Khyatt and Kelman
[2014] FCCA 834
•28 April 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KHYATT & KELMAN | [2014] FCCA 834 |
| Catchwords: FAMILY LAW – Property – quantification of assets and liabilities – liabilities exceed assets – whether parties should share liabilities equally – wanton conduct by one party diminishing assets – failure to make full and frank disclosure. |
| Legislation: Family Law Act 1975, ss.75, 79 |
| Stanford [2012] HCA 52, (2012) 293 ALR 70; 47 FamLR 481 Hickey & Hickey & Commonwealth [2003] FamCA 395; (2003) 30 FamLR 355; FLC 93-143 Chang v Su [2002] FamCA 156; (2002) 29 Fam LR 406; FLC 93-117 Briese v Briese (1986) FLC 91-713 Weir & Weir (1993) FLC 92-338; 16 FamLR 154 Sebastian & Sebastian [2013] FamCA 191; Newman & Newman [2013] FamCA 37; Watson & Ling [2013] FamCA 57; (2013) 49 Fam LR 303 Baglio & Baglio [2013] FamCA 105; Bowe &Bateman [2013] FamCA 253; Alexiou & Alexiou [2012] FamCA 1146; Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 Biltoft & Biltoft (1995) 19 Fam LR 39; FLC 92-614 Kowaliw (1981) FLC 91-092; (1981) 7 Fam LR N13 Antmann (1980) FLC 90-908 |
| Applicant: | MS KHYATT |
| Respondent: | MR KELMAN |
| File Number: | MLC 10266 of 2012 |
| Judgment of: | Judge Lapthorn |
| Hearing dates: | 29 & 30 August, 16 & 17 October 2013 |
| Date of Last Submission: | 11 December 2013 |
| Delivered at: | Brisbane |
| Delivered on: | 28 April 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Grant |
| Solicitors for the Applicant: | Zeno Family Lawyers |
| Counsel for the Respondent: | Mr O’Connell |
| Solicitors for the Respondent: | Horvat Legal |
ORDERS
That within 7 days from the date of these orders the parties do all acts and things and sign all such documents as are necessary to pay from the funds held in trust from the proceeds of sale of the former matrimonial home the sum of $115,000 to the previous owners of the [A] business;
That upon compliance with order (1) herein the parties do all acts and things and sign all such documents as are necessary to enable the balance of the funds held in trust from the proceeds of sale of the former matrimonial home to be released to the wife;
That within 7 days of the date of these orders the parties do all acts and things and sign all such documents as are necessary to enable the funds held on trust from the proceeds of sale of the [P] Property to be released to the wife;
That other than as provided for in Order (1) herein, the husband indemnify and keep indemnified the wife against all liabilities held or arising in his name or any business conducted by or on his behalf;
That other than as provided for in these Orders each party is to retain and be solely entitled to the exclusion of the other to any superannuation entitlements and all other property (including choses-in-action) in the possession and or control of such party.
IT IS NOTED that publication of this judgment under the pseudonym Khyatt & Kelman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 10266 of 2012
| MS KHYATT |
Applicant
And
| MR KELMAN |
Respondent
REASONS FOR JUDGMENT
Introduction
By way of Application filed 9 November 2012 the wife sought parenting and property orders after the demise of the parties’ 12 year marriage. Final Orders were made in relation to the parenting arrangements for their children on 17 October 2013 leaving for determination the issue of whether a property adjustment order should be made.
The orders sought by the wife provided for her to receive all of the cash assets and that the husband indemnify her in relation to all liabilities in his or their joint names. The husband argued that the liabilities were in excess of the assets and therefore I should not make a property adjustment order. In the alternative he argued that if I was to find there was an asset pool in excess of liabilities the property should be adjusted 70% to the wife and 30% to him.
Material relied upon
In support of her case the applicant wife relied upon:
a)Her Initiating Application filed 9 November 2012;
b)Her affidavits filed:
i)9 November 2012;
ii)5 December 2012;
iii)10 May 2013;
iv)9 July 2013; and
v)26 August 2013; and
c)Her financial statement filed 5 December 2012.
The respondent husband relied upon:
a)His Response filed 14 December 2012; and
b)His affidavit filed by leave on the first day of the trial – 28 August 2013.
The husband did not file a financial statement.
A number of documents were tendered into evidence.[1] Both parties were cross-examined. I have had regard to this evidence and the written submissions received from counsel in accordance with my directions made 17 October.
[1] C2 Agreed list of assets
I will address the evidence when considering the various aspects of the legislative framework. In doing so I will refer to a number of facts. Any such reference should be regarded as a finding of fact unless a contrary intention is clear from the context.
Background
The wife is 36 years of age and works as a [omitted]. The husband is also 36 and gave evidence that he is not currently working. He has previously worked as a [omitted] in his own businesses. The parties married in [L] on [omitted] 2000. They did not live together prior to their marriage. They separated on 28 October 2012. They have four children: [W] born [in] 2003 – 11; [X] born [in] 2008 – 6; [Y] born [in] 2010 – 3; and [Z] born [in] 2012 – 2 years. The children live primarily with their mother and have done so since separation. They had not spent time with their father for many months leading up to the final hearing but as a consequence of orders made on 17 October 2013 they will spend time with their father on alternate weekends and half school holidays.
The husband has re-partnered. His new partner is a student. She did not give evidence. They live in rental accommodation. He said he has suffered depression since separation and is not currently working but receives financial assistance from family and friends. He did not give any corroborative evidence of this. As I have indicated below when considering his credit I found he could not always be believed. I am sceptical of his claim to not be working or just relying on the generosity of friends in supporting himself and his new partner. I accept the wife’s evidence that the husband has not paid child support. The husband gave evidence of having worked hard in running his [omitted] businesses throughout the marriage. I have no difficulty in accepting his evidence in this regard as both he and the wife agreed the businesses were successful. What I have difficulty in accepting is the husband’s evidence that after separation he was no longer successful in running his businesses.
The wife has not re-partnered. She continues to work as a [omitted] and has the primary care of the children. The wife worked as a [omitted] and in the [businesses] during the marriage. A few years into the marriage the husband directed the wife to resign her employment as a [omitted]. She did not want to do so but as the parties lived in a traditional [religion omitted] marriage she followed his direction as head of the household. I accept the wife’s evidence that she was the children’s primary carer and that the husband played little role in their care.
Credit
The wife impressed as an honest and forthright witness who gave her evidence to the best of her ability. I accept her evidence.
Regrettably the same cannot be said in relation to the husband. Although he gave his evidence through an Arabic interpreter, for which I have made allowance, he did not impress as honest. He appeared at times to be evasive and at other times flippant. He repeatedly interrupted the interpreter, which for the most part was due to his impatience with the process, but on other occasions I was left with the impression he was attempting to change his evidence. Certainly on one occasion when cross-examined about his expenditure in [L] the solicitor for the wife who is an Arabic speaker instructed her counsel to raise with the court the attempt being made by the husband to change his evidence by interrupting the interpreter.
By his failure to file a financial statement and his failure to provide financial information requested of him by the wife in a timely way, some of which was not provided until the morning of the first day of the trial, I am satisfied the husband has failed to make full and frank disclosure. When challenged about this he said he did it so as to surprise the wife because she would not let him see his children. He rhetorically asked why would he get the financial information and put it into the wife’s hands. This attitude pervaded the whole of his evidence.
It was put to him that he had valued his retail [omitted] business at $650,000 for the purposes of obtaining the consent of the landlord to an assignment of a lease in August 2012 but at the hearing asserted the value to be just $40,000. When I asked him whether he was telling the truth then or at the hearing he arrogantly replied “I don’t know it is up to you”. I have no confidence the husband was truthful in his evidence. Rather I am satisfied he gave what evidence he thought would assist his case at that moment in time. It is for this reason that I prefer the evidence of the wife over that of the husband where their evidence differs.
Legal Approach
In determining property proceedings the court is firstly required to identify according to ordinary common law and equitable principles the existing legal and equitable interests of the parties in the property that is available for distribution between them. It is then necessary to determine whether it is just and equitable to make an order altering the parties’ interests in the property. If so satisfied the court must then consider the contributions made by each of them under the various s.79(4) considerations before looking at their future needs by reference to the s.75(2) factors. [2]
[2] S.79(2) & (4), Stanford [2012] HCA 52; (2012) 293 ALR 70; 47 FamLR 481. See Hickey & Hickey & Commonwealth [2003] FamCA 395, (2003) 30 FamLR 355, FLC 93-143 for approach prior to the High Court decision in Stanford
The property of the parties
Although there was an agreed list of assets and liabilities tendered into evidence at the hearing, along with a list of assets and liabilities that was not agreed, prior to the written submissions being received an investment property owned by the husband and his nephew at [omitted] (the [P] Property) was sold. The net proceeds of sale available to the husband was $61,285.[3] I have therefore included that figure in the list of assets rather than the figures used for the asset and the corresponding liability in the agreed list at the trial.
[3] Wife’s written submissions
There were a number of issues in relation to identifying the property that I was asked to rule upon.
Duty to Make Full and Frank Disclosure
Each party has a duty to make full and frank disclosure of their financial position in proceedings such as these.[4] When a party has failed to do so the court may take a more robust view and be less cautious when making orders than would otherwise be the case.[5] The husband failed in his obligation to make full and frank disclosure in that he failed to file a financial statement, provide many financial documents in a timely manner and failed to provide evidence of the [B] and [A] businesses making losses. Counsel for the husband argued that the wife already had much of the necessary information. Although I accept she annexed a number of documents to her affidavit addressing some of the husband’s liabilities it was clear that the husband had kept back much of the information until just before the trial.
[4] Chang v Su [2002] FamCA 156, (2002) 29 Fam LR 406, FLC 93-117, Briese v Briese (1986) FLC 91-713
[5] Weir & Weir (1993) FLC 92-338; 16 FamLR 154
The husband argued that the wife had also failed to make full and frank disclosure especially in relation to her credit card statements and a notebook used in the [B] business. I was not persuaded the wife deliberately withheld this information and she produced them when called upon by counsel for the husband.
The [L] Properties
The wife sought to have added back into the pool of assets four properties purchased in [L] and later sold without reference to her. Three of the properties were registered in the husband’s sole name and one in his name jointly with another person. She claimed the money used to purchase the properties came from their efforts in running the [omitted] businesses. Funds were sent to [L] via Western Union transfers totalling over $190,000 between 2007 and 2013. Another $183,094 was sent to [L] through a Commonwealth Bank international money transfer on 1 February 2011. The significant sums of money that were transferred through Western Union and the Commonwealth Bank would appear to suggest the wife’s evidence is credible.
The husband said he had purchased the properties with his business partner and some of the money from the Commonwealth Bank transfer was used to help relatives and people in need. The husband did not file any corroborative evidence. In any event the properties have now been sold. The husband’s evidence was that they were sold for around $305,000 but that he did not see any of the money because he used it to pay out debts to three people. He said he owed his brother-in-law $173,000. This is the same person who purchased the properties from him. Out of the remaining money his brother-in-law paid $79,000 to one man and $48,000 to another man on the husband’s behalf to honour debts the husband said he had incurred.
The wife urged the court not to accept the husband’s evidence and argued that he has had and may still have access to at least some of the sale proceeds. Determining this issue is difficult without corroborative evidence. Although I have found the husband lacked credit generally in these proceedings, I accept he may have owed family money in [L] in light of the evidence that the parties and their children lived with family in [L] for a number of months prior to their separation. It was not disputed that during this time they were supported by family. This though would not account for all of the money received from the sale proceeds. The husband said he had gambled with borrowed funds contrary to his religion and felt shame in doing so. Whilst this may explain his reason for choosing not to provide corroborative evidence I am not satisfied he has adequately explained how all of the proceeds of sale were dissipated if in fact they have been.
Counsel for the husband argued the wife’s contention that it was open to the court to find that the husband has significant sums of money in his possession would be without any evidential basis. Whilst it is not open to the court to find the husband has a specific sum of money remaining from the proceeds of sale of the [L] properties when I consider his lack of corroborative evidence in relation to the proceeds of sale; my adverse findings as to his credit; his evidence that he has been unemployed for many months, pays rent, supports his new partner and does not draw any government benefits along with his lack of corroborative evidence that he is currently living off the generosity of family and friends I am satisfied he has not been entirely truthful as to his financial affairs and find that he must have access to funds from either the sale of these properties or some other source that he has not disclosed.
I am not persuaded it would be appropriate to notionally add back into the pool of assets these properties as requested by the wife. I have had regard to a number of decisions[6] delivered after the High Court’s decision in Stanford which counsel for the husband referred to in his written submissions. I respectfully agree with the approach adopted by Murphy J in Watson & Ling[7] where his Honour said:
[29] Where, but for the disposal of money or other property by one party, legal or equitable interests in it would have been part of those existing at trial, it may be possible to assert, in the particular circumstances of a case, that the money or property is nevertheless to be considered as part of the existing legal or equitable interests of the disposing party (sham transactions and circumstances where it can be established that the property is held, for example, on trust by another for the disposing party are examples). The investigation of issues of that type might be seen to be part of the establishment of the existing legal and equitable interests at trial – a task which the majority of the High Court in Stanford (at [37]) said should be the first step in considering, pursuant to s 79(2) (cf s 90SM(3)), whether it is just and equitable to make an order.
[30] In many other cases, for example those which come within the convenient rubrics of “waste” (see Kowaliw & Kowaliw (1981) FLC 91-092) or “premature distribution” (see, for example, Townsend), legal and equitable title to the money or property will have passed. It could not be said that the money or property is part of the “existing legal or equitable interests” of a party or the parties. The notion that such money or property should be treated as a “notional asset” or “notional property” appears to run contrary to the thrust of the decision in Stanford: at issue is the consideration of two separate questions, the first of which is whether existing legal or equitable interests should be altered.
[31] Yet, of course, unilateral actions of the type described might very well be a consideration – indeed, in an appropriate case, an important consideration – in deciding if any order should be made altering the existing interests of a party or parties.
[32] Where the Court has determined that it is just and equitable to make an order pursuant to s 79(2) or s 90SM(3) and there is clear evidence that one party has engaged in conduct and, but for that conduct, the legal and equitable interests of a party or the parties (or the value of those interests) would have be significantly greater, justice and equity may require recognition of the unfairness inherent in those circumstances in the terms of the orders to be made.
[33] How might that be recognised? First, consistent with existing authority, it can be recognised pursuant to s 75(2)(o) (cf s 90SF(3)(r)) (see, for example, Omacini & Omacini (2005) FLC 93-218, Browne & Green (1999) FLC 92-873 and Cerini). Secondly, it might be contended that it might be recognised within the assessment of contributions. This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). Nevertheless, it might be argued that the “non-dissipating party” can be seen to have made a disproportionally greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, but for the other party’s unilateral dissipation, those existing legal and equitable interests would have been greater or had a greater value.
[34] The assessment of the circumstance under discussion is, ultimately, a matter of discretion (see, for example, Cerini at [46] and Townsend at 81,654). Equally, however, authority dictates that it will be “the exception rather than the rule” (Cerini at [46]) that a direct dollar adjustment equivalent to the amount of the alleged dissipation of the pool is made to the otherwise entitlement of a party. It may be that aspects of the erstwhile treatment of legal fees pre-Stanford (see, for example, Chorn & Hopkins (2004) FLC 93-204) will require further consideration in an appropriate case.
[35] Importantly, of course, as has been emphasised in many authorities including those cited above, not every dissipation by a party can be seen to involve an affront to justice and equity; again the circumstances of the individual relationship must be assessed.
[6] Sebastian & Sebastian [2013] FamCA 191; Newman & Newman [2013] FamCA 37; Watson & Ling [2013] FamCA 57, (2013) 49 Fam LR 303; Baglio & Baglio [2013] FamCA 105; Bowe & Bateman [2013] FamCA 253; Alexiou & Alexiou [2012] FamCA 1146; Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545
[7] [2013] FamCA 57 at [29]-[35]
Whilst the wife is right to be suspicious of the husband’s motives in selling the [L] properties she has not established that the husband has engaged in any sham transaction in relation to these properties. I am satisfied he no longer has any legal or equitable interest in them. In those circumstances and in light of the recent authorities, I do not consider it appropriate to treat the properties as notional assets and added back into the pool. I will however give consideration to this issue when I consider s.75(2)(0).
The [B] Business
Throughout the marriage the parties operated a number of retail [omitted] businesses in partnership with Mr E. I accept the wife’s evidence that they would make a profit on the sale of the businesses. In July 2010 they purchased a similar business in [B]. The wife said it was purchased for $147,500 and annexed to her affidavit a document purporting to be a Statement of Adjustment to corroborate that sum. The solicitor’s letter that would have accompanied the Statement of Adjustment was not included in the annexure.
The husband on the other hand said the business was purchased from the brother of Mr E for just $50,000 and annexed to his affidavit a document purporting to be a sale of business contract. The contract date was said to be 1 December 2011. The contract was not stamped and contained alterations that had not been noted by any initialling of the parties.
Consistent with my finding as to credit I prefer the wife’s evidence as to the purchase price.
In April 2012 the husband arranged for renovations to be carried out on the shop. He has been invoiced $85,790.17 for the work. The account has not been paid. His evidence was that the business was not doing well and was considering closing the shop, whereas the wife’s evidence was that during the marriage it was making a profit. I prefer her evidence.
The husband contended he sold the business on 5 November 2012 to his nephew for $40,000 although he has not yet received the money. This debt to him remains an asset. The wife exhibited to her affidavit statements from [omitted] Insurance Agencies Pty Ltd in relation to outstanding insurances for the business. It would appear from these documents the insurer understood the business was sold on 5 December 2012. If this notation is accurate the husband may have been in breach of an order of Federal Magistrate Hartnett, as her Honour then was, made on 13 November 2012. The order reads:
[1] The husband be forthwith restrained by injunction from selling, disposing, assigning or further encumbering or otherwise dealing with the real property and any other property or asset held in his sole name, or joint name or otherwise that is within his control or possession.
The wife alleged the husband sold the business in breach of the injunction. I am not satisfied there is sufficient evidence to find the husband has breached the order. Although the statement from the insurance broker suggested that business understood the sale to have taken place in December, and if so it would have been in breach of the order, the inclusion of that date in the statement is not evidence of the date of sale.
The wife invited the court to reject the husband’s evidence as to the sale of the business given he failed to call any corroborative evidence as to the sale and he had incurred the debt of $85,790 for the fittings, which formed part of the sale, only seven months earlier. She contended that I should notionally add back into the pool of assets the sum of $650,000 for the value of this business even though it has now been sold and the parties no longer have any interest in it. The husband though is still owed $40,000 from Mr B. She arrived at this figure by taking the husband’s own assertions of that sum in a Statement of Financial Position he completed for the purposes of having the lease of the business premises assigned to him in 2012. The husband tried to explain his use of this sum to value the business by saying that he wanted to be able to have the lease assigned to him and he knew he needed to persuade the landlord that he had significant assets. In other words he lied to gain a benefit he believed he otherwise would not obtain.
The husband argued that as the wife offered to buy the business for $50,000 in November 2012 but after its sale to Mr B I should accept that the value was nowhere near what the wife now asserts the court should ascribe to it. The wife’s evidence was that when she heard the husband was wanting to sell the business for $40,000 she offered the $50,000 to retain it. I accept her evidence. I do not however accept that the business was likely to be worth $650,000. I accept the husband’s evidence that he lied to the landlord of the premises about the value of the business in order to have the lease transferred. Notwithstanding the possibility the husband over-capitalised in spending $85,790 on the shop fittings, given he spent that amount only a few months prior to the sale and my findings as to the purchase price, I am not satisfied his sale of the business was at market value. It is not possible on the evidence however to determine what the true market value would have been. In any event for the reasons I have expressed in my consideration of the properties in [L] I am of the view that it is not appropriate to add back the business to the pool of assets.
[A] Business
The husband purchased a [business] in [A] in July 2012 for $120,000. In doing so he paid a $5,000 deposit with the remaining $115,000 to be paid in January 2014.
On 30 November 2012 the solicitors for the wife responded to an email from the husband’s solicitors sent that day advising the [A] business was making a loss and the husband intended to close the business down unless the wife agreed to the sale of the business. The wife’s solicitors requested particularisation of the alleged loss. They asked for a valuation of the business prior to any sale and sought further information in relation to the business. Notwithstanding this exchange of correspondence and the injunction made 13 November 2012 the husband closed the business, went about dismantling the shop fittings and returned the keys to the landlord.
The wife sought to have added back into the pool of assets the sum of $120,000 for this business. Although not specifically asserted in her counsel’s submissions it would seem the wife has adopted the purchase price as the value that should be ascribed to this business. It was conceded in those submissions that it is not possible to definitively determine a figure. The business no longer operates. It therefore has no current value. For the reasons I have already expressed above in relation to the [B] business and the [L] properties I do not consider it appropriate to add any figure back into the pool in relation to this business.
Husband’s Nissan
Although the wife raised issue with the husband having a Nissan motor vehicle which she ascribed a value of $35,000 her counsel did not address this in his submissions other than to include the sum in his list of assets. Counsel for the husband left it out of his list of assets consistent with his instructions. There is no evidence of the husband having ownership, possession or control of this vehicle and I therefore propose to exclude it from the list of assets.
$15,000 received by Wife
Judge Hartnett made the following order on 22 July 2013:
[3] The sum of $15,000 of the deposit monies be released forthwith to the wife as an advance on property settlement or as a payment of spousal maintenance as shall be determined by the trial judge.
The wife received this sum. The husband argued that the money should be added to the pool of assets. The wife argued however that she had received little financial support for her and the children from the husband after separation therefore the advance should be characterised as funds used by her to support the family in the time between receipt and the trial. It is clear from the list of assets the sum has been expended. I am satisfied that given the modest size of the sum; the time that elapsed between its receipt and the trial; the husband’s failure to make any child support; and notwithstanding the wife’s employment as a [omitted] the sum should be regarded as funds used by her in the ordinary support of herself and the children. I do not consider it appropriate to add back the sum as it does not fit within any extra-ordinary circumstance warranting an add back nor do I consider it appropriate to be factored in to any consideration I may make in relation to s.75(2)(o).
Liabilities
The extent of the liabilities and how they are to be treated was a significant issue at the trial.
The wife asserted she borrowed funds from her family of around $9,500. No corroborative evidence was filed. I am not satisfied it would be appropriate to include this amount in the list of assets and liabilities without such corroboration even though I found the wife to be a credible witness. In determining whether liabilities should be included the court may take into account whether the liability is certain, likely to be enforced and not unreasonably incurred.[8] I am not able to determine the extent of the borrowings of the wife and there is no evidence that the debt to her family will be called upon to be re-paid.
[8] Biltoft & Biltoft (1995) 19 Fam LR 39, FLC 92-614
The husband alleged he owed a significant number of debts which when totalled would exceed the parties’ assets. Although the wife conceded some of these debts she argued that they should be borne by the husband rather than the parties jointly. The husband argued that the debts were incurred in the running of his businesses and should therefore be borne by both parties. I propose at this stage to make findings as to the existence of the debts and will determine who should bear responsibility for them later in this judgment.
Although at the court’s request the husband tendered a list[9] of the liabilities he asserted were outstanding it was necessary for me to determine the extent of the liabilities by having regard to the evidence.
[9] Exhibit H1
The wife had from the beginning of the proceedings conceded that the amount of $115,000 remained owing on the purchase of the [A] business. She disputed however a further sum of $16,000 for stock in relation to this business. The husband did not provide any corroborative evidence in relation to the $16,000 and I therefore propose to exclude this sum and ascribe the sum of $115,000 as the amount owing on the [A] business. Exhibit H2 established that the amount owing by the husband to [T] Pty Ltd, the lessor of the premises of the [A] business, was $42,452.71. The amount was not challenged – only the responsibility for it.
During the course of the hearing the wife also conceded that the amount owing to [E] Pty Ltd was $152,708.
The husband annexed a number of tax invoices, letters of demand and/or final notices to establish the following liabilities:
a)Telstra: $ 7,896.58;
b)J.J. Richards & Sons Ltd: $ 1,125.45;
c)[omitted] Insurance: $ 4,002.39;
d)ATO: $ 2,361.84;
e)[omitted] Newspapers: $ 1,400.00;
f)[A] (Aust) Pty Ltd: $ 8,000.00;
g)Citywide: $ 1,250.43;
h)LUM Energy: $ 3,539.19;
i)Gallagher Bassett (Work Safe): $ 734.41;
j)Optus: $ 312.15;
k)Mr V ([omitted] Market): $48,500.00; and
l)Seoud Solicitors (Legal Fees): $29,150.00;
The husband had also included a number of infringement notices in relation to unpaid tolls on City Link. His list of liabilities listed these at $1,500. I have not been able to read all of the infringement notices annexed to his affidavit. In any event I do not intend to include them in the list of liabilities because even if they were incurred in the course of the husband conducting his business, being infringement notices, they could not be said to be reasonably incurred. The husband also included the amount of $800 for Ambulance fees in his list of liabilities but there was no corroborative evidence annexed to his affidavit. Accordingly I have not included that sum in my consideration.
The invoice from Seoud Solicitors appeared to include both business related legal fees, the husband’s family law fees and fees in relation to criminal charges. The wife raised issue with this in her affidavit but no attempt was made by the husband or his solicitors to separate the amounts. The fees also appear to relate to post separation issues. I accept the wife’s criticism of this account but accept the husband does owe his lawyers this amount for their services.
The wife also took issue with the amount said to be owed to Mr V at [omitted] market. The letter dated 31 October 2012 lists a number of alleged borrowings by the husband from Mr V and their requirement to be paid by the end of March 2013. It is clearly not a tax invoice for goods sold or services rendered. Mr V was not called to corroborate the husband’s evidence. I do not propose to accept this alleged debt given that lack of corroboration. For the same reason I do not propose to accept the husband’s assertion he also owes friends and family $25,000 for borrowings.
Gambling Losses
The wife argued that given the husband’s evidence that he gambled money I should factor this into a consideration of the pool of assets and liabilities. She conceded this could not be quantified. This is a factor more appropriately considered under s.75(2)(o).
Finding as to property
The lack of full and frank disclosure makes the task of definitively determining the extent of assets and liabilities impossible. However I am able to find and quantify the following assets and liabilities for the purposes of this judgment:
| Assets | Ownership | Value $ |
| Money held in trust upon the sale of the former matrimonial home | Joint | 234,000 |
| Money held in trust upon the sale of the [P] Property | Husband | 61,285 |
| Husband’s motor vehicle | Husband | 1,500 |
| Wife’s motor vehicle | Wife | 10,000 |
| Wife’s furniture | Wife | 15,000 |
| Wife’s bank account | Wife | 192 |
| Wife’s superannuation | Wife | 2,500 |
| Debt owed to Husband from Mr B | Husband | 40,000 |
| TOTAL | $364,477 |
| Liabilities | Legal Responsibility | Value $ |
| [A] Business | Husband | 115,000 |
| [T] Pty Ltd | Husband | 42,452 |
| [E] Pty Ltd | Husband | 152,708 |
| Telstra | Husband | 7,896 |
| J.J. Richards & Sons Ltd | Husband | 1,125 |
| [omitted] Insurance | Husband | 4,002 |
| ATO | Husband | 2,361 |
| [omitted] Newspapers | Husband | 1,400 |
| [A] (Aust) Pty Ltd | Husband | 8,000 |
| Citywide | Husband | 1,250 |
| LUM Energy | Husband | 3,539 |
| Gallagher Bassett (Work Safe) | Husband | 734 |
| Optus | Husband | 312 |
| Seoud Solicitors | Husband | 29,150 |
| TOTAL LIABILITIES | $369,929 |
I included the wife’s superannuation with the other assets rather than adopting a two pools approach given the nominal value of same and the lack of any superannuation held by the husband.
Is it just and equitable to alter the property interests?
The husband argued that it would not be just and equitable to alter the property interests of the parties other than to order the payment of as much of the liabilities as could be paid out of the funds held on trust. The wife argued that to do so would not be just and equitable and the husband should bear all of the liabilities given his failure to make full and frank disclosure; her belief that he has access to funds from the sale of the [L] properties and his conduct in selling the [B] business and closing the [A] business.
In Stanford[10] the majority held:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, 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. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, 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 marital 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. What order, if any, should then be made is determined by applying s 79(4).
[10] [2012] HCA 52; (2012) 293 ALR 70; 47 FamLR 481
I am satisfied that it is appropriate in this case to alter the property interests of the parties in light of the demise of their marriage. Although they hold joint funds which are less than the liabilities that I have found are owed by the husband, given the dispute as to how responsibility for these debts should be apportioned and my findings below in relation to that dispute I am of the view that justice and equity would not be afforded the parties if a property adjustment order is not made. Further for the reasons I will set out below in relation to the contributions of the parties and my consideration of the s.75(2) factors I am of the view that it would not be just and equitable to decline to make a property adjustment order.
Contributions
I now turn to the assessment of the parties’ contributions.
Neither party brought any significant financial contribution to the marriage at the commencement of their relationship. During the marriage however the husband worked hard in his businesses and as a result he was able to build them up and make profits from their sale.
The wife worked as a [omitted] in the early years of the marriage as well as in the [omitted] businesses where she helped in the shop. She said she did all the paper work for the businesses. The husband’s evidence was that the wife did little in the shop only helping out when a staff member was sick. He said she paid the bills for the business through her credit card at his direction. The wife agreed that she paid these bills but maintained a greater involvement in working at the shops. I preferred her evidence although I am not satisfied the wife did all of the paper work. She was excluded from the management decisions which were made by the husband either alone or with his business partner and specifically excluded from the room in the shops where the husband conducted his businesses.
At the husband’s direction and against her wishes she gave up her [omitted] job. The husband said that this occurred in 2001 whereas the wife said it was in 2005 although she was unclear as to exactly what year it was. I am not able to determine which year it was but I am satisfied that the wife worked as a [omitted] for a few years after their marriage. The wife returned to work as a [omitted] in 2012 not long before the parties separated.
The wife was also the primary carer for the children, when she was not working, and the homemaker for the family. She made the much greater contribution in this regard. I accept her evidence the husband contributed little by way of care for the children and work around the home. This also continued after separation as the husband had little time with the children. The husband has also failed to provide financial assistance to the wife for the care of the children since separation.
In light of the history of successfully running his businesses during the marriage and my findings as to his credit I was not persuaded that he was not likewise successful in both the [B] and [A] businesses. This failure to produce evidence of the losses only confirmed my finding that he was not truthful in the giving of his evidence. The husband’s conduct in selling the [B] business for $40,000 when it was purchased for $147,500 just over two years previously and expending a significant sum in renovations only a few months before, along with the closing of the [A] business not long after separation had led me to find that he has not made financial contributions post separation. I will address the issue of his conduct in this regard further when I consider the s.75(2)(o) factor. In making this finding I have not assessed his conduct as a negative contribution but rather a lack of contribution.
When I consider these three stages of the parties’ marriage I am satisfied that overall the wife has made a greater contribution than the husband. Given his hard work in the businesses during the marriage though his contribution should not be minimised. I assess the contributions as 60% to the wife and 40% to the husband.
Section 75(2) factors
The parties are in their mid thirties and their children are still very young. Although the husband will now spend time with the children pursuant to the orders made in October the wife will remain their primary carer. She has done so since separation without regular child support from the husband. This is likely to continue for some time given the husband says he is not currently working and the attitude he has shown towards the wife during the giving of his evidence.
The wife works as a [omitted] five days a week on a contract basis. It is not a permanent position. She is in good health and I see no reason why she would not be able to continue working.
The husband despite working hard during the marriage gave evidence of being unemployed. He said he had been depressed after the break down of the marriage. He did not provide any medical evidence to support any inference that he was unfit for work. Despite his assertion I find that he is capable of working in the [omitted] business either as an employee or in the running of his own business.
Given the young ages of the children, the primary care that will be given by the wife to them and the lack of child support thus far paid being an indicator that the husband is unlikely to financially support the children in the future I assess that there should be an adjustment in the wife’s favour of 10%.
I turn now to consider s.75(2)(o) which reads:
Any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
The wife asserted and I have earlier found that the husband is likely to have access to funds he has not disclosed. There is no evidence though that would enable me to quantify those funds. The extent of the funds may be significant if I was to reject entirely the husband’s evidence in relation to the sale of the [L] properties and/or the business in [B]. However, they may also be modest if there was an element of truth to his evidence of gambling and the repayment of loans. The husband was not able or willing to describe in any detail the extent of his gambling. He said he felt shame as a [religion omitted] in gambling and had borrowed money in doing so. If I was to accept this evidence, and in part I do, his conduct in gambling to such an extent that the parties have lost some of the equity they previously enjoyed in the [L] properties warrants an adjustment under s.75(2)(o) even though it is impossible to quantify the extent of the loss.
The husband’s conduct in selling the business in [B] for $40,000 quickly after separation and without proper consultation with the wife and closing the business in [A] despite the wife’s objection is conduct that can only be described as wanton. The husband was an experienced businessman who had been successfully running [omitted] businesses for a number of years during the marriage. They had been profitable. I do not accept his evidence that these businesses were not making a profit. I am satisfied the husband disposed of the businesses soon after separation to avoid making a property settlement with the wife.
In Kowaliw[11] Baker J held that if a party carries out a course of conduct intended to reduce or minimise the value of matrimonial assets or acts “recklessly, negligently or wantonly” with those assets then such conduct and the economic consequences that follow should be taken into account when considering the provisions of s.75(2)(o).
[11] (1981) FLC 91-092 at p.76,645; (1981) 7 Fam LR N13
In Antmann[12] the Full court rejected an argument that where one party unilaterally closed a business, the income from which supported the family, such action should be treated as a negative contribution. The court went on to say that if the other party took over the business it was open to the court to take into account that party’s increased burden of contribution otherwise any “waste” committed by a party may be more appropriately considered under s.75(2)(o).
[12] (1980) FLC 90-908 at p.75,744
I am satisfied that when I take into account the lack of full and frank disclosure by the husband, my finding that he likely has access to funds he has not disclosed; his admission to gambling incurring losses and his conduct in selling and closing the businesses quickly after separation over the wife’s objection an adjustment in the wife’s favour is warranted. I would assess that adjustment at 15% given the extent of the husband’s conduct. I would have allowed a greater adjustment if it were not for my findings below in relation to who should bear responsibility for the outstanding liabilities.
The wife also argued that the husband should retain responsibility for all of the liabilities. She argued that it would not be just and equitable if she was to bear some of the burden for business related expenses when the husband unilaterally elected to sell the [B] business and close down the [A] business whilst debts remained unpaid. It was submitted that even if all of the debts were legitimate the husband should have continued trading in order to meet his obligations to his creditors. The husband argued however that as the expenses were incurred in the ordinary course of business they should be borne equally by the parties at least to the extent the joint pool of assets would allow.
Parties to a marriage should ordinarily share in the highs and lows of business and investment outcomes. In other words they would reap the profits and bear the losses together. There are times however when to do so would not be just and equitable. In this case the wife gave evidence that prior to July 2012 they had minimal liabilities: primarily the mortgages over the former matrimonial home and the investment property as well as the money owing to the previous owners of the [A] business. I accept the wife’s evidence as to the husband’s failure to make payments on the mortgages and his business liabilities from around October/November 2012 coinciding with their separation. As a consequence of this the debts have mounted.
The wife conceded the previous owners of the [A] business were owed $115,000. This business was purchased during the marriage. Notwithstanding this the wife argued that the husband should bear this debt as he closed the business down in less than a year since purchasing it, over her objection and despite the injunction made on 13 November 2012. Whilst I have sympathy for the complaint made by the wife I am not persuaded that to exclude this debt from joint responsibility would be just and equitable. It is a considerable debt and was incurred in the purchase of the business which was a joint enterprise. I have however taken into account in my assessment of the adjustment pursuant to s.75(2)(o) the husband’s conduct in closing this business so soon after purchasing it.
In relation to the other debts however I accept the wife’s submissions that these could have been paid if the husband had retained and continued trading the businesses. This is particularly so of the following:
a)[E] Pty Ltd;
b)Telstra;
c)J.J. Richards & Sons Ltd;
d)[omitted] Insurance;
e)[omitted] Newspapers;
f)[A] (Aust) Pty Ltd;
g)Gallagher Bassett; and
h)Optus.
For this reason I am satisfied the husband should bear the responsibility for these debts.
I am further satisfied that he should bear the responsibility of the debt claimed by [T] Pty Ltd as that debt arose out of his decision to close the [A] business. His solicitors’ fees were not sufficiently particularised. Overall I am satisfied he should also bear this debt himself as the invoice appears to include costs associated with his business dealings, criminal charges and his family law fees. The wife’s family law fees were not included in her liabilities. The statement from the Australian Taxation Office in relation to the husband’s tax debt appears to be an integrated tax debt from early 2013. Given that date, it is highly likely to have arisen out of his income earned during the marriage rather than post separation. Ordinarily I would make an order for the parties to share in the responsibility for this debt. However I accept the wife’s evidence that she has paid out of a tax refund a debt to Centrelink in the sum of $8,000 that arose out of an unintentional error in her claim for the Family Tax Benefit. This error occurred as a result of the wife not being aware that she nominally received income of about $35,000 as a result of a distribution from a family trust set up by the husband. When I take this payment by her into account I am satisfied that the husband should be responsible for his tax debt notwithstanding it is likely to have arisen as of result of income received during the marriage.
Conclusion
In light of my findings as to who should bear the responsibility for the debts, the assets and liabilities to be considered in relation to the property adjustment order are:
a)The money held in trust upon the sale of the former matrimonial home: $234,000;
b)The money held in trust upon the sale of the [P] Property: $61,285;
c)The husband’s motor vehicle: $1,500;
d)The wife’s motor vehicle: $10,000;
e)The wife’s furniture: $15,000;
f)The wife’s bank account: $192;
g)The wife’s superannuation: $2,500;
h)The debt owed to the husband by Mr B: $40,000; and
i)The joint liability to the previous owners of the [A] business: ($115,000).
After considering my findings as to contributions and the s.75(2) factors I am satisfied the wife should receive 85% of the net position. Using the list set out in the paragraph above the net position after deducting the $115,000 is $249,692. Eighty-five percent of that figure is $212,055. The orders I propose to make will see the wife receive slightly less than the full 85%. This is because an order for an 85%/15% division would see the husband having to make a cash adjustment to the wife when he receives the $40,000 from Mr B. I am not confident the husband would comply with such an order. In order to avoid the potential for further litigation by way of enforcement proceedings and in light of the modest sum involved I intend to order that the wife receive all of the cash funds held in trust from the sale of the two pieces of real estate after the payment out to the previous owners of the business in [A]. When those funds are combined with the assets the wife already has she will receive a settlement to the value of $207,977 some $4,078 short of the 85%. The husband will not receive any cash out of the property adjustment order and he will retain responsibility for the liabilities that I have not included in the list. Despite this significant disparity between the parties, I am satisfied that this result and the orders to be made are just and equitable in light of my findings as to the husband’s failure to make full and frank disclosure, including his access to funds not disclosed, along with his conduct in disposing of the businesses.
The orders will provide for the parties to pay the $115,000 to the previous owners of the [B] business from the funds held in trust from the sale of the former matrimonial home. The wife will retain her motor vehicle; furniture; superannuation; bank account balance; the remaining funds in trust from the sale of both the former matrimonial home and the [P] Property. The husband will retain his motor vehicle and the debt owed to him by Mr B. He will also retain responsibility for the other liabilities and in doing so will indemnify the wife in relation to any debt held in his name or any business conducted by or on his behalf.
For the above reasons I will make the orders set out in the beginning of this judgment.
I certify that the preceding eighty-two (82) paragraphs are a true copy of the reasons for judgment of Judge Lapthorn
Associate:
Date: 28 April 2014
W1 Wife’s list of disputed assets and liabilities
H1 Husband’s list of disputed liabilities
W2 Transcript of 22 July 2013
W3 Log book
W4 Western Union spread sheet
W5 Child Support Online printout
W6 Husband’s tax returns 2004-2011
W7 [R] Trading Co Pty Ltd tax return 2011
H2 Letter dated 15 October Wisewould Mahony Lawyers to [F] Trading Pty Ltd
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