J and J
[2002] FMCAfam 269
•29 August 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| J & J | [2002] FMCAfam 269 |
| FAMILY LAW – Property settlement – contributions – contributions prior to bankruptcy eroded by bankruptcy – justice and equity rather than percentage distribution. Lee Steere and Lee Steere (1985) FLC ¶91-626 |
| Applicant: | D E J |
| Respondent: | R G J |
| File No: | HBM2268 of 2002 |
| Delivered on: | 29 August 2002 |
| Delivered at: | Launceston |
| Hearing Dates: | 31 July 2002 1 & 2 August 2002 |
| Judgment of: | Roberts FM |
REPRESENTATION
| Counsel for the Applicant: | Mr. M. Turnbull |
| Solicitors for the Applicant: | Ogilvie Jennings DX 109 HOBART TAS |
| For the Respondent: | The Respondent on his own behalf |
ORDERS
That the entire balance proceeds of the sale of the parties’ former matrimonial home at 156 O B R, Margate in Tasmania comprising approximately $34,745.00 be paid to the Wife, D E J together with any interest earned thereon.
That the Husband R G J relinquish in favour of the Wife and where necessary transfer to her any interest he may have in:
(a)any monies at banks, savings, shares or investments in the sole name of the Wife or under her exclusive control;
(b)any entitlement of the Wife’s to superannuation;
(c)any furniture, household effects or similar chattels in her possession;
(d)the Nissan Patrol motor vehicle registered number DF3793 in her possession or control (“the Nissan Patrol);
to the intent that the Wife shall be the sole and absolute legal beneficial owner thereof
That the Wife relinquish in favour of the Husband and where necessary transfer to him any interest she may have in:
(a)any monies at banks, savings, shares or investments in the sole name of the Husband or under his exclusive control;
(b)any entitlement of the Husband to superannuation;
(c)any policy of life assurance owned by the Husband;
(d)any furniture, household effects or chattels in his possession;
(e)any motor vehicle registered in his name and in his possession;
to the intent that the Husband shall be sole and absolute legal and beneficial owner thereof.
That the Wife take the Nissan Patrol subject to its loan liability to GMAC Financial Services.
That the matter be otherwise adjourned for mention in Hobart on 30th September 2002 at 10.00 a.m.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT LAUNCESTON |
HBM2268 of 2002
| D E J |
Applicant
And
| R G J |
Respondent
REASONS FOR JUDGMENT
Background and applications
The parties in this matter have had a long and acrimonious litigation history in the Family Court of Australia, the Tasmanian Magistrates Court and in this Court.
The parties’ competing applications for property settlement were transferred from the Family Court of Australia to this Court on 12th April 2002.
The Applicant is D E J (“the Wife”) and the Respondent is her former husband, R G J (“the Husband”). They were married on 23rd February 1985 and separated on 1st February 2001.
There are two children of the marriage, a girl aged fourteen years and a boy aged twelve. Both children live with the Wife and have regular contact with the Husband.
Since the parties separated, the Husband has behaved in a violent and abusive way towards the Wife. She has obtained domestic restraint orders and the Husband has spent approximately three months in prison as a result of breaching those orders.
The property proceedings were initiated by the Wife in an application she filed in the Family Court of Australia on 21st March 2001. After that, it was necessary for her to file a number of interim and contravention applications in relation to both property and children matters. As a result of those applications orders were made as follows:
a)Orders on 6th April 2001 relating to the sale of the former matrimonial home and injunctions in relation to selling certain items;
b)Orders of 13th August 2001 discharging some of the Orders made on 6th April 2001;
c)Orders of 26th November 2001 requiring $5,000.00 to be paid off the loan in relation to the Wife’s vehicle from the proceeds of sale of the former matrimonial home. (I shall comment further below in relation to these orders.)
Orders have also been made at times dismissing various contravention and enforcement applications commenced by the Husband.
The Wife says that, when the parties commenced cohabitation in 1985, they had little by way of assets or liabilities. On the other hand, the Husband says that he was comparatively well off for his age and his asset base was approximately $20,000.00.
At that time the Wife was working as an executive secretary and I accept her evidence that the parties’ earnings were at similar levels.
In 1987 the parties purchased their first house in Victoria. They subsequently sold that for a profit and in 1989 purchased another house in Victoria, which was subject to a mortgage.
In 1988 the Husband had left work and started his own business as a mechanic. The Wife’s evidence is that that business did not do very well and the following year he began another business which involved the leasing of a service station. At that time she was pregnant, so she left work and helped in the service station.
The parties’ business did not do well and it was necessary for them to sell their house in order to pay off debts.
In 1993 both parties were declared bankrupt. It is clear that the parties each have a different view as to why they were declared bankrupt. The Wife says that it is because the Husband squandered money, particularly in relation to racing motor vehicles. The Husband says that their bankruptcy was the Wife’s fault because she was in charge of the financial affairs of their various businesses. He saw some significance in the fact that she had worked as an executive secretary for financial advisers. I shall refer to that further below.
The parties had a period of separation of approximately six months as a result of their financial difficulties. However, they reunited by moving to Tasmania.
Shortly after moving to Tasmania the parties opened a second hand shop. That business was quite successful and they sold it a year later for a reasonably significant profit.
Initially, the Husband was employed as a mechanic. That job lasted for six months. Thereafter, he started building merry-go-rounds and other showground equipment. He was clearly reasonably talented in that area and the parties operated that equipment at school fairs, regattas and shows. I am satisfied that they made some reasonable sums from that activity.
In 1995 the Wife was involved in a motor vehicle accident which resulted in her not being able to work for a period of approximately five years.
In that year the parties purchased their last house (“the former matrimonial home”) for approximately $169,000.00. They borrowed approximately $103,000.00 from a recognised lending institution which was secured by a first mortgage. The balance was secured by way of a second mortgage from the vendor. They paid interest to the vendor and I accept that it was understood that the vendor would be paid from the Wife’s damages settlement from the Motor Accident Insurance Board (MAIB).
Between 1994 and 1996 the Husband operated another mechanical repair business. When that business closed the parties were again left with significant debts.
From 1997 to 1998 he operated another business which appears to have been primarily related to panel beating and spraying. When that business closed the parties were left with significant debts yet again.
In 1998 the Husband was employed as a mechanic in the motor racing industry and that employment lasted for approximately one and a half years.
After that employment ended, the Husband worked for various employers, including working on Tasmania’s ABT Railway. In 1999 the Wife’s MAIB settlement of $100,000.00 was paid. From that amount, she had to repay $11,056.80 to Centrelink and it appears that she had some legal costs in the vicinity of $3,000.00 over and above the agreed legal costs paid by MAIB.
Within a week of receiving that money, the Wife paid out the second mortgage by a payment of $65,000.00. She also paid $2,500.00 for a jump castle that the parties subsequently used to earn money at fairs, regattas and the like. The balance of her MAIB settlement was used to pay debts and do some improvements to the former matrimonial home.
The former matrimonial home has been sold and the funds obtained have been invested on behalf of the parties. At the time of the hearing the balance was $34,745.16. However, $5,000.00 had previously been paid from the deposited funds to reduce the loan in relation to a Nissan Patrol drive by the Wife. That payment was as a result of a Consent Order arising out of an application made by the Wife for urgent spouse maintenance. That payment was not characterised as spouse maintenance in the order. It was stated to be an interim payment on the Wife’s behalf in relation to property settlement.
On 11th April 2002, the Wife filed an Amended Application in which she sought the payment of the net proceeds of the sale of the former matrimonial home to her and, effectively, that each party keep what they have in their possession or control subject to any liabilities attaching thereto. She also sought an order that she be paid $200.00 per week by way of spouse maintenance but did not pursue that at the hearing.
The Wife also sought final orders in terms of the interim orders in relation to the children made 18th December 2001. However, that application was not pursued before me either.
The Husband filed a Response on 24th June 2002 in which he sought orders to the following effect:
a)that all creditors of the marriage at the time of separation be paid in full from the sale proceeds of the former matrimonial home and that he be reimbursed for any creditor that he had paid;
b)that he be paid $15,000.00 from the proceeds of sale;
c)that he relinquish the Nissan Patrol registered in his name in possession of the Wife and any livestock (horses) in his name;
d)that he be paid for the removal and clean up of the former matrimonial home;
e)that he retain all his tools, motor vehicles, amusement equipment, and other chattels; and
f)that he be reimbursed the sum of $3,400.00 that he claims the Wife took and for 500 bales of hay that he said she removed.
The law
The Court’s approach to the determination of an application for the adjustment of property interests has been well established by authority. See Lee Steere and Lee Steere (1985) FLC ¶91-626, Ferraro (1993) FLC ¶92-335 and Clauson (1995) FLC ¶92-595. It is essentially a three step process: firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing; secondly, evaluating the contributions made by the parties as defined in section 79(4)(a) to (c) and thirdly, evaluating the matters contained in section 75(2) if they are relevant.
In determining what Order the Court should make under section 79, the Court must also be satisfied that it is just and equitable in all the circumstances to do so – see section 79(2) and Russell v Russell (1999) FLC ¶92-877. In that case the Full Court of the Family Court said, at paragraph 80:
“Furthermore, it must be remembered in this regard that under s 79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.”
Assets and liabilities
The agreed assets and liabilities appeared to be a bit of a moving feast during the three day hearing. However, I am pleased to say that the majority of assets and liabilities were agreed by the time the hearing concluded. Notwithstanding this, it is still necessary for the Court to deal with some of the disagreements about assets and liabilities.
The agreed list of assets is as follows (using whole dollars):
House sale proceeds.................................................................... $34,745.00
Nissan Patrol................................................................................ $14,000.00
Saddle............................................................................................ $200.00
Horse............................................................................................. $250.00
Wife’s furniture........................................................................... $4,153.00
Husband’s furniture...................................................................... $2,431.00
Jump castle................................................................................... $960.00
Clown’s van................................................................................... $1,200.00
Merry-go-round........................................................................... $120.00
Show tent...................................................................................... $75.00
Snow cone machine..................................................................... $100.00
XD van (cream)............................................................................ $150.00
............. XD van (white)............................................................................. $350.00
............. Datsun........................................................................................... $500.00
............. Chev van........................................................................................ $150.00
............. Nissan engine............................................................................... $1,200.00
............. TOTAL:......................................................................................... $60,584.00
The assets that are in dispute are as follows:
a)The tools in the Husband’s possession which have been valued at $3,650.00 by Websters Limited at an auction valuation, $6,195.00 by Websters Limited at a fair market valuation and $3,730.00 by Gowans Auctions. For the purpose of these reasons I accept the Websters valuation of $3,650.00 (which the Husband preferred).
b)A bus valued at $300.00 by the Husband’s valuer, Argyle Quality Cars. I will include the bus at $300.00.
c)An Acco truck valued by Websters at fair market value at $2,600.00, Websters Auction value $950.00 and Argyle Quality Cars at $750.00. For consistency I will accept the Websters Auction valuation at $950.00.
d)A horse float valued by Gowans at $1,250.00, a Mr. McCann at $1,500.00 and the manufacturer (Mr. King) at $2,500.00. For the purpose of these reasons, I accept Mr. King’s valuation at $2,500.00 (which the Husband preferred), because Mr. King manufactured the particular horse float and he is also in the business of selling second-hand horse floats.
e)A food van which Gowans say they were told was sold by the Husband at $4,000.00, but the Husband says that he sold it for only $3,000.00. I will accept the Husband’s claim to have sold it for $3,000.00, because he is the only person who can give first hand evidence about that.
f)The Husband’s house at P that the Wife says has an equity of approximately $6.000.00, being the deposit of $1,000.00 paid by the Husband and the subsequent payments totalling approximately $5,000.00. On the other hand, the Husband says that he is only renting the property. However, it is quite clear that the Husband has a long term purchase contract in relation to the P property. He paid a deposit of $1,000.00 and according to that contract his weekly payments of $100.00 are “in reduction of the purchase price”. It is clear that he does have an equity worth approximately $6,000.00.
It therefore seems to me that the total value of these disputed items is an additional $16,400.00, so the total asset pool is $76,984.00.
At this stage, I should mention that there is also a horse valued at $300.00 that appears to be the property of the parties’ daughter. I do not intend to include that as an asset of the parties.
Further, I can see little point in adding back into the property pool the sum of $5,000.00 that was paid to the Wife as an interim property settlement. That is because that sum was paid directly to GMAC Financial Services on account of arrears and instalments on the loan secured on the Nissan motor vehicle that is still in the Wife’s possession. If I were to add that $5,000.00 back in as an asset, it would be appropriate to increase the liabilities by the same amount and there would be no difference to the “bottom line”.
In relation to liabilities, there appears to be some significant disagreement. Basically, it is the Husband’s position that only liabilities at the time of separation should be taken into account and, while that might have an initial simplistic appeal, an approach like that has some flaws.
It is the Husband’s contention that if all the Wife’s post separation bills are taken into account, then all his post separation bills should be taken into account. However, that ignores the fact that some significant debts on the part of the Wife were caused by the Husband’s totally unacceptable behaviour. As mentioned above, the Husband spent three months in goal as a result of his failure to observe domestic restraint orders. Further, it was necessary for the Wife to obtain the Court’s approval to sell the former matrimonial home without the Husband’s consent. It was also necessary to for her obtain orders requiring the signing of documents by an officer of the Court because the Husband refused to cooperate. All of those proceedings increased the Wife’s legal costs. She estimates that those were approximately $10,000.00. As a consequence, she incurred debts to a friend and to her parents.
There is also a debt to Centrelink that I accept was incurred as a result of the marriage. The balance is in the vicinity of $1,600.00. The parties disagree about how that debt arose, with each party blaming the other. As far as I am concerned, the cause of the debt does not really matter. It is a debt that arises out of their marital relationship and the Wife has to pay it. Clearly, it must come into account.
The parties each have incurred valuation expenses and I do not intend to take those into account. Similarly, I do not intend to take into account the general living expenses for electricity, telephone and the like that the parties have incurred.
There is a debt owed by the Husband for fuel that appears to have been incurred during the parties’ relationship and the balance is $1,077.00. I intend to take that into account. However, the Husband would like me to take a further $2,000.00 into account, because he paid that off after separation. I will not be doing that. He paid that off so shortly after separation that it is my view that either he paid that from funds that he had hidden somewhere in cash (as was his habit) or he disposed of an asset that would otherwise have been available. Even if I am wrong as to that, it is clear that the debt does not now exist and the Husband has had the ability to discharge it.
The Husband does not accept that the Wife’s liability to a friend in the sum of $1,049.00 and to her mother in the sum of $4,402.00 should be considered when assessing the assets and liabilities. However, seeing that the Husband has been the cause of the Wife incurring significant unnecessary legal costs, thereby reducing the Wife’s capacity to pay her other bills, it is my view that those borrowings should be taken into account.
As a consequence, the liabilities that I will take into account are as follows:
GMAC loan------------------------------------------------- $13,282.00
Centrelink-------------------------------------------------- $1,600.00
Loan from Wife’s friend---------------------------------- $1,049.00
Loan from Wife’s mother--------------------------------- $4,402.00
Fuel account------------------------------------------------ $1,077.00
Total:-------------------------------------------------------- $22,410.00
Deducting the total of the liabilities from the total value of the assets referred to above, I arrive at a net value of $55,574.00.
Credit
The parties disagreed in relation to many aspects. Generally, I found the Wife to be the more truthful witness. Consequently, where the parties differ as to their version of events, I have generally preferred the Wife’s version.
At this point, I should say that I do not accept the Husband’s evidence that the Wife stole the proceeds of sale of the food van from his home while he was in prison for breaching restraint orders.
Findings and discussion
As stated above, I need to consider the parties’ contributions to the acquisition, conservation and improvement of their property. This raises an interesting question in relation to the Husband’s claim to a greater contribution at the start of their relationship.
The parties became bankrupt in 1993. As a consequence, neither of them had any property following that bankruptcy. That was because all property of a bankrupt at the commencement of bankruptcy vests in the bankrupt's trustee in bankruptcy. As a result, it is clear that any property contributed earlier by the parties did not contribute in any way to the acquisition, conservation or improvement of the property that they have now. Those contributions of the parties prior to their bankruptcies were completely eroded by those bankruptcies.
As mentioned above, each party appears to blame the other for the bankruptcy. I am generally of the view that both must share some responsibility. I have no doubt that both parties were very good at spending the cash when they had it and neither party was very good at paying the debts.
I take into account what Baker J said in Kowaliw and Kowaliw (1981) FLC ¶91-092 about losses and I come to the conclusion that the parties were probably equally responsible for their financial losses.
In relation to the contributions after they were discharged from their bankruptcy, I am satisfied, that with the exception of the Wife’s MAIB settlement, the parties contributed on an equal basis. Although the parties adopted fairly traditional roles of the Husband being the primary breadwinner and the Wife being the homemaker and parent, it is clear that the Wife contributed her earnings from time to time. As I have said, I am satisfied that they contributed equally after they were discharged from bankruptcy .
As mentioned, the Wife’s MAIB settlement is another matter. She has suffered an injury in a motor vehicle accident for which she has been compensated. All of that compensation money went into the marriage and $65,000.00 of it became the parties’ equity in the former matrimonial home. Unfortunately, that equity now stands at only $34,745.00. To that must be added the sum of $5,000.00 that was paid in reduction of the GMAC liability. However, it appears that the equity of $65,000.00 has reduced to an equity of less than $40,000.00.
It is therefore clear that the Wife has contributed a sum greater than the entirety of the current balance proceeds of the sale of the former matrimonial home.
Although the Husband tried very hard to blame the Wife and her nominated real estate agent for selling the home too cheaply, I am satisfied that they both acted in an entirely proper manner in relation to the sale. Indeed, it is perfectly clear from the number of court applications and their results that, if anything, it was the Husband who acted improperly.
When the Husband was questioned about why he thought that the Wife’s MAIB settlement should be treated as a “matrimonial asset” for division, he clearly believed that it should be treated in the same way as the proceeds of sales of entertainment equipment that he had manufactured. That completely misses the point of the compensatory nature of the MAIB payment. From the evidence of the Wife’s doctor, it is quite clear that she suffers ongoing pain and she may need an operation on her neck in the future. Her injuries have clearly affected her lifestyle in that she is no longer able to ride horses.
It is also clear that the Husband’s behaviour after separation has had the effect of being a negative contribution in that it has caused the liabilities of the parties to increase. In addition, the Wife’s contribution towards the welfare of the children after separation must have been made more difficult by the Husband’s behaviour – see Kennon v Kennon (1997) FLC ¶92-757.
When I consider that the Wife’s contribution to the net equity in the home was effectively 100%, it follows that her direct financial contribution to the net value of all the property currently held by the parties from her MAIB payment was slightly in excess of 60%. Given that I have also indicated that her contributions otherwise equalled those of the Husband, it also follows that her overall contributions were the vicinity of 80%.
In addition to the contributions of the parties, I am required to take into account the factors set out in subsection 75(2) of the Act. In this regard, the following is clear:
a)The Husband’s state of health is better than the Wife’s and he has a better capacity for employment at a higher level of remuneration
b)The Wife has the care and control of the two children of the marriage and the Husband pays less than $36.00 per week by way of child support for those two children.
c)Neither party has a responsibility to support any other person apart from the children
By the Wife’s proposal, the Husband would retain the following:
Husband’s furniture---------------------------------------- $2,431.00
Jump castle------------------------------------------------- $960.00
Clown’s van------------------------------------------------- $1,200.00
Merry-go-round-------------------------------------------- $120.00
Show tent--------------------------------------------------- $75.00
Snow cone machine---------------------------------------- $100.00
XD vans----------------------------------------------------- $500.00
Datsun------------------------------------------------------- $500.00
Chev van---------------------------------------------------- $150.00
Nissan engine----------------------------------------------- $1,200.00
Tools-------------------------------------------------------- $3,650.00
Bus---------------------------------------------------------- $300.00
Truck-------------------------------------------------------- $950.00
Food van proceeds----------------------------------------- $3,000.00
His home equity-------------------------------------------- $6,000.00
Total:-------------------------------------------------------- $21,136.00
From this we must deduct the fuel debt of $1,077.00, leaving a net figure of $20,059.00.
The value of the Husband’s net property at $20,059.00 is 36% of the total net value of the parties’ property.
Conclusions
Given that the Wife’s contributions were of the order of 80% (see paragraph 56 above), and it is clear that she has the subsection 75(2) factors heavily in her favour, it is quite clear to me that the proposal put forward by the Wife is the proposal that I must prefer. If anything, that proposal is generous to the Husband. As a consequence, I shall make orders that are essentially the same as those sought by the Wife.
Bearing in mind the words from Russell v Russell referred to at paragraph 29 above, that “it is the justice and equity of the actual orders not of the percentage distribution which must be considered”, it is my very firm opinion that it would be neither just nor equitable to pay any of the proceeds of sale of the former matrimonial home to the Husband.
I heard this matter in Hobart but I am handing down these reasons in Launceston. I shall therefore adjourn the matter for mention in my next list in Hobart.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Roberts FM
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