Milford & Milford (No.2)
[2008] FMCAfam 1239
•21 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MILFORD & MILFORD (No.2) | [2008] FMCAfam 1239 |
| FAMILY LAW – Property settlement proceedings – effect of earlier agreement between the parties carried into effect – 20 year marriage – three children – asset by asset approach adopted. PRACTICE AND PROCEDURE – Contempt of court orders – failure to comply with five orders to attend conciliation conferences and to make disclosure – fine of $5,000 imposed. |
| Family Law Act 1975, ss.43, 75, 79, 81, 117 Federal Magistrates Court Rules; r.19.02(6) |
| Hickey & Hickey (2003) FLC 93-143 Mallett v Mallett (1984) 156 CLR 605 Norbis v Norbis (1986) 161 CLR 513 Pearce & Pearce (1999) FLC 92-844 In the Marriage of Ferraro (1993) FLC 92-335 DW and GT (2005) FLC 93-217 Penfold v Penfold (1980) 144 CLR 311 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 |
| Applicant: | MS MILFORD |
| Respondent: | MR MILFORD |
| File Number: | BRC 2798 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 6 February 2008 |
| Date of Last Submission: | 27 February 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 21 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Blond |
| Solicitors for the Applicant: | McCarthy Durie Ryan Neil |
| Counsel for the Respondent: | Mr Maddox |
| Solicitors for the Respondent: | J R Lawyers |
ORDERS
The husband pay to the wife, within 28 days of the date of these orders, the sum of $48,878.50.
That pursuant to s.90MT(1) Family Law Act 1975, whenever a splittable payment becomes payable in respect of Mr Milford’s Navigator Retirement Plan [5], Ms Milford is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001, using a base amount of $142,500.00 and there is a corresponding reduction in the entitlement of Mr Milford.
That the order sought in paragraph (2) hereof have effect from the operative time.
That the operative time be thirty (30) days from the date hereof.
That there be liberty to apply to each party and the Trustee in relation to the implementation of the orders affecting the Superannuation interest.
The husband pay to the Collector of Public Monies at the Family Court of Australia at Brisbane, within 28 days of the date hereof, the sum of $5,000 by way of a fine for his contempt of court orders made on
27 July 2006, 25 September 2006 and 31 May 2007.
The husband pay the wife’s costs of and incidental to the application for contempt filed 31 January 2008 to be taxed on the indemnity basis, pursuant to Chapter 19 of the Family Law Rules 2004.
The costs ordered to be paid by the husband on 13 August 2007 be taxed and paid on the indemnity basis, pursuant to Chapter 19 of the Family Law Rules 2004.
IT IS NOTED that publication of this judgment under the pseudonym Milford & Milford is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 2798 of 2007
| MS MILFORD |
Applicant
And
| MR MILFORD |
Respondent
REASONS FOR JUDGMENT
These are property settlement proceedings pursuant to s.79 Family Law Act1975 (“the Act”). This case highlights the difficulties that can occur when the parties to a marriage make an informal agreement as to the division of their property at or shortly after the time of separation, but take no steps to regularise that agreement in orders of the court. If they do not divorce until some years later, as in this case, the court is faced with adjusting property that in some cases did not exist at the date of separation, and in other cases has grown substantially in value, either with or without significant post separation contributions by one or other of the parties.
The court is also required to deal with an application that the husband is in contempt of orders of this court. I will deal with that matter after dealing with the substantive application for property settlement orders.
The parties married in December 1981 and separated on 19 December 2001. They divorced on 2 July 2005.
The applicant wife, who was born in 1959, is now 49 years of age and is a [occupation omitted]. The husband, who was born in 1958, is now 50 years of age, and is an [occupation omitted].
There are three children of the marriage:
a)[X], born in 1985;
b)[Y], born in 1989;
c)[Z], born in 1991.
All three children presently live with the wife. The wife lives at Cleveland, near Brisbane and the husband lives in Sydney.
By application filed 22 June 2006, the wife sought the following orders:
(1)That an account be taken of all the property which the parties have an interest either individually or jointly with any other person and thereafter an adjustment be made in order to ensure that the wife receives seventy-five per cent (75%) of the nett property available for distribution between the parties.
By amended initiating application filed 11 September 2007, the wife sought the following orders:
(1)That within thirty (30) days as from the date orders are made herein, the husband pay to the wife the sum of $234,500.00.
(2)
That pursuant to section 90MT(1) of the Family Law Act, whenever a splittable payment becomes payable in respect of
Mr Milford’s Navigator Retirement Plan [5], Ms Milford is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001, using a base amount of $214,593.00 and there is a corresponding reduction in the entitlement of Mr Milford.
(3)That the order sought in paragraph 2 hereof have effect from the operative time.
(4)That the operative time be thirty (30) days from the date final orders are made herein.
(5)That there be liberty to apply to each party and the Trustee in relation to the implementation of the orders affecting the Superannuation interest.
(6)Each party otherwise retain all such assets in their possession or under their control, including the benefit of any financial resources in which that party has an interest.
(7)Each party indemnify the other against any liabilities relating to an item of property or financial resource which that party is to retain.
The orders sought by the wife at the commencement of the final hearing were as follows (exhibit 1):
(1)That the wife be declared to be the sole owner and retain absolutely her interest in the following:-
(a)House situate Property C E$390,000.00
(b)ANZ Bank account
·Cheque account E$ 6,000.00
·Savings account E$ 24.00
(c)51 TAB shares E$ 240.00
(d)1990 Toyota Corolla motor vehicle E$ 2,000.00
(e)2000 Hyundai Accent motor vehicle E$ 4,000.00
(f)Household contents including computers $ 5,000.00
(g)QSuper policy $ 85,093.00
(h)Catholic Superannuation Retirement Fund $ 255.00
(i)ING super $ 16.11
(2)That the wife indemnify the husband in relation to the following liabilities:-
(a)ANZ Mortgage $127,000.00
(b)ANZ Credit card – outstanding balance $ 1,060.00
(3)That the husband be declared to be the sole owner and retain absolutely his interest in the following:-
(a)Wealthtrac Portfolio Service $ 77,750.00
(b)Proceeds of sale of Rinker Shares $ 66,273.00
(c)OMIP 140 Plus (10,000 shares) $ 13,071.00
(d)[C] shares $ 10,680.00
(e)Macquarie fixed interest fund $168,741.00
(f)Credit Union account $ 59,666.00
(g)1998 VT Commodore station wagon $ 5,000.00
(h)Navigator superannuation $477,186.00
(i)[A] – 3 woodlots
(j)[P] – 2 grapevine units
(k)[W] – 5 woodlots
(l)[G] – 4 woodlots
(m)[G] – 5 woodlots
(n)[G] – 9 woodlots
(o)[G] – 3 droves cattle
(p)[T] – 1 sandalwood lot
(4)That the husband indemnify the wife in relation to the following liabilities:-
(a)St George Navigator loan $ 36,405.00
(b)Loan on cattle droves investment $ 15,000.00
(c)Loan on Sandalwood lot investment $ 27,809.00
(d)Any other liability standing in the husband’s sole name.
(5)(a) That within thirty (30) days as from the date orders are made herein, the husband pay to the wife the sum of $234,500.00.
(b)That pursuant to section 90MT(1) of the Family Law Act, whenever a splittable payment becomes payable in respect of Mr Milford’s Navigator Retirement Plan [5], Ms Milford is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001, using a base amount of $214,593.00 and there is a corresponding reduction in the entitlement of Mr Milford.
(c)That the order sought in paragraph 5(b) hereof have effect from the operative time.
(d)That the operative time be thirty (30) days from the date final orders are made herein.
(e)That there be liberty to apply to each party and the Trustee in relation to the implementation of the orders affecting the Superannuation interest.
By his response filed 17 August 2007, the husband seeks the following orders:
(1)That the parties each be declared to be the sole owner to the exclusion of the other of their respective property, investments and the like presently in their name.
(2)That the informal property settlement between the parties in 2001 be declared as the final property settlement of all financial matters between the parties.
In Hickey & Hickey (2003) FLC 93-143 at [39] the Full Court of the Family Court of Australia stated:
“The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79 (4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79 (4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determine and resolve what order is just and equitable in all the circumstances of the case.”
In Mallett v Mallett (1984) 156 CLR 605, the High Court made it clear that s.79(1) and (2) of the Act confer on the Court a very wide discretion to make such order as thought fit, when satisfied that it is just and equitable to do so. Gibbs CJ, at 608, observed that there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account. His Honour identified the principles as the need to achieve finality (s.81 of the Act) and that the parties to a marriage are equal in status. However, the Court expressly eschewed any presumption of an equal division of property, or that it should be the normal starting point for the exercise of the court’s discretion (Gibbs CJ at 610, Mason J at 625, Wilson J at 636, Deane J at 640-1, Dawson J at 648).
In Norbis v Norbis (1986) 161 CLR 513, the High Court reiterated that although s.79 of the Act confers a very wide discretion on the court, that discretion is not unlimited. Its exercise is conditioned on a number of matters: that the order is just and equitable (s.79(2)); that the matters specified in s.79(4) are taken into account; and the general principles embodied in ss.43 and 81 (see Mason J at 521). In Norbis the Court was primarily dealing with the argument as to whether an asset by asset approach or a global approach was appropriate to the determination of contributions. Not surprisingly, the Court concluded that no fixed rule could be applied. However, at 523 Mason J observed that “there is much to be said for the view that in most cases the global approach is the more convenient” (see also Wilson and Dawson JJ at 530-532).
In this case, counsel for both parties submitted that an asset by asset approach should be adopted, particularly having regard to what has occurred since separation.
There was a large measure of agreement as to the assets, liabilities and financial resources of the parties as at the date of the final hearing. I find on the evidence available that they comprised:
a)The house and land at Property C worth $390,000;
b)The wife’s ANZ bank accounts with a balance of $6,024;
c)The wife’s 51 TAB shares with a value of $240;
d)The wife’s Toyota Corolla motor vehicle worth $2,000;
e)The wife’s Hyundai motor vehicle worth $4,000;
f)The wife’s household contents worth $5,000;
g)The wife’s superannuation with Go Super worth $85,093;
h)The wife’s superannuation with Catholic Superannuation Retirement Fund worth $255;
i)The wife’s ING superannuation worth $16.11;
j)The mortgage liability secured against the Cleveland property of $127,000;
k)The wife’s credit card liability of $1,060;
l)The husband’s Wealthtrac Portfolio Service valued at $76,591.24;
m)The husband’s Rinker shares sold for $66,273;
n)The husband’s OMIP 140 Plus investment worth $13,525;
o)The husband’s 3000 [C] shares worth $8,490;
p)The husband’s Macquarie fixed interest investment worth $171,895;
q)The husband’s credit union account with a balance of $41,024.65;
r)The husband’s motor vehicle worth $5,000;
s)The husband’s Navigator superannuation fund worth $423,137.01;
t)The husband’s investment in [A] (3 woodlots);
u)The husband’s investment in [P] (2 grapevines);
v)The husband’s investment in [W] (5 woodlots);
w)The husband’s investment in [G](21 woodlots);
x)The husband’s investment in [G] (3 cattle droves);
y)The husband’s investment in [T] (three Sandalwood lots);
z)The husband’s investment in [G] (2 olive grove lots)
aa)The husband’s investment in [G] (4 high value timber woodlots)
bb)The husband’s loan with St George Bank (for margin lending) $40,503.23;
cc)The husband’s loan owed to [T];
dd)The husband’s loan owed to [G] on woodlots;
ee)The husband’s loan owed to [G] on high value timber woodlot;
ff)The husband’s credit card liability of $5,404.
I accept that the wife and her legal advisers have had considerable difficulty extracting from the husband details of his assets and liabilities, particularly of the myriad of managed investment schemes in which he is involved.
I have deliberately not ascribed a value to the various investments set out above, nor as to any liabilities associated with them, as there was no evidence at the final hearing as to whether they had any, and if so what, value. There was a debate as to whether they should be treated as an asset or a financial resource. I will set out what the evidence discloses about each of the investments.
The investment in [A] was the only one made prior to separation. Documents produced by Mr B, the husband’s financial adviser states that on 26 June 1999 the husband purchased three woodlots for $23,250. The investment is due to mature in 2010. Mr B’s schedule notes “No value under ATO ruling”. There was no evidence about what this means. Mr B was not called to give evidence. There is not said to be any loan associated with this investment.
In 2001 when the parties made their informal settlement agreement, that I will refer to in due course, the wife ascribed a value of $30,000 to this investment. There was no basis for this value. There is no evidence as to what, if any sum will be derived by the husband when the investment matures in 2010. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased 2 grapevine lots in the [P] Project 2 on 23 June 2002, according to Mr B’s schedules taken in conjunction with the husband’s most recent affidavit. No details are disclosed of the subscription amount. Mr B’s schedule contains the notation “Wound up – no value”. This was not explored in evidence. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased five woodlots in the [W] Project on
10 February 2003. The husband paid $17,500 for this investment. There is no evidence of any liability associated with this investment. It is said to mature in 2028. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The most substantial investment made by the husband has been in the [G] timber projects. He has exhibited to his recent affidavit a prospectus relating to one of these projects. He purchased four woodlots on 30 June 2004 for $12,000. The investment is said to mature in 2015. Although Mr B’s schedule contains the notation “financed”, there is no evidence of the amount of any loan associated with this investment. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased a further five woodlots on 8 March 2005 for $15,000. The investment is said to mature in 2016. Again, there is no evidence of any loan associated with this investment. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased a further nine woodlots on 30 June 2005 for $27,000. The investment is said to mature in 2016. Again, there is no evidence of any loan associated with this investment. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased a further three woodlots on 30 March 2007 for $9,000. Mr B’s schedule indicates that the finance for this investment was twelve months interest free. The husband says that as at
31 December 2007$4,500 was still owed on this loan. I assume that loan has now been repaid. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased three cattle droves on 12 June 2006 for $15,000. This investment is said to mature in 2014. There is no evidence of any outstanding loan in respect of this investment. It is not possible for me to ascribe any value to this investment on the evidence put before me.
On 13 June 2007 the husband purchased two olive grove lots in a [G] project. Mr B’s schedule does not say when the project will mature. He says there is a loan of $11,500 that is interest free for twelve months. The husband’s schedule says that as at 31 December 2007 the loan balance was $5,749.98. I assume that the loan has now been repaid. It is not possible for me to ascribe any value to this investment on the evidence put before me.
On 27 June 2007 the husband purchased one lot in a high value timber project with [G]. It is said to mature in 2027. Mr B’s schedule says the amount owed is $12,500. The husband’s schedule says that as at
31 December 2007$6,250.02 was owed. I assume that by now the loan has been repaid. It is not possible for me to ascribe any value to this investment on the evidence put before me.
On 10 October 2007 the husband purchased a further three lots in the high value timber project. This cost $37,500. Mr B’s schedule says that finance commenced in July 2008. This investment was 12 months interest free. There is no evidence of the amount of the loan, nor when the investment matures. It is not possible for me to ascribe any value to this investment on the evidence put before me.
On 7 June 2006 the husband purchased one lot in the [T] Sandalwood Project. It matures in 2031. It cost $35,750. Mr B’s schedule says there is a loan of $28,600. The husband has exhibited to his affidavit a loan document with Arwon Finance Pty Ltd pertaining to this investment. It contains a loan schedule showing that at 1 December 2008 the amount owing will be 16,571.91, and that the loan will, if all payments are made when due, be repaid on 1 August 2011. It is not possible for me to ascribe any value to this investment on the evidence put before me.
The husband purchased a further two woodlots in the [T] Sandalwood Project for $24,200. Documents exhibited to the husband’s affidavit demonstrate that the loan associated with this has now been fully repaid. It is not possible for me to ascribe any value to this investment on the evidence put before me.
It can be seen that the husband has invested a considerable amount of money, and has incurred significant liabilities pursuant to loan agreements, in respect of these various managed investment scheme products. The husband is an [occupation omitted] by occupation. He has been financially advised by Mr B in respect of the investments. Common sense dictates that the husband would not have made the investments unless he had the expectation of deriving a financial benefit from them. That could come in at least one of two ways. First, when the investment was made, the husband may have been entitled to a tax deduction that would have resulted in him receiving a refund from PAYG tax deducted from his salary income. Secondly, the husband may expect to receive a return when each investment matures, equal to or greater than his financial expenditure.
As to the first of those possibilities, the husband’s evidence is particularly curious. He frankly admitted that he had not lodged a taxation return for many years. I will return to the consequences of that in due course. However, for present purposes, the husband cannot be said to have derived a financial benefit from making each of the investments by way of a taxation deduction.
As to the second of the possibilities, many of the investments do not mature for many years. The amount to be derived from the investment is unknown. The husband said in his oral evidence, which I accept on this point, that the promoters of the managed investment schemes are prohibited by law from making any projections as to the likely return from any particular investment.
It is therefore not possible to quantify the value of these investments. They cannot be included in the pool available for adjustment between the parties. They can, at best, be treated as a financial resource potentially available to the husband when each investment matures.
If an asset by asset approach is used, which I consider is appropriate in the circumstances of this case, it can be said that the husband acquired each of the investments, except for one, post separation and contributed entirely to them from his post separation income.
Sections 79(4)(a), (b) and (c) of the Act provide:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
…
The parties were together for twenty years. During that time they accumulated assets, and raised a family. They each contributed to that in different ways.
The wife gave evidence that, at the time they married, she had a motor vehicle. The wife says she had part time employment at a [workplace omitted] and undertook holiday jobs as a [occupation omitted]. The husband was employed as an [occupation omitted], and was also attending university part time to finish his studies. He had a motor vehicle borrowed from his parents.
In 1982 the parties purchased a property at Property N for approximately $62,000. This remained the matrimonial home until the parties relocated to Brisbane in May 1992. The husband contributed his savings of approximately $20,000 towards the acquisition of the property and the balance funds were borrowed.
The husband argues that by this initial financial contribution he enabled the parties to start on the journey of accumulating their wealth, and should be given credit for that. The husband contributed almost one third of the purchase price of the parties’ first home.
In considering the weight to be given to initial contributions, the Full Court said, in Pearce & Pearce (1999) FLC 92-844:
“31. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
33. In our opinion it is not so much a matter of erosion of contributions but a question of what weight is to be attached in all the circumstances to the initial contribution by a party with all other relevant contributions by both the husband and the wife. In considering the weight to be attached to the initial contribution in this case of the husband regard must be had to the use made by the parties of that contribution.”
In this case, the husband’s initial contribution has to be measured against the contributions that both parties made over the ensuing twenty years.
In that time, I do not think it can be seriously argued that the husband made a significantly greater financial contribution, and the wife made a significantly greater contribution in the homemaker role, although it must be recognised that the wife also worked outside the home for significant periods prior to separation.
In In the Marriage of Ferraro (1993) FLC 92-335 the Full Court highlighted the difficulty involved in evaluating and balancing fundamentally different activities. It also reinforced that the court’s task includes evaluating the significance of the various contributions, the weighting of which is ultimately a matter for the court. The Full Court said:
“The task of evaluating and comparing the parties’ respective contributions where one party has exclusively been the breadwinner and the other the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a “level playing field”. Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a home maker contribution is vulnerable to subjective value judgments as to what constitutes a competent home maker and parent and cannot be readily equated to the value of assets acquired. This leads to a tendency to undervalue the home maker role. However, there are cases where the performance of those roles has what may be described as “special features” about it either adding to or detracting from what may be described as the norm. For example, in relation to the home maker role the evidence may demonstrate the carrying out of responsibilities well beyond the norm as, for example, where the home maker has the responsibility for the home and children entirely or almost entirely without assistance from the other party for long periods or cases such as the care of a handicapped or special needs child. On the other hand, in the breadwinner role the facts may demonstrate an outstanding application of time and energy to producing income and the application of what some of the cases have referred to as “special skills”.
In 1983 the wife secured a permanent [occupation omitted] position. She resigned from her employment at the [workplace omitted]. I accept that the wife’s income was used to pay the parties’ weekly expenses, so that the husband’s income could be applied to the loan taken out to purchase the first matrimonial home.
In 1984 the wife says she commenced a [omitted] degree at [omitted] University. She continued [occupation omitted] until approximately one month prior to the birth of their first child. She then relinquished her [occupation omitted] position.
The wife says that [X] was a difficult baby who was diagnosed with gastric reflux. The substantial responsibility for his care fell onto her. The wife says, and I accept, that during the marriage the husband worked very hard, and for long hours. He is not to be overly criticised for that, but it carries a recognition that much of the homemaking duties and child rearing responsibilities fell onto the wife.
The parties paid off the mortgage on their home in 1986. The wife says she recommenced [occupation omitted] in the same year, on two days per week. Tragically, the wife’s second pregnancy ended in a still birth. So as to enable her to keep working the wife’s family assisted with the care of [X].
In 1988 the wife finished her [omitted] degree. During this year the husband underwent a knee reconstruction and was incapacitated for four or five months.
In May 1989 the wife secured a [occupation omitted] contract for two days a week, three months after the birth of the couple’s second child. She continued in this position until she fell pregnant with the couple’s third child. The wife says for the first 24 weeks of her pregnancy she was chronically ill.
In 1991 the couple purchased a parcel of land at [suburb omitted] for $140,000, according to the wife. The husband says it was at [different suburb omitted] and was purchased for $144,000. I do not think these minor discrepancies are necessary to be resolved. The parties intended to construct a house on the land.
The husband was offered a promotion that required the parties to transfer to Queensland. They did so in May 1992. I accept that the wife attended to most of the tasks associated with the move. She also took charge of co-ordinating an insurance claim that was necessitated by damage inflicted to the Property N house in a hailstorm.
When the parties moved to Queensland, the wife did not immediately return to employment.
The parties purchased land at [suburb omitted] for $168,000. They sold the property nine months later for the same price.
In June 1994 the parties sold their two properties in Sydney. Again, there is a small disagreement between the parties as to the price at which each of the properties was sold, but again it is not necessary to resolve that discrepancy for the purpose of my determining these proceedings. Both with the sale, as with the purchase of the Sydney properties I was not assisted by any documents that would have supported one party’s case over the other.
In June 1994 the parties purchased the property at Property T that became their matrimonial home for either $234,000 (according to the wife) or $245,000 (according to the husband). Again no documents were produced. The parties borrowed monies to acquire the property.
At paragraph 36 of her affidavit the wife says that at the time Queensland did not recognise her [occupation omitted] qualifications from New South Wales. Her degrees were in storage under the husband’s name. The wife says he refused to retrieve them for her. Eventually she had her qualifications recognised. She returned to the paid workforce in 1995. She then began, for the first time, to accumulate superannuation. She continued to work in a part time capacity. The wife says she took care of everything to do with the children and the house. The husband continued to work long hours.
In 1997 when [Z] started school the wife says that she was able to undertake more employment. The wife says she secured employment at [workplaces] in the area, including at [R]. The wife says that it was around the time that she commenced employment at [R] that the husband’s financial adviser suggested he make investments to alleviate tax. The wife says the husband refused to discuss these investments or loans with her.
The wife says that in 1999 the husband came home from work early and unexpectedly and asked her to sign documents to enable them to borrow a further $30,000 against the security of the matrimonial home. The husband said he was borrowing money to make investments. This turned out to be the [A] investment.
The wife says that she lost faith in the husband so far as financial matters were concerned and began to accumulate her own savings as a nest egg. She did not tell the husband she was doing so.
The wife deposes that in early 2001 the parties mutually agreed to separate. The matrimonial home was listed for sale, and until it sold the parties lived separately under the same roof. Physical separation occurred on 19 December 2001.
Prior to physical separation the wife had signed a contract to purchase the property that she currently lives in, at Property C. She had paid a deposit of $6,000. The wife had also accumulated an investment in the Howard Mortgage Trust of approximately $30,000.
On 3 December 2001 the wife’s solicitors wrote to the husband the letter that is exhibit “A” to the husband’s affidavit filed 20 August 2007. This letter was in the following terms:
“December 3, 2001
…
Dear Mr Milford
RE: MATRIMONIAL
I advise that I have been consulted by Ms Milford.
It is Ms Milford’s intention, if at all possible, to resolve matters of property with you as quickly and as amicably as possible.
I am instructed by Ms Milford that the following comprise the matrimonial assets:-
1. Former matrimonial home
Sale Price: $270,000.00
Less mortgage: $ 80,000.00
$190,000.00
Less remaining balance of loan for trees $ 17,000.00
$173,000.00
Less estimated real estate agent’s $ 10,000.00
commission and costs of sale
Equity $163,000.00
2. Gum tree investment $30,000.00
3. Life insurance payout (yet to be received) $10,000.00
4. Communication Investment (est) $10,000.00
5. Ms Milford’s savings $20,000.00
6. Motor vehicle in Ms Milford’s possession $10,000.00
7. ANZ Savings $ 8,000.00
8. Credit Union Savings $ 3,000.00
TOTAL NET ASSET POOL $254,000.00
In addition, I am instructed that there are the following financial resources available to you:-
1. Your Superannuation Policy estimated $250,000.00
2. Ms Milford’s combined Superannuation
Policies ($8,000.00 and $1,000.00 –
[omitted] ) $ 9,000.00
There are a number of matters which the Family Court takes into consideration when considering property settlement. Of particular relevance in your circumstances are Ms Milford’s continued care and responsibility for the boys, your considerable policy of superannuation and your large disposable income compared with Ms Milford’s income. Having regard to these factors, I have advised Ms Milford that I believe it is likely she would receive an award of assets in her favour of between 75% to 80%.
In the interests of achieving a speedy resolution of the matter, I advise that Ms Milford is prepared to accept a 75% - 25% division of the matrimonial assets in her favour. Each of you would keep without claim of the other your respective policies of superannuation.
75% of the available assets would generate a total entitlement to Ms Milford of $190,500.00. To be deducted from this of course are the saving that Ms Milford has in her possession together with the motor vehicle, a total of $30,000.00. Ms Milford would therefore receive from the net proceeds of the matrimonial home $160,500.00. In reality, under Ms Milford’s proposal, she will probably receive the entirety of the net proceeds of sale set out in accordance with page 1 herein.
I would appreciate a response within seven (7) days in order to confirm that you are giving this matter your attention. In the event that I do no receive any response on your behalf I will have no alternative but to seek my client’s instructions with a view to commencing proceedings. In this event, my advice to Ms Milford will be not to be bound by the percentages referred to herein.
In relation to the amount of child support, these are governed by the Child Support Agency and agreement between yourselves. My client wishes me to point out that she does feel you will be sensible and responsive to the boys’ needs.
As such proceedings will be instigated without further notice or warning to you, I would suggest that you give this matter your immediate attention.
Yours faithfully
Alison King
Solicitor”
The husband responded on 14 December 2001 in the following terms:
“December 14, 2001
…
Dear Ms King
RE: Your reference AMK:JN 211489 Matrimonial
Thank you for your letter dated December 3, 2001. I wish to advise that I also would like to resolve the matter quickly and amicably.
Although I do not agree with the values attributed to some of the assets listed in the net asset pool, I have agreed with Ms Milford that she receive the stated sum of $160,500.00 from the proceeds of the sale of our house. In addition, I believe that we will be able to agree on the amount of child support between ourselves.
As such, there would be no reason to commence proceedings against me, particularly without further notice.
Yours faithfully
Mr Milford”
By letter dated 21 December 2001 the wife’s solicitors said:
“December 21, 2001
…
Dear Mr Milford
RE: MATRIMONIAL
I thank you for attending at my office to authorise Ms Milford receiving the entire nett proceeds arising from the sale of property at Property T.
Ms Milford received a total amount of $162,166.15.
Rosemary Andrews of our office will be in contact with you shortly if she has not already done so to advise the settlement figures.
Upon the resumption of business in the New Year, I intend to finalise the agreement between yourself and Ms Milford by the preparation of a Form 12A Application Minutes of Consent Order. In order that I may prepare the Form 12A Application I will require certain details from you regarding your current financial circumstances. I enclose extract from the pro forma Form 12A which I require you to complete under the heading “Respondent”. Ms Milford is to do likewise under the heading “Applicant” and I have sent her a separate pro forma in this regard.
Please return the pro forma to my office early in the New Year so that the arrangement between yourself and Ms Milford can be finalised.
Yours faithfully
Alison King
Solicitor”
No consent orders were executed or filed.
The husband’s primary argument at the final hearing was that the informal agreement made in 2001 was a favourable one so far as the wife was concerned, and the parties should be left with the assets that they received as a result of it. Any further assets acquired from post separation contributions should, so the husband argues, be ignored.
The husband gave evidence (T46.12) that he understood what they did was a final settlement. In contrast, the wife gave evidence that she did not regard the settlement as finalised until it was recorded in a legal document (T15.20).
An agreement made between the parties to the marriage, to divide up matrimonial assets is not of course binding on this court. As Dickey, Family Law, 5th ed at 650 observes Australian and English Courts have consistently held that it is contrary to public policy to permit spouses to contract out of their statutory maintenance or property rights. Spouses accordingly cannot, without more, oust the power (jurisdiction) of the courts to determine their entitlement to maintenance or an alteration of property interests. Further, because it is contrary to public policy to permit spouses to contract out of their statutory maintenance or property rights, no agreement between spouses on these matters can ordinarily estop a spouse from invoking a court’s jurisdiction to claim such rights (citing Woodcock v Woodcock (1997) FLC 92-739).
Therefore, the division of assets effected by the parties by their agreement of December, 2001 (if there was in fact an agreement) is not such as to preclude either of them from seeking property settlement orders from the court. However, the court retains discretion as to whether to make property settlement orders and, as required by s.79(2) of the Act must consider whether such orders as are made are just and equitable. That to my mind requires the court to consider what the parties have already received, and what steps if any they have taken to their detriment as a result of the earlier division of assets. It is only when such matters are viewed, together with those mandated by s.79(4) of the Act, that the court can properly consider whether any further orders are necessary to effect a just and equitable division of property between the parties.
In DW and GT (2005) FLC 93-217 the Full Family Court held that where there has been an agreement made between the parties, there was no threshold test which required the court to first determine whether the earlier agreement was just and equitable. A trial judge is required to refer to the asset pool at the time of hearing and consider the contribution of both parties to that property, including post-separation contributions. The trial judge is also required to consider s.75(2) factors as at the date of the hearing. At paragraph [38] their Honours said:
“The earlier agreement should be considered (as an indication of what the parties may have regarded as just and equitable at the time), but its provisions only given effect if they coincide with an order which is just and equitable according to s. 79 at the time of the hearing.”
At [39] their Honours said:
“In determining s. 79 applications in circumstances where there has been an earlier agreement, it will often be necessary to consider what was the value of the parties’ assets at the time of the agreement, what their various contributions were to that time, and what might have been an appropriate s. 75(2) adjustment. A consideration of these matters might well be necessary in order to provide a background to the parties’ understanding of what was a just and equitable settlement at the time. However, and perhaps more significantly, it would generally be necessary for the Court to acquaint itself with changes in the composition and value of the property pool, so that post-separation contributions can be assessed.”
When one has regard to the wife’s solicitor’s letter of 3 December 2001, the following points can be made:
a)The proceeds of sale of the former matrimonial home received by the wife were $162,166.15; therefore, the estimate of the value of the equity in the property was remarkably accurate;
b)The value of the husband’s investment in [A] was not $30,000. The wife said this was the mount of the additional loan taken out by the husband to make the investment. However, the amount paid out when the property was sold was $17,000. That should be taken as a benefit received by the husband (otherwise he would have had to keep paying the loan from his after tax income);
c)The husband says that following separation he received $10,000 that was in the former joint bank account, and some months later he received the savings component of a life insurance policy of about $10,000. That seems to correlate with items 3 and 4 in the letter;
d)The husband’s superannuation was then probably close to $250,000. Exhibit 6 shows that as at 1 July 2003 the husband’s superannuation account was $255,498.02;
e)The law so far as superannuation is concerned has changed considerably since December 2001. Then, it could only be treated as a financial resource. Now it can be treated as an asset and be subject to a splitting order;
f)The wife admitted in her evidence that she did not disclose the deposit she had paid, or the investment that she had in the Howard Mortgage Trust;
g)The parties did not take into account any entitlements the husband may have had in his employment.
With the monies she received the wife purchased the property at Property C.
In my view, over such a long marriage, and having regard to their respective roles in the relationship, the parties’ contributions to the date of separation should be regarded as equal.
Sections 79(4)(d) to (g) of the Act provide:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
…
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The orders I propose will have no effect on either party’s earning capacity. The wife can continue to work as a [occupation omitted], and the husband as an [occupation omitted].
There are, so far as I am aware, no other orders made under the Act affecting the parties or their children.
There was evidence adduced as to the husband’s failure to pay child support as required during the period between separation and the final hearing. The wife alleges that at the time of final hearing the husband had a child support debt of $6,932. This is supported by a certificate from the Child Support Agency.
The husband is required, until [Z] turns 18, to continue to pay child support for him.
Both parties are apparently in good health. There was no evidence to the contrary.
Both parties have the capacity, both physical and mental, to work until retirement in their respective occupations.
The wife currently has the care of one child under the age of 18 years. She also cares for her other two sons who still live at home, although technically she has no legal obligation to do so.
The husband has no legal obligation to support any other person.
Both parties are able to support themselves on their current income or financial resources. Shortly before the final hearing, the husband was made redundant from his employment, on 7 January 2008. At the date of final hearing he was unemployed. He was supporting himself, and meeting the financial obligations that he had, particularly to the loans associated with the managed investment schemes, from his savings. He received a redundancy package from his employer.
The husband lives, rent free, in a property owned by his mother in Sydney and has done so since early 2005.
The wife speculated that the husband may potentially receive the property from his elderly mother, who is in a nursing home and suffers from dementia. There was, however, no evidence as to the husband’s mother’s state of health, her likely longevity, nor the terms of her will. The husband has two siblings. I do not include any benefit that the husband is likely to receive from his mother’s estate as a financial resource that he has.
There was no evidence that either party was in receipt of, or qualified for, a Commonwealth benefit or pension.
There is no financial agreement binding on the parties.
Neither party is cohabiting with another person.
The wife said she had an income of $67,000 per annum from [occupation omitted]. In her financial statement filed 9 January 2008 the wife discloses a net weekly income from [occupation omitted] at $925.
In his financial statement filed 20 August 2007 the husband discloses his net weekly income from his previous employment at $1373.
The husband gave evidence that on the termination from his previous employment it took him approximately six months to find further employment. I accept that it may take the husband some time to find further employment commensurate with his experience. However, I also accept that the husband, when he does find employment, will have an earning capacity significantly greater than that of the wife.
I turn then to the various assets and liabilities of the parties. The first is the property at Property C. It has a net present value of $263,000. The property was purchased using funds from the sale of the former matrimonial home. The wife would have had to borrow some $70,000 to facilitate the purchase. In fact she borrowed $138,000. The wife gave evidence that she placed monies in a mortgage offset account. She said that she borrowed additional funds so that she had money at her disposal if she needed it. I accept that the wife put the $30,000 she had invested into the property to pay for renovations including a swimming pool.
The wife has had to maintain the property for approximately seven years, pay the utilities and other expenses associated with the property and service the mortgage.
In my view, if it is accepted that each party was entitled to 50% of the property at the date of separation on a contributions based entitlement, the above matters to which I have referred should be reflected in an adjustment in the wife’s favour of 15%.
There is no evidence that the current balance of the wife’s bank account reflects other than savings she has made from post separation earnings. I accept that any savings that the wife may have had at the date of separation have been expensed in supporting herself and the children during the intervening period. Similarly, I accept that the husband’s credit union account reflects savings made by him since the date of separation.
The wife still has the Hyundai motor vehicle that she had at the date of separation. Each party should be entitled to 50% of the value of that vehicle. The wife’s other vehicle was acquired from her post separation earnings and should remain with her.
I accept that both parties contributed to the wife’s household contents which on a contributions based entitlement should be apportioned 50% to each party.
The wife’s superannuation is now worth $85,093 (plus two smaller policies with negligible value). At separation it was worth approximately $9,000. The bulk of the wife’s superannuation was accumulated due to her post separation contributions. There is no evidence that enables me to determine what the $9,000 component would now be worth but for those additional contributions. I think the fairest way to deal with superannuation is for any interest that the wife might have to the husband’s superannuation to be slightly adjusted downwards to reflect the small interest that the husband may have in the wife’s superannuation.
There is no evidence when the wife’s TAB shares were purchased.
I assume her credit card liability relates to post separation purchases, given that separation occurred almost seven years ago.
The husband’s Wealthtrac Portfolio Service was created on 11 June 2002, after separation. It seems to be associated with the St George Margin Loan. That is the husband borrows money to make investments. There is no evidence that the wife made any contribution to this investment.
Similarly, the husband purchased 10,000 shares in OM-IP 140 Plus (AUD) Limited on 4 June 2004. There is no evidence that the wife made any contribution to this investment.
The husband’s Macquarie Fixed Interest investment relates to the termination of the husband’s employment with [C]. The husband’s employment was finalised on 30 November 2004. He says that he received a gross amount of $180,699.52 (net in the vicinity of $150,000) which he then invested in the Macquarie Fixed Interest Fund. Mr B, in his letter of 22 November 2006 says that this money was put aside by the husband for the costs involved in providing nursing home accommodation for his mother. Unfortunately, no evidence was adduced as to what this cost was, nor as to the husband’s mother’s financial capacity to pay for it herself.
A letter exhibited to the husband’s affidavit from his former employer reveals that the sum referred to was comprised of:
a)Annual leave $59,478.87;
b)Long service leave $47,920.15; and
c)Ex gratia payment $73,300.50.
The husband has also provided a Separation Agreement, which at clause 2 provided:
“2.The Company has agreed to make to the Employee an ex-Gratia payment of $73,300.50 in addition to outstanding long service and annual leave at the Separation date less any amounts required to be withheld for taxation.
The Company will also (Strike out one of (a) or (b)):
(a)Provide the Employee with an Outplacement Program with Aubrey Page and AssociatesOR
(b) Make to the Employee an additional ex-Gratia payment of $24,433.50 less any amounts required to be withheld for taxation
The Company also has agreed to pay the Employee a Short Term Incentive (STI) Payment for the year ending March 31 2005, equal to 8/12 of the amount the Employee would have received under this scheme had he continued to be employed. This payment, less any amounts withheld for taxation will be paid at the same time as it would have been had The Employee remained employed by The Company at that time.”
It seems from this that the husband received two additional payments to which he has not referred – an additional ex gratia payment of $24,433.50 and a Short Term Incentive Payment details of which are not known.
The husband commenced working for [C] in 1986. He ceased working there in November 2004. It can be seen that the bulk of the time was during the parties’ marriage and before separation.
Whilst it is correct to submit, as the husband’s counsel did, that by its very nature an ex gratia payment is not made pursuant to any entitlement that the recipient has to it, nevertheless, one would expect some correlation between the amount of the ex gratia payment and the period of service of the recipient.
In my view, it is beyond argument that the wife should share in the payments made for unused annual leave and long service leave. She should in my view also share in the two ex gratia payments. The husband estimates that he received $150,000 net from the bulk payment of $180,699.52. I find that he would have received at least $15,000 after tax from the additional ex gratia payment to which I have referred. I consider these payments are reflected in the balance of the Macquarie Fixed Interest investment, particularly if the husband has been making withdrawals to pay for his mother’s nursing care. To give effect to a small amount of post separation contributions, I consider this asset should be apportioned between the parties as to the husband 55% and as to the wife 45%. This apportionment is arrived at by quantifying the husband’s employment during the marriage before separation (16 years/18years) and then dividing this amount equally between the parties.
The husband’s [C] shares were accumulated during his employment and should likewise be shared between the parties on the same apportionment.
The husband received Rinker shares from his employment, but these were sold, on an unspecified date post separation for $66,273. Extraordinarily, the husband gave evidence at the trial that he still had the cheque for this sum in his possession, and he had not banked it. There was some debate as to whether the cheque was stale. In my view, if it is that is the husband’s concern given his failure to promptly bank the cheque. The amount should be apportioned between the parties as were the other benefits of his employment.
There is no evidence as to when the husband’s motor vehicle was purchased, or his household contents. Given that the husband moved to Sydney in early 2005, I think it most likely that the assets were purchased then from post separation earnings. There is no evidence that the wife made any contributions to these assets.
The husband’s superannuation is now worth $423,137.01. As I have said it was worth in the order of $250,000 at the date of separation.
On the recent termination of his employment the husband was paid a redundancy entitlement of some $28,659.24. The wife made no contribution to that. He was also paid the sum of $30,000 to his superannuation fund.
The husband gave evidence that he made no contributions to superannuation from the date of separation, other than his employer’s contributions.
The evidence does not permit me to make precise calculations but I am satisfied that the superannuation held by the husband at the date of separation would be worth at least $300,000 at the date of final hearing. Having regard to the small adjustment to which I referred earlier having regard to the small superannuation entitlement held by the wife at the date of separation, I would apportion 47.5% of the value of $300,000 to the wife.
The parties are of similar age. There is no reason why a marked differentiation should be made between superannuation and non superannuation assets or that the adjustment between the parties should be weighted in a particular way.
I am satisfied, as I have previously concluded, that each of the managed investment scheme interests held by the husband constitutes a potential financial resource in his hands. They cannot however be quantified. All but one was acquired post separation, and it cannot be said that the wife made any contribution towards them. In my view the husband should take the benefit, and the associated risk, of these investments, with one exception. That relates to the loan paid out from the sale of the former matrimonial home. An adjustment in the wife’s favour needs to be made for that.
On a contributions basis, applied to the assets to which I have referred, the wife would be entitled to assets to the value of $294,945.60, being:
a)65% of net value of Property C property;
b)50% of the value of each of the Hyundai motor vehicle and her household contents;
c)45% of each of the Macquarie Fixed Interest investment, the [C] shares and the proceeds of sale of the Rinker shares;
d)50% of the amount of the loan paid out attributable to the [A] investment.
The wife would also be entitled to $142,500 of the husband’s superannuation.
The wife has the Property C property with a net value of $263,000, her motor vehicle (worth $4,000) and her contents (worth $5,000). These total $272,000. It can be seen that on a contributions basis a small adjustment should be made to the wife from the assets, other than superannuation.
Should any further adjustment be made for s.75(2) factors?
Since separation the wife has had the substantial care of the three children of the marriage. It is well established that contributions made to the welfare of the family include contributions made after the parties have separated (see Williams & Williams (1984) 9 Fam LR 789; FLC 91 – 541; Ferraro & Ferraro (supra)).
For at least part of this time, the wife did so with no financial contribution from the husband. In 2003 the wife successfully applied for a [occupation omitted] exchange to Canada for twelve months. The wife took the two younger children. The oldest child, [X], was looked after by friends. The husband accepts that he paid no child support between November 2003 and 2006. The wife accepts that the husband is now paying what he is legally obliged to pay by way of child support.
The husband says that he has provided financial assistance, in the amount of $14,000 towards motor vehicles for the two older boys. The wife accepted in cross examination that he has also contributed to the children’s education expenses.
The children excelled at sport. This was expensive for the mother. One child achieved national representation in volleyball. This required travel expenses for training and tournaments. The wife says she also paid for all of the children’s birthday parties, school formal costs, driving lessons and orthodontic work, although no particulars are given of the amounts expended. The wife says that her post separation earnings were applied to the maintenance of the family home and enabled her to take the children on holidays, including an overseas holiday. By contrast the husband did not have these expenses.
A further matter needs to be addressed. It seems that throughout the marriage neither party submitted a tax return.
At paragraph 80 of her affidavit the wife says:
“In 2005 I regularised my outstanding Tax Returns. Although I became aware during the marriage that Mr Milford had not, contrary to his assurances, submitted tax returns for either of us, I had relied upon Mr Milford’s continued assurances that this would be done. I subsequently discovered that Mr Milford had placed my documents with a tax accountant, who had applied for an amnesty for those who had not completed Tax Returns . . . It was at this time that I discovered that Mr Milford had not submitted any of my Tax Returns since 1982, even though he told me everything had been taken care of. To the best of my knowledge and belief Mr Milford has not submitted any Taxation Returns personally since 1982”
The wife has produced notices of assessment to show that her taxation liabilities are up to date.
By contrast the husband has not filed any tax returns. That is in clear breach of the relevant taxation administration legislation. What I find curious is that the husband by failing to lodge tax returns seems to have deprived himself (and indirectly the wife) of refunds consequent upon the tax effective managed investment schemes in which he has participated. However, in the absence of details of the husband’s income, and particulars of the deductions that could have been claimed I am unable to quantify the amount involved. I am therefore not in a position to assess the amount of money which the husband deprived the household of by his failure to submit tax returns. At paragraph 41 of his affidavit the husband says:
“I have not prepared or filed taxation returns for many years. I have not produced my group certificates for the last three years . . . “
See also the husband’s evidence at T57.30.
The husband has a greater earning capacity than the wife. The adjustment in the wife’s favour would have been greater if the husband had been in full time employment at the date of the final hearing. He was not. This highlights a vicissitude in the husband’s earning capacity. He has been made redundant twice since 2004.
In my view this means that a 25% adjustment in the wife’s favour, as the parties agreed to in late 2001 is inappropriate. The wife herself gave evidence that she thought such a settlement was favourable to her. It did not of course include any adjustment of the husband’s superannuation, in respect of which I propose to make a splitting order.
In my view a small further adjustment in favour of the wife is called for. She is in secure employment. The children have almost all achieved their majority. An adjustment of 5% relating to the assets that can be seen to be jointly contributed to is in my view appropriate. That is quantified at a further adjustment in the wife’s favour of $25,932.90.
Taken together with the contributions based adjustment would require a payment to the wife of $48,878.50, in addition to the superannuation splitting order.
I should add that I am cognisant of the possibility that the husband has a small additional sum in an ANZ bank account, but consider that it most likely represents post separation savings. I am also cognisant that the wife says that she has borrowed monies from her parents to assist in the prosecution of these proceedings. I do not propose to make any adjustments for these matters.
Are the orders I propose just and equitable? The wife will retain the property she purchased, and receive a modest sum from the husband’s investments to which she made an indirect contribution during the marriage, particularly the termination payment from [C]. The wife will also receive a splitting order in respect of the husband’s superannuation to reflect her indirect contribution to the accumulation of the husband’s superannuation until separation. The husband will retain his various managed investments, and the bulk of his liquid assets, from which he can make the payment to the wife. Both parties will, I am satisfied be hereafter able to support themselves to a suitable standard, having regard to the lifestyle they previously enjoyed whilst married. I consider the orders are just and equitable.
There is no need to make the declarations that the wife seeks. There is no longer any property or liabilities in joint names. Each party will retain assets or liabilities in their respective names.
It is now necessary to deal with the allegations that the husband is in contempt of orders of the court.
By application filed 31 January 2008 the wife specified the five alleged instances of contempt:
Date
Time
Place
25/09/2006
2.00pm
Commonwealth Law Courts Family Court of Australia at Brisbane Qld
Statement of the alleged contempt
Husband failed to attend Case Assessment Conference appointed by the Court.
Date
Time
Place
09/10/2006
4.30pm
Commonwealth Law Courts Family Court of Australia at Brisbane Qld
Statement of the alleged contempt
Husband failed to file and serve a Response to Final Orders and Financial Statement as directed by the Court.
Date
Time
Place
14/06/2007
4.30pm
Commonwealth Law Courts Family Court of Australia at Brisbane Qld
Statement of the alleged contempt
Husband failed to make, file and serve a Response setting out with particularity the Orders sought by him, together with a supporting affidavit and Financial Statement as ordered by Federal Magistrate Wilson on 31 May 2007.
Date
Time
Place
13/08/2007
2.00pm
Commonwealth Law Courts Family Court of Australia at Brisbane Qld
Statement of the alleged contempt
Husband failed to attend Conciliation Conference (initially fixed for 18 July 2007) or to provide Response or Financial Statement to enable the Conciliation Conference to proceed in a meaningful manner.
Date
Time
Place
28/06/2007
4.30pm
Commonwealth Law Courts Family Court of Australia at Brisbane Qld
Statement of the alleged contempt
Husband failed to make, file and serve a List of Documents as ordered by Federal Magistrate Wilson on 31 May 2007.
In my reasons delivered on 29 January 2008 I explained why the breaches of court orders complained of by the wife should be dealt with on an application for contempt.
At the conclusion of the final hearing I put the allegations to the husband pursuant to Rule 19.02(6) Federal Magistrates Court Rules. The husband admitted each of the allegations:
a)At T79.4 he admitted that on 25 September 2006 he failed to attend a case assessment conference that had been ordered by the court on 27 July 2006;
b)At T79.10 he admitted that by 9 October 2006 he failed to file and serve a response and financial statement as directed by orders of the court made on 25 September 2006;
c)At T79.17 he admitted that by 14 June 2007 he failed to make file and serve a response setting out with particularity the orders sought together with a supporting affidavit or financial statement as ordered on 31 May 2007;
d)At T79.24 he admitted that he failed to attend a conciliation conference on 13 August 2007 at 2pm or to provide a response or financial statement by 4 June 2007, as ordered on 31 May 2007;
e)At T79.30 he admitted that he failed to make, file and serve a list of documents by 28 June 2007 as ordered on 31 May 2007.
I take into account the husband’s pleas of guilty in my determination of penalty. Such pleas have saved court resources and further expense on the wife’s behalf.
I also take into account that the husband has, in an affidavit filed by him, apologised to the court for his conduct. He has also purged part of his contempt by filing a response, affidavit and financial statement. I dispensed with the holding of a further conciliation conference given the husband’s failure to attend three conferences.
I also take into account that on 13 August 2007 I made an order for costs against the husband by which he was ordered to pay:
“the applicant’s costs thrown away by reason of non-compliance with previous directions including attendance at the case assessment conference on 25 September 2006 and attendance at the conciliation conferences on 14 February 2007 and 13 August 2007.”
By email dated 12 March 2008 (a copy of which was sent to the husband’s solicitors) the wife’s solicitors sought clarification as to whether such costs were ordered to be paid on the indemnity basis. They were not so ordered. Unless specified costs are usually awarded on a party and party basis.
Section 117(1) of the Act provides:
(1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AB, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
Sections 117(2) and (2A) of the Act provide:
(2) If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a) the financial circumstances of each of the parties to the proceedings;
(b) whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c) the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d) whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e) whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f) whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g) such other matters as the court considers relevant.
As the authors of Australian Family Law & Practice, Brown & Fowler, at [61-100] observe:
“In the absence of there being, in a particular case, circumstances that justify the court in making an order for costs, then s. 117 (1) provides that each party bears his or her own costs of the proceedings under the Act. As noted by the Full Court in Collins and Collins (1985) FLC 91-603, s 117 “negates any principle that costs should follow the event or that the husband should bear the costs of the wife in matrimonial proceedings” (at p 79,877).”
The interrelationship of ss.117(1) and (2) was considered by the High Court of Australia in Penfold v Penfold (1980) 144 CLR 311. There the majority justices in a joint judgment construed s.117(1) as being subject to s.117(2) and that the former must yield to the latter whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs. Their Honours continued, at 315:
“Subsection (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order. Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. Consequently, with respect to their Honours in the Family Court, we do not agree with the suggestion made in the judgment under appeal that an order can only be made under s. 117(2) in a “clear case”.
The discretion of the Court must be exercised having regard to the matters set out in s.117(2A). The weight to be given to a particular consideration under s.117(2A) is a matter for the discretion of the court.
Having regard to the considerations in s.117(2A) I made the order for costs on 13 August 2007. The wife seeks that the husband pays her costs on an indemnity basis.
As Brown & Fowler, supra, observe at [61-420] the ordinary rule is that, where the court orders the costs of one party be paid by another party, the order is for the payment of those costs on the party and party basis. The court “should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind” (citing Kohan and Kohan (1993) FLC 92-340 at p 79,614; Yunghanns v Yunghanns (2000) FLC 93-029 at pp 87,470-1).
The authority most often cited on an application for indemnity costs is that of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. Of course in that case the court was dealing with a forum in which the ordinary rule as to costs applied, namely that the successful party recovered their costs on a party and party basis. That is to be distinguished from family law proceedings, in which s.117(1) is applicable. That is, the court must be persuaded that circumstances exist which justify any order for costs at all. Neither counsel submitted that the principles discussed in Colgate-Palmolive were inapplicable in this jurisdiction, nor that the Full Court of the Family Court has decided that some different test should apply.
At paragraph [24] in Colgate-Palmolive Sheppard J said:
“24. It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:
1. The problem arises in adversary litigation, i.e. litigation as between parties at arm’s length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg. a government agency or statutory authority.
2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of Order 62, rules 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.
3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v. British Transport Commission and Handley JA in Cachia v. Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.
4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require.” Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.
5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motice (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1978) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will be different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.
6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.”
As Sheppard J pointed out at subparagraph 5 in the extract quoted, one of the types of case in which indemnity costs are usually awarded is against a contemnor. I propose to make such an order in this case, not only of the costs ordered to be paid on 13 August 2007, but of the application for contempt generally.
Returning to the matters of contempt, I take into account that there have been multiple breaches of Court orders by the husband. I also take into account that the breaches by the husband were of procedural orders, but related to important steps in the proceedings including disclosure and the holding of a conciliation conference.
The wife says, at paragraph 53 of her affidavit:
“In the course of the proceedings [the husband] has avoided service, failed to file material by specified dates, failed to provide disclosure as well as failed to appear at various Court events. [The husband], by his actions, has caused frustration to me, as well as for additional legal costs and delay. It has also been stressful having the proceedings on foot for an extended period of time . . .”
By order of a registrar of the Family Court on 27 July 2006 service of the initiating application was dispensed with.
During the course of the final hearing, and in supplementary submissions, much was made by the wife’s representatives of the husband’s inadequate disclosure in the proceedings. Documents were called for during cross examination of the husband that were not produced. At T56.45 the husband agreed that there had been an issue of disclosure and complying with court orders throughout the entire proceedings. He said that he found complying with court orders and disclosure difficult throughout the proceedings.
It was submitted on behalf of the husband that he failed to comply with the orders for three reasons:
a)Until late 2006 he was unrepresented;
b)He made a number of moves and a lot of his documents were in various places;
c)In the earlier parts of the proceedings he was in a state of disbelief that the wife brought the proceedings, and avoided addressing the issue.
Counsel for the husband did not submit that each incident of contempt should not be found proved. I so find. I find that the husband’s conduct in breaching each of the orders of the court constitutes an act of contempt.
In my view none of the reasons advanced amount to a sufficient reason why a penalty should not be imposed on the husband. Self represented litigants must obey orders of the court. There was nothing in the orders that was difficult to understand, and in any event the husband has not said that he did not understand his obligations.
Full and frank disclosure is a core responsibility particularly in property settlement proceedings. A conciliation conference is ordinarily ordered to enable parties to resolve their dispute without having to incur the additional costs and time involved in taking their dispute to a contested hearing. It is mandated by the Act. The husband’s repeated failure to attend such a conference demonstrates serious disregard for orders of the court. His contempt in this regard was not an isolated occasion.
It was submitted that the court retains a discretion whether to impose any penalty, which is undoubtedly correct. It was then submitted on behalf of the husband that there will be very little achieved by any penalty. I disagree. The court needs to mark its disapproval of repeated contemptuous behaviour and wilful disregard of its orders. The deterrent effect of a penalty must also be taken into account. It was conceded by the husband that he has the capacity to pay a fine. In my view a sentence of imprisonment is not justified at this stage.
I take into account each of the above matters, and the totality principles of sentencing where multiple occurrences of contempt are proved. In my view a fine of $5,000 is appropriate for all proved incidents of contempt.
Otherwise, there will be orders as set out at the commencement of these reasons.
Finally, I should deal with the husband’s repeated apparent breaches of the taxation legislation. As I have said, it is by no means certain that the husband has avoided any tax otherwise payable by him. Rather, it is likely that he has failed to recoup refunds otherwise due to him.
I have vacillated as to whether to refer this matter to the appropriate authorities. Although foreshadowed in his supplementary written submissions dated 23 February 2008, counsel for the husband has not further addressed this issue.
In the end, I do not think that the repeated failure to lodge tax returns for over twenty years can go uninvestigated. The papers will be referred to the appropriate authorities.
I certify that the preceding one hundred and seventy one (171) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 21 November 2008
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