Milley and Milley
[2011] FamCA 33
•24 January 2011
FAMILY COURT OF AUSTRALIA
| MILLEY & MILLEY | [2011] FamCA 33 |
| FAMILY LAW – PROPERTY – Add-backs in relation to each party seizing large sums of money at separation – Liabilities of the wife – Contributions and other factors |
| Family Law Act 1975 (Cth) s 75(2) |
| Kennon v Kennon (1997) FLC 92-757 Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Essex and Essex [2009] FamCAFC 236 Townsend v Townsend (1995) FLC 92-569 |
| APPLICANT: | Ms Milley |
| RESPONDENT: | Mr Milley |
| INDEPENDENT CHILDREN’S LAWYER: | Hamish Cumming Family Lawyers |
| FILE NUMBER: | SYC | 845 | of | 2008 |
| DATE DELIVERED: | 24 January 2011 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 13, 14, 15 & 16 December 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Cowen |
| SOLICITOR FOR THE APPLICANT: | H A Miedzinski |
| COUNSEL FOR THE RESPONDENT: | Mr Givney |
| SOLICITOR FOR THE RESPONDENT: | McGrath Dicembre & Company |
Orders
The husband shall pay to the wife the sum of $870,485 and such payment shall be made as follows:-
a.BY CONSENT the sum of $25,000.00 on or before 20 December 2010.
b.BY CONSENT the sum of $25,000.00 on or before 20 January 2011.
c.The balance on or before 20 April 2011.
d.From the sum payable to the wife, she shall pay such monies as may be outstanding by her for the Court experts, namely Dr R, and M Chartered Accountants.
In the event the husband fails to pay the specified sum on the specified date then interest shall accrue from the date of default until the date of payment, such interest to be calculated at the rate set under the Rules of Court.
Upon the whole of the payments being made in accordance with Order 1, together with interest if any, the wife shall transfer to the husband her interest in the following properties:-
a.B property
b.C property
c.K property
d.O property
e.L property.
The husband shall indemnify and keep indemnified the wife in respect of all mortgage payments, rates, taxes and all other outgoings in respect of B, C, K O and L properties and shall cause any personal covenants of the wife in respect of any mortgage in respect of such properties to be released on or before 20 April 2011.
The husband shall indemnify and keep indemnified the wife in respect of the Westpac Banking Corporation line of Credit and shall cause any personal covenants of the wife in respect of the line of credit and underlying mortgage to be released on or before 20 April 2011.
In the event the husband fails or neglects to pay the sums referred to in Order 1, and any accrued interest, by 20 April 2011, then the parties shall do all acts and things necessary to sell K property and in respect of such sale the following shall apply:-
a.The parties shall forthwith upon the default of the husband place the property in the hands of a licensed auctioneer to sell the property by way of public auction with a reserve price agreed to by the parties.
b.The proceeds of sale shall be applied as follows:-
i.In payment of agents commission, legal fees occasioned by the sale and outstanding rates and taxes.
ii.In payment of any mortgage secured over K property.
iii.In payment to the wife of such sum as is outstanding from Order 1, plus any accrued interest. From such amount payable the wife, she shall pay such monies as may be outstanding by her for the Court experts, namely Dr R, and M Chartered Accountants.
iv.In payment to the husband of the balance.
v.In the event the parties cannot agree upon the reserve price at auction or any offers received before or after auction then the parties or either of them shall appoint the President for the time being of the Real Estate Institute or his or her nominee to assess the reserve price at auction and/or whether any offer made before or after auction is the best price reasonably obtainable and the parties shall be bound by such assessment and shall equally bear the cost.
In the event that the proceeds of sale of K property are insufficient to meet the amount due to the wife pursuant to these Orders, then the parties shall do all acts and things necessary to sell, in sequential order, C property, O property, L property then B property (or such other order as is determined by the husband in writing) until such time as the full amount due to the wife is paid. The orders that apply to the sale of K property shall apply to any sale of these properties.
The wife is declared to be the sole and beneficial owner of any motor vehicle or item of personalty in her possession or control (including the Teddy Bear collection) and any superannuation entitlements accruing in the name of the wife at the date of this order.
The husband is declared to be the sole and beneficial owner of:-
a.The business undertaking of E Business.
b.The 1996 Ford Mustang motor vehicle.
c.The 1991 Harley Davidson motorcycle.
d.The household contents at B (except the Teddy Bear collection).
e.The proceeds of sale of the Haines Hunter Boat.
f.The proceeds of sale of the Toyota Camry motor vehicle.
g.Any superannuation entitlements accruing in the name of the husband at the date of this order.
The husband shall pay to the Australian Taxation Office one half of the tax accrued by the wife in respect of the rental received on the jointly owned properties between 1 July 2008 and 30 June 2010 namely K property and O property, subject to
a.The husband shall provide to the wife full details of such rental received within sixty (60) days from the date of this order.
b.The amount payable by the husband shall be calculated on the basis of the higher rate or rates of taxes incurred by the wife in respect of that or those financial years in which such tax accrued.
c.Such indemnity and requirement to pay shall only arise provided that the wife lodges her relevant income tax returns for the 2009 and 2010 income tax year on or before 30 June 2011, or such longer period as is agreed between the parties or determined by the Court if the husband does not provide information in accordance with this order or does not make the payments due in accordance with order 1.
It is declared that all income earned by the properties at K and O is income of the husband from 1 July 2010 and all liabilities incurred in respect of those properties prior to the date of these orders and prior to assignment of these properties to the husband are the liability of the husband and he shall indemnify the wife in that respect.
The parties be given liberty to apply in respect to the mechanical issues in respect of these orders, within twenty one (21) days from the date of these orders.
All subpoenaed documents be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same.
This matter be removed from the list of cases requiring determination.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend
IT IS NOTED that publication of this judgment under the pseudonym Milley & Milley is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 845 of 2008
| MS MILLEY |
Applicant
And
| MR MILLEY |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Milley (“the wife”) and Mr Milley (“the husband”) are unable to agree on the division of their property following the breakup of their marriage. The dispute was heard over a number of days in December 2010. The hearing initially also involved a dispute about the parenting of the parties’ children, a son and a daughter.
During the course of the hearing the parties and the Independent Children’s Lawyer resolved the parenting issues and consent orders were made. In addition the parties also consented to orders for each of them to pay the defined costs of the Independent Children’s Lawyer.
In the orders pursuant to these reasons there is an order requiring the husband to indemnify the wife in respect of a tax liability on income accrued in the names of the parties but retained and used by the husband in respect of their properties at K and O. These properties were let by the husband and he collected and exclusively used the rent on those properties. That indemnity in relation to one half of the tax liability was made by consent. However, I have limited its operation by requiring the wife to lodge her tax returns by 30 June 2011. The wife has not lodged income tax returns in recent years and has not been careful in maintaining documentation for tax purposes. As such I have determined that the indemnity should only apply provided the wife lodges her income tax returns within a reasonable period of time. I have determined that time as being 30 June 2011, as it will give the wife at least five months to enable the preparation of tax returns and is some months after payment by the husband. I will give the wife leave to apply to extend that time if the husband does not make payment in accordance with the times provided in these orders or if the husband does not provide information and documentation to enable the wife to disclose this information to the revenue authorities.
The wife presently lives in Melbourne and is about eight months pregnant with a child from another relationship. She was unwilling to provide the Court with any details of the child’s father.
The Issues
In terms of the property dispute there were a number of areas in issue, regarding add-backs, liabilities, contributions and other factors and there were areas of agreement.
At the commencement of the hearing counsel for the wife outlined an argument that the wife sought a Kennon v Kennon (1997) FLC 92-757 adjustment. However, this issue was not addressed in the wife’s final submissions nor was it addressed (in substance) in terms of the evidence. There was some evidence of violence, which facts were disputed. Even if the violence was to the level asserted by the wife (and I make no finding either way) it would not have amounted to a sufficient factual platform to base a Kennon type adjustment.
In terms of the pool of assets the parties are agreed as to the valuation of real estate at B, K, C, O and L.
The parties are in agreement that a Ford Mustang and Harley Davidson motor cycle owned by the husband have a combined value of $50,000. There was initially an issue as to whether these vehicles were included in the valuation of the business, it was later agreed that they were not and as such I have included them separately.
The husband operates a business called E Business (this was formerly a joint business of the parties). A single expert valuation was provided shortly before the hearing commenced. That expert valued that business at $304,000, and it was not challenged by either party.
The parties are agreed that the household contents of the former matrimonial home at B have a value of $7,910. At the conclusion of the hearing the wife sought the return of a teddy bear collection which the parties agreed had a value of $920. Accordingly, the husband and wife agreed with that course. Accordingly, I made consent orders on the 16 December 2010 that the husband have that teddy bear collection delivered to the wife’s solicitors. The agreed value of the furniture and contents at B is now $6,990 and the wife has an asset in the form of the teddy bear collection valued at $920.
The parties are agreed that there are liabilities to Westpac Banking Corporation of $420,000 secured on the home and another liability of $1,100,000 making a total of $1,520,000. Including tax these liabilities total $1,582,317.
The wife claimed liabilities in respect of MasterCard, rental arrears, power bills and an accounting fee. I have dealt with those in these reasons. She also sought an allowance in relation to fees which are outstanding to Dr R, CPA Partners and Berwick Legal. She sought an allowance of an alleged $30,000 debt to a friend, Mr T.
The question of how the legal costs are to be determined was to be dealt with in submissions at the end of the hearing. At the commencement of the hearing I informed the parties that if they did not address me in that regard I would assume that those expenses were roughly equal and needed no further adjustment. (This would not include the fees to Berwick Legal, the expert business valuer and Dr R which I have dealt with elsewhere).
There were also a number of liabilities of the wife which are agreed as to amount however there was an issue as to whether they ought to be included. These liabilities are:-
· Rental arrears of the G property $1,200
· Integral Energy G property $980
· Rent Melbourne apartment $2,600
· AGL Melbourne $350
· Wife’s MasterCard $17,000
There was an issue as to whether the above liabilities should be allowed, not the quantum.
After separation the husband sold a Haines Hunter motor boat for $3,266 and a 2002 Toyota Camry for $5,000. There was no issue that these items were sold at this price. In submissions counsel for the husband agreed that those amounts should be added back, and I have adopted that course.
Shortly after separation the wife withdrew $159,000 from a line of credit account. There was a question as to whether this ought to be added back.
At about the time of separation the husband withdrew from that line of credit a sum of approximately $486,000 plus a further sum of $35,152 from a Rocket account. The wife asked that those sums be added back.
Background
The wife relied upon her lengthy affidavit and financial statement both filed 10 December 2010. She also relies upon an affidavit of Ms P sworn 20 February 2008.
The husband relies upon his affidavit filed 1 December 2010, his financial statement of 8 December 2010, an affidavit of Ms I filed 1 December 2010 and an affidavit of LB sworn 8 December 2010.
At the time of hearing the husband was aged 36 and the wife was aged 33. They married and commenced cohabitation in September 1998 and separated in March 2007. The marriage was dissolved in September 2008.
As I have indicated earlier there are two children of the relationship, a son aged eight and a daughter aged six. The children were independently represented in the parenting proceedings. The wife is pregnant with her third child to an undisclosed person who she says she is not living with and with whom she has no intention with living. The wife is presently living in Melbourne and does not anticipate moving to Sydney for about six months.
The wife seeks an interim order for property so that she can house herself and pay some expenses. At the conclusion of the evidence it was agreed between the parties that the husband would pay to the wife $50,000 by two instalments, each of $25,000, one in December 2010 and one in January 2011. That order was made by consent. That order is repeated in the orders made pursuant to these reasons, it is not intended that there be a ‘double dip’ in regard to that $50,000.
The credit of witnesses
Evidence of wife
The wife was cross-examined by counsel for the husband. Much of that cross-examination was initially in relation to children’s issues. The wife was not an impressive witness. She prevaricated from time to time and often retreated to a position of ‘not recalling’. I am satisfied that she used this as a way of avoiding answering some difficult questions.
The wife’s explanation in relation to the expenditure and money in 2006 was inadequate and at times unbelievable, particularly in respect of her explanations about the purchase of furniture for her friend and the sale and purchase of cars. She went on a spending spree over the last year of so of the relationship, and had little or no regard to the financial consequences.
Her evidence was at times unreliable, and I treated it with caution.
Evidence of Ms P
Ms P gave evidence in accordance with her affidavit filed 20 February 2008 and that was primarily in respect of children’s issues. She did give some evidence of an incident of violence, and having regard to my earlier comments, such evidence, if accepted would not have amounted to a basis for a Kennon type claim.
Evidence of the husband
The husband gave evidence in accordance with his lengthy affidavit. He was cross-examined in relation to some pamphlets that were distributed around the wife’s home. He said he had not even seen the photographs taken from the internet. That was incorrect as that was part of the material he had provided (albeit through his present partner Ms I) to the Child Support Agency.
In addition there was a hand-written note on the material that was distributed. The handwriting bore a remarkable, if not uncanny, resemblance to the handwriting of Ms I.
The husband’s evidence and that of Ms I, in that regard was unreliable and I do not accept it. I am satisfied the handwriting is that of Ms I and that she and the husband orchestrated the distribution of that material to the apartments of the wife’s then neighbours.
Some of the husband’s evidence was fashioned to inflate his own role as a contributor and deflate that of the wife. In his affidavit he asserted that he was the primary carer but during cross-examination he said he worked twelve to sixteen hours a day six days a week and he was away for 30 per cent of the time. Both cannot be true.
Some of the husband’s answers were glib. I am satisfied that his evidence was from time to time also unreliable.
Ms I
Ms I gave evidence in accordance with her affidavit. She is closely aligned with the husband and her evidence needs to be seen through that prism. I was troubled by her evidence in relation to the distribution of pamphlets near the wife’s home and to her neighbours and I am concerned that her evidence was likewise unreliable and was fashioned to assist in what she perceived as the husband’s just cause.
The Relevant Legal Principles to be applied
The Full Court in Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 78,386 reiterated the preferred approach to the exercise of discretion in property matters, pursuant to s 79:-
39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
40. Section 79, unlike s.78, requires the Court to consider the whole of the property of the parties, however and whenever acquired, notwithstanding that the parties may only seek an alteration of interest in some of that property. As a consequence of the first step in the preferred approach to the determination of the s.79 proceedings, each party to the proceedings has an obligation to make a full and frank disclosure of his/her financial circumstances and all matters relevant thereto: Oriolo and Oriolo (1985) FLC 91-653; Black and Kellner (1992) FLC 92-287; Weir and Weir (1993) FLC 92-338 and Tate v Tate (2000) FLC 93-047.
Thus the approach in this case involves a number of steps:-
a.The identification of the property and its value;
b.An evaluation of the parties’ contributions having regards to ss 79(4)(a)(b) and (c) of the Family Law Act 1975(Cth) (“the Act”).
c.Consideration of any adjustment to that assessment having regard to the relevant matters in ss 79(d)(e)(f) and (g) of the Family law Act (“the other factors”) including the matters referred to in s 75 (2) of the Act.
d.A review of the outcome against a just and equitable requirement
Pool of Assets and Values
Many of the assets of the parties are agreed:-
Joint
C property (agreed)
$526,500
Joint
B property (agreed)
$1,070,000
Joint
O property (agreed)
$195,000
Joint
K property (agreed)
$825,000
Joint
L property (agreed)
$125,000
Wife
Wife’s superannuation (agreed)
$7,521
Husband
1996 Ford Mustang (agreed)
$28,000
Husband
1991 Harley Davidson motor cycle (agreed)
$22,000
Husband
Household contents of B property (agreed)
$6,990
Wife
Teddy bear collection
$920
Husband
R Business– goodwill
$304,000
Husband
Add-back Haines Hunter boat sale proceeds
$3,266
Husband
Add-back 2002 Toyota Camry
$5,000
Husband
Superannuation
$4,140
Total
$3,123,337.00
Liabilities
Joint
Westpac Banking Corporation mortgage on house (agreed)
$420,000
Joint
Westpac Banking Corporation line of credit (agreed)
$1,100,000
Wife
Australian Tax Office debt
$62,317.30
Wife
Debt to Dr R
$3,300
Wife
Debt to CPA Partners
$1,200
Wife
Barwick Legal
$3,000
Wife
Rental arrears G property
$1,200
Wife
Integral Energy G property
$980
Wife
Rent on Melbourne Apartment
$2,600
Wife
Mastercard debt
$17,000
Wife
AEI Melbourne
$350
Wife
S Accountants
$2,200
Total
$1,614,147.30
Superannuation
The parties’ respective superannuation savings are of very modest levels. Neither party sought a splitting order. Having regard to the amount involved I have simply treated the parties’ superannuation as being part of the general property although I had regard to its nature when determining the adjustment of the parties’ property.
R Business
A valuation was provided by Ms F of M Accountants. She valued the business at $304,000. In that valuation she determined that the business had a goodwill component of $55,039.
The parties agreed that this was the value of the business as is presently stood, the goodwill was calculated on future maintainable earnings and in calculating that sum she adopted a salary of the husband of $170,000 per year. Ms F also noted that the husband’s present partner earns an income from the business of $500 per week.
In accepting the valuation I have assumed that the liabilities to the Westpac Bank of $1,100,000 and $420,000 (the mortgage on house) have not been deducted from the value of the business. If it has been then it is open for the parties to apply under the Slip Rule, and pursuant to the leave that I have provided in the orders.
Add-back sought against wife in relation to $159,000
Shortly after separation the wife drew the sum of $159,000 against the parties’ line of credit. From this sum, part was used by the wife to pay a deposit and make repayments on a BMW motor vehicle, part was used to provide furnishings and furniture in setting up her new accommodation and part was used by her for general living expenses including the repayments of the car loan, legal expenses and rent. All of this money was spent by the wife within about twelve months from separation.
In terms of the general principals regarding add-backs I note they are set out by the Full Court in Essex & Essex [2009] FamCAFC 236. In this case the Full Court said:-
30.The Questions of how a trial Judge should deal with so called “add backs”, and/or premature distribution of assets, regularly arise in cases under s 79 and are often the subject of grounds of appeal. Often the amounts are minor when compared to the overall property in issue and the time taken and costs involved to agitate the claims both at first instance and on appeal, lack proportionality. Trial Judges are correct to deal with such claims robustly in the broad exercise of their discretion under s 79.
31.The principles about when an expense should be “added back” have been comprehensively discussed in Full Court decisions particularly Chorn & Hopkins (2004) FLC 93-204, Omacini & Omacini (2005) FLC 93-218 and Gollings & Scott (2007) FLC 93-319.
32.The principle that where one party has unilaterally assumed control of, and has improperly disposed of, or diminished the value of, an asset to the detriment of the other party, that the disposal should be regarded as a premature distribution to the party at fault is not in doubt (see Townsend& Townsend (1995) FLC 92-569).What is often controversial is when the principle is applicable.
In Townsend v Townsend,[1] Nicholson CJ found appealable error in the trial Judge’s dealing, under s 75(2), with a loss of matrimonial property caused by the husband’s unilateral purchase of taxi plates which he then sold at a loss. The Chief Justice, with whom Fogarty and Jordan JJ agreed, determined that some sums expended by the husband should be “added back” to the pool of property as a premature distribution, but excluded funds used to repay a loan.
[1] (1995) FLC 92-569.
Having regard to those factors and principles and the wife’s need to provide for herself after separation I do not intend to add-back this sum. The wife needed funds to re-establish herself. In addition I have had regard to the husband’s use of funds for himself and the children since separation.
The wife has spent money on legal costs and other expenses. Her evidence with regard to the expenditure of this money was not particularly helpful. However, I assess that part of the money has been applied in legal costs and others in her day to day living expenses.
Whilst I have concerns about that aspect of her evidence having regard to the principals set out earlier I do not intend to add-back the sum sought by the husband, vis $159,000.
Add-back sought against husband in relation to $486,000
The wife sought an add-back of about $486,000 plus $35,152 transferred by the husband to an account at about the time of separation. There is no doubt that these monies were transferred and used by the husband. Evidence was provided by the wife in that respect.
The 2006 to 2007 financial year was very profitable for the parties’ business. However, the records of the business were not properly kept and there was significant expenditure (which I will deal with later) and significant tax liabilities were incurred. Money was not quarantined to meet that expense and other expenses. I accept the evidence of the husband that there were other liabilities including superannuation which needed to be paid and there were significant monies outstanding on the credit cards.
The business at that time was turning over in excess of two million dollars per year and needed to continue to pay the debts that it had incurred and which debts were not paid in the months prior to separation. I do not intend to recite all of the evidence, although I have had regard to it. The husband has used funds to pay legal fees and used the funds to pay GST, tax and superannuation for his employees.
Having regard to his evidence in this respect and the approach I adopted in relation to the add-back claimed against the wife, on balance I do not intend to add those sums back.
Other issue in respect of the husband
There was criticism of the husband that he had not made full and frank disclosure. He was not as careful as perhaps he might have been but I am not satisfied that there was any intentional failure on his part to make full and frank disclosure.
The areas relate to some dividends from AMP (which the husband has no knowledge of and was clearly perplexed by and which could have been the subject of enquiry by the wife either to the husband or AMP prior to the hearing).
There was criticism of the husband in failing to disclose a bank account. He did in fact provide that account but it was closed and I accept that his memory of that was somewhat poor.
There was also criticism by counsel for the wife that the husband had not included some old horse drawn surreys or wagons in the list of assets. The wife was well aware of that and it was open for her to ask the expert to value them further if need be. In the context of the assets of these parties I am not satisfied that these are matters which overly impeach the quality of the husband’s disclosure. This is subject to other remarks I have earlier made in that regard.
The Haines Hunter boat and Toyota Camry
The husband has agreed to the value of the add-back of $3,266 being the proceeds of sale of the Haines Hunter boat. I have adopted that course. The husband also agreed to an add-back of $5,000 being for a Toyota Camry which he sold to his brother. The wife sought an add-back of a larger sum relying on a ‘Red Book’ valuation.
There was evidence from the husband, which I accept, that the vehicle had not been used for some time, it was uninsured and in poor condition. There was no tested valuation evidence, beyond the $5,000. I intend to adopt the course submitted on behalf of the husband and add-back the $5,000.
Legal costs
Each of the parties has incurred significant legal costs. At the commencement of the trial I asked the parties to raise with me what they wanted to do with the question of legal costs. There was no cross-examination of the parties during the hearing in respect of legal costs.
The husband has clearly paid some legal costs and in that regard I note that he claims no amount outstanding to Dr R and says that part of his legal costs with regard to the Independent Children’s Lawyer has been paid. The wife has been unable to raise money to pay her share of this amount, exercising the wide discretion I have in that respect I will allow that liability in the pool of assets and liabilities.
I assess that part of the income from assets of the business have been used to that end. The wife claimed legal costs although it was addressed in an arbitrary manner in final submissions. It is not clear whether the wife used part of the monies she took at separation for the payment of her legal costs. However, given the limited nature of the evidence and the broad discretion I have in that regard I do not intend to make any further adjustment or add-back in regard to legal costs, except for those particular sums I have referred to elsewhere in these reasons, such as Barwick Legal.
Debt to Mr T
The wife asserted that she owed a friend, Mr T, from Western Australia an amount of $30,000. She said the friend was a married man who did not want his relationship with the wife disclosed. The wife said she had documents which established the loan although when pressed she produced a composite of material from her diary and not the original documents.
It was open for the wife to call Mr T from Western Australia and whilst it may have been embarrassing for him directions or orders could have been put in place to protect his privacy. There was evidence available to support the wife’s view but that evidence was not called. Having regard to the wealth of authorities I am entitled to infer that that evidence would not have assisted the wife. Accordingly, I do not allow that liability.
I accept that the wife was subjected to vilification by the husband and his present partner, in terms of pamphlet distribution to her neighbours and the republication of material from the internet, for which they should hang their heads in shame.
Other liabilities
The wife had other liabilities in terms of a MasterCard debt of $17,000, rental arrears of $1,200, a debt to Integral Energy of $980, rental arrears in Melbourne of $2,600, a debt to AEI Melbourne of $350, a debt to S Accountants of $2,200, a debt to Dr R of $3,300, CPA Partners of $1,200 and Barwick Legal of $3,000. I accept the wife’s evidence in relation to these liabilities and include them as liabilities of the wife as I do in terms of her tax liability of $62,317.30.
Wife’s tax liability
After separation the husband needed to put the affairs of the company in order. In doing so it was ascertained that the parties had significant tax liabilities, the wife’s now being $62,317.35. The husband blamed the wife for the circumstances that gave rise to the debt (I am satisfied that it was their joint responsibility) and he has not paid that debt. It seems to me that this is an appropriate liability and ought to be treated as a debt, accordingly I will be leaving that in as the wife’s liability for which the parties will effectively, deal with that liability equitably.
During the course of the hearing I raised with counsel for the husband whether the debt of the wife to the Australian Taxation Office of $62,317.35 was agreed. Counsel for the husband submitted that they could hardly impose that as the debt was incurred during the marriage. Having regard to the evidence and that submission (whilst not a concession) I am satisfied that that debt ought to be allowed.
The taxation liability of the wife was initially much greater but she employed accountants, S Accountants, to negotiate with the Tax Office and reduce the liability. That cost $2,200. I accept that that is a liability to which the wife is entitled to set off against the pool of assets.
Contributions
The parties married in 1998 but had been making contributions for some years beforehand. The husband’s initial contribution was somewhat greater than the wife’s although not that much greater. I accept that the wife contributed prior to the parties’ marriage. Both parties worked exceptionally hard in the first years of their marriage to enable the business to develop. The business grew over the years as a consequence of the efforts of both the husband and the wife.
I do not accept the submission of counsel for the husband that the contribution of the wife in her role as a homemaker parent and in the business was less than that of the husband. Her contributions over those years in respect of both were significant.
Up to 2003 I am satisfied that the contributions were relatively equal but for the initial contribution of the husband.
From 2003 onwards the wife’s role as homemaker became greater. I accept that her role was far less than she asserted but was certainly far greater than that asserted by the husband.
In 2006 the wife clearly was unhappy in the marriage and began spending in a profligate way and at levels, and at times of which the husband was not aware. However, this must be seen in the context that the parties were earning considerable income over that time and that the husband was away a significant portion of the time, some 30 per cent of the time according to his evidence.
Each of the parties took considerable funds at the time of separation (albeit that the husband took far more but also had far greater liabilities with which he had to contend).
Following separation the husband has borne the primary financial and emotional care of the children and maintaining the household. He has had the benefit of significant income from the business and the support of Ms I.
Counsel for the husband submits that in the years before separation the wife was out every day and relies on credit card statements to support the husband’s assertions. The wife attended a gym and bought clothes and shoes. However, I am satisfied that she still provided significant care for the children over that period of time although she was spending some time and probably some significant time in her new life.
In the same year the husband travelled to Malta for a holiday without the wife and without the children. He was content to leave the children in the wife’s care whilst he took that trip.
It is clear that in 2006 the relationship between the husband and wife was failing. Each of the parties have their own perceptions of what happened in that time and that is flavoured by the wife’s discontent with the husband and the lifestyle that their relationship provided and the husband’s clear distress and anger at the wife’s lifestyle choices.
I am satisfied that the wife continued in her role as a parent albeit that her personal life was a greater interest for her from shortly before separation until at least recent times. There is no doubt that she spent significant monies without the husband’s full knowledge or involvement.
This must be seen in the context of the parties earning significant income and in their joint absence of having a clear understanding of how to manage the business and the income in those circumstances. I am satisfied that the husband was at some levels aware of the wife’s expenditure (although not to the full extent).
The husband restored the financial equilibrium of the business post separation although its profitability has significantly reduced. The wife asserted that this reduction is, at least, in part, as a result of the husband’s efforts to minimise her property settlement.
The husband’s evidence, which I accept, is that the business became more competitive and costs increased. The reduction in the profitability of the business also needs to be seen in the context of the husband’s full time care of the children.
Having regard to all of the facts and circumstances and the concern I have about the evidence of both of the parties and Ms I, I determine, on balance, that the contributions are as to 47 per cent by the wife and 53 per cent by the husband.
Other factors
Until May of 2010 the wife worked in the entertainment industry. In the financial year ended 30 June 2008 the wife says she earned about $24,000. She has not lodged income tax returns for the following two years and has not maintained proper records.
I am satisfied that she earned a modest income from those endeavours. In May of 2010 the wife fell pregnant and has not worked in the entertainment industry since that time.
The wife is able to undertake some work in therapeutic massage. She is trained as a secretary and has keyboard skills. Albeit those keyboard skills are somewhat rusty they are likely to lead to additional work. I am satisfied in the future that the wife has the capacity to work in secretarial and/or book-keeping provided she is adequately supervised.
This would enable her to earn a modest income. However, this must be seen in the context of her responsibility to care for her youngest child.
The wife also has skills and training in make-up and has earned income in that regard. She undertook a significant number of courses and at one stage had run a business. I am satisfied she is able to undertake work in that regard.
(a) the age and state of health of each of the parties;
The husband is aged 36 and the wife is aged 33. There are no issues about their health. The wife is presently pregnant with her third child and he is due to be delivered in late January 2011.
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The husband’s finances are in good order. He runs the business and it is profitable and has been profitable for many years. The parties had accumulated significant assets over a relatively short period of time and the husband has re-partnered. He and his partner have adopted a sound and financially responsible attitude towards the husband and wife’s assets. The husband will be able to earn a very good income in the future. Albeit part of the value of that income has been included in the asset pool of the value of the business, but not all.
On the other hand the wife has had real difficulties managing finances. That is clear from some of the evidence of the husband and some of the wife’s evidence of the expenditure particularly in 2006 and over 2007. I am satisfied that the wife has no significant assets.
The wife does have a good earning capacity in the secretarial field but she will need some retraining in that respect. The wife has some book-keeping knowledge but it is basic and would need significant re-training. The wife has qualifications in terms of make-up and worked in that area.
The wife says, and I accept, that she no longer wishes to pursue a career in the entertainment industry. The wife was unable and or unwilling to provide details of her income in the last two financial years.
In part that was because she lacked the funds to pay for income tax returns to be prepared and secondly there is a possibility she will have income tax liabilities. From the evidence of her lifestyle from both herself and the husband it is clear that she has not earned a significant income.
The wife’s income earning capacity is significantly less than that of the husband and is likely to remain that way. She will have the care of her third child and, with the agreement in terms of parenting of the parties’ children, an increasing role in their lives.
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The primary care of the two young children of the parties will remain with the husband and with Ms I. The wife will be involved in their lives although much of that depends on whether the wife relocates from Melbourne to Sydney.
The wife’s support is in Melbourne. Her family in Sydney are not supportive and are estranged from her. The wife says she proposes to move to Sydney in about six months. I have some doubts in terms of that evidence.
In any event the primary care of the children emotionally, physically and financially will rest with the husband and Ms I.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain
The husband will have a duty to maintain himself and the children. He has a duty to maintain Ms I although she has some income earning capacity in terms of her work in the business and has her own assets.
The wife has a modest capacity to support herself although this will be made difficult in the next few years with her need to care for her soon to be born son. It is not clear whether the child’s father will provide child support. In the absence of evidence in that respect I infer that such evidence will not assist the wife and that she will receive some financial support from the child’s father.
(e)the responsibilities of either party to support any other person
The husband has a responsibility to support Ms I. The wife has no obligation to support any other person (apart from the children referred to earlier).
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
The husband is not entitled to a pension. The wife may be entitled to some sort of support for the short to medium term bearing in mind the upcoming birth of her youngest child.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
The standard of living of the husband has not changed in any significant way since separation nor has that of the children. The wife’s standard of living has changed dramatically. She has gone from a lifestyle where she can enjoy high levels of spending and material wealth to much more difficult circumstances.
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in business or otherwise to obtain an adequate income
It is likely that the wife will need to undertake some retraining to refresh some of her skills. I take judicial notice that much of that training can be achieved through short term courses which will provide the wife with a modest income.
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
The wife’s contribution to the creation of the parties’ wealth and their business began in 1995. In that respect I note that the husband’s submissions were:-
21.The wife’s contributions commenced when she contributed to the purchase of the property at [B] in 1995. That property was rented and the parties moved into the property upon their marriage in September 1998.
The parties worked as a partnership to create significant wealth from that time until their relationship began to break down in 2005 and at a greater level in 2006 and 2007.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
The parties were married and commenced cohabitation in September 1998 and Separated in March 2007. The marriage and relationship were of medium to long duration and the husband’s earning capacity improved over that time period. I have discussed the wife’s earning capacity elsewhere, and I have considered the parties’ respective earning capacity in the light of the circumstances of their relationship.
(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;
I have had regard to the financial circumstances of the husband’s present partner to which she is relatively self-sufficient although she is employed by the business and earns an income of approximately $500 per week.
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
The wife is unlikely to be able to contribute meaningfully to child support for the children in the care of the husband for the foreseeable future. However, the husband is in receipt of a strong income and is well able to maintain the children.
This is a fact of which I have had regard.
The wife seeks an adjustment of ten per cent in terms of the other factors the husband concedes five per cent. The effect of those respective submissions is in essence ten per cent and twenty per cent.
Having regard to all of the facts and circumstances in this case I am satisfied that there ought to be an adjustment in respect of the other factors so that the property is divided as to fifty two per cent to the wife and forty eight cent to the husband.
Just and equitable
The pool of assets are:-
Property, including superannuation $3,123,337.00
Liabilities $1,614,147.00[2]
Nett pool $1,509,190.00
[2]Rounded to a whole dollar.
Having regard to the approach adopted in respect of the other factors and contribution the result would be:
Fifty two per cent to the wife $ 784,779.00
Forty eight per cent to the husband $ 724,411.00
Total $1,509,190.00
The husband indicated, through his submissions, that he wanted to retain the properties, depending on the outcome of the proceedings. If a property was to be sold it was to be K property. I have structured the orders to give effect to this approach and I have given leave for the husband to seek a change in the order of sale should he chose to do so, the time open for that application is limited. I have taken into account the agreement between the parties for some payments to the wife. I have also provided time for the husband to put in place arrangements to finance the payment to the wife.
I had considered whether I should make the payment to the wife dependant on the sale price of the property or properties in the event that the husband is unable or unwilling to make payment to the wife. However, having regard to the poor communication between the parties and their respective lack of trust of the other, I have determined that I should not adopt that course.
That being the case the husband retains:-
B property
$1,070,000
K property
$825,000
C property
$526,500
O property
$195,000
L property
$125,000
R Business
$304,000
1996 Ford Mustang
$28,000
1991 Harley Davidson
$22,000
Household contents of B property
$6,990
Husband’s superannuation
$4,140
Haines Hunter boat proceeds of sale
$3,266
Toyota Camry proceeds of sale
$5,000
Westpac Banking line of credit
($1,100,000)
Westpac Rocket account
($420,000)
Payment to wife
($870,485.00)
Total
$724,411.00
The property to be retained by the wife is:-
Teddy bear collection
$920
Wife’s superannuation
$7,521
Payment by husband
$870,485.00
Australian Taxation Office debt
($62,317.00)
MasterCard debt
($17,000)
Rental arrears – G property
($1,200)
Integral Energy
($980)
Rent – Melbourne
($2,600)
AIE Melbourne
($350)
S Accountants
($2,200)
Dr R
($3,300)
CPA Partners
($1,200)
Barwick Legal
($3,000)
Total
$784,779.00
The husband has a significant earning capacity and will be able to manage that payment by way of his business or through the sale of one or the other of the assets.
The assets which the parties accumulated during their relationship were significant.
I am satisfied that the overall result is a just and equitable division of property.
I certify that the preceding one hundred and nineteen (119 ) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 24 January 2011.
Associate:
Date: 24 January 2011
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