Magee and Magee
[2009] FMCAfam 629
•26 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAGEE & MAGEE | [2009] FMCAfam 629 |
| FAMILY LAW – Property – asset pool – post separation assets and liabilities – post separation contributions – spousal maintenance. |
| Family Law Act 1975, ss.72, 74, 75(2), 79 |
| Lee Steere & Lee Steere (1998) FLC 91-625 Vaughan & Vaughan [1981] FLC 91-066 Vautin & Vautin [1998] FLC 92-827 |
| Applicant: | MS MAGEE |
| Respondent: | MR MAGEE |
| File Number: | ADC 1842 of 2007 |
| Judgment of: | Kelly FM |
| Hearing dates: | 16, 17 October 2008, 17 February 2009 |
| Date of Last Submission: | 17 April 2009 (written) |
| Delivered at: | Adelaide |
| Delivered on: | 26 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr B McQuade |
| Solicitors for the Applicant: | David Burrell & Co |
| Counsel for the Respondent: | Mrs H Tinning |
| Solicitors for the Respondent: | Andrew Swifte & Co |
ORDERS
Within 60 days the husband do all things and sign all documents necessary to transfer to the wife all his right, title, estate and interest in the former matrimonial home known as Property D (“the Property D property”).
Contemporaneously with paragraph 1 herein, the wife shall do all things necessary to discharge the mortgage secured over the said property in the parties’ joint names.
Within 28 days of the date hereof, the wife make available for the husband to collect the following items:
(a)council mower/mulcher;
(b)pumps and spraying equipment;
(c)spray chemicals;
(d)tools belonging to the husband and/or the husband’s business.
Thereafter wife shall retain as her sole property free from any claim by the husband the following:
(a)all her estate and interest in the Property D property;
(b)any motor vehicle presently in her possession;
(c)any monies standing to her credit in any financial institution;
(d)all items of jewellery, furniture and household effects presently in her possession;
(e)all her estate and interest both at law and in equity in any superannuation scheme or retirement benefit;
(f)all her estate and interest both at law and in equity which she now has in any life assurance, insurance or endowment insurance policy;
(g)all other property presently in her possession.
The husband shall retain as his sole property free from any claim by the wife the following:
(a)all his right, title and estate in the business known as and registered as “[T]” including all plant and equipment;
(b)all his estate and interest in the property known as Property S;
(c)any motor vehicle presently in his possession;
(d)any monies standing to his credit in any financial institution;
(e)all items of furniture and household effects presently in his possession;
(f)all his estate and interest both at law and in equity in any superannuation scheme or retirement benefit;
(g)all his estate and interest both at law and in equity which he now has in any life assurance, insurance or endowment insurance policy;
(h)all other property presently in his possession.
Thereafter the wife shall keep the husband indemnified with respect to:
a)any mortgage in her name secured against the Property D property;
b)any council rates, water rates or other taxes and charges regarding the said property; and
c)all other debts and liabilities outstanding in her sole name.
Thereafter the husband shall keep the wife indemnified with respect to:
(a)any liability arising from his business known as “[T]”;
(b)any liability arising from the business previously known as and registered as “[T]”;
(c)the debt of $30,000 outstanding to his mother Ms M;
(d)all other debts and liabilities outstanding in his sole name.
Within 28 days the wife deliver up to the husband’s solicitors copies and/or negatives of all family photographs of the parties’ children such that the husband can obtain copies of the photographs and/or negatives at his expense PROVIDED THAT the husband return all the photographs or negatives to the wife in good order and repair within 21 days thereafter.
In the event the wife is unable to comply with paragraph 2 of these orders, then the former matrimonial home shall be placed on the market for sale at a price to be agreed between the parties and with a real estate agent to be agreed between the parties and upon sale of the property the proceeds shall be paid in the following manner:
(a)in payment of any agents commission, legal expenses and auction expenses (if relevant);
(b)in discharge of the mortgage presently secured over the property;
(c)in discharge of all outstanding liability for Council, water and other rates and taxes;
(d)the balance then remaining to the wife.
Each party shall do all things and sign all documents necessary to give effect to these orders.
This is an order to which s.77A of the Family Law Act 1975 applies and the value of property retained by the wife that is attributable to spousal maintenance is fixed at TWENTY THOUSAND DOLLARS ($20,000.00).
If he has not already made payment, the husband pay the wife’s costs as previously ordered in the sum of THREE THOUSAND ONE HUNDRED AND FIFTEEN DOLLARS ($3,115.00) within 14 days.
Liberty to either party to apply with respect to costs.
IT IS NOTED that publication of this judgment under the pseudonym Magee & Magee is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 1842 of 2007
| MS MAGEE |
Applicant
And
| MR MAGEE |
Respondent
REASONS FOR JUDGMENT
Ms and Mr Magee were married for approximately 20 years before separating in August 2005. In April 2007 the wife commenced proceedings for property settlement in the Family Court of Australia. The delay in filing the application has led to a situation where over three years have passed between the date of separation and the trial and the parties’ financial circumstances have changed substantially in the intervening years.
Both parties acknowledge that their general contributions during the marriage should be treated as equal. The wife, however, seeks an adjustment for a lump sum financial contribution made by her early in the marriage. Although the parties have agreed much of the matrimonial asset pool, there are some significant areas of dispute, particularly regarding assets and liabilities acquired since separation.
Accordingly, it now falls to the Court to determine the matrimonial asset pool, whether any adjustment should be made between the parties on account of contribution (either pre separation or post separation) and whether any adjustment on account of s.75(2) factors is required to achieve a just and equitable outcome.
Background
The husband was born in 1957 and is 51 years old. The wife was born in 1962 and is 46 years old. They married in April 1985 after a brief period of cohabitation. Their oldest daughter [X] was born in January 1989 and is now 20 years old. Their second daughter [Y] was born in September 1990 and is 18 years old.
The wife was employed as a [office administrator] in the early years of the marriage. The husband was employed [in the Scientific Research Industry]. In 1985 the wife received a compensation payout of $20,000 from a motor vehicle accident, the bulk of which she says was used as a deposit to purchase the parties’ first home at Property C. Neither party had any other significant assets of value at the time they commenced their relationship.
The wife gave up her full time employment upon the birth of [X] in 1989. She eventually resumed part time work with [G]. In 1992 the family moved to [K] where the husband had accepted employment. Upon their return to Adelaide, the wife resumed part time employment as a. [office administrator].
The husband worked full time throughout the marriage, initially on a salary basis before establishing his own business in 1995. The business known as [T] began trading in 1999.
Property C was sold in 1996 and the parties moved in with the paternal grandmother for six months before purchasing the former matrimonial home at Property D. The proceeds of sale from Property C were used as a deposit and the balance of the purchase price was secured by way of mortgage with the Commonwealth Bank.
The husband continued to work full time in his business. The main clients of [T] Pty Ltd are the [C] City Council and [T] Council.
Ms Magee continued to work part time during the marriage. Her capacity to maintain employment was compromised by numerous health problems across the years. She underwent various surgical procedures and was hospitalised on other occasions because of complications arising from surgery. This has affected the wife’s capacity to take on full time employment although she continues to work part time providing [administrative] to a number of employers.
The wife acknowledged in cross examination that she did not disclose all of her sources of income across the latter years of the marriage. While she worked for a number of different companies, and clearly earned more than her taxable income would suggest, I am satisfied that the wife was working part time and that her health complications have substantially affected her capacity for full time employment.
I am satisfied that Mr Magee was primarily responsible for running the business however the wife assisted from time to time, particularly with the administrative aspects of running a small business. The husband acknowledged that he “was not good with paper work” and I consider that the wife’s contribution in this regard would have been significant. I am equally satisfied that the husband was the “powerhouse” behind the business.
The parties agree that the husband’s income was substantially greater than the wife’s income during the marriage. The husband acknowledges that the wife took on the primary role of parent and homemaker during the marriage, although he says his contribution increased after the wife’s health deteriorated in 2000.
The parties separated on 30 August 2005. The husband moved out of the family home and the wife and the two children remained living in Property D. The husband agreed to pay maintenance for the wife and children in the sum of $300 per week. He also agreed to pay the ongoing mortgage repayments and meet other associated expenses for the wife’s household, including medical insurance and car insurance.
The wife complains that the husband was unreliable and she eventually sought interim orders regarding spousal maintenance. While the husband’s pattern of payments has been erratic, it seems that he has generally kept payments up to date by discharging arrears that may have accrued from time to time, whether in respect to mortgage repayments or spousal maintenance payments.
The husband has continued to operate the business since separation. The original company has ceased trading and he now operates the business as a sole trader under the same name “[T]”. In December 2007 he purchased his own home at Property S.
The husband has also suffered significant health difficulties including depression, anxiety and diabetes. In early 2007 he was diagnosed with cancer and ultimately had one kidney removed. The husband is concerned that his own health complications will affect his capacity to operate the business in the longer term.
Since separation the wife has continued to work part time in various casual or part time [administrative] positions, most recently with [company omitted], where she commenced in August 2008. She informed the Court that she is presently working four hours per day, three days per week.
Prior to separation the wife had initiated proceedings seeking compensation for complications arising from a surgical procedure. She has finalised these proceedings but it is acknowledged that any settlement proceeds were directed to payment of her legal and medical expenses.
The wife is also the beneficiary of the deceased estate of her Aunt who passed away early in 2008. She has received an inheritance of approximately $59,000.
History of proceedings
It is necessary to set out the history of these proceedings in some detail given events that have transpired since the wife’s application was filed in April 2007. The wife’s application was first listed on 3 May 2007. On that occasion orders were made by consent as follows:
1.That until further order the husband pay or cause to be paid the following:
(a)all arrears owing on the Commonwealth Bank Home Loan No [5] and the Commonwealth Bank Home Loan No [6]; and
(b)all instalments relating to the Commonwealth Bank Home Loan Nos [5] and [6] as and when they fall due.
2.That the husband pay or cause to be paid to the wife the sum of $300 per week by way of spousal maintenance and child support.
3.That both the husband and wife file and serve an affidavit of documents listing all the documents which they have within their respective possession and control relating to the financial affairs of the parties within 28 days.
4.That the husband file and serve his Response and a Form 13 Statement of Finances within 28 days.
5.The matter be listed for a Conciliation Conference on 13 June 2007 at 9.15am.
In mid 2007 the husband was diagnosed with cancer. Both solicitors wrote to the Court on 7 June 2007 requesting an administrative adjournment of the Conciliation Conference and the Conference was relisted to 26 July 2007. The husband was still too unwell to attend on that occasion. Not surprisingly, he had not yet been able to file his answering documents nor had he filed an Affidavit of documents.
The solicitors again agreed to vacate the Conciliation Conference and list the matter for directions. On 26 July 2007 the proceedings were transferred by consent to this Court. On 15 August 2007 a Registrar of the Federal Magistrates Court made the following orders by consent:
1.That within 7 days the husband comply with his obligations pursuant to orders 1, 2, 3 and 4 of the orders made 3 May 2007.
2.That within 21 days the husband and wife shall agree on a single expert valuer to value the business operated by the husband with the cost of same to be paid at first instance by the husband.
3.That within 7 days the husband authorise his accountant and any other person or entity that has possession or control of financial documents on behalf of the husband, to provide all documents to the single expert valuer as are required.
4.That liberty be given to both parties to have this matter relisted urgently in respect of order 2 herein, should same become necessary.
The proceedings were listed for a further Conciliation Conference on 26 October 2007. The husband filed his Response, Statement of Finance and Affidavit on 16 August 2007. The Conciliation Conference was unable to proceed on 26 October 2007 as the valuation of the business had not been obtained. The conference was adjourned to 16 January 2008. The conference, again, did not proceed due to the valuation not being completed. The wife’s costs for attendance on both occasions were reserved and the matter was listed for further directions before me.
A further directions hearing took place on 22 February 2008. The wife had filed an interim application on that same date, along with a supporting affidavit of her solicitor, Mr S Burrell. Mr Burrell’s affidavit annexed extensive correspondence between solicitors addressing the husband’s failure to comply with various orders regarding discovery, spousal maintenance, mortgage payments and the costs of the valuation report.
It is clear from Mr Burrell’s affidavit that the parties had agreed to instruct Mr M of Edwards Marshall as the single expert to value the husband’s business. A joint letter of instruction was forwarded to Mr M on 23 August 2007. Mr M requested payment in trust in the sum of $5,500 in accordance with the orders of the Court made 3 May 2007.
By correspondence dated 22 October 2007, the husband’s solicitor Mr A Swifte acknowledged that his client had not yet met the payment to Mr M due to his client’s recent ill health which had “seriously affected his earnings, at least for the last 12 calendar months”. The same explanation was provided for the husband’s failure to meet mortgage repayments. The correspondence otherwise identifies that the husband was struggling to meet the financial obligations imposed upon him by the existing Court orders.
By letter dated 29 October 2007 the wife’s solicitors threatened to issue enforcement proceedings with respect to the husband’s failure to meet mortgage repayments and the costs associated with Mr M’s services. The husband’s solicitors responded on 5 November 2007 confirming he had instructions that the husband would “forthwith attend to meeting his mortgage obligations in relation to the former matrimonial home” and “will meet the ‘up-front’ payment to Mr M”.
Notwithstanding that letter, further complaints were made by the wife by letter of 19 November 2007, alleging that mortgage repayments had still not been made and seeking full disclosure of the husband’s new business structure. A further letter was forwarded from David Burrell & Co to the husband’s solicitors on 18 December 2007 again complaining that the husband was in arrears with respect to mortgage repayments. The correspondence also sought full disclosure regarding the recent purchase of a property by the husband.
As the parties were before me for general directions on 22 February 2008, I brought forward the wife’s interim application and made the following orders, inter alia:
1.The husband forthwith pay to the trust account of Edwards Marshall the sum of $5,500, those funds to be held on account of the valuation costs to be incurred regarding valuation of the husband’s business “[T]”.
2.The valuer is authorised to liaise with and inspect or copy all relevant financial documents relating to the said business that may be held by the husband or by his accountant.
3.The husband’s solicitor do all things necessary to facilitate access by the valuer to the business records held by the husband’s accountant.
4.The husband provide full disclosure with respect to the purchase of his new property and the purchase of his motor vehicle inclusive of all settlement statements, loan documents and bank statements and details of repayments regarding the recently purchased assets.
5.The husband pay the wife’s costs incurred for the attendance at the Conciliation Conferences on 26 October 2007 and 16 January 2008, such costs to be fixed in accordance with the Federal Magistrates Court scale allowing 1½ hours per each attendance.
The matter was listed for trial on 4 and 5 August 2008 and further trial directions were made. Unfortunately the trial could not proceed on that date. Mr M was still unable to complete the valuation report as he had not yet received the relevant financial records relating to [T]. The trial was vacated and the following orders were made inter alia:
1.The trial is adjourned to 16 and 17 October 2008 at 10.00am with priority (allowing two days).
2.The matter is adjourned to 25 September 2008 at 9.30am for directions.
3.In the event the husband has not supplied any outstanding documents or records to Messrs Edwards Marshall for the purposes of Mr M completing his valuation report of the business conducted by the husband within six (6) weeks, the wife is at liberty to apply to be appointed Trustee for Sale of the said business.
4.The husband do cause all outstanding documents and records identified in the letter of Edwards Marshall of 31 July 2008 to be forwarded to Edwards Marshall within six (6) weeks.
5.The husband is to pay the wife’s costs of and incidental to today thrown away fixed in the sum of TWO THOUSAND, FIVE HUNDRED DOLLARS ($2,500.00) inclusive of GST, such costs to be paid within six (6) weeks.
6.Liberty to both parties to apply on three (3) days notice if there is any delay in the husband supplying any further documents requested by Mr M, the appointed valuer.
7.Each party to file and serve any short updating affidavit not later than 4.00pm on 3 October 2008.
8.Each party is to file and serve to the other party not later than 4.00pm on 3 October 2008 a case outline setting out the precise minutes of the orders sought, a relevant chronology and a statement of evidence supporting the principles contained in s.79 and s.75(2) of the Family Law Act 1975, together with an agreed list of affidavits to be read.
9.No party shall be entitled to rely on any affidavit material not filed and served in accordance with these directions without leave of the Court first had and obtained.
10.Liberty to both parties to file and serve any further subpoenas if required, such subpoenas to be marked returnable on 15 September 2008.
On 25 August 2008 the husband filed an interim application seeking leave to obtain a valuation regarding the former matrimonial home. Leave was granted, notwithstanding that the parties had previously conducted their respective cases on the basis that the valuation was agreed.
On 25 September 2008 orders were made to enable a valuation of the husband’s property at Property S in the event the value was not agreed between the parties.
The single expert valuation was still not available on the morning of 16 October 2008. Mr M had commenced his report but was awaiting further documentation from the husband. The wife sought summary dismissal of the husband’s Response, given his repeated failure to provide proper discovery. She argued her application should proceed on an undefended basis.
In the circumstances I declined to proceed on an undefended basis. Both parties were available to give evidence and I directed that the trial proceed, on the basis that it could be adjourned part heard to enable
Mr M’s valuation to be completed.
The hearing
The hearing proceeded before me on 16 and 17 October 2008 and evidence concluded on 17 February 2009. The applicant wife relied upon the following documents:
a)her Application filed 5 April 2007;
b)her trial Affidavit filed 24 July 2008;
c)her updated Financial Statement filed 24 July 2008;
d)Affidavit of Dr E filed 14 October 2008;
e)Medical report from Dr H dated 15 October 2008 (tendered at trial).
The husband relied upon the following documents:
a)his trial Affidavit filed 8 July 2008;
b)Financial Statement filed 8 July 2008;
c)Affidavit of husband’s mother filed 29 September 2008;
d)
Affidavit of Dr G sworn 15 October 2008 (tendered at trial on
20 October 2008);
e)Update trial Affidavit filed 2 October 2008.
Mr M’s report became available on 12 February 2009 and was tendered by consent. The evidence concluded on 17 February 2009 and written submissions were ordered.
Both parties gave evidence and were cross examined. Neither party required any other witnesses for cross examination. While both parties endeavoured to give their evidence accurately, the husband’s evidence was hampered by his poor memory for detail and by his own acknowledgement that he was “not too good with paperwork”.
I accept that part of the husband’s memory loss may be attributable to his health complications and medication regime. However, when asked about specific financial details relating to his business, the husband was unable to answer. He had made no effort to familiarise himself with the financial records of his business, preferring instead to refer the Court to his bookkeeper Ms S. Ms S was not called to give evidence, but no explanation was provided in this regard.
The wife’s evidence was not without its own difficulties. She acknowledged in cross examination that she had not fully declared income earned by her, which cast some doubt over her reliability as a witness. However, when particular employment scenarios were put to the wife, I am satisfied that she answered the questions honestly, even when the answer was to her detriment. Generally I am satisfied the wife’s recollection of specific events and the parties’ past financial dealings is more reliable than the husband’s evidence.
The conduct of the trial was significantly hampered by the husband’s failure to provide proper and timely discovery. Consequently the trial commenced prior to the business valuation being available to the parties. Counsel were left in a less than satisfactory situation where cross examination occurred “on the run”, so to speak, as the husband produced a range of different financial records during the trial. The husband’s failure to provide proper discovery was particularly problematic when counsel for the wife was endeavouring to trace the funds that the husband paid to purchase the Property S property but was generally unsatisfactory at any level.
Legal principles
Section 79 of the Family Law Act 1975 sets out the factors that the Court must consider when deciding a property settlement. The Full Court has said that when applying s.79, the court follows a four step process[1]. First the Court must identify the assets and liabilities arising from the parties’ marriage. The parties agree about the value of most assets and liabilities and I will rule on those matters that are still in dispute.
[1] Lee Steere & Lee Steere (1998) FLC 91-625
Once the asset pool has been identified, the Court must then assess each party’s contribution during the marriage. The relevant factors pursuant to s.79(4)(a)-(c) include the parties’ direct and indirect financial contributions, any other contribution the parties may have made to the “acquisition, conservation or improvement of the matrimonial assets” and their respective contribution to the overall welfare of the family as a whole – what is often described as the “home maker or parent” contribution.
The third step requires the Court to consider a range of factors set out in s.79(4)(d), (e), (f) and (g), including a range of considerations set out in s.75(2). Finally, the Court must be satisfied that the orders to be made are just and equitable as between the parties in accordance with s.79(2). As was noted by the Full Court in D & D[2]:
“… the task of the court in proceedings under s.79 is not akin to an accounting exercise. The task is to examine the facts of each case carefully to decide what is appropriate and just and equitable in the circumstances. There cannot be expected to be a universal answer to that question on any given set of facts. It is of the essence of judicial discretion that different minds may comfortably arrive at different conclusions.”
[2] D & D[2] (2003) FamCA 473 at 49
Asset pool
The case authorities are clear that the matrimonial assets are to be assessed as at the date of trial.[3] At the commencement of the trial, there were a number of issues in dispute but these matters crystallised in the course of the hearing. The parties eventually reached agreement on the value of most of the assets. However the following issues remain in dispute and must be determined.
[3] AJO v GRO (supra)
Husband’s purchase of Property S property
The husband argues that his Property S property and associated debts should be excluded from the asset pool. I am satisfied that the husband’s capacity to purchase this property arose through his retention of the business assets that were acquired by the parties during the marriage. I conclude this property and the associated debts should be included within the matrimonial asset pool.
How are the funds provided by the husband’s mother to be characterised?
The husband’s mother Ms M provided $30,000 towards the purchase of this property. Ms M Snr has filed an affidavit confirming that she provided the funds to her son as a loan. She acknowledges that there is no formal arrangement between them about how or when the moneys will be repaid.
The wife argues that even if Ms M Snr’s affidavit is taken at face value, the absence of any formal arrangement for repayment of the loan allows the court to infer that there is no real expectation of repayment. At best, the wife argues the $30,000 should be treated as a contribution on behalf of the husband.
I disagree. Ms M Snr’s affidavit is before me and her evidence has not been challenged. She was not required for cross examination. I accept the sum of $30,000 is a loan from Ms Magee and should be included as a matrimonial liability.
Should the post separation withdrawals be included as addbacks?
The husband argues that the wife made two withdrawals in February 2006 – one of $8,000 and one of $4,700. He argues the wife has retained these funds and they should be added back into the asset pool. The wife disputes that she ever received these funds and says these funds were withdrawn by the husband.
The husband himself conceded in cross examination that he had withdrawn the funds and used them to pay business expenses and tax. In light of this evidence, I am not satisfied the wife received the benefit of these funds and I decline to add these amounts back into the asset pool.
The husband further argues that both parties have drawn down funds from the home loan accounts in the period since separation but neither party sought to include these amounts within the asset pool.
Is the unpaid tax from the deregistered company a matrimonial debt?
There is apparently an outstanding income tax debt of $25,129 arising from the parties’ company, “[T] Pty Ltd”. The husband commenced trading as a sole trader in mid 2007 when he formally registered the business “[T]”. The company was subsequently deregistered in October 2007. The husband tells the Court that he “wound up the company following separation”, but it appears there was no formal reconciliation of the company assets and liabilities at that time. The husband simply retained the assets of the business and commenced trading on his own behalf.
This company taxation liability is not mentioned by the husband anywhere in his affidavit material. Indeed, the first reference to this taxation liability seems to arise in the wife’s trial affidavit, where she refers to a “Debt to ATO [amount] Not Known”[4]. The first mention of a specific amount occurs in Mr M’s valuation report. There is no evidence clarifying whether the taxation liability outstanding against [T] Pty Ltd arose before or after separation.
[4] Wife’s affidavit 24 July 2008, para.47(m)
The husband argues the company tax debt should be included as a matrimonial debt. Part 5A.1 of the Corporations Act 2001 sets out how the assets and liabilities of a company should be dealt with at the time a company is deregistered. Section 601AD says that a company ceases to exist on deregistration and that the property of a deregistered company vests in ASIC.
Section 601AE(3) provides that any company property so vested in ASIC remains subject to company liabilities including any charge secured against the property and any liability that arises under a law that imposes rates, taxes or other charges. Section 601AF empowers ASIC to fulfil outstanding liabilities or obligations from the assets of the company.
As we know, the husband has retained all of the assets that were used by him whilst running the business as a company. It would seem there was no company property held by “[T] Pty Ltd” at the time the company was deregistered, assuming that any of the plant and equipment were ever owned by the company (as opposed to owned by the parties personally). Accordingly there was no property to vest in ASIC from which liabilities such as the outstanding tax debt could be discharged.
Section 601AD notes that the officers of a company may still be liable for things done before the company was deregistered. Mr M noted that there had been no repayments made regarding the company tax liability since February 2007 and assumed that the husband was not personally liable for the taxation liabilities of the deregistered company.
There is no evidence before me to suggest that the Australian Taxation Office is pursuing, or indeed is able to pursue, any enforcement action in relation to the unpaid company tax liability. By contrast, we know that the husband has been pursued by the ATO regarding his ongoing personal tax liabilities that have arisen since he re-established the business as a sole trader.
It is up to the husband to establish that the company tax liability is an ongoing debt of the parties that has somehow survived deregistration of the company. He has not provided any evidence in this regard and I decline to include this taxation liability as a matrimonial debt.
Is it appropriate to include the parties’ superannuation within one asset pool?
The wife seeks to include the parties’ superannuation interests within one asset pool. The Full Court has directed that the preferred approach in property proceedings is to identify and deal with superannuation interests separate from the non superannuation assets, unless the circumstances of the case suggest otherwise.[5]
[5] C & C (2005) FLC 93-220, paras.61-63
In this case, the value of the husband’s superannuation has not varied substantially since the date of separation. Indeed, the husband’s Financial Statements sworn 16 August 2007 and 3 July 2008 indicate he has not been contributing to superannuation at all and the same applies to the wife. Given the relatively modest value of the parties’ superannuation interests and there are no separate “post separation contribution” issues to consider, I conclude it is appropriate to deal with the superannuation and non superannuation assets within one asset pool.
I find the value of the parties’ assets as at the date of trial are as follows:
Former matrimonial home Property D (agreed value)
$430,000
Wife’s Honda Odyssey motor vehicle (agreed)
$10,000
[T] (agreed)
$32,300
Husband’s property at Property S (value agreed)
$410,000
Wife – household contents (agreed)
$5,000
Wife’s jewellery and china (agreed)
$770
Wife’s merger cheque BUPA + NBF (agreed)
$3,500
Husband’s superannuation with Local Super
$88,449
Wife’s superannuation with Local Super
$16,111
TOTAL $996,130
The matrimonial liabilities are as follows:
Home loan account [6] (Property D)
$84,136
Home loan account [5] (Property D)
$61,258
Husband’s mortgage (Property S)
$320,000
Loan from Ms M Snr
$30,000
TOTAL $495,394
Accordingly the nett asset pool is $500,736.
Contributions
The parties lived together for over 20 years. While they disagree about the extent of the other party’s involvement in family life and parenting responsibilities, I am satisfied that both parties contributed the whole of their efforts to the benefit of the family whether through paid employment or employment within the home. To that extent, the parties’ pre-separation contributions should be assessed as generally equal.
The wife received a compensation payout of $20,000 in 1985. She says that $17,000 was paid as a deposit towards the purchase of the parties’ first home. The husband disputes this. Not surprisingly, there are no financial records available to confirm or disprove this suggestion. However I find the wife’s recollection of the parties’ financial dealings to be more reliable than that of the husband and I accept the wife’s evidence on this point.
Property C was sold in 1996 and the net proceeds of sale directed to the purchase of the Property D property. To that extent the benefit of the wife’s lump sum contribution is traceable to the net equity presently available in the Property D property. The weight to be attached to a lump sum contribution made by one party diminishes with the passage of time, as both parties have made other financial and non‑financial contributions over the intervening years, but it remains a relevant factor.
The parties’ post separation contributions must also be taken into account. The wife conceded that the husband assisted with various expenses immediately following separation, such as motor vehicle expenses and health insurance. He also contributed to the wife’s legal fees arising from her personal injuries claim in February 2006.
Both parties have contributed to the financial support of their two children since separation. The girls continue to live with the wife, who has made a significantly greater parenting contribution. This is particularly relevant for [Y], who was only 15 years old when the parties separated. [Y] was completing her year 12 studies when the trial commenced in October 2008. [Y] has experienced emotional difficulties since her parents separated and has required ongoing support from the wife across this time.
[X] turned 18 in January 2007. She was studying at TAFE across 2007 and early 2008 although she had ceased formal study by the time of trial and was working part time for the husband in his business. It was anticipated [Y] would also undertake tertiary education.
The husband gave evidence that he spends time with the children regularly but agreed that the girls rarely stay overnight. I am satisfied that the husband has provided financial support to both children in the period since separation by virtue of the $300 per week paid since separation (formally described as “spousal maintenance and child support” in the consent orders made 3 May 2007).
While I accept he has provided other financial assistance directly to both children from time to time, I do not accept the amounts claimed by him in the “reconstructed expenditure” identified in his banking records[6] are a reliable guide to his financial support for the girls. Given that the husband’s memory about financial issues was erratic at best, I do not accept that his memory with respect to this expenditure would be any more reliable.
[6] Exhibits H10 and H11
The husband’s weekly spouse maintenance payments fell behind on numerous occasions. Likewise, he also allowed the mortgage payments to fall into arrears although he has ultimately brought the mortgage repayments up to date in accordance with his obligations under the Court orders. The wife herself made loan repayments to avoid possible recovery action by the bank. These payments from the wife were, in effect, payments in discharge of the husband’s obligation under the Court orders. I accept that her contribution to the mortgage was approximately $4,550.
The amount owing on the mortgage secured against the former matrimonial home is virtually unchanged since the parties separated and indeed, the balance of one loan account has increased. While the husband’s post separation payments were made pursuant to Court order, they nonetheless reflect a contribution to the welfare of the family.[7] However, the weight to be attached to this contribution is undermined by his poor payment record. I conclude the husband cannot claim credit for these payments as a substantial post separation contribution made by him.
[7] Kirby & Kirby (2004) FLC 93-188
I have already determined that the Property S property forms part of the asset pool. The present equity is approximately $60,000. This property was purchased by the husband in December 2007 for the sum of $404,000, plus stamp duties and costs of approximately $20,350.
The husband’s evidence in relation to the purchase of this property was remarkably inconsistent. The husband took out a mortgage with Perpetual Trustee in the sum of approximately $322,000, with the balance of approximately $72,000 coming from the husband’s own finances. He initially said he borrowed $51,000 from his mother towards the purchase, before clarifying that the amount borrowed from her was $30,000.
The husband was unable to demonstrate how or where he managed to save the sum of $72,000 between the parties’ separation in August 2005 and the purchase of this property in December 2007. His evidence about this topic was vague and unhelpful. The Court cannot be satisfied that all banking records and accounts for the husband were disclosed. There were discrepancies in the business financial records that Mr M was unable to explain. The husband repeatedly suggested that his bookkeeper Ms S would be called, but this did not occur.
It may be that funds more properly attributed to the business (whether trading as the company, or as a sole trader) were in fact directed by the husband towards his house purchase, thus leaving the business in a less advantageous financial position, with unpaid GST liabilities and so on. It may also be that the husband chose to direct funds towards his house deposit, rather than meeting his obligation under the May 2007 orders.
Taking into account all of the above I find the wife’s overall contribution during the marriage slightly exceeds the husband’s contribution, by virtue of her compensation payout. Both parties have continued to make significant contributions since separation, whether as homemaker and parent to the parties’ children or by their direct and indirect financial contribution to the asset pool.
The husband has made a direct financial contribution by virtue of his purchase of the Property S property, but the weight to be attached to this contribution is not easily quantified, given the uncertainty about husband’s financial dealings. Taking into account all of the above, I find the husband’s contribution should be assessed at 53% and the wife’s contribution at 47%.
Section 75(2) factors
The wife is presently 46 years old and the husband is 52 years old. Both parties have significant health complications which may affect their long term income earning capacity. I take into account the medical evidence they have both filed in that regard.
There is a significant disparity between the parties’ incomes. Mr M’s valuation notes that the business has continued to trade profitably, despite the husband’s health complications. The husband concedes that the business is more profitable now than it was during the relationship. The husband’s ill health appears to have had little actual impact upon his current income earning capacity at the present time. However, I accept this may not always be the case.
Mr M estimates the husband has a likely income range between $71,000 and $84,000. The wife has [administrative] skills and has been able to maintain part time work in this field. She is presently employed part time earning approximately $220 per week, or approximately $12,000 gross per annum. Based on the medical evidence presented by the wife, I am satisfied she is unlikely to manage full time work in the future. Even if she were able to pursue full time work, which I consider is unlikely, the husband concedes the wife is unlikely to earn more than approximately $30,000 per annum.
The wife has recently received an inheritance of approximately $55,000 which I take into account as a financial resource available to her. The parties’ property is otherwise as identified in these reasons.
There is no current order or application regarding adult child maintenance. While the children are now over 18 years of age, it is likely one or both girls may require ongoing financial support for some time, particularly if they are studying. Both girls are living with the wife, as is [X]’s boyfriend. [X] and her boyfriend each pay nominal board of $50 per fortnight. The wife gave evidence that [X] and her boyfriend are largely self-sufficient within the household, but I am satisfied that the wife is subsidising [X]’s support beyond the $50 board that she receives from her daughter.
Neither party has any obligation to support any other person. Neither party is cohabiting with a partner. The husband’s income capacity has arisen as a direct result of the business jointly owned and developed by the parties during their marriage.
Taking into account all of the above, particularly the ongoing disparity in the parties’ income earning capacity, I conclude that an adjustment in the wife’s favour of 12% is appropriate. This outcome results in the wife receiving 59% of the nett asset pool and the husband receiving 41%.
Calculations
I have calculated the total value of the nett asset pool as $500,736. Based on the wife retaining 59% and the husband retaining 41% the following calculations would apply:
As to the wife:
Nett asset pool $500,736 59% of nett asset pool $295,434 Assets retained by the wife: Equity in Property D $284,606 Motor vehicle $10,000 Jewellery & household contents $5,770 Proceeds of BUPA & MBI merger $3,500 Superannuation $16,111 Total $319,987 The wife’s assets exceed her presumed 59% entitlement by the sum of + $24,553
As to the husband:
Nett asset pool $500,736 41% of nett asset pool $205,302 Assets retained by the husband: Equity in Property S $60,000 [T] business $32,300 Superannuation $88,449 Total 180,749 The husband’s 41% entitlement exceeds the value of his assets by the sum of - $24,553
To give effect to a 59/41% division of the assets, the wife will need to pay to the husband the sum of $24,553, such that the husband retains assets valued at $205,302.
I will consider whether these calculations reflect an outcome that is just and equitable after addressing the wife’s application for spousal maintenance.
Spousal Maintenance
The wife also seeks an order for spousal maintenance. She proposes that her entitlement should be set at $300 per week for a period of two years, which should be paid as a lump sum of $30,000. Section 74 sets out the Court’s power to make an order for spousal maintenance. Section 72 says that a party is liable to maintain the applicant party “to the extent that the first-mentioned party is reasonably able to do so” if the applicant is unable to support themselves adequately by reason of, inter alia, “... age or physical or mental incapacity for appropriate gainful employment”.
I am satisfied the wife is unable to support herself due to her health issues. The wife has set out her personal weekly expenses in Part N of her Financial Statement sworn 21 July 2008. While some of these expenses could be reduced, her claimed expenditure is not excessive.
In addition to those expenses the wife will have ongoing fixed expenses including mortgage repayments of approximately $277 per week[8]. Her reasonable expenses are likely to exceed $550 per week, whereas her present income (excluding any Centrelink benefits) is only $220 per week. I am satisfied the wife has established that she is unable to support herself adequately. Her application for $300 per week is reasonable.
[8] Husband’s Financial Statement, Item 21
I am also satisfied that the husband’s weekly income is substantially greater than set out in his Financial Statement filed 8 July 2008. I find the husband’s gross income is in the vicinity of $1,500 per week, based on Mr M’s estimate of the husband’s anticipated income.
The husband’s fixed expenses are set out at Part G of his Financial Statement. I exclude the BMW repayment as it is more properly a business expense. In considering the husband’s ongoing expenditure, I also exclude those expenses currently paid on behalf of the wife. It is also appropriate to make some allowance for tax, which the husband fails to mention. The husband claims personal expenditure of $400 per week[9]. I am satisfied this expenditure could be trimmed to a modest extent. It is likely that a portion of other expenses claimed by him, such as motor vehicle expenses are met by the business. Taking into account all of the above, I am satisfied the husband is reasonably able to make a contribution to the wife’s support, which I fix at $200 per week.
[9] Husband’s Affidavit filed 2 October 2008, Annexure B
Section 80 empowers the Court to make an order for lump sum spousal maintenance however the authorities are clear that such orders should not be made lightly.[10] One basis upon which the Court can be satisfied to depart from periodic payments is a party’s likely compliance.
[10] Vaughan & Vaughan [1981] FLC 91-066 at p.76,508
The wife has demonstrated that the husband has a poor record of compliance to date. Even though he has eventually paid up his obligations in full, it is unfair to expect the wife to live with that uncertainty. Accordingly I am satisfied an order for lump sum spousal maintenance is appropriate in this case. I fix the amount at $20,000 and I conclude that this amount should be reflected in the assets to be retained by the wife. This assists the wife to retain the Property D property for her and the children and has the added advantage of ending the financial arrangements between the parties.
Conclusion
At this stage of my determinations, I must step back and consider the overall impact of the orders to determine whether the outcome is just and equitable between the parties. There is no obligation or expectation under the Family Law Act that the Court should leave the parties in an equal position, however the actual impact of the anticipated orders on each party must be considered and in some cases a further adjustment may be warranted.[11]
[11] Phillips & Phillips [2002] FLC 93-104 at p.88,986
Taking into account the lump sum spousal maintenance order, the wife is still required to pay to the husband the sum of $4,550. The amount to be paid to the husband is relatively modest, especially when compared, for example, to the disparity between the parties’ annual incomes. The reality is the husband will quickly be able to recoup his financial position. This is a significant factor to consider when assessing the justice and equity of this outcome.
Given the uncertainty over the true state of the husband’s financial affairs I am unable to rely upon his evidence that he has been unable to meet his outgoings or that he has had to rely on his overdraft to meet his obligations. At the same time, I note that the husband has accumulated a significant personal taxation liability, which suggests he has not been managing his finances particularly well. While this is not a debt of the marriage, it is an ongoing liability that the husband must pay.
I accept the wife will retain the inheritance from her aunt, but in reality this sum represents the only “nest egg” the wife is ever likely to acquire. She has very modest superannuation and given her income, is unlikely to be in a position to make substantial contributions to her fund in the future.
Taken as a whole, I am concerned that the division of assets as outlined does not achieve a just and equitable result. I conclude that the appropriate outcome in this matter is one that will see each party retain the assets in their possession, with no cash adjustment to the husband.
This will result in the husband retaining the bulk of the parties’ superannuation entitlements and a smaller proportion of the remaining assets. Such an outcome may not be generally appropriate in the usual run of cases, but I am satisfied that the situation before me is unusual. The income disparity between the parties leads to the conclusion that this outcome is indeed just and equitable.
Finally, there are various minor adjustments to be made between the parties. I am satisfied the wife should retain responsibility for council rates and taxes incurred for the Property D property. The husband has met the initial cost of Mr M’s valuation. He now seeks the wife reimburse him for one half of those fees, in the sum of $2,750. That would usually be the appropriate outcome, but when I take into account the husband’s repeated failure to comply with orders for discovery and the extraordinary delays that his behaviour has caused, I reach a different conclusion.
I conclude that the husband’s delays have led to a situation where the wife has incurred unnecessary legal fees, some of which may not be fully recovered, given that costs are rarely awarded on a party/party basis in this jurisdiction. In those circumstances I decline to make an order that the wife contribute to the costs of Mr M’s valuation.
In addition there have been costs orders already made against the husband as follows:
·The wife’s costs for attending the conciliation conferences listed on 26/10/07, and 16/1/08 subsequently fixed at 1½ hours for each attendance ($615 in total)
·Costs thrown away for the trial listing on 4 August 2008, fixed in the sum of $2,500.
It may be these costs have already been paid, but if not, they should be paid promptly. Each party is at liberty to address the Court on the question of costs generally.
I now make orders as set out at the commencement of these reasons.
I certify that the preceding one hundred and nine (109) paragraphs are a true copy of the reasons for judgment of Kelly FM
Associate: K. Fedele
Date: 26 June 2009
Hickey & Hickey (2003) FLC 93-143
AJO v GRO (2005) FLC 93-218 Clauson & Clauson [1995] FLC 92-595 at p.81,809
Vautin & Vautin [1998] FLC 92-827 at para.43
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