McDonald and Malevitis
[2012] FamCA 955
FAMILY COURT OF AUSTRALIA
| MCDONALD & MALEVITIS | [2012] FamCA 955 |
| FAMILY LAW – PROPERTY – where the husband received an inheritance shortly before separation - where the parties have significant liabilities - where the husband has a valuable earning capacity |
| Family Law Act 1975 (Cth) |
| Farmer & Bramley (2000) FLC 93-060 West& Green (1993) FLC 92-395 |
| APPLICANT: | Ms McDonald |
| RESPONDENT: | Mr Malevitis |
| FILE NUMBER: | CSC | 254 | of | 2010 |
| DATE DELIVERED: | 19 November 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Cairns |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 30 July 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Fellows |
| SOLICITOR FOR THE APPLICANT: | O'Reilly Stevens Bovey Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Litigant in person |
Orders
Pursuant to s 79 Family Law Act 1975 (Cth), an order be made in the terms of paragraphs 2 – 14.
Within twenty-one (21) days the husband and wife do all acts and things and sign all necessary documents to cause the husband to transfer to the wife any interest that he has in Malevitis Pty Ltd and the business carried on in the name of D Health Services.
The husband pay the wife $76,108 at the following times:
3.1.$15,000 within four (4) months;
3.2.$15,000 within eight (8) months;
3.3.$15,000 within twelve (12) months;
3.4.$15,000 within sixteen (16) months;
3.5.$16,108 within twenty (20) months;
and such sums will bear interest at the rate prescribed by Rule 17.03 Family Law Rules 2004 (Cth).
In the event that the husband fails to make the payments referred to in order 3 within twenty (20) months of the date of these orders, then the husband transfer to the wife a portion of his one-quarter share as tenant in common in the property known as R Street, B suburb (certificate of title …552). The portion of the husband’s one quarter interest to be transferred will be calculated by the formula A/140,000 where A is the balance outstanding under order 3 at the expiration of twenty (20) months from the date of the orders (including any accrued interest).
The husband shall do all acts and things necessary to indemnify the wife in relation to any debt owing to the National Australia Bank in respect of the Toyota vehicle and to secure a release from the National Australia Bank for the wife in respect of any debt associated with that vehicle.
The wife otherwise indemnify the husband in relation to any debts associated with Malevitis Pty Ltd or the business carried on in the name of D Health Services.
The parties do all things and sign all necessary documents to cause the monies held in the trust account of Edwards Legal Services from the sale of W Street, S Town in the sum of $2,397.60 be paid to the wife.
Pursuant to section 90MT(1)(b) of the Family Law Act1975 (Cth), whenever a splittable payment becomes payable in respect of the husband’s interest in the Public State Superannuation Scheme also known as QSuper (“the Fund”), the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations2001 (Cth) using a specific percentage of 100 percent and that there be a corresponding reduction to the entitlement the husband would have had in the Fund but for this Order.
The trustee of the Fund do all such acts and things and sign all such documents as may be necessary to:
9.1.Calculate, in accordance with the requirements of the Family Law Act1975 (Cth), the entitlement created in these Orders; and
9.2.Pay the entitlement whenever a splittable payment becomes payable.
Each party be at liberty to apply to the Court in relation to the implementation of the Orders affecting the superannuation interest.
Until such time as the superannuation split to the wife pursuant to these Orders can be rolled over into a separate account for the wife, the husband shall direct and authorise the Trustee of the Fund to communicate with the wife and/or any person authorised by her in writing:
11.1.To answer any reasonable enquiries as be made by her or on her behalf from time to time in relation to his entitlement in the Fund; and
11.2.To provide to the wife and/or her authorised representative a copy of any notice of any application or request by the husband, which seeks release of the entitlement in the Fund insofar as that release effects the wife’s entitlement in the Fund pursuant to these Orders.
The husband is restrained from requesting the trustee of the Fund, in accordance with Regulation 7A.06(2) of the Superannuation (Industry) Supervision Regulations 1994 (Cth) to roll over or transfer the transferrable benefits to another superannuation fund.
The husband by himself, his servants and/or agents be and hereby are restrained from doing any acts or things which will prevent the wife, her heirs, executors, administrators or nominees from receiving the benefit in the Fund to which she is entitled pursuant to these Orders.
Unless otherwise specified in these Orders, and except for the purpose of enforcing the payment of any monies due under these or subsequent Orders:
14.1.Each party be solely entitled to the exclusion of the other to all property (including choses in action) in the possession of such party as at this date;
14.2.Monies standing to the credit of the parties in any bank account is to become the property of the person so named as the owner of the bank account; and
14.3.Each party be solely liable for and indemnify the other against any liability in their own names.
That if either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to give effect to the terms of these Orders, the Registrar of the Cairns Registry, at the Family Court of Australia is hereby appointed pursuant to provisions of s 106A of Family Law Act1975 (Cth) to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment under the pseudonym McDonald & Malevitis is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: CSC 254 of 2010
| Ms McDonald |
Applicant
And
| Mr Malevitis |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
At the end of the day, this case was primarily about how responsibility for debt was to be allocated. The parties would have had net liabilities (even after superannuation had been taken into account) had it not been for the husband receiving an inheritance shortly before separation.
The husband left the marriage with a valuable earning capacity. The wife will have the primary responsibility of the two young children of the marriage. In the event that I conclude that it is just and equitable to make an order altering property interests of the parties, my task is to create as clean a break as possible whilst at the same time making an order that is just and equitable .
APPLICATIONS
At the commencement of the hearing the wife sought the orders set out in Schedule 1.
The wife has sought a number of orders, the effect of which are:
4.1.that the husband be responsible for half of the tax debt which is currently in the company under which she trades;
4.2.that the husband transfer any interest he has in the business to her;
4.3.that the wife receive the Honda motor vehicle;
4.4.the husband be responsible for the debt associated with the Toyota vehicle;
4.5.the husband be solely responsible for a debt of $20,000 with M Finance, a line of credit which the wife says was taken out to renovate the F suburb property;
4.6.that the parties equally assume a debt of $13,000 to the wife’s parents;
4.7.that the wife receive an amount of $2,397 which is in the trust account of solicitors who did the conveyancing transaction for the sale of the S Town property;
4.8.that the husband reimburse the wife for a sum of $1500 relating to rates on the F suburb property;
4.9.that the wife retain her current superannuation interests;
4.10.that the husband transfer all his superannuation interests to her;
4.11.that the husband pay the wife a sum of $56,682.88, being the net sale proceeds from the F property, which were applied to the mortgage of the S Town property;
4.12.some unspecified adjustment from the inheritance the husband has received from his father’s estate;
4.13.otherwise, the parties to retain the assets and liabilities that are currently in their own name.
In final submissions, counsel for the wife was unspecific about the result that the orders sought by the wife would lead to in terms of percentage division of assets between the parties.
The orders sought by the husband as set out in his Amended Response to Initiating Application filed 13 June 2012 are set out in Schedule 2.
Initially, the husband sought the wife receive 30 per cent of his superannuation; which amounted to $23,465.70 (0.3 x $78,219). However, in his case summary the husband sought that:
The wife receive a 50% split of the husbands [sic] superannuation with QSuper for contributions since the commencement of the relationship to the separation (2005 to 2010). June 2010 balance of $64,069.57 - 28,932.55 divided by half equals $17,568.
The husband also sought that the wife pay him $50,000 as unpaid wages for work conducted at D Health Services, however the husband did not press that claim at the hearing.
The parties agreed the husband will assume the debt for the Toyota motor vehicle.
DOCUMENTS RELIED UPON
The documents relied upon by each party are set out at Schedule 3.
SHORT HISTORY
The wife was born in 1972 and is now aged 40.
The husband was born in 1974 and is now aged 38.
The parties commenced cohabitation in 2003 or early 2004.
The parties married in January 2005.
The child A was born in September 2006 and is now aged six.
The child P was born in November 2009 and is now aged three.
The parties separated on 15 February 2010. They cohabited for between six to seven years.
CREDIT
The wife made submissions impugning the husband’s credit. The main complaint went to issues around financial disclosure by the husband. The wife complained (and the husband conceded) that he had not made any disclosure about his interest in his late father’s estate until a subpoena was issued.
There was an issue about whether the husband had signed cheques from the wife’s personal account without authorisation. The wife engaged a handwriting expert, Mr A. Mr A went on affidavit, opining that the six cheques bearing writing or signatures that were questionable “were probably not written by [the wife].” However there was “inconclusive” evidence to say those signatures, or writing, were signed or written by the husband. Mr A noted that one of the limitations of his examination was that the specimen writings of the husband were limited to his signature and stylised capital letter formations.
The husband did not make any submission in relation to the credit of the wife.
Notwithstanding the wife’s submissions about the husband’s credit, there is no significant issue in this case that turns on findings of credit and I do not need to make any.
DETAILED CHRONOLOGY
The wife was born in 1972 and is now aged 40.
The husband was born in 1974 and is now aged 38.
In 1999, the husband purchased the property at S Town for $136,000 with borrowings of $124,100. His mother lived in that property until the parties moved in around 2004.
The husband’s child from a previous relationship, N, was born in 2000. She is currently aged 12.
In 2003, the husband set up the company Malevitis Pty Ltd.
The parties commenced cohabitation in 2003 or early 2004.
Around 2004, the parties moved to the S Town property.
The parties married in January 2005.
On 12 January 2005, the parties left the S Town property and lived with the wife’s parents at F Town for five months, rent free.
In March 2005, the wife established D Health Services in Queensland.
In April 2005, the parties moved out of the wife’s parents’ home and moved into a property at Z Street, Q suburb. They purchased the home for about $290,000, using the S Town property as security.
In 2005, the wife was made a director of Malevitis Pty Ltd.
In 2006, the husband commenced studying a University degree.
The child A was born in 2006 and is now aged six.
In November 2007, the parties sold the Z Street property for $370,000.
At the end of 2007, the parties moved into the F suburb property. This property was initially owned by the wife’s parents. The wife asserts the parties lived rent free, however the husband asserts the parties renovated and improved the property as payment.
Around 2007 or 2008, the wife established a health services practice at Y, where her parents had relocated. She worked there initially one day per week. This was subsequently increased to two days per week. The wife would take A with her to her parents’ home. She spent approximately three or four nights a week at her parents’ home.
In 2008, the husband began working at a Queensland government department.
In June 2009, the husband undertook the requirements for professional practice in Brisbane for six weeks.
The child P was born in November 2009 and is now aged three.
On 5 January 2010, the wife asserts the husband pushed her. She fell to the floor, breaking her collarbone. The husband denied he caused the fall. The wife did not seek to make any claim relying on Kennon & Kennon (1997) FLC 92-757 and this incident was not the subject of any exploration during the hearing.
On 11 January 2010, the parties purchased the F suburb property. They funded the purchase with a $450,000 mortgage from the National Australia Bank.
On 21 January 2010, the husband’s father died. As part of the probate, the husband received a 25 per cent share (as tenants in common) in his late father’s home. The husband’s father’s elderly de facto partner currently resides in the home.
In early February 2010, the husband traded in the business motor vehicle, and purchased a Toyota motor vehicle, with company funds.
The parties separated on 15 February 2010. They cohabited for six to seven years.
In 2010, the husband asserts the wife “removed all the paperwork from the [F suburb] premises”. The wife denies this. She has affidavits from two witnesses who accompanied her to the premises when she removed some items. Both witnesses deny the wife took any paperwork.
On 21 June 2010, the wife asked the husband to remove his signature from the professional claims equipment. He refused.
In July 2010, the wife underwent a shoulder reconstruction.
Around July 2010, the husband commenced a relationship with his new partner Ms L.
On 1 September 2010, the wife closed the far north Queensland practice. She remained the manager of the Y suburb practice.
On 5 November 2010, the husband sold the S Town property for $305,000. At that time, the mortgage on the property was $335,870.92.
On 9 December 2010, the F suburb property was sold for $545,000. $467,495.96 of this was applied to the mortgage. After the payment of arrears of rates, the net proceeds of $56,682.88 were applied to the S Town property mortgage.
In 2011, the husband resigned as a director of Malevitis Pty Ltd.
In mid 2011, the husband commenced cohabitation with Ms L.
On 3 June 2011, consent orders were made that the husband deliver the Toyota to the wife for her to sell. The husband did not deliver the motor vehicle. It was subsequently repossessed on 2 August 2011. There was significant damage to the vehicle, and it was delivered locked without keys. As indicated below, the parties have agreed upon how issues about the Toyota, and its associated debt, should be treated.
Around December 2011, the husband purchased a new property with Ms L for $690,000.
APPROACH
In this matter my task is to:
58.1.Identify according to ordinary common law and equitable principles and then value the property, assets, financial resources and liabilities of the parties;
58.2.Determine whether it is just and equitable to make an order altering those interests and if so;
58.2.1.Identify relevant contributions and assess them;
58.2.2.Consider relevant matters referred to in Section 79(4)(d) – (g) FLA;
58.3.Determine what order adjusting the property, assets and liabilities of the parties is just and equitable.
BALANCE SHEET
The settled balance sheet is set out below. In respect of the values which are not agreed my determination appears in bold. The reason for that determination is set out under the relevant item number.
| Assets | ||||||
| Item no. | Title | Description | Husband | Wife | Agreed/ Determined | Value |
| 1 | W | Honda | $15,000.00 | $15,000.00 | Agreed | $15,000.00 |
| 2 | H | New house with partner ($690,000 ÷ 2) | $345,000.00 | $345,000.00 | Agreed | $345,000.00 |
| 3 | W | D Health Services | $50,000.00 | $0.00 | Determined | $0.00 |
| 4 | J | Trust account of vendor's solicitors for sale of Spencer | $2,397.00 | $2,397.00 | Agreed | $2,397.00 |
| 5 | W | Chattels | $1,000.00 | $1,000.00 | Agreed | $1,000.00 |
| 6 | H | Sale of SUV retained by husband | $3,000.00 | $5,000.00 | Determined | $5,000.00 |
| 7 | H | Husband's interest in his father's estate | $140,000.00 | $140,000.00 | Agreed | $140,000.00 |
| 8 | W | Superannuation | $5,000.00 | $5,000.00 | Agreed | $5,000.00 |
| 9 | H | Superannuation | $78,219.00 | $78,219.00 | Agreed | $78,219.00 |
| Total assets | $591,616.00 | |||||
| Liabilities | ||||||
| Item no. | Title | Description | Husband | Wife | Agreed/ Determined | Value |
| 10 | J | Investec Experien | $25,000.00 | $25,000.00 | Agreed | $25,000.00 |
| 11 | J | Investec Experien | $30,000.00 | $30,000.00 | Agreed | $30,000.00 |
| 12 | W | Line of Credit with M Finance | $20,000.00 | $20,000.00 | Agreed | $20,000.00 |
| 13 | W | D Health Services | $19,569.00 | $19,569.00 | Agreed | $19,569.00 |
| 14 | W | D Health Services | $9,332.00 | $9,332.00 | Agreed | $9,332.00 |
| 15 | W | Personal credit card | $10,236.00 | $10,236.00 | Agreed | $10,236.00 |
| 16 | H | NAB credit card | $9,000.00 | $9,000.00 | Agreed | $9,000.00 |
| 17 | H | Westpac credit card | $13,000.00 | $13,000.00 | Agreed | $13,000.00 |
| 18 | H | Mortgage on current property with new partner ($690,000 ÷ 2) | $345,000.00 | $345,000.00 | Agreed | $345,000.00 |
| 19 | W | Debt to wife's parents at separation | $0.00 | $13,000.00 | Determined | $13,000.00 |
| 20 | W | Borrowed from wife's parents since separation | $0.00 | $20,000.00 | Determined | $0.00 |
| 21 | W | D Health Services | $0.00 | $37,000.00 | Determined | $32,800.00 |
| Total liabilities | $526,937.00 | |||||
| Total net assets | $64,679.00 | |||||
The value of the husband’s Toyota, and the corresponding National Australia Bank loan for the Toyota, has been removed from the balance sheet. The husband presented his case on the basis that any dispute (and there was substantial dispute) in the way the husband dealt with the disposal of the Toyota and any debate about the culpability about what he had done in relation to the Toyota has basically been put to one side by the husband saying that he would take on any responsibility relating to the motor vehicle including being responsible for any liability associated with it.
Item 3 – D Health Services
The husband asserted that the wife’s business was worth $50,000.
The wife relied upon a report by Mr J. In that report, Mr J opined “there is no basis for goodwill that ought to be included, as the company does not earn super profits… the net value of the company is negative $95,445… In my opinion, based upon the above, no value ought to be attributed to the shares in the company, as at 30th June 2011.”
I accept Mr J’s opinion and find the wife’s business does not have a positive value which should be included on the balance sheet.
I will deal with the tax liability associated with the company at item 21 below.
Item 6 - Sale of the SUV retained by the husband
The husband deposes the wife gave him the company motor vehicle, a SUV, after she purchased a new Honda. He traded the SUV in and purchased the Toyota. He says “the trade in value was agreed at $3000 and the dealer adjusted the trade in value up… to [$5000] so that I could lease the Toyota at a higher value and obtain a trade-in cheque for $5[000]”.
The Toyota was purchased for $46,000.90. The purchase document on its face shows an “allowance for trade-in” as $5000. The husband settled the balance using finance of $43,500.90. The husband asserted the amount labelled “refund customer” ($3000) was the actual amount he received for the SUV vehicle. I am unconvinced that the purchase document means something different to what it plainly says. “Allowance for Trade-In” is $5,000. It seems to me that a deposit of two amounts totalling $3,000 was refunded but that the purchase price for the motor vehicle was made up of the trade on the company’s motor vehicle plus the $43,500.90 financed.
The value of the SUV to the husband will be included on the balance sheet at $5,000.
Item 7 – The husband’s interest in his father’s estate
The parties have agreed to add to the balance sheet the husband’s interest in his father’s estate at $140,000. That figure is calculated as one quarter of the value of the unencumbered property that was the substantial asset of the estate. I note however that that value of $140,000, whilst seemingly an agreed figure at trial, is subject to a life interest. There was no evidence led as to the value of the life interest. I will take that life interest into account when assessing s 79(4)(d)-(g) Family Law Act 1975 (Cth) (“FLA”) matters.
Items 19 and 20 – loans from the wife’s parents
The wife says her parents loaned the parties $13,000 before separation (item 19). The parties applied $3000 of this “towards the roof and office at…[F suburb]” and another $10,000 “to assist in paying with initial furnishings for the [health services] practice” at far north Queensland.
She says her parents contributed $20,000 to D Health Services after separation (item 20). The wife agrees to be solely liable for this debt.
The husband says he has “no knowledge” about these amounts, and that the wife’s parents “never lent [him] a single dollar during, before, or after [the parties’] marriage”.
I accept the wife owes both these amounts to her parents. I have already accepted Mr J’s valuation of the D Health Services business (see item 13 above). Item 19, the $13,000 that was advanced prior to the separation should be added to the balance sheet. Given the wife’s concession, item 20 should not be ascribed a value on the balance sheet.
Item 21 – D Health Services
There is an issue as to whether or not a tax liability of about $37,000 in the company Malevitis Pty Ltd, which is the trustee of the family trust trading as D Health Services, should be a joint responsibility or simply a responsibility of the wife.
The wife says the husband said he was managing the bookkeeping of the business. She said, after separation, she was advised “there was unpaid BAS and that superannuation had not been paid to employees. The unpaid BAS was approximately $5,500. The unpaid PAYG tax was over $13,000. The unpaid superannuation totaled [sic] $21,000.”
The husband said he had no knowledge of a tax debt or superannuation debt. The husband says the wife was unable to manage the business “including the need to pay PAYG tax and superannuation”. He says the parties engaged an accountant during the operation of the business. The husband did however originally claim that he assisted the wife as her “business manager” and I accept the wife’s contention that he did not properly attend to the regular statutory obligations relating to tax and superannuation.
I am satisfied the husband did the majority of the bookkeeping for Malevitis Pty Ltd. This debt has been incurred as a result of a joint activity that existed during the cohabitation. I find that this debt in the company should be added to the balance sheet.
The wife asserts the value of the tax debt to be $37,000. In support of that assertion, she annexes to her affidavit a letter from the Australian Taxation Office to Malevitis Pty Ltd dated 1 July 2011 which says “Our records show that an amount of $37,229.65, being a debt payable to the Commonwealth, remains unpaid on your account with this office.”
The parties separated in February 2010. As at June 2010 the tax liability associated with the wife’s business was $32,800 (see balance sheet as at 30 June 2011 attached to Mr J’s report). Mr J has assessed the business as having a current negative value of $96,445.
I find the value ascribed to the debt should be $32,800, which is the amount of the debt at separation.
WHETHER AN ORDER ALTERING INTERESTS SHOULD BE MADE
The parties have separated and their marital partnership has ended. After the separation, there was no longer a continuing commitment to the mutual use of assets and a shared responsibility for liabilities. As the above balance sheet demonstrates, the assets and liabilities remaining with each party are quite uneven. The husband’s net assets are $201,219; the wife’s net liabilities are $83,937 and the parties’ net liabilities are $52,603.
I find that in all the circumstances, it is just and equitable to make an order altering property (including adjusting liabilities).
CONTRIBUTIONS
Initial Contributions
The wife did not have any significant assets at the commencement of cohabitation. She had a brand new SUV motor vehicle worth approximately $35,000, with an associated car loan from Primus Finance in the sum of $35,000. She also had household furnishings and effects which were new and of good quality.
The wife says the husband had a property at S Town worth “in the high $300,000s” as well as a second hand German motor vehicle. The husband purchased the S Town property for $136,000 in 1999, with borrowings of $124,000. In his Financial Questionnaire, the husband asserted the S Town property was mortgaged for $270,000 at the date of cohabitation. The husband asserted the property was worth $400,000 at the date of cohabitation, but was unable to provide any evidence of that assertion. I am unable to place any reliance upon the husband’s assertion, if for no other reason than the husband sold the S Town property in November 2010 for $305,000. I am unable to say that the husband had significant net equity in the S Town property at the date of cohabitation.
The husband had some superannuation at the commencement of cohabitation.
I am unable to accurately assess the value of the husband’s initial contribution.
Financial Contributions
At the commencement of the relationship, the husband left his employment and opened a small business. The wife assisted him in purchasing, and with cleaning. She gave the husband $2,056.39 to assist in developing the business. She further gave him $2000 as contributions towards the business.
The husband worked in paid employment for some periods during the marriage. He deposes “the [wife]…contributed a minor amount to the running of our household, paying for ancillary items and food.” He says he was “working full time, studying full time and assisting her as Business Manager until end [of] 2009.” The husband asserted that he had two “full time” jobs during most of the time the parties lived together. He commenced a degree in 2005 doing full time subjects. I accept the wife’s contention however that the husband did not maintain stable paid employment during the period of cohabitation. The husband conceded that he had at least seven employers during the seven years the parties were together. He conceded that it was difficult for him to maintain his full time studies and satisfy the requirements of a full time employer.
The husband says the wife did not earn an income for years after they married. He says he “paid for the mortgage, deposit, and recurrent costs for our first home at [Z] St[reet]”. He says after this property was sold in 2007, he gave the wife half the proceeds (totalling approximately $30,000) and also “paid for her unpaid tax bill in excess of $5[000]”.
The husband claims the wife “continued to take out loans and purchase expensive equipment and renovate business premises and a home office in the hope that [he] would subsidize her with [his] [professional] career”.
The husband says that the wife made no direct financial contributions to the mortgage on the F suburb property and there is no evidence from the wife that she did so.
The husband asserts he worked at reception for the first six months of the D Health Services business, and at later stages for periods of up to three months at a time. The wife denies the husband ever worked on reception in the four years the business was in operation. She asserts that role was initially fulfilled by her mother, but she concedes the husband “attended at the business and initially answered some phone calls.” This difference in the parties’ evidence is not significant.
The husband claims the wife “drew a wage [from the business] and also supplemented her income with considerable quantities of cash income.” The wife denies she withdrew large sums of cash from the business. Again, little turned on the difference in their evidence.
The wife asserts, and I accept, she paid for the majority of the parties’ regular joint expenses; A’s day care fees, hiring a nanny, and purchasing groceries. I also accept the wife also paid for her medical appointments and procedures while undertaking IVF.
The wife paid for health insurance for the husband and the husband’s child from his previous relationship, N.
Non-Financial Contributions
I accept the husband rarely looked after the children during the day. The wife’s mother cared for A when the wife returned to work. The wife also hired a nanny.
The wife denies the husband assisted in her practice at Y suburb.
The husband says he renovated the F suburb property; “painting extensively, building fences and refurbishing the entire upstairs”.
Post Separation Contributions
The husband has had the continued benefit of the company credit card and the Toyota motor vehicle since January 2010. The wife says she was “advised that [the husband] had used the work business account for flights for he [sic] and another person” and that the husband “used the business account to pay for his personal phone accounts, in excess of $800.”
The husband also had the benefit of the F suburb property after separation. The husband had a tenant live with him. The husband did not regularly make payments in respect of the mortgage or the rates. The wife asserts she received letters indicating the loan on the houses and the loan on the car was in arrears.
In submissions, the husband asserted that he has made regular payments of child support since May 2010. He relied on Annexure MAM-11 of the wife’s affidavit sworn 16 June 2011 (which was tendered by agreement). The document, from the Child Support Agency, shows regular payments from May 2010 to 30 December 2010. However, from 30 December 2010 to 6 June 2011, the husband made no payments of child support. The husband conceded that was the case.
The wife has made the more significant contribution post separation in the role of parent.
Conclusion on contributions
In the splitting order the husband sought in his case summary (see paragraph [7]), he has done a calculation which is one that approaches his contributions to his superannuation on a mathematical basis, attempting to isolate the value of the superannuation at the commencement of the cohabitation and at the end of the marriage. Such a precise calculation is not appropriate (see West& Green (1993) FLC 92-395).
Whatever the husband’s initial equity was at the date of the commencement of cohabitation in the S Town property, I find that it was eroded (over a relatively short time) time by the other contributions that each party made during the course of the cohabitation during which two children were born, and particularly by the wife’s post separation contribution.
I have not taken into account contributions that the wife made towards the development of the husband’s earning capacity when assessing contributions as I intend to take it into account when dealing with matters pursuant to s 79(4)(d)-(g) FLA.
The overall net assets, including superannuation, are only $64,679. The husband’s inheritance exceeds that amount. The husband’s entitlement to an inheritance came immediately before separation, but that does not necessarily exclude it from consideration when contributions are assessed (see Finn J in Farmer & Bramley (2000) FLC 93-060 at [56]).
The husband has no equity in the new home he has purchased with Ms L.
Overall I conclude, primarily because of the inheritance the husband received very late in the marriage, that the contributions of the parties towards the acquisition and development of the assets on the balance sheet favour the husband.
Given the size of the inheritance when compared with the net balance of the other assets and liabilities, I find the division of assets based upon contributions to be 80/20 in favour of the husband.
FUTURE NEEDS - SECTION 79(4)(d) - (g) MATTERS
The husband leaves this marriage with the most valuable thing developed during the time the parties were together. This is not an asset recognised on the balance sheet. It is his future earning capacity which he obtained as a result of his professional degree. The wife in a real sense has made a contribution towards the acquisition of that earning capacity by the husband and it is a significant feature in this case.
The husband submitted that the wife had an earning capacity of $100,000. I am unable to accept that submission. There is no evidence that the wife has ever earned that level of remuneration. I find the husband has a significantly higher earning capacity than the wife.
The wife is highly educated. She has gained multiple Bachelor degrees and a Masters in the health sciences field. She has worked in health services.
The wife indicated that because of a current injury to her shoulder she will not be able to work until at least October 2012 and her prognosis after that time seemed to be a little uncertain. The wife however did not seek to lead any medical evidence in relation to any long term disability or inability to work in her chosen profession.
The husband’s income is $150,000 per year plus compulsory 9 percent superannuation paid by his employer. He is the president of a local service club. He has a significant earning capacity.
He lives with Ms L who is self employed and receives gross income in the order of $15,000 - $20,000 per year. Ms L has three children. They have recently bought a house together, borrowing the whole of the sum. The purchase price was $690,000. The debt to the Commonwealth Bank of Australia was $690,000, being a joint borrowing against the new property of $550,000 and a borrowing against the property in the husband’s late father’s estate of $140,000. The husband said that he and his new partner needed a house that would accommodate six children. Ms L’s three children live there permanently, the two children of this marriage spend time there on an alternate weekend basis and half of school holidays and the husband also had another child aged 12 of a previous relationship.
Upon the death of the husband’s father, the husband acquired an interest in his father’s estate. The beneficiaries of his father’s will were his father’s de facto partner (who lived with him in the B suburb property) as to half and he and his brother as to a quarter each. The husband’s father’s de facto partner had indicated that she intended to make a claim to challenge the distribution of assets under the deceased’s will. The matter was compromised on the basis that the husband and his brother enter into a lease with his late father’s de facto partner to allow her to live in the property for her life. There was also an agreement that the property be able to be used as security for borrowing in relation to the husband’s new home. I generally take into account that the value of the husband’s father’s estate on the balance sheet is subject to a life interest. Given I have no evidence about what that life interest is worth, I cannot be more specific than that.
The wife was cross examined as to her potential benefit from the McDonald Family Trust. She conceded that it may have been possible in 2000 that she received about $20,000 to assist her in her university costs. The wife said however that since that time she has received no distributions from the trust, although she conceded that her parents had significantly assisted her from time to time and have paid the legal fees associated with the litigation between the parties. Her parents have also indicated that they are prepared to pay an amount of approximately $70,000 in respect of surgery on the younger child’s ear in the United States.
The husband asserted, and the wife conceded, the wife is living in a home purchased by the wife’s mother. The husband submitted that the wife had an “overall financial resource that has been at her disposal in relation to her legal fees and her living arrangements and her general standard of living that is beyond certainly her income.”
The wife also owes her parents $20,000 (see discussion about item 20 on the balance sheet above).
The wife has primary care of the two children of the marriage. The distance the parties live apart precludes any shared care arrangement. She deposed that she has received little financial assistance from the husband post separation. Her current financial statement recorded that he is now paying child support in the sum of $198.14 per week for the two children.
The wife’s weekly income is $980. She estimates her average weekly expenses to be $530.71.
The husband’s weekly income is $2884. He deposes his weekly expenses total $3143.45. The figure in item 32 of his financial statement of May 2012 does not reconcile with his claims in Part N of his financial statement. The superannuation expense claimed is paid by his employer. The bulk of the expenses seem to arise from recent borrowings he has made for his new accommodation with Ms L. There was no testing of assertions made by the husband in relation to his level of expenditure, and I treat his assertions with some caution.
Following my findings on contributions and taking into account what I have said about the disparity in the earning capacity of the parties, and the small amount of net assets the parties actually have left, I find the husband is in a stronger position than is the wife, looking forward.
An adjustment should be made of 7.5 per cent in the wife’s favour for s 79(4)(d)-(g) FLA matters.
JUST AND EQUITABLE
The result of the conclusions that I have come to in relation to contributions and s 79(4)(d)-(g) FLA adjustment would lead to an overall division of assets as to 72.5 per cent to the husband and 27.5 per cent to the wife.
The wife has asked that I make an order that the husband be responsible for:
125.1.the entirety of the line of credit with M Finance (item 12)
125.2.half of the debt to wife’s parents at separation (item 19)
125.3.half of the D Health Services Tax Debt (item 21)
All of these debts are associated with the wife’s business. In my view, it creates a cleaner break between the parties’ financial affairs if the wife takes those debts on the basis that the husband is to pay a lump sum to her.
In addition the wife sought:
126.1.that the husband reimburse her for $1500 relating to rates on the F suburb property. I accept that the husband was in arrears for the rates and water in the amount of $2,626.27 and $70.70 respectively;
126.2.that the husband pay her $56,682.88; the proceeds of sale from the F suburb property. This money was applied to the S Town mortgage, which was not fully discharged when that property was sold. The surplus funds of the sale of the two properties are $2,397, which the wife will receive (item 4).
The total of the payments which the wife seeks from the husband is $101,082 ($20,000 + $6,500 + $16,400 + $1,500 + $56,682).
The overall percentage division could be achieved by a distribution of the assets and liabilities in accordance with the following table (and having the husband make the payment referred to).
Husband gets 72.5% Assets Item No. Description Percentage Value 2 New house with partner ($690,000 ÷ 2) 100% $345,000 6 Sale of SUV retained by husband 100% $5,000 7 Husband's interest in his father's estate 100% $140,000 Liabilities Item No. Description Percentage Value 16 NAB credit card 100% $9,000 17 Westpac credit card 100% $13,000 18 Mortgage on current property with new partner ($690,000 ÷ 2) 100% $345,000 Husband pays Wife $76,108 Net Assets to Husband $46,892 Wife gets 27.5% Assets Item No. Description Percentage Value 1 Honda 100% $15,000 3 D Health Services 100% $0 4 Trust account of vendor's solicitors for sale of S Town 100% $2,397 5 Chattels 100% $1,000 8 Superannuation 100% $5,000 9 Superannuation 100% $78,219 Liabilities Item No. Description Percentage Value 10 Investec Experien 100% $25,000 11 Investec Experien 100% $30,000 12 Line of Credit with M Finance 100% $20,000 13 D Health Services bank debt 100% $19,569 14 D Health Services credit card 100% $9,332 15 Personal credit card 100% $10,236 19 Debt to wife's parents at separation 100% $13,000 20 Borrowed from wife's parents since separation 100% $0 21 D Health Services Tax Debt 100% $32,800 Wife receives $76,108 Net Assets to Wife $17,787
Standing back, I consider an adjustment of assets and liabilities in that manner to be one that is just and equitable between the parties.
It is appropriate the wife receive the monies in the trust account (item 4) and 100 per cent of the husband’s superannuation (item 9). This will minimise the lump sum payment the husband has to make to the wife. The husband’s superannuation is relatively small in comparison to his earning capacity, and I find the husband will be able to regenerate his superannuation in the future.
The husband will be given an opportunity to pay to the wife the sum of $76,108 over a period of 20 months. If he does not take advantage of that repayment schedule then by way of default, an order will be made that the husband transfer to the wife a portion of his one-quarter share as tenant in common in the property known as R Street, B suburb (certificate of title…552). The value of that share is currently $140,000. The percentage of the husband’s interests that he will transfer to the wife will be A/140,000 where A is the balance outstanding under Order 3 at the expiration of 20 months from the date of the orders (including any accrued interest).
The wife sought an order to wind up Malevitis Pty Ltd. She has deposed that she does not intend to continue operating under that company. I do not intend to make orders to wind up the company. The husband should transfer any interest he has in the company, and the D Health Services business to the wife. Whether the company is wound up is a matter for the wife.
I certify that the preceding one hundred & thirty two (132) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 19 November 2012.
Associate:
Date: 19.11.2012
SCHEDULE 1 – ORDERS SOUGHT BY THE WIFE
[Malevitis] Pty Ltd
That within seven (7) days or upon a timeframe specified by the company accountant, the husband and wife do all acts and sign all things necessary to wind up the company [Malevitis] Pty Ltd and each party will be equally responsible for any taxation consequences in winding up the said company and any taxation liabilities outstanding in the company name.
Each party will be equally responsible for any accountant’s fees incurred in winding up the said company.
[D Health Services]
That within seven (7) days of the date of these Orders or upon a timeframe specified by the business accountant, the husband and wife do all acts and sign all things necessary so as to cause the husband to transfer any interest in the said business to the wife and permit the wife to carry on business in the name of [D Health Services].
Vehicles
Prior to the company [Malevitis] Pty Ltd being wound up, the husband and wife will sign all such necessary documents and do all such necessary things so as to transfer to the wife the … Honda vehicle to enable the vehicle to be registered in the sole name of the wife. The wife will retain the … Honda vehicle for her sole use and benefit and will indemnify the husband in relation to any debt associated with the said vehicle.
That the husband shall do all acts and things necessary to refinance the debt to the National Australia Bank with respect to the Toyota vehicle and will secure a release from the National Australia Bank for the wife with respect to any debt associated with the said vehicle.
That the husband be solely responsible for the debt with M Finance by [D Health Services] of $20,000 and such debt being incurred by the business for renovations and repair of the roof to [F suburb property].
That the husband and wife assume equally the debt to the wife’s parents in the sum of $13,000 which was used for renovations on the matrimonial home and to start up the business, [D Health Services].
That within seven (7) days of the date of this Order, the husband make payment of the sum of $6,500 into the wife’s parents [sic] nominated bank account to reduce his debt as set out in Order 7.
That the monies held in the trust account of Edwards Legal Services from the sale of [W Street, S Town] in the sum of $2,397.60 be paid to the wife.
Adjustment to wife
That the husband reimburse to the wife, $1,500, being one half of the cost with respect to rates and water usage for the property situated [H Street, F suburb], noting that the husband was in occupation of the home after separation and pending sale.
Superannuation
That the husband assign to the wife all his right title and interest in and to the wife’s superannuation funds with Suncorp and QSuper to the wife.
Husband’s Superannuation
That the Husband will transfer all his right, title and interest in and to his superannuation fund with Public State Superannuation Scheme also known as QSuper to the Wife.
That these Orders are binding on the Trustee of the Public State Superannuation Scheme also known as QSuper (“the Fund”).
That the operative date of these Orders be four (4) days after service of the Order on the Trustee.
That pursuant to section 90MT(1)(b) of the Family Law Act 1975 (“Act”), whenever a splittable payment becomes payable in respect of the husband’s interest in the Fund, the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using a specified percentage of 100 percent and that there be a corresponding reduction to the entitlement, the husband would have had in the Fund but for this Order.
That the trustee of the Fund do all such acts and things and sign all such documents as may be necessary to:
(a)Calculate, in accordance with the requirements of the Family Law Act 1975, the entitlement created in these Orders; and
(b)Pay the entitlement whenever a splittable payment becomes payable.
That any costs involved in the transfer, be borne solely by the husband.
That each party be at liberty to apply to the implementation of the Orders affecting the superannuation interest.
Until such time as the superannuation split to the wife pursuant to these Orders can be rolled over into a separate account for the wife, the husband shall direct and authorise the Trustee of the Fund to communicate with the wife and/or any person authorised by him in writing:
(a)To answer any reasonable enquiries as be made by her or on her behalf from time to time in relation to his entitlement in the Fund; and
(b)To provide to the wife and/or her authorised representative a copy of any notice of any application or request by the husband, which seeks release of the entitlement in the Fund insofar as that release effect the wife’s entitlement in the Fund pursuant to these Orders.
That the husband is restrained from requesting the trustee of the Fund, in accordance with Regulation 7A.06(2) of the Superannuation (Industry) Supervision Regulations 1994 to roll over or transfer the transferrable benefits to another superannuation fund.
The husband by himself, his servants and/or agents be and hereby are restrained from doing any acts or things which will prevent the wife, her heirs, executors, administrators or nominees from receiving the benefit in the Fund to which she is entitled pursuant to these Orders.
Sale proceeds of [H Street F suburb]
That the husband pay to the wife the sum of $56,682.88 being the net sale proceeds from the [H street] property, which was applied towards the [S Town] property.
Husband’s Father’s Estate
That the Court determine what adjustment, if any, should be made to the wife with respect to the property retained by the husband from his late father’s estate and being a financial resource to the husband.
General
Unless otherwise specified in these Orders, an except for the purpose of enforcing the payment of any monies due under these or subsequent Orders:
(a)Each party be solely entitled to the exclusion of the other to all property (including choses in action) in the possession of such party as at this date;
(b)Monies standing to the credit of the parties in any bank account is to become the property of the person so named as the owner of the bank account; and
(c)Each party be solely liable for and indemnify the other against any liability in their own names.
Registrar be appointed
That if either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to give effect to the terms of these Orders, the Registrar of the Townsville Registry, at the Family Court of Australia is hereby appointed pursuant to provisions of s 106A of Family Law Act 1975 to execute such documents on behalf of such party.
Costs
That the husband pay my costs of and incidental to this application.
Any further Order as the Court deems just.
Notation
The business has a loan to the wife’s parents in the sum of $20,000, which sum has been used to allow the business to continue operating since separation, for which the wife will be solely liable for.
The parties intend that pursuant to the terms of Section 81 of the Family Law Act 1975 these Orders shall as far as practicable, finally determine the financial relationship between them and avoid further proceedings between them.
SCHEDULE 2 – ORDERS SOUGHT BY THE HUSBAND
Superannuation – That the husband transfer 30% of his interest to the Wife.
Vehicles – That the husband assume the debt for the Toyota.
Adjustment to the Husband – That the Wife reimburse the husband $50,000.00 with respect to lost, unpaid earnings and wages for work conducted at [D Health Services] by the Husband, for loss of goodwill in the business and loss of capital assets.
Costs – That each party pay their own costs of and incidental to the Application.
SCHEDULE 3 – LIST OF DOCUMENTS RELIED UPON
The applicant wife relies on the following:
Additional Further Amended Initiating Application filed 30 March 2012
Further Amended Initiating Application filed 22 October 2010
Wife’s updated affidavit filed 30 March 2012
Wife’s affidavit filed 22 October 2010
Wife’s affidavit filed 4 May 2010
Wife’s financial statement filed 30 March 2012
Wife’s financial statement filed 22 October 2010
Affidavit of Mr J sworn 30 March 2012
Affidavit of Ms B sworn 10 April 2012
Affidavit of filed 16 August 2011
Affidavit of Mr O filed 11 march 2011
Affidavit of Mr E filed 11 March 2011
Affidavit of Mr filed 26 August 2011
The respondent husband relies on the following:
Response to an Application in a Case filed 8 February 2011
Further Amended Response to Initiating Application filed 31 May 2011
Amended Response to Initiating Application filed 13 June 2012
Response to an Application in a Case filed 8 February 2011
Husband’s affidavit filed 8 February 2011
Husband’s affidavit sworn 31 May 2011
Husband’s affidavit filed 16 June 2011
Husband’s affidavit filed 11 May 2012
Husband’s affidavit filed 13 June 2012
Husband’s financial statement sworn 25 May 2012
Husband’s financial statement filed 8 February 2011
Husband’s financial questionnaire filed 16 February 2011
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Remedies
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Costs
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Injunction
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Statutory Construction
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Appeal
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Jurisdiction
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