Morrison and Morrison
[2007] FamCA 37
•5 February 2007
FAMILY COURT OF AUSTRALIA
| MORRISON & MORRISON | [2007] FamCA 37 |
| FAMILY LAW - PROPERTY - Settlement in relation to marriage |
| Family Law Act 1975 (Cth) – s 75(2), s 79 |
Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355
Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414
| APPLICANT: | Mr Morrison |
| RESPONDENT: | Mrs Morrison |
| FILE NUMBER: | SYF | 4435 | of | 2004 |
| DATE DELIVERED: | 5 February 2007 |
| PLACE DELIVERED: | Sydney |
| JUDGMENT OF: | Johnston JR |
| HEARING DATE: | 3, 4 & 5 October 2006 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Mater |
| SOLICITOR FOR THE APPLICANT: | Broun Abrahams Burreket, Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Dura |
| SOLICITOR FOR THE RESPONDENT: | Harrington Family Lawyers |
Orders
That both parties have leave to re-list these proceedings by arrangement with Judicial Registrar Johnston’s Associate for further submissions in relation to the form of the orders.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 4435 of 2004
| Mr Morrison |
Applicant
And
| Mrs Morrison |
Respondent
REASONS FOR JUDGMENT
Introduction and Applications
Mr and Mrs M have divorced. They have been unable to resolve a dispute between them concerning their property and their financial relationship. So they have approached this Court with applications for orders to be made for the purpose of resolving their dispute.
For convenience I shall refer to them as “the husband” and “the wife” respectively.
The husband seeks orders to the following effect:
(1)That the wife shall within 42 days pay to the husband the sum of $44 464.
(2)That the husband shall forthwith thereupon cause the M Family Trust to make a capital distribution to the wife of the whole of the legal and beneficial title free of encumbrance in the property known as D.
(3)A splitting order is hereby made whereunder there shall be split from the wife’s entitlement in the L Pty Limited Superannuation Fund (L) in favour of the husband 100 percent of the wife’s entitlement in the L.
(4)That the base amount allocated to the husband out of the interest held by the wife in the L is 100 percent of member entitlement.
(5)Pursuant to section 90MT(1) of the Family Law Act 1975, whenever the trustee shall pay to the husband or his administrators, executors, heirs or assigns the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 there shall be a corresponding reduction in the entitlement the wife would have had in the L.
(6)That orders 3, 4 and 5 have effect from the operative time and the operative time shall be the fourth business day after the day on which a sealed copy of this order is served upon the trustee of L by the wife’s solicitors.
(7)That the wife shall release the husband, the trustee from time to time of the M Family Trust including but not limited to L Pty Limited, the trustee from time to time of the G Trust including U Pty Limited, the trustee from time to time of the M Trust including but not limited to T Pty Limited and the trustee from time to time of The O Trust including but not limited to N Pty Limited against all actions, claims, suits and demands arising out of any matter or thing occurring before this day.
(8)That the husband shall indemnify the wife against all claims, actions, suits and demands which might hereafter be brought against her by the husband and / or the trustee from time to time of any of the trusts mentioned in the previous order hereof arising out of any matter or thing occurring before this day.
(9)That the wife shall forthwith transfer to the husband the whole of her interest in any credit loan account held by her alone or jointly in all of the trusts referred to in order 7.
(10)That save as otherwise herein provided, it is declared that neither party has any interest in any item of property or financial resource presently in the name, possession or control of the other.
(11)That the wife shall pay the husband’s costs of an incidental to these proceedings.
The wife seeks orders to the following effect:
(1)That within 14 days from the date of these orders, the husband do all things and sign all documents necessary to resign as a director and secretary of L Pty Limited and to transfer all his right, title and interest in his shareholding in L Pty Limited to the wife and contemporaneously with the husband’s resignation as director and secretary of the said company the wife shall be appointed director and secretary of the said company.
(2)That within 14 days from the date of these orders the husband do all things and sign all documents necessary to resign as an Appointor of the M Family Trust and to transfer all his right as Appointor to the wife.
(3)That within 14 days from the date of these orders, the husband do all things and sign all documents necessary to resign as a director and secretary of H Pty Limited and to transfer all his right, title and interest in his shareholding in H Pty Limited to the wife and contemporaneously with the husband’s resignation as director and secretary of the said company the wife shall be appointed director and secretary of the said company.
(4)That within 14 days from the date of these orders the husband do all things and sign all documents necessary to resign as an Appointor of H Unit Trust and to transfer all his right as an Appointor to the wife.
(5)That the husband shall use his best endeavours and do all acts and things and sign all documents necessary to have National Australia Bank Limited release the mortgage secured by the property at D, as soon as possible.
(6)That the husband and wife sign all documents necessary to assign any right, claim or obligation to any loan account of the husband in the M Family Trust arising pursuant to these orders or otherwise within 14 days from the date of these orders.
(7)That the husband indemnify the wife and keep the wife indemnified with respect to all and any taxation liabilities for the following entities, howsoever and whenever arising:-
a.H Pty Limited;
b.H Unit Trust;
c.M Family Trust;
d.L Pty Limited; and
e.L Pty Limited Superannuation Fund.
(8)That the husband instruct Y & Co to amend the financial accounts and statements for the M Family Trust so as to allocate all income for the year ending 30 June 2006 to the husband.
(9)That the husband further instruct Y & Co to finalise the accounts and financial statements for the year ending 30 June 2006 for the entities referred to in order 5 above within 14 days from the date of the orders and in the event that there is an increase in the income to be distributed, then such income is to be distributed to the husband.
(10)That the husband shall do all things and sign all documents necessary to resign as a Trustee of the L within 4 days from the date of the making of these orders.
(11)That the base amount allocated to the wife out of the interest held by the husband in the L is 100 percent (the whole) of his member entitlement.
(12)That pursuant to section 90MT(1) of the Family Law Act 1975, whenever the trustee of the L makes a splittable payment from the interest held by the husband the Trustee shall pay to the wife or her administrators, executors, beneficiaries, heirs or assigns the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 and there shall be a corresponding reduction in the entitlement the husband would have in the L.
(13)That orders 11 and 12 have effect from the operative time and that the operative time shall be the seventh business day after the day on which a sealed copy of this order is served upon the Trustee of L by the wife’s solicitors who shall advise the trustee whether this clause has effect.
(14)That the Trustee of L in accordance with the obligations set out under the Family Law Act 1975 Family Law (Superannuation Regulations 2001), shall do all acts and things and sign all documents necessary to calculate the entitlement of and make payment to the wife.
(15)That H Pty Limited as trustee of the H Unit Trust shall permit the wife to occupy the property situated at C in the State of Queensland.
(16)That until such time as the terms of orders 1, 2, 3, 4 and 5 have been complied with and the resignations and transfer have been registered by the relevant authorities, the terms of the orders of this Honourable Court dated 5 September 2005 shall continue to be in effect.
(17)That except as specifically provided in these orders, each party is solely entitled to the exclusion of the other to all other property and chattels of whatever nature or in the possession, ownership or control of each party as of the date of the making of these orders.
(18)That save and except for any liability dealt with pursuant to the terms of these orders, each party shall be solely responsible for and meet payment of his or her liabilities and shall keep indemnified the other party from any liability howsoever arising thereunder.
(19)That upon him carrying out all of his obligations pursuant to the terms of these orders, the husband shall be released from the injunctions made by this Honourable Court on 19 April 2005, 14 July 2005 and 5 September 2005.
(20)That the husband and the wife execute all documents as necessary and do all acts and things necessary to give validity and effect ot the terms of these orders and in the event of either rparty refusing or neglecting to execute any such document or to do any such acts or things, then the Registrar or a Deputy Registrar of the Family Court is hereby appointed pursuant to section 106A of the Family Law Act 1975 to execute such documents in the name of the relevant party to do all such acts and things as aforesaid.
(21)That the husband pay the wife’s costs of and incidental to these proceedings.
(22)That the husband pay the wife’s costs in the sum of $5467.83 pursuant to the orders of this Court dated 26 July 2006 within 14 days of the date of these orders.
(23)Such further or other orders as this Honourable Court shall deem appropriate.
Background
The husband was born in January 1945 and he is therefore 62 years of age. The wife was born in September 1947 and she is therefore 59 years of age. They married in October 1970 and separated in April 2004.
There are 3 adult children of the marriage namely, G born in April 1971, A born in March 1973 and R born in April 1978.
At the time of their marriage, the wife’s property consisted of savings of $3000. Apart from these funds, neither party had property of any significant value. The husband was working in a factory and the wife was working at B.
In late 1970, the wife accepted a redundancy payment of approximately $5000.
After G’s birth the wife returned to full-time employment undertaking clerical work. The wife continued to work in full- time clerical positions for many years placing the children with various carers. At this time the husband was working in a factory and as a barman in the evenings.
In approximately 1973 the parties purchased their first home. This was the property at T in Victoria, the purchase price being $17 000. The wife says that she paid the deposit of approximately $4000. The balance of the funds required for the purchase were borrowed by the parties on mortgage. I accept that it is more probable than not that at least the major part of the deposit came from the wife’s funds.
In 1974 the husband went to Greece for a holiday. At approximately this time he was working as a waiter at the C.
By 1977, the mortgage on the parties’ home had been paid out. At approximately this time the husband again went on holiday to Greece.
Subsequently the husband’s mother came to Australia from Greece for a holiday living with the parties and the children for approximately 9 months. She cared for the children during this time. The husband’s sister T also came and lived with the family for approximately 18 months. T also looked after the children.
In 1982 the husband purchased a one-third interest in a business at Queensland. The family moved to the Gold Coast for approximately six months living in rented accommodation. There were difficulties with the lease and the business was sold after approximately six months. The family returned to Melbourne.
In 1983 the husband purchased a business at L, Victoria. The husband and the wife operated this business for approximately six months then it was sold for a profit. The husband had become ill. Some of the proceeds of sale were used to purchase a motor vehicle. The family also went on a holiday to Cairns.
In 1983 the parties established a family trust called the M Family Trust. They established a company, L Pty Limited which is the trustee of the M Family Trust. The husband is the sole shareholder and director of this company. L Pty Limited is also the trustee of the L Pty Limited Superannuation Fund. I shall refer to this again below.
At approximately this time the husband was working as a waiter at U Restaurant in Melbourne.
In 1986 the husband arranged for the purchase of the leasehold of a business at A for $97 000. The required funds were borrowed using the parties’ T home as security. The family moved to A and the parties worked the business.
The children attended a private school, P College, A.
In 1990 the parties decided to purchase the freehold property on which they conducted their business. They sold their T home, the net proceeds being $150 000. L Pty Limited as trustee for the M Family Trust purchased D for $140 000. The purchase was funded from the net proceeds of sale.
In 1990 the parties purchased vacant land at R, Queensland for $130 000. They also purchased vacant land at S for $45 000 - $50 000. These purchases were funded from savings.
In June 1991 the parties established the L Pty Limited Superannuation Fund. They rolled-over entitlements each of them had in various superannuation funds into this Fund. They also deposited some income from their business into the Fund.
In 1994 the parties had a home built on their A land. This cost approximately $150 000. At approximately this time, they sold the leasehold of the chicken shop business for $180 000. Then the wife commenced working as a clerk at the N.
At approximately this time the wife’s mother permitted her home to be used as security for loans in favour of the wife’s brothers apparently for business purposes. Unfortunately the business failed and the wife’s mother’s home became at risk of being lost to the relevant financial institution. The wife and her sister provided $30 000 each to save the home. The wife’s $30 000 came from the proceeds of sale of the leasehold of the business. The wife’s mother changed her Will to provide for her home to pass only to the wife and her sister to the exclusion of the wife’s brothers.
After G completed her university course she went to Brisbane to live. The parties decided that they would also move to Brisbane. A company H Pty Limited had been established by them in June 1993. They decided that they would purchase a home. They wanted to be able to use the money in their superannuation fund to assist in financing a purchase. On advice, they established a unit trust called the H Unit Trust. The trustee was H Pty Limited. In November 1996 this Company purchased the property at C for the H Unit Trust using the superannuation funds and a loan of $60 000 on mortgage. The purchase price was approximately $282 000. There was a lease agreement between the trustee and G.
Upon moving to Brisbane the wife again worked in full time clerical work. The parties occupied separate bedrooms in the C home and there was considerable conflict between them. They received rent from the lessees of the A shop. From time to time the wife received unemployment benefits representing herself as having separated from the husband.
In 1999 the husband established the company U Pty Limited and the G Trust. The company is the trustee. The husband is the sole shareholder and director of the company.
At approximately this time the husband purchased a one-half share in a business on the Gold Coast for $160 000. These funds were borrowed from the National Australia Bank on the security of the land at R. The husband had been unemployed since selling the A business. Unfortunately this business venture did not succeed and, after six months, the husband sold his interest in the business to his partner at a loss of $42 000.
The parties then sold their land at R the net proceeds of sale being $218 326. These monies were used to repay the National Australia Bank, to clear business debts and to pay loan repayments in respect of the wife’s motor vehicle.
Unfortunately, the wife was diagnosed as suffering from breast cancer and depression in 2000. The wife had to cease her employment and she underwent two operations.
The parties encountered difficulty in selling their previous home S. But it sold in January 2001, the net proceeds being $250 000. The parties then arranged for their company L Pty Limited to purchase the freehold and leasehold of Q in Queensland for the M Family Trust. The purchase price was $226 960.
In 2002 the wife commenced part time employment with O.
In October 2003 the company U Pty Limited as trustee for the G Trust purchased the leasehold and the freehold of a shop at P in New South Wales. The purchase price was $320 000. The husband borrowed $300 000 from the National Australia Bank and used some funds from the L Pty Limited overdraft. The husband also later borrowed $99 000 from his sister, raised $167 000 on credit cards and used other funds to undertake a substantial renovation of the shop. Within a couple of weeks of this purchase the husband left the former matrimonial home at C and commenced residing above the P shop. The husband says that this was the time of the parties’ separation although the wife disputes this.
In December 2003 the wife commenced employment as a part time switchboard operator at D.
In April 2004 the husband returned to the C home for a couple of days. During this period the wife informed the husband that she regarded the marriage as over. I accept the wife’s evidence and regard this to be the time when the parties separated.
The husband opened the P business in late June 2004. He failed to make provision for payment of goods and services tax and accumulated a substantial liability to the Australian Tax Office. This necessitated a sale of the business. The husband sold the business for $452 925 including stock adjustment on 1 July 2005. The net proceeds of sale were insufficient to discharge the husband’s debts which came to $532 100. As a consequence, U Pty Limited was in overdraft.
In March 2005 the husband sold the Q property for $315 000. After paying various debts and the M Family Trust overdraft the balance of the proceeds were loaned to U Pty Limited to reduce debt. Such debts were monies loaned by the husband’s sister and the husband’s credit card debts.
U Pty Limited was also subject to a claim by two former employees of the P business for alleged unpaid wages to a total of $126 170. This claim was settled in March 2006 by a payment of $2000 to each of the employees.
In April 2006 the husband arranged for a new trust, which he had set up, to purchase the property at E, South Australia for $384 000. This trust was the M Trust. The trustee is T Pty Limited. This purchase was funded entirely from borrowings including $100 000 from the husband’s sister P.
Alleged non-disclosure by the husband
One of the main issues in these proceedings is an allegation by the wife that the husband has failed to disclose his true financial position. In particular, it is alleged by the wife that the husband has a superannuation fund which he has not disclosed and that the Court should regard such undisclosed superannuation fund as having a value of at least $150 000.
There are various parts to this submission.
Firstly, it is submitted that the wife has not had a detailed understanding of the parties’ financial affairs because generally, it has been the husband who has attended to these matters. I accept this. He has been the party who has sought financial advice from his accountants, Y and Co over the years in respect of the businesses and the structure of companies and trusts through which the parties have managed their financial affairs. In recent years he has not consulted the wife about business decisions and his most recent business ventures, the purchase of the P business and purchase of the E property in South Australia, have been decisions taken by the husband without involvement by the wife.
Secondly, it is submitted on behalf of the wife that the husband failed to disclose the correct level of his income in each of three financial statements sworn or affirmed by him in these proceedings. For instance, in his financial statement sworn or affirmed on 23 November 2004, the husband said that his total average weekly income was $408. This was said to include salary from the company U Pty Limited, distribution of income from the M Family Trust and director’s fees from the company L Pty Limited. The husband also said that expenses paid on his behalf by the company U Pty Limited were $234 per week. This is a total of $642 per week.
Yet the actual position of the husband’s income for 2004 / 2005 as disclosed in his income tax return for the year ended 30 June 2005 was $78 387 after allowing for a capital gains tax liability. This is $1507 per week, a considerably different position from that disclosed by the husband to this Court.
I note that the husband’s income tax return for the relevant financial year was not prepared until recently. Also, there is a level of complexity in his financial affairs. But it is difficult to accept that the husband would not have had a more accurate idea of the level of his income. What he disclosed in his financial statement is less than one half of his actual income. In the absence of a satisfactory explanation I conclude that he has done this for the purpose of under-stating his income.
In relation to the husband’s financial statements sworn or affirmed on 21 December 2005 and 7 September 2006 the husband stated his income as being $346 and the source of the income as being distribution of income from the M Family Trust. This represents the weekly component of the $1500 per month which the husband was to receive pursuant to the orders of this Court dated 19 April 2005. Yet again, in view of the income tax returns it is difficult to understand why the husband understated his income.
The other basis for the non-disclosure submission is as follows. The husband made a general inquiry to Westpac Banking Corporation on 17 January 2005 about the possibility of opening a business account for U Pty Limited. The Westpac record of this inquiry included a notation to the effect that the husband had superannuation with the National Australia Bank. The husband denied that he informed the Westpac officer this. The husband also made a home loan application to the I Bank (Australia) Limited dated 10 April 2006 for a loan to fund his proposed purchase of the property at E, South Australia. In this application the husband’s assets were recorded as consisting not only of the properties at C, A and P, the husband’s Fairlane motor vehicle, $100 000 in the I Bank and household items but also superannuation with a current value of $150 000.
The husband said during cross-examination that he had not informed the officers of the I Bank that he had superannuation with a current value of $150 000. He said that he had an overdraft facility with National Australia Bank for $150 000. The husband denied that he had an undisclosed superannuation fund with a value of approximately $150 000.
Both the husband’s accountant Mr C and an officer of the I Bank Mr S were cross-examined in relation to this matter. Mr C said that he did not recall discussing the husband’s assets and liabilities with the I Bank.
Mr S, Retail Lending Manager of the I Bank sent a letter dated 3 October 2006 to the husband’s solicitors during the course of these proceedings at the request of the husband’s solicitors. This letter came into the evidence and Mr S was cross-examined about its contents. Mr S was asked about a reference in the Bank’s internal document “Loan Approval Certification” form to the husband having $150 000 in credit funds with the National Australia Bank. It was suggested to him that this was a reference to a superannuation fund in the amount of $150 000. Mr S replied that the Bank had nothing on their file about this and he referred to the letter he sent referred to above. Mr S indicated that, as set out in the letter, the Bank’s recollection was that the husband had a business overdraft facility of $200 000 with the National Australia Bank which had $150 000 in credit, that being information which had been provided to them by the husband. It was also suggested to Mr S that the form should have included a reference to the husband having $150 000 superannuation and he agreed. While this would have been consistent with the reference in the Home Loan Application to “Current Value of Superannuation $150 000” referred to above, I must say I am unable to accept that this single reference in the Home Loan Application is persuasive that the husband has an undisclosed superannuation fund of $150 000.
The remaining items of relevant evidence are three cheque butts for cheques drawn in favour of the National Australia Bank by the husband on the U Pty Limited account with National Australia Bank. The first is dated 18 January 2005 for $2471.16 described as “superannuation for December quarter”, the second is dated 16 February 2005 for $103.59 described as “Superannuation” and the third is dated 27 April 2005 for $2539.08 and described as “Superannuation Pay”.
Although I was not addressed on the relevance of these cheque butts by learned counsel for the husband, I am far from persuaded that they provide evidence of an undisclosed superannuation fund. As indicated above, the parties have a superannuation fund, L Pty Limited Superannuation Fund. This owns units in H as also indicated above which in turn owns the C home. Funds were borrowed to purchase the home. At the relevant time, there was still a debt in respect of C. In addition, when the husband purchased the P shop he drew down monies on the L Pty Limited overdraft. It might be that the cheques were for the purpose of servicing these loans.
In any event, there is no document of the National Australia Bank other than the three cheque butts tendered in these proceedings to support the assertions of the wife about such a superannuation fund. In my view, bearing in mind the complexity of the husband’s financial affairs, simply to tender three cheque butts which refer to superannuation as evidence of an alleged undisclosed superannuation fund is drawing a very long bow, as it were. I am unpersuaded that the husband has an undisclosed superannuation fund.
The third part of the submission is that the husband failed to inform the wife that he was making arrangements to sell the business of the P shop notwithstanding that the wife was presenting an application to the Court for injunctions in respect of the P shop.
On 14 July 2005 the wife was successful in an application by her for various injunctions to restrain the husband from dissipating assets. On that occasion I made orders including the following:
“That the husband do all acts and things necessary to prevent [L] Pty Limited from disposing of the real estate at [D] NSW or any leasehold interest attached thereto.
That pending further order the husband is restrained from selling or leasing the premises at [P] without giving 14 days prior written notice to the wife or her solicitors.”.
That very day, 14 July 2005, the husband completed the sale of the lease of the business of the P shop for $452 925 including stock adjustment as I have said.
It is true that the injunction in relation to the P shop only restrained the husband from selling or leasing the freehold without giving notice to the wife or her solicitors. But in my view, it was reprehensible for the husband not to have disclosed to the wife at least by the time the proceedings for the injunction were before the Court, the fact that he had arranged for U Pty Limited to enter into a contract for sale of the business. Those advising the husband are experienced family law practitioners and are only too aware of the obligation of a party to make true and frank disclosure of their financial situation. The husband failed to do this, certainly on this occasion and it must reflect poorly on him.
In relation to the general submission that the husband has failed to disclose his true financial position, while there are some valid criticisms as indicated above, I am not persuaded that the husband has an undisclosed asset. I am also fortified in this view by the fact that despite the wife asking her accountants to investigate whether there was any evidence of a failure by the husband to disclose assets, the accountants were unable to report any non-disclosure or waste of assets by the husband.
It is true that the accountants were unable to verify $64 331 in costs recorded as having been spent on renovation of the P shop. But I am satisfied that a significant part of such expenditure would have related to costs of acquisition of the property and business.
The wife’s gambling
Another major issue in the proceedins was the extent of the wife’s gambling and how the Court should regard this.
It was alleged on behalf of the husband that the wife has been a prolific gambler, particularly over the later years of the marriage, and that she has lost significant amounts of funds which otherwise would have been available for purposes of the household.
The wife said that she has been playing poker machines since approximately 1994 primarily at the Casino, Brisbane two or three times per week. The wife said that she usually plays in the company of her friend Ms L or the parties’ daughter G. The wife said that occasionally she plays poker machines at a Casino on the Gold Coast but that this is usually on occasions when she accompanies friends or her mother on holiday with her from Melbourne.
The wife plays poker machines under two names, her married name, Mrs M and her now-preferred name Ms V. Player records provided under subpoena by Conrad Treasury state that for the period commencing in July 2000 and concluding in May 2006, total bets for Ms V were recorded as having been $1 258 638.20 and total losses as having been $108 276.66.
The wife said in effect that these records overstate the amount of gambling activity by her. She said that she has two gold cards. Such cards are apparently provided to a player who accumulates certain credits. The cards entitle the cardholder to benefits such as free or discounted meals and free parking.
The wife said that she was in the habit of asking her friend Ms L to use the wife’s gold card in her poker machine so that the wife could also accumulate credits from Ms L’s machine. The wife said that Ms L did not have a gold card for a couple of reasons. Firstly, because she did not have a driver’s licence and therefore had no acceptable means of identification. Secondly, Ms L did not want her son to know that she played poker machines.
The wife also said that she would often ask other players if she could insert her card into their machine which they usually agreed with thereby enabling her to build up a lot of credits.
I accept that the wife used her gold card in this manner. I accept therefore, that the player records produced by the Casino do not accurately present the level of gambling by the wife. I also note that the wife had a $50 000 poker machine win in approximately 2000. But even taking these matters into account, in my view, it is clear that the wife has spent a lot of money on gambling. The difficulty is that the amount spent is unable to be quantified. I shall refer to this again below.
Credit
The husband was forthright in his answers to questions during his cross-examination. He was somewhat flamboyant in style and at one point took great offence to a suggestion to the effect that he only worked for a few hours each day in the A shop. But he quickly regained his composure and apologised for his outburst. In the main I thought his evidence generally was truthful although I had the impression that he sought to understate the extent of his unemployment.
As also indicated above, the husband understated his income in his financial statements and this must reflect poorly on him.
The failure of the husband and his legal representatives to inform the wife, her legal representatives and the Court on 14 July 2005 that the husband had sold the lease of the P shop business also reflects poorly on him. I think this was consistent with the husband’s behaviour during the marriage in that he was the person who made the business decisions and he would decide when the time had arrived to sell an asset. He never really involved the wife much in such matters. I shall refer to this matter again below.
I have more reservations about the wife’s evidence. She was less forthright in her evidence than the husband. She gave me the impression in her answers to many questions that she was trying to promote her own case rather than give a responsive answer.
In particular, I had the impression that the wife very much understated the husband’s contributions. I shall refer to this again below.
There were some inconsistencies between the wife’s evidence and that of the parties’ daughter G, particularly in relation to the wife’s gambling. I do not have any confidence that the wife and G presented to the Court an accurate account of the level of the wife’s gambling.
In addition, the wife has shown herself to be a dishonest person by dishonestly using her Casino gold card in a manner which cannot have been intended by the Casino, so as to endeavour to gain an advantage for herself.
Generally I had a poor view of the evidence given by G. I thought she was quite partisan to her mother’s case. She found it difficult to concede that her father had done much at all over this very long marriage either in relation to the various businesses or as a parent to her and her siblings.
The Applicable Law
The Court must be satisfied that in all the circumstances it is just and equitable to make an order. This is provided by s 79(2) of the Family Law Act 1975.
The Full Court of this Court in its decision in the case of Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355 said as follows:
“The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to 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 (and various other well known authorities).”
Despite some criticism of this decision by the majority of the Full Court in Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414, see for example paragraphs 36 and 37 at page 79,641 and paragraph 63 at page 79,646, in my view it is not incorrect to take the approach to the hearing of property proceedings as described in Hickey above.
Property available for division
As should be clear from the above, there is a level of complexity about the parties’ financial affairs. This is largely because the parties have used numerous trusts and corporations as vehicles through which property is owned and businesses have been operated. The structure has been set up by the husband on the advice of his accountants over the years. No doubt there have been some taxation advantages although in the case of the L Superannuation Fund it would appear that a unit trust, the H Unit Trust, has been used to assist the parties to achieve complying status for the Fund with taxation and perhaps other legislative requirements.
Each of the parties has been assisted in these proceedings by forensic accountants. The wife has had her accountant Mr B of T (Qld) Pty Limited conduct an investigation into the husband’s financial affairs and to prepare a valuation of the parties’ interests in the various trusts. The husband has been assisted in the proceedings by his accountant Mr C of Y and Co Pty Limited. Mr C was cross-examined on behalf of the wife. After some discussions between them the accountants arrived at agreement about the value of the parties’ interests in the various trusts including loan accounts. It has been agreed that their combined superannuation interests have a value of $505 662 and that their non-superannuation interests have a value of $322 410.
On this basis the pool of available property is as follows:
$
1. Husband’s superannuation (before realisation costs)
290,561
2. Wife’s superannuation (before realisation costs)
215,101
3. Balance of husband’s and wife’s interests in trusts
322,410
4. Husband’s motor vehicle
5,000
5. Contents of husband’s home
500
6. Husband’s legal fees (add back)
85,434
7. Husband’s bank account
585
8. Contents of wife’s home
8,875
9. Wife’s legal fees (add back)
67,943
10. Wife’s shares
1,500
11. Wife’s Credit Union account
17
12. Wife’s Toyota Corolla motor vehicle
12,000
13. Payment to wife by W, Solicitors (add back)
3,095_____________
$1,013,021
The liabilities are as follows:-
$
1. Husband’s tax liability
711
2. Husband’s credit cards
106,236
3. Wife’s liability to daughter G
60,000
4. Wife’s credit cards
66,698
_____________
$233,645
Surplus
$779,376
Contributions
As indicated above, at the commencement of the marriage the parties’ circumstances were modest. The wife had savings of $3000. Apart from this, neither party had any property of significant value. So the wife made an initial contribution of these funds as well as the $5000 redundancy payment which the wife received very shortly after marriage and prior to the birth of the parties’ eldest child G.
The wife returned to full time work after G’s birth. The wife continued to work full time in various clerical positions until the family left Melbourne in 1986 subject to her taking leave of between three and six months when each of the two younger children were born.
The wife said that during this early period of the marriage the husband had numerous periods of unemployment. I accept that the husband changed jobs and that he was unemployed between jobs. But it is clear that he worked in the hospitality industry as a waiter and in take-away food businesses during this period. I am not persuaded that over this period he was largely unemployed as suggested by the wife.
The parties both worked in their shop in L which they operated for approximately six months before selling the business for a profit.
It is also clear that they both worked in their shop at A, New South Wales which they purchased in 1986. They worked in this business until they sold the business leasehold in late 1994. Then the wife commenced working in a clerical position at the N, A.
After the wife moved to Brisbane in 1996 she worked in various full-time clerical positions unless becoming ill with breast cancer in 2000.
The husband was unemployed between the time the parties sold their business in A and the purchase of the business at S on the Gold Coast in 1999. The family’s income came from the rental produced by the A shop and the wife’s employment.
The husband also appears to have been unemployed after the sale of the S business until the purchase of the P shop in 2004.
As I have said above, I had the impression that the wife and G endeavoured to minimise the effort the husband put into operating the shops. In my view, this flies in the face of the reality that it was the husband who was responsible for acquiring the various businesses, working with accountants and solicitors in establishing the various trusts, arranging finance and having the ongoing responsibility for the financial affairs of the businesses and the family.
In weighing the parties’ financial contributions in my view the wife is a little ahead of the husband, but nothing like the extent which she would like the Court to find. She started ahead of him as I have said and I do not think this has changed. But the margin is small, particularly because the marriage is a long marriage.
In relation to the parties’ contributions to the welfare of their family constituted by themselves and the children again in my view, the wife is slightly ahead of the husband. The husband conceded that the wife was the children’s primary parent. I accept this. But this is not to say that the husband did not make a reasonable contribution to the children. The wife appeared to be unable to make any concessions about this. G also found this difficult but somewhat begrudgingly conceded that her father may have driven the children to school once or twice a year, taught one of the children to ride a bicycle and did some other things on a few occasions.
The husband said that for much of the time the children were cared for by babysitters because he and the wife were working long hours. He said he cared for the children when he was not working. He said that he played with them, fed them and dropped them off at school.
As I have said, I have difficulty in accepting the accuracy of the evidence of the wife and G. I suspect that the true position in relation to these matters is somewhere between the accounts of the husband and the wife.
The evidence of the wife and G was similar in relation to work around the home. The wife was unable to concede that the husband had done much at all around the home over the entire period of marriage.
The husband said that he did the shopping with the wife each Saturday. He said that he helped with the domestic work and mowed lawns, cleaned out gutters, pruned trees and installed the front gate.
I must say, in my view, it is likely that the husband has overstated the amount of domestic work undertaken by him. I doubt whether he undertook much domestic work at all until perhaps after the A business was sold and the parties were becoming rather estranged. But I accept that he did much of the outside work although I am also satisfied that the wife did quite a bit of this including mowing lawns.
In terms of the parties’ contributions overall had it not been for the wife’s gambling, in my view, the wife’s contributions should be assessed as having been greater than those of the husband although not by a significant margin. But it is clear that the wife has allocated significant sums of money to her interest in gambling on poker machines and lost money which could have been directed to the benefit of the family. As I have said, I am unable to quantify the losses. In these circumstances, doing the best I can, I propose to arrive at a finding that overall, the parties contributions have been equal.
s 75(2) matters
The wife is 59 years of age. There are some limitations in terms of her health. The wife is in remission from breast cancer suffered in early 2000. She has suffered intermittently from clinical depression. Her General Medical Practitioner Dr D has prescribed medication for the depression and also arranged counselling. Dr D has the view that the wife is unfit to work at present but thinks her prognosis is good. This appears to be on the basis that completion of these proceedings will remove one of the factors in the wife’s depression.
Despite her doctor’s opinion, the wife has been working. She commenced working at a call centre for W, apparently a Government service. At the time of the hearing, the wife had only completed five days in the position. She said that her employer informed her that she was not able to achieve the required speed in undertaking the necessary tasks and that she had to request her employer to permit her another week to develop the required skills. The wife is not confident that she will be able to retain this position of employment. The wife was earning $615 per week from this employment. In addition, she has been in receipt of the $346 per week paid from the M Family Trust pursuant to orders of this Court. The wife has also had the benefit of occupancy of the C property.
The wife estimates her weekly personal expenditure as being $1157. But this includes $454 on credit card payments. The parties’ daughter G has been assisting the wife by paying for food, electricity and telephone.
On the other hand, the husband is 62 years of age. He has Type 2 diabetes, high blood pressure and he is anticipating surgery on his shoulder. He has many years experience in business, particularly the take-away food business. One would expect him to be able to resume the operation of a business once the stress of these proceedings is behind him.
His income consists of the $346 per week paid pursuant to the orders. He appears to have been living off credit cards. What his weekly personal expenditure is at present is unclear to me.
But in any event the trust structure is going to have to be unravelled, at least to some extent as a consequence of these proceedings.
On present indications, the wife might well obtain an inheritance at some future point if her mother does not change her will and the wife survives her mother. This is all rather uncertain. Much was made of this on behalf of the husband as a significant s 75(2) matter. On present indications it appears that the wife and her sister would share equally in their mother’s estate.
The wife’s mother’s home appears to have a value in the vicinity of $235 000 and there is a mortgage thereon of approximately $85 000. One could only guess at what the position might one day be in relation to this matter.
It is of some relevance, however, particularly because $30 000 of the parties’ funds was used towards satisfying the Bank and thereby saving the wife’s mother’s home from foreclosure by the Bank.
But, in my view, the most significant s 75(2) matter is the difference in the parties’ future income-earning capacities. In my view, the husband is ahead of the wife in this regard to some extent.
I am not confident that the wife will have as strong a capacity for earning income at the level which I think the husband will be able to generate. The wife applied for numerous full time positions of employment recently all of which had been unsuccessful.
In my view, upon a consideration of the relevant s 75(2) matters there should be a set off of 4 percent of property in favour of the wife.
The fourth step
The wife is to have 54 percent of the property available for division. This is property with a value of $420 863.
The husband is to have 46 percent of the available property. This is property with a value of $358 513.
In the absence of valuation evidence of the items of real estate and further submissions about the trusts and the superannuation, I find myself unable to make orders which would reflect my findings.
Accordingly, I shall require the parties to re-list these proceedings for further submissions about the form of the orders including valuation evidence if necessary.
I certify that the preceding one hundred and fifteen (115) paragraphs are a true copy of the reasons for judgment of Judicial Registrar W P Johnston
Associate: ___________________
Date: 5 February 2007
IT IS NOTED that this judgment for all publication and reporting purposes be referred to as Morrison & Morrison
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Costs
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Remedies
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Statutory Construction
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