wishes to make any further submissions on this calculation before the orders are made.

41 There are also potential GST liabilities to be paid by the husband. For example,

there was GST of about $16,250 claimed on the invoices rendered and paid after the

[2009] FCWA 70

husband lost his salaried employment. Counsel for the wife submitted that these may be offset by GST credits the husband will be able to claim when returns are ultimately lodged. The orders should also make provision for the GST liabilities.

Contributions

42 The husband was the main income earner during the marriage and the wife was

the primary homemaker. It was conceded that pre-separation contributions were equal, save for the inheritances. It was agreed the wife made no contribution to the $140,000 inheritance the husband received shortly before the separation in 2007. It was also common ground that I should deal with the inheritances received in the mid 1990s on the basis that the husband contributed $100,000 more than the wife.

43 Counsel for the husband conceded that the husband’s greater contribution by

way of the 1990s inheritance had been “eroded”. He nevertheless submitted that the credit the husband should receive for that payment should be an amount somewhere in excess of $50,000.

44 Counsel for the wife submitted that the discrepancy of $100,000 represented less

that 5% of the asset pool and that I should find that the contributions were equal or close to equal (save for the 2007 inheritance). He further submitted that the $100,000 discrepancy in the earlier inheritances was offset, either completely or largely, by the greater contributions made by the wife in the period following separation. This submission was based on what the wife had to do in “picking up the pieces” after the husband was charged and convicted of molestation of the youngest child.

45 I do not in any way wish to be seen as underestimating the enormous trauma that

the wife and the children must have experienced as a result of the husband’s behaviour. However, there was no indication in the wife’s Papers for the Judge that this was an issue that impacted on contributions and the wife’s evidence did not address this issue in any meaningful way. Furthermore, the husband continued to work and earned a very substantial amount of money following separation. This ongoing contribution is reflected in the asset pool.

46 I am satisfied that the wife continued to make a significant contribution in the

period after separation and that the husband did likewise. It is true that the wife drew on capital in order to make ends meet, but she did so at a time when she needed funds and the husband had refused her reasonable requests to provide periodic maintenance. I find that the parties’ post-separation contributions were of equal value.

47 In my view, it is appropriate that the 2007 inheritance of $140,000 should be

“quarantined” and the husband should receive that amount before the rest of the assets are divided. In the exercise of what is undoubtedly a very wide discretion, I consider that the husband should also receive an additional $75,000 to take account of the discrepancy in the earlier inheritances. In determining that significant weight should be given to this discrepancy, I take account of the fact that the earlier inheritance received by the husband was used to provide the deposit on the [investment] property which has subsequently increased substantially in value.

[2009] FCWA 70

Section 75(2) adjustment

48 The husband submitted there should be no adjustment for the s 75(2) factors. He

noted that one of the children was independent and the other child almost independent. He also pointed to the fact that the wife had a secure income, whereas he now has no income. He also submitted that he would have considerable difficulty in regaining employment upon his release from prison, by which time he will be 59 years of age (presuming the appeal he proposes to lodge is unsuccessful).

49 The wife submitted there should be a 10% adjustment on account of s 75(2)

factors. Primarily, she relied upon the impact of the marriage on her own earning capacity and she also relied on the conduct of the husband, which had resulted in him losing his very substantial income earning capacity. The wife submitted that she would be punished for the husband’s criminal behaviour if she did not receive the adjustment for s 75(2) factors which she would have been entitled to receive if the husband had remained in his well paid work.

50 Counsel for the wife referred to a number of English authorities relating to the

impact of conduct on matrimonial property adjustment. I do not find them of assistance in determining these proceedings since, as was submitted on behalf of the husband, the cases involve materially different facts and were decided under materially different legislative provisions.

51 The parties are of similar ages and both are fit for work. The wife is earning

about $36,000 per annum. It is possible she might be able to earn somewhat more but I accept that she has very good reasons for wishing to remain in her present employment, including the flexibility her employer has allowed her in dealing with her youngest daughter’s needs.

52 The husband has nominal earnings as a prisoner but all of his needs are met for

him. At the time of separation the husband was earning $130,000 per annum working as an [accountant]. I accept that the husband will face many difficulties in regaining employment as an [accountant] upon his release from gaol. Not only will he have been out of the workforce for a number of years, he will have to provide some explanation for the “gap” in his working history when he seeks out employment. I am nevertheless of the view that the husband’s considerable experience and ability are such that he is likely to obtain some form of employment, at the very least sufficient to meet his needs.

53 In my view, the following are the matters of most importance in considering the s 75(2) adjustment:

54 First, I accept that the marriage has had an adverse impact on the wife’s earning

capacity. She was a university graduate with [additional] skills but has been out of the workforce for lengthy periods during the marriage whilst the husband obtained and improved his qualifications and gained experience. The husband acknowledged that he and the wife made a mutual decision she would not work in order to “focus on the care of the children”. Were it not for this fact, I am satisfied the wife would now have the capacity to earn an income somewhat greater than she presently enjoys.

[2009] FCWA 70

55 Second, although the wife has a regular income it would be sufficient only to

provide for her very basic needs. The wife will need to resort to capital in order to maintain a standard of living similar to that enjoyed during the marriage. She has an immediate and ongoing need for accommodation, whereas the husband’s accommodation needs will be met for a number of years. He will be able to invest his share of the settlement, whereas the wife in all probability will need to use a significant proportion of hers in providing for her accommodation needs.

56 Third, the wife has an ongoing responsibility in relation to the youngest child of

the marriage. I accept that this child is now an adult and only spends part of her time with the wife. She does have some means of support (part youth allowance, a scholarship and a little paid employment). Nevertheless, the wife contributes to her support to the extent of approximately $50 per week and is likely to do so until she is fully independent (which I accept is likely to be in the fairly near future). It is entirely appropriate that the wife provides this modest level of assistance, given the support provided to the parties’ other child, not to mention the trauma the youngest child would undoubtedly have experienced.

57 Finally, while the husband’s employment prospects are impaired, there is at least

the possibility that he will be able to return in due course to employment as an actuary or in some occupation where his previous skills and experience will be valuable. In those circumstances he may well earn an income greater than the wife. In any event, the diminution in his income earning capacity is entirely referrable to his own behaviour.

58 I consider that taking all of these matters into account it would be appropriate

that instead of the husband receiving the “first” $215,000 to take account of the
discrepancy in inheritances, he should instead receive only the “first” $30,000.

Just and equitable?

59 As the final step in the process I am required to step back and determine whether

or not the outcome based on assessment of contributions and the adjustment for
s 75(2) factors is just and equitable.

60 Whilst I acknowledge there is room for differences of opinion in relation to the

submission made on behalf of the wife that she should not suffer a financial disadvantage as a result of the husband’s behaviour, it is the case that the husband has suffered not only the serious financial consequences of his behaviour but he has also had administered to him the severe punishment the law has properly imposed for his behaviour. It is noted also that as a result of losing his work after being charged with the criminal offences, the husband received about $53,544 by way of a retrenchment/bonus payment and this has, one way or another, been reflected in the asset pool. Furthermore, the CGT payable on sale of [investment] is likely to be lower if it is sold in later years as he will have no income because he is in prison. On the other hand the wife is now obliged to maintain and accommodate herself without the benefit of the financial support she could have reasonably anticipated receiving from the husband.

[2009] FCWA 70

61 The effect of the orders I intend to make will be that the assets and

superannuation entitlements will be divided almost equally, notwithstanding the discrepancy in the inheritances favouring the husband. I am satisfied this outcome is just and equitable.

Orders
62	I intend to ask counsel to endeavour to agree a Minute of Orders to give effect to
these reasons. Subject to hearing any further submissions, it would be my intention that the orders reflect the following matters:

1. If the [matrimonial] property sells first, the wife should receive the entire proceeds of sale as she will need to acquire a new home for herself. Her need for capital at the present time is greater than that of the husband.

2. The parties’ respective CGT liabilities in relation to the [matrimonial] property are likely to be somewhat different given there is likely to be a difference in their incomes in the year in which the property is sold. It is my intention that the combined capital gains tax liability on that property (and on the [investment] property) would be met equally by the parties.

3. Portion of the proceeds of the second property to sell should be set aside in an interest-bearing trust account pending calculation of the capital gains tax to be paid on the sale of the real estate.

4. Any moneys received in relation to the invoices rendered by the husband but unpaid at the date of trial will be divided equally. (The parties will also be responsible in equal shares for the additional income taxation liability the husband will incur in relation to those invoices.)

5. The parties will be responsible in equal shares for the GST liabilities on the invoices rendered by the husband after separation (both those already recovered and those yet to be recovered).

63 If agreement cannot be reached in relation to the orders to reflect these reasons,

the parties may seek the listing of the matter before me for argument. In the event of such a listing being allocated, each party will need to provide to my Associate a Minute setting out the orders they propose to seek at least seven days before the appointment.

Costs
64	I will, in due course, hear from the parties in relation to costs issues if they
cannot be agreed. Clearly the husband can anticipate being required, at the very least, to meet costs concerning what I have found to be his deliberate failure to make a full and frank disclosure of his financial position.
65	I do not intend to put the parties to the expense of making written submissions in
relation to costs. I invite the parties, if they cannot agree costs, to seek an appointment

[2009] FCWA 70

before me for oral argument. In the event that either party intends to rely on any offer of settlement made, these should be provided to my Associate at least seven days prior to the appointment.

I certify that the preceding [65] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate