M and N
[2006] FMCAfam 559
•22 December 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & N | [2006] FMCAfam 559 |
| FAMILY LAW – Property settlement – business built up by primarily wife – house built to an extent with husband’s labour. |
| Family Law Act 1975, ss.75(2), 79(2), 79(4) |
| Weir v Weir (1993) FLC 92-338 Hickey v Hickey (2003) FLC 93-143 |
| Applicant: | M |
| Respondent: | N |
| File Number: | MLM 9334 of 2005 |
| Judgment of: | Riley FM |
| Hearing date: | 12 October 2006 |
| Date of Last Submission: | 12 October 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 22 December 2006 |
REPRESENTATION
| Counsel for the Applicant: | Ms Gordon |
| Solicitors for the Applicant: | McMahon and Treby |
| Counsel for the Respondent: | Mr Littlejohn |
| Solicitors for the Respondent: | Collards |
ORDERS
The husband within 14 days transfer all his right title and interest and all shares held by him in the company to the wife and resign all directorships and other offices he holds in the company.
As and from the transfer referred to in order 1 hereof, the wife indemnify the husband and forever thereafter keep him indemnified against all and any liability in respect of the company.
Within 7 days of the husband complying with order 1 hereof, the wife pay to the husband the sum of $900.00.
Within 60 days of the date of the making of these orders and contemporaneously:
(a)the husband pay to the wife the sum of $121,100;
(b)the wife do all such acts and things and sign all documents as may be required to transfer to the husband at the expense of the husband (“the transfer to the husband”) all of her right title and interest in the real property (“the real property”);
(c)the husband pay all monies and do all acts and execute all documents necessary to discharge the mortgage over the real property (“the mortgage”); and
(d)the wife do all acts and things and execute all documents necessary to facilitate a discharge of the mortgage by the husband.
As and from the transfer to the husband, the husband indemnify the wife against all payments and liability pursuant to the mortgage and all rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind.
In the event that the husband does not pay the wife the sum of $121,100 within 60 days, then within a further 60 days and contemporaneously:
(a)the wife pay to the husband the sum of $73,900;
(b)the husband do all such acts and things and sign all such documents as may be required to transfer to the wife at the expense of the wife (“the transfer to the wife”) all his right title and interest in the real property;
(c)the wife pay all monies and do all acts and execute all documents necessary to discharge the mortgage; and
(d)the husband do all acts and things and things and execute all documents necessary to facilitate a discharge of the mortgage by the wife.
As and from the transfer to the wife, the wife indemnify the husband against all payments and liability pursuant to the mortgage and all rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind.
In the event that neither party pays the other the amounts specified within the times specified in orders 4(a) and 6(a) hereof, the following orders shall take effect:
(a)the parties are to do all acts and execute all documents necessary to sell the real property by public auction, such auction to be held on or before 23 June 2007;
(b)the reserve price at the public auction is to be such amount as the parties agree 14 days before the auction and, in default of agreement, the reserve price is to be the value of the property as determined by a valuer appointed by the President of the Real Estate Institute of Victoria or his nominee, and the valuer’s costs are to included in the costs of sale of the real property;
(c)each party has the right to bid at the auction;
(d)the purchase price of the real property, less any adjustments in favour of the purchasers and plus any adjustments in favour of the husband and wife, are to be applied as follows:
(i)firstly, to discharge the mortgage secured over the real property;
(ii)secondly, to pay the costs of sale of the real property, including the agent’s commission and disbursements, legal costs and disbursements and the costs of any valuer;
(iii)thirdly, in payment of $22,000 of the husband’s tax debt;
(iv)fourthly, 70% of the balance remaining to the wife;
(v)fifthly, the remainder to the husband; and
(e)each party has liberty to apply with respect to the sale of the real property.
Until compliance with orders 4 and 5, or 6 and 7 or 8 hereof, the wife has the right to occupy the real property (to the exclusion of the husband) subject to the wife paying the mortgage and rates, building insurance and other outgoings on the property as they fall due, keeping the property tidy, clean and in good repair (having regard to its present condition) and permitting inspection by agents and prospective purchasers at all reasonable times;
The wife retain her superannuation.
The husband retain the personal property set out in list C together with one dining suite and the wife retain the personal property set out in list B (being exhibit H2).
The parties have liberty to apply in relation to the implementation of these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 9334 of 2005
| M |
Applicant
And
| N |
Respondent
REASONS FOR JUDGMENT
Overview
This is an application filed by the wife for final property orders. The wife was born in May 1965 and is now 41 years old. The husband was born in November 1965 and is also 41 years old. Both of them are in good health. The husband and wife commenced cohabitation when they married in January 1993. They initially lived with the husband’s parents but in 1997 bought a block of land and built a home on it.
When the parties met, the husband was a house painter and the wife ran a modelling and marketing business. The parties have one child, C, who was born in 1994. C is now almost 13 years old and attends a private school in Melbourne. The parties separated in March 2005. Since then, the wife and C have remained in the matrimonial home and the husband has returned to live with his parents.
Applications
The orders sought by the wife in her application were that:
a)the husband transfer to the wife his interest in the former matrimonial home;
b)the husband transfer all shares held by him in C… (Vic) Pty. Ltd. (“the company”) and resign all directorships and offices held in the company;
c)the wife pay to the husband the sum of $100,000; and
d)each party keep all other property and resources in his or her possession or to which he or she is entitled.
The husband in his response sought orders among others that:
a)the wife pay to the husband the sum of $300,000;
b)the wife transfer to the husband her interest in the matrimonial property; and
c)the husband transfer to the wife all of his interest in the company and resign as a director of the company.
The wife sought a split of 75:25 in her favour and the husband sought a split of 55:45 in his favour. In addition to the matrimonial assets, the wife drives a 2000 BMW registered in the name of the company, which trades under the names CMM and CM in Toorak. On the other hand, the husband said that he had a personal income tax debt dating from the period prior to separation.
Interim application
The husband filed an urgent interim application on 1 March 2006 seeking orders that the wife file and serve an affidavit of documents and give full disclosure of her own relevant documents and the financial records of the company for the previous six years.
On 12 April 2006, orders were made by consent for such disclosure to be made by the wife, although, in relation to the company, records were required only for the previous three years. More particularly, the wife was ordered by consent to file an affidavit of documents within 48 hours. She did not do so, notwithstanding that she was represented by solicitors throughout the proceeding. Under cross-examination, at the final hearing, the wife, in effect, denied all knowledge of the order for discovery notwithstanding that it was ostensibly made with her consent. She professed to have no idea what had been required of her: transcript pages 50-51.
Notwithstanding that the wife did not file an affidavit of documents on or about 16 April 2006 contrary to the consent orders, the husband’s solicitors appear to have done nothing further to secure the relevant documents until 11 October 2006. On that day, which was the day before the final hearing, the husband’s solicitors served a notice to produce. In cross-examination, the wife said that she had not received the notice to produce until 3.00pm. She produced only her personal bank statements in response to it, and none of the company’s records. I accept that the notice to produce was served too late for the wife to have had a reasonable opportunity to comply with it.
However, the wife also failed to give discovery for several months after she was required to do so by a consent order. In Weir v Weir (1993) FLC 92-338 at 79,593, the Full Court of the Family Court said:
This court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black & Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC 91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non disclosure, which follows from his Honour's findings in this case, then the court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
It is true that in the case of Monte and Monte (1986) FLC 91-757, the Full Court said that to found jurisdiction under s 79 in relation to property other than that which had been identified, the trial judge was obliged to make a finding as to the existence and value of other undisclosed property, even though the unsatisfactory nature of the evidence made it necessary to express that finding in the most general terms both as to identity and value.
We confess to some difficulty with this proposition. We should have thought that the court's jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets.
The difficulty then arises as to what order should be made. However we are troubled by the proposition which seems to arise from Monte and Monte that if a party is either cunning enough or vague enough to cover his or her tracks sufficiently to prevent a court making a finding as to the amount that has not been disclosed, then the other party fails. We do not believe this to be the law and in so far as the decision in Monte and Monte supports such a proposition, we do not believe that it should be followed.
In the circumstances, I find that the wife has deliberately failed to make proper disclosure as required by a specific court order. Accordingly, I consider that I should apply the reasoning in Weir in this case, and not be unduly cautious in making findings contrary to the interests of the wife.
The legislation
Section 79 of the Family Law Act1975 (“FLA”) defines the Court’s powers in determining applications for property settlement. Sub-section 79(2) of the FLA provides that:
The Court shall not make an Order under this Section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
Section 79(4) of the FLA sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under ss.75(2) of the FLA are as follows:
(a)the age and state of health of each of the parties;
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e)the responsibilities of either party to support any other person;
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l)the need to protect a party who wishes to continue that party’s role as a parent;
(m)if either party is cohabiting with another person—the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties.
The four step approach
In Hickey v Hickey (2003) FLC 93-143 at [39], the Full Court of the Family Court described the preferred four step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), ("the other factors") including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
STEP 1
The assets
The parties are in agreement that the asset pool consists of the matrimonial home, a 1987 Holden Jackaroo motor vehicle, the model agency business and the wife’s superannuation of about $1,000. The husband has no superannuation. The wife initially alleged that the matrimonial home was worth $620,000. However, the parties eventually agreed that the matrimonial home was worth $480,000 and that it had a mortgage over it of $285,000, leaving an equity of $195,000. The parties valued the Holden Jackaroo at $2,000. Additionally, after much negotiation, the parties were able to reach an agreement on the value of the business which they put at $6,000.
Given that the Holden Jackaroo is of a very small value, I consider that the appropriate course is for the husband to simply retain that vehicle and for its value to be excluded from the asset pool. Similarly, the wife’s superannuation is of a very low value. It is appropriate that the wife retain it and its value be excluded from the asset pool. Orders will be made accordingly. The value of the asset pool is thus $201,000, being the equity in the house valued at $195,000, and the business valued at $6,000.
The husband’s income tax debt
The husband claims that he had an income tax debt of approximately $22,000 at the time of separation in March 2005. In support of this contention, he produced his notices of assessment for income tax for the years ended 30 June 2000, 2001 and 2002. The notice of assessment for 2000 shows that the balance of the assessment was a debit of $1,328.14 and that there were other amounts payable of $6,236.57 making a net amount payable of $7,564.71. The notice of assessment states that the amount is due for payment on 24 July 2001.
The notice of assessment for the year ended 30 June 2001 states that the balance of that assessment was a credit of $2,440.60 (as a result of PAYG withholding credits) and that there were other amounts payable of $8,558.95. In total the assessment states that the amount due by the husband to the Australian Tax Office (“ATO”) was $6,118.35.
The notice of assessment for the year ended 30 June 2002 states that the balance of the assessment was a debit of $624.49 and that there were other amounts payable of $6,662.86. The notice of assessment also states that the amount due for payment is $7,287.35 and that that amount was due on 21 February 2003.
The husband said in evidence that the amounts of income tax assessed for the years ended 30 June 2000, 2001 and 2002 were not paid by him, that the debt accrued during the course of the marriage and that it remains outstanding. The husband did not produce his notices of assessment for the 2004 or 2005 income years.
A notice of assessment to income tax states how much tax has been assessed for a particular year and when it is payable, but does not indicate whether or not it was paid by the due date or at some subsequent time. It was put to counsel for the husband that the item in each of the notices of assessment headed “other amounts payable” may have been an indication of amounts outstanding from previous years. However, counsel did not agree with that suggestion and, without evidence about what the entries on a notice of assessment actually mean, I must disregard it.
Counsel was asked whether there was any document showing that the amounts assessed in 2000, 2001 and 2002 had not been paid. The husband tendered a document entitled “Integrated Client Account” dated 24 June 2006 from the ATO to the husband. That document indicated that there was a statement opening balance on 28 May 2006 of $26,875.34. It also showed that a further $261.19 in general interest charge had accrued from 27 May 2006 to 23 June 2006. However, it otherwise gave no indication of when the debt mentioned in that account actually arose.
The wife admitted in cross-examination that the husband had accrued a tax debt during the course of the marriage from the year 2000 onwards. However, she said that she did not know how much the debt was at the time of separation.
Counsel for the husband submitted that all of his records remained at the wife’s house and she had refused to provide them to the husband. Counsel for the husband conceded that the husband could have obtained from the ATO, simply by making a telephone request, a statement indicating when the tax debt had arisen and how much it was at various dates.
All in all, the husband has failed to produce his two most recent income tax assessments and has failed to produce a letter from the ATO, which it was within his power to obtain, stating how much his debt was at various times. On the other hand, the wife made an admission that the husband had a personal tax debt that was outstanding as at the time of separation and which had accrued since 2000. Additionally, the wife has failed to make full disclosure of her financial affairs contrary to a specific order of the court made by consent.
In the circumstances, I am prepared to apply Weir and accept the husband’s evidence on oath that he had a personal tax debt of $22,000 as at the date of separation, notwithstanding that the documentary evidence supporting his assertion on this point was inadequate.
The net asset pool
The husband did not seek to reduce the asset pool by the amount that his tax debt had increased by since separation. I consider that it is appropriate in the circumstances of this case to reduce the value of the asset pool by the amount of the husband’s tax debt to the extent that it was incurred during the course of the marriage. Accordingly, the net value of the asset pool is the $201,000, being the value of the matrimonial home plus the business, less the husband’s tax debt at the date of separation of $22,000, making a net asset pool of $179,000.
Financial resources of the parties
The wife in her financial statement said that she earned $1,000 per week or $52,000 per year. However, in oral evidence, she said that the business paid her $50-60,000 per annum.
As for her expenses, she said that she paid $2,000 per month for the mortgage on the matrimonial home, being $24,000 per year, $20,000 per year in school fees and associated expenses and $6,500 for C’s dancing lessons and associated costs. Those sums total $50,500. When it was put to the wife that that left her with only $8,000 per year for all other expenses (actually $9,500) she said that she budgeted very carefully.
The husband’s counsel submitted that the wife must have had another source of income, or must have been drawing more from the business than she had admitted. One aspect of this argument was based on the business having a credit card debt of $47,000, the breakdown of which had not been disclosed by the wife. The husband’s counsel suggested that some of the company’s credit card debt was for personal expenses. The wife denied this.
Notwithstanding the wife’s denials, and applying Weir, I am satisfied that the wife draws from her company for her personal use substantially more than the $60,000 per year that she claims.
In her financial statement, the wife stated that she pays:
a)$230.00 per week, or $11,960 per annum, in income tax;
b)$550.00 per week, or $28,600 per annum, on her mortgage;
c)$30.00 per week, or $1,560 per annum, on rates;
d)$10 per week, or $520.00 per annum, on motor vehicle registration;
e)$700.00 per week, or $36,400 per annum, on food, educational expenses, and the other items at question 60 of the form.
That totals $79,040 per annum.
Of the $700.00 per week, the wife said that she paid $150.00 per week on educational expenses and $100.00 per week on children’s activities. That works out to $7,800 per annum and $5,200 per annum respectively.
The amounts the wife claimed in oral evidence to pay for school fees and children’s activities were $20,000 and $6,500 respectively, or a total of $26,500. The amounts the wife allowed for those items in her financial statement totalled $13,000. The difference between the totals of those amounts is $13,500. Adding that sum to the $79,040 gives a total of $92,540. Given that the wife has admitted, in a convoluted way, to spending $92,540 per annum, and applying Weir, I find that her annual income is at least $92,540.
The wife alleged that the husband before 2004 had been earning $100,000 per annum gross from his trade as a house painter. Since separation, the husband maintained that he had not been able to generate the income from his painting trade that he did before 2004, because he had not yet re-established himself. His financial statement indicated that he now averages $1,050 per week gross, or about $54,000 per annum, from his painting business. The husband did not disclose his net income after business expenses.
I am satisfied that the husband will be well able to earn a good income from his trade as a house painter in the reasonably near future. He is still reasonably young and reports no health problems. In the absence of any evidence of the husband’s business expenses, I am satisfied that the husband will be able to earn at least $40,000 per annum from his trade.
The husband also gets some support from his parents, in that he is able to live at their house, without paying rent or board, and they assist in the care of C.
The parties apparently have no other financial resources.
STEP 2
Initial contributions
The husband said that at the time of the commencement of the relationship, he had $20,000 in the bank and a car of negligible value. The wife did not seriously dispute this. Applying Weir, I accept the husband’s claim to have contributed initially $20,000 in funds and assets. The wife had her business but she did not seek to establish that it had any particular value at the time of the commencement of the relationship. The husband also had his trade as a painter. I find that each of the parties came into the relationship with their income earning potential and, in the husband’s case, $20,000. I consider that the husband’s initial contribution of $20,000 has been eroded, so to speak, over the course of the parties’ 12 year marriage, especially in view of the wife’s higher earnings. Accordingly, I find that the husband’s initial contribution of $20,000 should be given very little weight in the further consideration of this matter.
The wife also appeared to say that at the commencement, or possibly at the end of the marriage, the husband had a tax debt. Her evidence was quite confused on whether the husband had a tax debt at the commencement of the relationship and, if so, how much it was. All in all, I consider that there is no proper basis on which I could find that the husband had a tax debt at the commencement of the relationship.
Contributions during the marriage
The question of the parties’ respective contributions to the marriage is the most vexed area in this case. There was virtually no evidence as to the parenting of C. I take it that both parties were working hard and both contributed more or less equally to her care, and to the other aspects of the homemaker role.
The wife said that the business was basically her creation. The parties appeared to be in agreement that the business had generated a good deal of income that had enabled the parties to have a number of trips overseas at company expense. The business was also able to afford a BMW for the wife to drive and, according to the husband, enabled the parties to be on Melbourne’s A list where they were known as Melbourne’s “glamour couple”.
The wife said that in 2004, the husband gave up his painting trade and forced his way into her business. She said no one wanted him and he had no capacity to do the work. She said that he had finished school in year nine and was unable to write the necessary business proposals. She said that the husband tried to control the business and particularly its finances. She said that he would take money from the business and gamble it away and that he had failed to pay the company’s income tax as it fell due.
The wife said that, at the time, she had thought that the tax for the business was being paid by the husband but he failed to pay it. She said that he had the passwords for internet banking and he would not make them available to her. She said that the tax debt accrued for that reason. The wife said that when the husband came into the office he would become aggressive and the business started to fall off and the tax debt accrued.
The wife said that the company had a tax debt of $60,000 which was presently outstanding. She tendered a statutory demand issued by the ATO to the company on 13 July 2005 for $45,000 approximately. She said that the debt has increased since then. I accept that the company does have a tax debt of at least $45,000. However, I take it that the tax debt has been taken into account in arriving at the agreed value of the business in the sum of $6,000.
Ultimately, the wife said that the husband damaged the business partly by being incompetent but also by being violent and aggressive particularly towards her. She said that the young girls for whom the business was the agent were uncomfortable with the husband and she ultimately obtained an intervention order against him to keep him away from the business. She said that he was frequently rude, arrogant and drunk.
The wife tendered the income tax returns of the company for the years ended 30 June 2003, 2004 and 2005. As noted, the parties separated in March 2005. The tax return for 2003 shows that the company had a total income of $480,585 and expenses of $480,955 resulting in a net loss of $370.00 for that year. The company’s income tax return for the year ended 30 June 2004 shows that the company had a total income of $373,585 and expenses of $373,784 resulting in a net loss of $199.00. The company’s income tax return for the year ended 30 June 2005 shows that the company had a total income of $240,320 and total expenses of $281,289 resulting in a net loss of $38,969. The company’s tax returns indicate that the company was able to generate substantial sums but that it also had very large expenses. I am unable to determine whether all of those expenses were legitimate.
The husband agreed that the value of the business was $6,000, notwithstanding that his counsel persisted in questions directed to establishing that the business was able to generate an income much larger than a value of $6,000 would suggest.
In relation to the wife’s claim that the husband has damaged the business due to his rudeness, drunkenness and aggression, I note that the gross takings of the business did decline between 30 June 2003 and 30 June 2004 and then declined further between that date and 30 June 2005. To that extent, the wife’s allegations are corroborated.
However, the husband denied that his conduct resulted in the reduction in the income of the business. He said that in 2005, the company lost a major tender because its offer was for $15.00 per hour over the tender price of the successful tenderer. There was no independent evidence of this. The husband also claimed that he had assisted the wife over a period of twelve years to build up the business.
In the witness box, the husband did not present as the illiterate and incompetent person that the wife had described. He was articulate and answered questions with much more clarity of thought and expression than the wife. I do not accept that he would have been unable to write a business proposal, at least, if he had been given a reasonable amount of training.
I accept that the husband would have contributed in some way to the building up of the business whether by actually being involved himself or by providing backup to enable the wife to concentrate on the business.
On the other hand, after 2004, I consider that the husband’s direct involvement in the business was to its detriment. I accept that the husband did control the finances of the business and failed to pay its income tax as it fell due. I also accept that he was violent and aggressive and his conduct resulted in the decline in the turnover and profit of the business from 2003 onwards. The business may have lost a major tender by reason of losing the bid. But I accept that the principal reason for the decline in the income of the business was the husband’s poor behaviour.
I also accept that the business was predominantly the wife’s creation and it was her skills that were and are essential to its continuation. Taking into account the damage done by the husband to the business, as well as his earlier indirect contribution that enabled the wife to build it up, I find that the wife’s contribution to the business was 85% and the husband’s was 15%.
The wife acknowledged that when the matrimonial property was purchased in 1997 the husband was very involved with the construction of the matrimonial home. She said that he subcontracted some people but that she paid for all of the materials. She said that the husband did “contra deals” for labour. By that, she explained, she meant that the husband exchanged his labour as a painter for the labour of other tradespeople. The husband did work on other people’s houses in exchange for other tradesmen doing work on his house. In this way, as I understand it, both the husband and the other tradespeople were able to circumvent the tax system.
There was a dispute as to how much work the husband did on the house himself and whether he did very much of the plastering or just the painting. One way or another, I am satisfied that the husband did a great deal of work towards the construction of the matrimonial home. Whether this was a result of doing the work himself or swapping his labour for the labour of others who did the work, I do not doubt that his contribution was very substantial.
The husband prior to 2004 worked as a painter and in the wife’s estimation he had an income in the vicinity of $100,000 per annum. It was not clear whether this was a gross or a net income. In any event, the husband was clearly contributing financially to the marriage. He also contributed about $22,000 initially. I do not doubt, however, that the wife was contributing more in direct financial terms during the course of the marriage. In relation to the matrimonial home, I accept that the wife earned through her business at least the bulk of the money that was paid for materials and other items for which money had to be paid.
However, the evidence that was provided to me was not sufficiently specific for me to draw any conclusion about the precise contributions of each of the parties to the acquisition of the matrimonial home. In the circumstances, and applying Weir, I find that the parties’ direct and indirect financial and non-financial contributions to the acquisition of the matrimonial home were equal.
Leaving aside the business, I consider that, while the marriage subsisted, the wife’s overall contributions to the family and its assets, other than the business, directly and indirectly, financially and non-financially, were 57.5% and the husband’s were 42.5%.
Contributions post separation
Since separation, the wife has continued to live in the matrimonial home and has also paid the mortgage and other costs associated with it. The wife has continued to pay C’s school fees and the costs of her extracurricular activities.
The parties were in dispute about the care of C after the separation. They agreed that C lived with her mother in the matrimonial home and they agreed that C took the school bus back to her paternal grandparent’s house after school. The mother said that she collected C every day at 7.00pm.
Since separation, the father said that C was rarely collected before 8:00pm or 9.00pm and often stayed overnight at the paternal grandparent’s house. The husband maintained that when C was at the paternal grandparent’s house he was in attendance and cared for her. However, the wife said that C was basically looked after by the paternal grandparents.
On the evidence, such as it is, I find that C does frequently remain at her grandparents’ home until 8pm or 9pm and she is looked after mostly by her grandparents, rather than her father, while she is there. I find that C’s paternal grandparents have made a substantial contribution to her care since separation, and I would hope that they would continue to do so in the future. As between the parents, I consider that that the wife has contributed somewhat more than the husband to the non-financial aspects of the care of C since separation. I consider that these contributions are likely to continue in similar proportions in the future.
In relation to the financial aspects of C’s care since separation, I note that the wife is paying all of C’s school fees and all of the costs of her extracurricular activities. The wife is also housing C and paying for at least some of her sundry expenses. The father’s parents pay for C’s meals when she spends the evening with them. All in all, I find that, as between the parties, the mother since separation has paid for the vast bulk of C’s expenses.
Contribution based entitlements
Taking into account all of the contributions of each party, I find that the wife is entitled to 60% of the non-business assets of the parties and the husband is entitled to 40%. I find that the wife is entitled to 85% of the business and the husband to 15%.
STEP 3
At this step, the court is required to consider, essentially, whether there should be any adjustment to the parties’ contribution based entitlements by reason of their future circumstances, in so far as they can be foreseen.
In relation to the effect of any proposed order upon the earning capacity of either party to the marriage, the parties are in agreement that the wife should retain the business and the husband should transfer his interest in the company to the wife. That seems to me to be essential for the continuation of the wife’s earning capacity and I will make orders accordingly.
As to the s.75(2) factors, I note that the parties are both 41 years old and in good health although the wife claims to have had a minor stroke. It does not appear to have affected her income earning ability or her ability to go about her life and work in the normal way.
As indicated above, I consider that the wife has an annual income of approximately $92,000 and the husband could be expected to have an annual income of at least $40,000. The husband additionally has the support of his family and, of course, the parties own the matrimonial home. Otherwise, the parties have no financial resources but they do each have the capacity for gainful employment.
It appears that both of the parties share in the care of C who is 13 years old. Although she lives with the mother in the matrimonial home, she spends at least part of every evening with her paternal grandparents and her father.
The wife is bearing the burden of the mortgage on the matrimonial home and has done so since separation. Both parties also have a duty to maintain C but otherwise only have a commitment to support themselves. Neither of the parties is eligible for a pension, allowance, or benefit.
The parties appear to have enjoyed a pleasant standard of living both in their home and in the social scene to which the business gave them access. While the husband may no longer have access to that world, I do not consider that it is appropriate to compensate him in any financial way for that loss. It is a social matter rather than a financial matter.
There is no application for maintenance and no suggestion that either party wishes to undertake a course of education.
If the husband were to receive a lump sum payment it may assist him to discharge his tax liability. I do not regard this is a weighty factor.
The marriage lasted 12 years but did not adversely affect the earning capacity of either party. Neither party appears to wish to have a full-time role as a parent. The husband is cohabiting with his parents and to a significant extent is being supported by them. No child support as such is being paid but the wife is meeting all of the expenses of C connected with her private school education and her extracurricular activities.
In my view, the only adjustment that should be made to the contribution based entitlements of the parties concerns the wife’s payments for C’s school fees and extracurricular activities. These amount to about $26,000 per year. I do not consider that in the circumstances of this case the discrepancy in the parties’ annual incomes requires an adjustment to be made nor do I consider any of the other factors requires an adjustment to be made.
The cost of C’s school fees and extracurricular activities for the next five years is in the vicinity of $125,000. The father signed her enrolment form for the private school and I consider that it is appropriate that she continue her education there. I also consider it appropriate that she continue with her dance classes. By reason of the costs of C’s education and extracurricular activities, I consider that an adjustment should be made to the contributions of the parties in relation to their assets, other than the business, of 10% in favour of the wife. This means that the wife will receive 70% of the value of the non-business assets and the husband 30%.
Leaving aside the Holden Jackaroo valued at $2,000 and the wife’s superannuation valued at $1,000, the non-business assets of the parties are the equity in the house valued at $195,000, less the $22,000 tax debt of the husband, making a total of $173,000. Seventy percent of that is $121,100.
As regards who should have the option of buying out whom in relation to the matrimonial home, both parties said that they wished to keep it. The wife initially indicated that she wanted to keep the home as a stable environment for C but subsequently agreed that she wished to do the house up and sell it.
The husband has invested a lot of his own labour in the house. For that reason, in my view, it is appropriate that the husband has the first option to retain the matrimonial home on the condition that he pays the wife $121,100 within sixty days. If he does not do so, I consider that the wife should have the opportunity to buy the husband’s share for $51,900. If neither party is willing or able to buy out the other, I consider that the property should be sold and the proceeds distributed proportionately.
As regards the business, it has been valued at $6,000. Eighty-five percent of that figure is $5,100. In my view, it is appropriate for the wife to retain the business and buy out the husband’s share for $900.00.
STEP 4
In my view it is just and equitable in all the circumstances of the case that the husband retain the matrimonial home provided that he pays the wife $121,100 within sixty days in default of which the wife would have the option of buying out the husband’s interest in the matrimonial home for $51,900. If neither party is able to buy out the other, the property would need to be sold and the proceeds split 70% in favour of the wife and 30% in favour of the husband.Orders will be made accordingly.
It also appears to me to be just and equitable that the wife should retain the business that she has built up and in which it appears only she can prosper. Given that the parties have agreed the value of the business at $6,000 and I have set the wife’s contribution at 85%, it is appropriate that orders be made for the husband to transfer his interest in the property to the wife upon the payment of $900.00. Orders will be made accordingly.
As regards chattels, the parties were in substantial agreement about the appropriate division. Essentially, it was agreed that the husband would retain the assets on List C with the addition of one dining suite and the wife would retain the assets on list B. Orders will be made giving effect to that agreement.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate: Melissa Gangemi
Date: 22 December 2006
0