Lois and Mort

[2008] FamCA 103

FAMILY COURT OF AUSTRALIA

LOIS & MORT [2008] FamCA 103

FAMILY LAW – PROPERTY SETTLEMENT – where one party’s failure to cooperate has caused substantial loss

Evidence Act1995 (Cth)
Family Law Act1975 (Cth)

Coghlan (2005) FLC 93-220, (2005) 33 Fam LR 414
Ferguson at FLC 77 612

Hickey v Hickey and Attorney-General (2003) FLC 93-143; 30 Fam LR 355

Kowaliw (1981) FLC 91-092
Soblusky (1976) FLC 90-124, 2 Fam LR 11, 528

APPLICANT: MS LOIS

RESPONDENT: MR MORT

FILE NUMBER: DGF 980 of 2006

DATE DELIVERED: 12 February 2008

PLACE DELIVERED: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 12 February 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr G.F. Holmes

SOLICITOR FOR THE APPLICANT: Goddard Elliott

THE RESPONDENT: No appearance

Orders

1. Pursuant to s 106A of the Family Law Act 1975 (Cth) a registrar of the Family Court of Australia is hereby appointed to execute all deeds and documents in the name of the husband and do all acts and things necessary to give validity and operation to any document required to complete the sale of the parties’ property (“the property”) described in Certificate of Title Volume … Folio … (“the Title”) and in particular to the application or document required by the Land titles Office to obtain a new title for the said property.

2. The husband pay $9035 towards the costs of the wife of and incidental to these proceedings.

3. Upon completion of the sale, the proceeds of the sale of the property be applied as follows:

   (i)firstly a payment to the husband of $40,465;

   (ii)secondly, the balance to the wife.

4. That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:

   a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owed by or in the possession of such party as at the date of these orders (the furniture, personal possession, and like chattels in the property being deemed to be in the possession of the wife);

   b)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;

   c)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.

5. The application of the wife as amended and filed on the 4^th day of February 2008 otherwise be dismissed and the proceedings be removed from the Active List of cases awaiting a hearing.

IT IS CERTIFIED

1. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

2. The wife’s solicitor forthwith serve a sealed copy of this order on the husband via email at his email address.

IT IS DIRECTED

1. That the reasons for judgment this day be transcribed and that copies be made available to the parties, the husband’s copy to be forwarded by the Court to the email address referred to above.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: DGF 980 of 2006

MS LOIS

Applicant

And

MR MORT

Respondent

REASONS FOR JUDGMENT

1. On 30 November 2006 the wife filed an application seeking a property settlement from her husband.  Since that time the husband has not participated in the proceedings.  It seems he resides in China.  Today he was called outside of the court and he has not appeared either in person or through a legal representative.  I was handed an undated and unsigned letter purporting to be from the husband which arrived only a few days ago.  My Associate emailed the husband a note which reads:

   You should be conscious that the court determines the matter on affidavit material and notwithstanding your indication that you do not have the funds to have a lawyer represent you, you should have a representative at the proceedings if you desire to participate or put some submission as to how the matter should be resolved.

2. One curious thing about the husband's letter, is that it appears to have been hand delivered.  It is clearly not emailed to the court nor faxed.  I have inferred that someone in Australia received possibly an email from the husband and delivered it by hand to the Court.  It is important to also understand that the husband has an email address which he acknowledges.  To that extent, he has had ample opportunity to participate.  In January of 2007, orders for substituted service were made by a registrar and the case was adjourned to March.  At that hearing before another registrar, the application was adjourned to an indefinite date to await a trial notice listing but with a notation that the wife would be bringing applications for sale of assets.  Those applications were not brought until September 2007.

3. On 15 October 2007, Brown J heard the application of the wife for various interlocutory orders, again in the absence of the husband.  Leaving aside for a moment the orders made to sort out some property issues, her Honour made provision for the husband to be served with documents by email to the address about which I have already made a comment.  Her Honour permitted further and future service on the husband at that specified email address.  Brown J went on to order that the husband file and serve any material that he wished the Court to consider by 18 December 2007.  Nothing was filed.  Her Honour's order went on also to provide that should the husband fail to comply, the wife had liberty to seek to have the matter listed for an undefended hearing.  That is what she has done.

4. I am satisfied on the evidence that the husband has been served with the relevant documents required by Brown J, and that the husband has been made aware that today was the day that the wife intended to ask the Court to proceed to finalise matters.  I am satisfied that he has had ample opportunity to participate, but has chosen not to do so.  Natural justice has been satisfied.  There is some urgency about this case because, as I shall mention in a moment, all of the assets have been sold almost because of a domino effect.  If anything could go wrong in this financial history, it has, and there is now some urgency about a further step being taken to replace the certificate of title to the former matrimonial home.  I shall deal with that as well.

5. To that end, I have given leave to the wife to file an affidavit by her solicitor about the sequence of events which has given rise to that problem.  The background to the marriage in the case is not exceptional.  The parties married in December 1981 and separated on 21 April 2002 after being separated under the one roof for some time.  It is therefore a relationship of about 20 years.  The parties' marriage was dissolved by divorce in 2005, the decree becoming final on 3 December 2005.  The wife's application for financial orders was properly issued within the period of 12 months after the decree of divorce became absolute.  There are no children of the marriage.  I have had the advantage of reading the affidavit material of the wife in support of her application for final orders.  I am satisfied that that material has been provided to the husband, and having regard to his silence on the issue, I am entitled to presume that he does not object to orders being made, nor that he disputes the evidentiary basis upon which the applications are put. 

6. I say that having regard to the fact that he has filed a letter with the Court but I propose to ignore the contentious issues there set out. I propose to accept the evidence of the wife and where I make statements of fact hereafter, it is on the basis that I have accepted them to be accurate to the requisite standard under s 140 of the Evidence Act 1995 (Cth). I have also accepted that the financial position as outlined to me by the wife through her financial statement is also evidence which I can and should accept. It does not mean that the Court is simply acting in a default capacity to grant the orders sought. The jurisdiction of the court must be exercised having regard to the provisions of Part VIII of the Family Law Act 1975 (Cth) (“the Act”) and I intend to follow the appropriate steps set out by the Full Court in Hickey v Hickey and Attorney-General (Cth) (2003) FLC 93-143; 30 Fam LR 355

7. At the time that the parties married, neither had assets of any substance.  Throughout the relationship both parties contributed financially and non‑financially.  Neither party received any unusual inheritances or windfalls and there is no suggestion of any significant disparity of contributions up until the time of separation when the husband left the home and also Australia.  The major issue is the assessment and weighing up of the period subsequent to separation which although relatively modest in terms of time by comparison to the length of marriage, has been as I find, the most difficult for the wife to manage the financial matters on behalf of both parties.

8. At separation, the parties had interests in the home at R, a franchise business, some motor vehicles, superannuation and chattels.  After separation, the wife remained living in the home and paid the mortgage commitments and other outgoings.  In October 2007 Brown J ordered that the wife as trustee for sale conduct the sale of the home.  That occurred and the property sold for $615,500.  The home was subject to a mortgage to BankWest who have now created a difficulty because notwithstanding that they are the mortgagee, they have lost the certificate of title and advised the wife only in late January.  I have read the affidavit of the wife's solicitor.  He says that the husband was advised of the Land Titles Office requirements and sent a form.  Ironically the husband returned the form.  The delay between sending and returning the form was about two weeks. 

9. Unfortunately the husband had witnessed what was a statutory declaration in front of a Chinese official who, as might be expected, executed the form in his native language. That did not satisfy the requirements of the Land Titles Office. The dilemma is now that purchasers have served notice of default, but have given a further short period of time for the wife to rectify the position. The delay to which I have just referred would have disastrous financial consequences for the husband and the wife, and something which I could not imagine the husband would want. It makes sense therefore to presume that the husband will not be able to sign the necessary document within the timeframe that I have envisaged to enable the settlement to occur, and as such, I propose to direct that pursuant to s 106A of the Act, a Registrar sign the necessary documents.

10. Section 106A is a wide provision which can be construed to include situations other than just neglect or default. It provides for "any other reason" to be the basis for its use. The end result is that there is very little available for distribution between the parties.

11. In 2001 the parties paid $525,000 for the franchise business.  About $110,000 came from their own resources and the balance was otherwise borrowed and the debt secured by mortgage against the home and the corporate entity to which I shall turn.

12. During the ensuing years, the parties worked the franchise and reduced the mortgage by about $100,000.  The franchise was conducted through and by a corporate entity J Pty Ltd.  That entity contracted with the franchisor company.  It was a condition of the franchise that the husband be present and it would appear that when the franchisor company found out about the absence of the husband, not only were they not prepared to transfer the franchise to the wife, they issued a default notice to the parties.  In turn, that precipitated the sale of the business.  The consequent problems of revocation of the franchise agreement and the re-entry by the franchisor company into the business premises meant that when it was ultimately sold there was a disastrous financial outcome. 

13. From the purchase price of $525,000 in 2001 the sale price dropped to $120,000 all of which did not satisfy the debt.  The shortfall was about $230,000.  The husband has not been cooperative in relation to the running of the business and its orderly disposal.  His lack of cooperation extended to a refusal to sign a power of attorney to enable various documents to be signed.  In fairness, what he said was that he had no objection to someone being appointed to sign things for him because he could not get to the appropriate place to execute the power of attorney.  The lack of cooperation does not necessarily mean that he is being wilful.  I am not comfortable in making that finding but I am certain that his leaving Australia and lack of capacity to respond has created a situation where he can be said not to have cooperated.

14. After a request that the husband return to sort out the financial problems, he declined an invitation in May 2006 saying that he had work with the government, presumably in China, and he also did not have the fare.  In an email at the end of 2006, the husband wrote that he was in China on a tourist visa and had to have it renewed periodically for five years until he could seek residence there.  He made some suggestions about what the wife could do but in hindsight they were not helpful.  He made the observation that he wanted to "move on from" the franchise and sell it, but the wife would not agree.

15. I am told that many of these issues are still disputed.  I do not have to determine them today because I only have the wife's evidence to rely upon and I intend to do so.  In addition to the dilemma about the franchise, the mortgagee of the home suggested foreclosure because the wife would not have been able to service the large consequential debt.  That gave rise for the necessity for the wife to sell the home and hence the matter came before Brown J in October 2007.  It was understandable therefore that her Honour was content to make the orders that she did.  In addition to the home and the franchise, the parties owned two motor cars.  I am satisfied that one was sold and the proceeds used to pay legal fees associated with the franchise issue.  The second vehicle has been retained by the wife and there is no other evidence about its value other than it is worth about $10,000.  I see no reason to put the wife to the expense of a formal valuation in this case, and I accept that $10,000 should be added to the pool accordingly.

16. The wife's superannuation was described in her financial statement as just over $13,000.  Her evidence which I accept was that in 2004 there was approximately $50,000 there but in 2004 this money was used to prop up the franchise business.  Having regard to the modest sum, I propose not to seek that any formal proof about value be required.  The wife described the interest as being in the Emergency Services Superannuation Fund and that it was an accumulation interest.  The Full Court in Coghlan (2005) FLC 93-220, (2005) 33 Fam LR 414 required judges to determine whether to treat the interest as part of the pool or something different and separate from the pool. If I took the latter course I would be treating it as something akin to resource. The wife is aged 45 and as an accumulation fund, that sum is not likely to grow significantly. In addition, the wife has a long time to wait to receive that limited benefit.

17. Having regard to the size of the sum, I propose not to add it into the pool but rather to take it into account as a matter that I should under s 75(2) of the Act. There was similarly no valuation of the chattels, but the wife's admission against interest can be taken as $10,000. When the husband left Australia he took $14,000 from the business account. He made reference to it in an email he wrote attached to the wife's material in September 2007 saying that he needed to live on that. Notwithstanding it may have been used for living expenses I have the email from the husband indicating on the one hand that he had employment, and an inconsistent indication later in the same year. Having regard to the capital position of the parties I think it is a situation where justice requires that it be added back to the pool as a Townsend-type premature distribution.

18. Accordingly I find the pool to be net proceeds of the sale of the home about $220,000, the wife's car $10,000, chattels $10,000 and the husband's cash taken $14,000.  The total is therefore $254,000.  As I have already mentioned I am setting aside the sum of the wife's superannuation not to be added into the pool.  Contributions in this case are harder to quantify than usual because of what has occurred after the husband left Australia.  Counsel for the wife said that I should deal with the matter on a wastage basis.  In Kowaliw (1981) FLC 91-092 Baker J referring to a case involving significant wastage said:

    As a statement of general principle I am firmly of the view that financial losses incurred by parties or either of them in the course of the marriage, whether such losses result from a joint or several liability should be shared by them although not necessarily equally except in the following circumstances, (a)  where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of the matrimonial assets or, (b) where one of the parties has acted recklessly negligently or wantonly with matrimonial assets the overall effect of which has reduced or minimised their value.

19. In Fisher (1990) 13 FLC 806 the Full Court dealt with a matter concerning violence but obiter said referring to Soblusky (1976) FLC 90-124, 2 Fam LR 11, 528:

    Soblusky suggested that there may be a limited number of cases in which conduct may be relevant pursuant to section 43. 

20. Strauss J in Ferguson (1978) FLC 90-500 at 77 612 commented:

    I consider that sec. 43 does not provide any justification for taking into account matrimonial misconduct as such either under sec. 75(2)(o) or under sec. 79(2).

21. The Full Court in Fisher went on to say, “We would respectfully agree with that remark”.  Strauss J however acknowledged there might be circumstances in which misconduct with financial consequences might be relevant.  He said:

    By the same token, conduct by either party resulting in the destruction or dissipation of assets of the family might be in a particular case, but is not necessarily, a fact or circumstance within the meaning of sec. 75(2)(o) which the justice of the case may require to be taken into consideration, either in the determination whether a party can support herself or himself adequately, or what the quantum of the order for maintenance should be.

22. I am not convinced that this was a case of the destruction or dissipation of assets, nor that the husband embarked on a course of deliberate and wanton acts causing the destruction of the pool of assets.  I do however find that as a result of the husband's conduct in leaving the wife in circumstances where he was the person upon whom the franchise depended, the wife's contribution was significantly more onerous than it would otherwise have been.  The wife paid all mortgage and other outgoings of the house and maintained as best she could the business.  Normally one would not be given credit for contribution in respect of mortgage payments made whilst occupying a home, but here the solution of a sale would have been met by the problems that the wife faced up until the orders of Brown J.

23. It seems to me therefore appropriate to give a significant weighting in favour of the wife for the fact that she had to pay the outgoings alone.  Similarly in respect of the business, the wife claimed to have paid $105,500 after January 2004 to keep the business afloat.  Some moneys were refunded to the wife from the business but not anywhere near what she outlaid.  It is important to look back at where those extra funds came from.  During the marriage, the wife had been employed in the emergency services and upon her resignation, she obtained a position with an insurance company until 2001 when the parties acquired the franchise.  These positions of employment enabled the wife to have some savings and I have referred to those as being contributed to the purchase of the franchise. 

1. The wife maintained in her evidence that as the relationship deteriorated, the husband worked less and she more.  She said that the husband was absent from the business for much of 2005.  As that continued, the cash flow fell and her funds were called upon to enable the business financial commitments to be met.  Although the wife asked me to assess some of her contributions in a specific way by effectively ordering that she be repaid the large sums that she had paid to maintain the home and the business, to do so would mean that I would be departing from the usual assessment of contributions in a percentage way, but it would also not take into account any other offsetting entitlement, if any, that the husband may have for such things as not having access to the property, and the fact that he contributed to the building up of those assets.  It should only be in unusual circumstances to depart from the percentage assessment method and I see no reason to do so here.

2. The post separation contributions of the wife have been significant having regard to the dilemma that the husband left her, and that must be recognised in a real rather than just a token way.  I am mindful that this was a long marriage and up until the separation there was no argument about contribution.  Clearly I am required to make a finding which is just and equitable to both parties.  It is also important to recognise that the process of assessing and weighting the contributions looks at the underlying value of what the outcome is rather than the artificial concept of the percentages.  That is particularly so in this case where the pool is very modest but it must apply to both parties.  It is equally important to look at the fact that a percentage in one party's direction creates a double effect in the opposite direction.  As such, part of the weighting process is to look at the difference between what each party ultimately receives not only in percentage terms but ultimately in net underlying value.

3. In this case having regard to all of those matters, I assess the contributions both pre and post separation as to 75 per cent to the wife and 25 per cent to the husband. The third step is then to turn to the factors set out in s 75(2) of the Act. In this case, Mr Holmes concedes that his client is working and there is a paucity of evidence about the husband other than that he has skills in a trade. He is currently employed in some form or other in China and seems to have remarried.

4. One of the factors that I have taken into account though, is the fact that the wife does have the benefit of a very modest superannuation sum to which I have earlier referred.  In my view it is such a modest sum that it makes very little difference in this case having regard to the wait that the wife will endure before she can reap the benefits of it.  In my view there is no basis for any further adjustment in this case.  I am not aware of any health impediments that would preclude the parties from being able to exercise their respective earning capacities.  Accordingly, the final step in the process which is the fourth step, is where I have to step back and be satisfied that the outcome is just and equitable to both parties.  Here having regard to what I have just said, I am so satisfied.

5. Accordingly I divide the pool of assets of $254,000 as to $190,500 to the wife and $63,500 to the husband.  However, adjustments need to be made to those sums because the husband has already received the $14,000.  His entitlement is therefore $49,000 from the pool of assets in cash subject to the issue of costs to which I shall now turn.

6. On 15 October 2007 as I have already mentioned, Brown J heard the matter on an interlocutory basis and reserved the wife's costs of the applications filed 17 September. I have to start in any costs application from the provisions of s 117 of the Act that requires that each party bear their own costs. The Act goes on to provide that a court is entitled to depart from that fundamental rule where it feels justified in the circumstances.

7. This is a case in which having regard to the lack of cooperation in the sense that I have described it, Brown J's order reserving the costs should now be made absolute, and in my view having regard to the fact that Brown J's orders were communicated to the husband, for him not to have then cooperated subsequent to October, requiring the wife to go to the lengths that she has, is a circumstance that justifies a departure from the provisions in s 117 of the Act. In saying that, I am satisfied that the husband had an opportunity to endeavour to negotiate, and his letter which I have not taken into account as an evidentiary matter, indicated that his position was, when the letter was drafted only some days ago, that he was content with a fifty-fifty division.

8. Having regard to what I have set out in the judgment, that position was untenable. That in itself justifies a departure from the provisions of s 117(1) of the Act. Before making an order for costs, however the act requires that I consider the matters set out in sub-s (2A). Turning to those, I have the financial circumstances of each of the parties in the sense that I am now aware of what the wife's financial position is and from my calculations I can determine what her future may be in the capital sense. On any view, she will only have a modest sum. Whilst the husband's entitlement out of the orders I have made is going to be much more modest, he says in his recent letter that he has remarried and that he seems to have some sort of work in China. On that basis I am entitled to take into account that his financial circumstances are reasonably stable.

9. I am confident in saying in this case that neither party is in receipt of assistance by way of a Legal Aid grant.  The third provision of sub-s (2A) relates to the conduct of the parties to the proceedings in relation to a number of matters without limiting them to include conduct relating to discovery, inspection, production of documents and similar matters.  Whilst negotiation is not included in that, it is in my view that this is a case where had the husband cooperated in the winding up of the business, then it is likely that there would never have been any necessity for court proceedings at all.  It is trite to say that it is sad that the case has had to come to a determination by a judge having regard to the modest amount in the pool, particularly in circumstances where the husband would have been aware of the consequences of not being present at the business and it being sold.  He would have also been very cognisant of the fact that the wife would have not been able to continue to pay the mortgage and the probability of a consequent sale.

10. I am satisfied therefore that having regard to the fact that the wife had to go to extraordinary lengths in relation to the initiation and continuation of the proceedings, that that is a matter that I should take into account.  There are also requirements to consider that the proceedings were necessitated by the failure of a party to comply with previous court orders.  The husband has not complied with the order of Brown J in respect of putting his position as he should have.  For reasons I have indicated, that is a matter that has culminated in the wife having to take the steps that she has to get a determination.

11. The fifth consideration is whether any party to the proceedings has been wholly unsuccessful.  The husband's position if I take it as being what he set out in his letter a few days ago, wanting effectively an equal division of the assets, must be seen as being wholly unsuccessful.  There are no other matters in those particular provisions that warrant consideration.  Accordingly this is a case where I am satisfied that the orders that Brown J made should be visited upon the husband, although I do not have the precise details, it is not appropriate in my view for the parties to go down a taxation route because of the difficulties in communicating with the husband and his lack of cooperation as I have described it.

12. Whilst there are no precise details as to what the wife will incur in terms of costs, looking at the scale and having regard to the size of the documents that are on the court file, I am quite satisfied that a sum of $1500 is going to contribute towards the wife's costs that she will incur with her solicitor, and the sum of $1500 seems to me to be well within what the scale provides.  Similarly in respect of the period subsequent to the orders of Brown J, as the husband did not respond, then the wife was required to put before the court an enormous amount of material to establish her case. 

13. Again, the precise details of how much those costs will be are unclear, but in my view looking at the scale and again the size of the file, the sum of about $2900 seems to be adequate in the circumstances.  Counsel's brief is marked at $2750 and that seems to be well within what the scale contemplates.  Accordingly it is appropriate in my view that the husband pay the wife's costs, or make a contribution towards them in the sum of $9035.

I certify that the preceding Thirty Six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date:  26 February 2008