O'Malley & O'Malley
[2009] FamCA 52
•5 February 2009
FAMILY COURT OF AUSTRALIA
| O’MALLEY & O’MALLEY | [2009] FamCA 52 |
| FAMILY LAW – PROPERTY – non disclosure – consequences – weight to be given to initial financial contribution – liability for post separation debts FAMILY LAW – SPOUSAL MAINTENANCE – unformulated claim – dismissed |
| Family Law Act 1975 (Cth) ss 79(4), 75(2), 117(2A)(f) Family Law Rules 2004 Div 13.1.2, 13.04(1), Part 13.2, Part 12.2, Chapters 15 & 16 |
| Weir & Weir (1993) FLC 92-338 Black & Kellner (1992) FLC 92-287 Chang & Su (2002) FLC 93-117 Rice & Asplund (1979) FLC 90-725 Chorn & Hopkins (2004) FLC 93-204 M & M [1998] FamCA 42 C & C [1998] FamCA 143 Pierce & Pierce (1999) FLC 92-844 Bevan & Bevan (1995) FLC 92-600 Mitchell & Mitchell (1995) FLC 92-601 K & K [2002] FamCA 1150 |
| HUSBAND: | Mr O’Malley |
| WIFE: | Ms O’Malley |
| FILE NUMBER: | MLF | 2831 | of | 2006 |
| DATE DELIVERED: | 5 February, 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Brown J |
| HEARING DATE: | 19 December, 2008 |
REPRESENTATION
| THE HUSBAND: | In person |
| COUNSEL FOR THE WIFE: | Mr. T.J. Puckey |
| SOLICITOR FOR WIFE: | Taussig Cherrie & Assoc |
Orders
That all prior orders and arrears pursuant to previous orders be discharged, save parenting orders in respect of the parties’ child … born … August, 1996.
That on or before 26 February, 2009 the parties do all such acts and things and sign such documents as may be required to sell the real property situate at and known as W Street, C, in the State of Victoria being the whole of the land more particularly described in Certificate of Title volume … folio … (“the real property”) and by way of consequential arrangements that should be made for the purpose of effecting a sale, and subject to any agreement to the contrary between the parties :
(a)the listing price for the real property shall be as agreed by the parties and, if there is no agreement, be as advised by a valuer nominated by the President of the Victorian Division of the Australian Property Institute, who is also a licensed real estate agent;
(b)the real property shall be listed for sale by private treaty, on a sixty day contract, by an agent agreed to by the parties and, if there is no agreement, with the agent nominated to advise the value pursuant to the preceding sub-paragraph;
(c)in the event the real property has not been sold by 23 April, 2009 the parties shall make all such arrangements and do all such acts necessary to procure a sale by public auction, without reserve, such auction to take place within a further period of one month, by an agent to be agreed to by the parties and, if there is no agreement, the agent nominated to advise the value pursuant to sub-paragraph (a) hereof; and
(d)the wife shall have the conduct of the sale and keep the husband informed, in writing, of all relevant dates and events including (but not limited to) dates of inspection and any maintenance or preparation work considered necessary prior to sale.
That upon completion of the sale the proceeds be applied as follows :
(a)first, to pay all costs, commissions and expenses of the sale and to pay any rates and taxes and like apportionable outgoings outstanding in respect of the property; and
(b)second, the balance then remaining shall be held in the names of the parties on trust pursuant to these orders in the trust account of the solicitors for the wife.
That pending the settlement of the sale of the real property :
(a)the wife have the sole right to occupy the real property and during occupation she must ensure the real property is insured;
(b)the parties hold their respective interests in the real property upon trust pursuant to these orders;
(c)neither party encumber the real property without the consent in writing of the other party; and
(d)the husband be and is hereby restrained from attending at the real property, save :
(i)with the consent in writing of the wife; or
(ii)if an auction is held at the real property, to attend the auction.
That on or before 26 February, 2009 the parties do all acts and things and sign all necessary documents to effect the sale of all shares held in their joint names and by way of consequential arrangements that should be made for the purpose of effecting a sale, and subject to any agreement between the parties to the contrary :
(a)the wife shall have the conduct of the sales;
(b)the wife may choose the selling agent (whether a stock broker or internet service); and
(c)the wife shall advise the husband as soon as practicable of the sale of a parcel of shares, including the sale price, brokerage, any additional charges and nett proceeds;
and the nett proceeds of the sale of shares shall be held in the names of the parties on trust pursuant to these orders in the trust account of the solicitors for the wife.
That on or before 19 February, 2009 the husband and wife each do all such acts and things and sign all necessary documents to direct and authorise Dawes & Vary, Lawyers to distribute funds currently held in trust on behalf of the parties as follows:
(a)the sum of $30,608 to the Australian Taxation Office, being capital gains tax, income tax and Medicare levy assessable in respect of the sale of real properties at G Street, R Street, H Street and A Street, and the sum paid be categorised as follows :
(i)in respect of the wife, for the year ending 30 June, 2008 - $9,088;
(ii)in respect of the husband, for the year ending 30 June, 2008 - $15,032;
(iii)in respect of the husband, for the year ending 30 June, 2009 - $6,488;
(b)the sum of $29,634 to S Group Accountants of C;
(c)any capital gains tax, income tax and Medicare levy calculated by Mr. T as likely to be assessed in respect of either party as a result of the sale of shares pursuant to paragraph (5) hereof.
That a pool be notionally created, by adding together the following sums :
(a)funds held in trust in the names of the parties with the wife’s solicitors, pursuant to paragraphs (3) and (5) hereof;
(b)the balance of funds held in trust in the names of the parties by Dawes & Vary, Lawyers after payment of sums pursuant to paragraph (6) hereof;
(c)funds held in trust in the names of the parties by Kennedy Wisewoulds; and
(d)$269,691 (representing the found values of shares in the wife’s name, shares sold pursuant to orders herein, boats and bikes sold by the husband, Porsche car in the possession of the husband, BMW car in the possession of the wife and superannuation in the husband’s name).
That upon the settlement of the sale of the real property the funds held in trust which form part of the pool be disbursed as follows :
(a)to the wife a sum which, added to $61,696, is equivalent to 65% of the pool AND THE COURT DECLARES that $61,696 represents assets in the wife’s possession;
(b)the sum of $1,600 to the wife in satisfaction of the costs order made against the husband on 19 March, 2007; and
(c)the balance to the husband AND THE COURT DECLARES that $207,995 of the husband’s entitlement, as found in the judgment published this day, represents assets in and deemed to be in the husband’s possession.
That unless otherwise specified in these orders :
(a)each party be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and for that purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank’s record thereof; insurance policies are deemed to be in the possession of the beneficiary thereof; superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for the payment out of such entitlements; and the chattels in the real property are deemed to be in the possession of the wife; and
(b)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
That within fourteen days hereof the wife do all acts and things and sign all necessary documents at the expense of the husband, if any, to relinquish her entitlements to any benefits or distributions as a beneficiary of the O’Malley Family Trust (“the trust”) and to retire as a trustee of the trust and thereafter the husband shall be liable for and indemnify the wife against all claims of payments, debts and liabilities of whatsoever nature and kind, including any liability for any taxation arising out of the wife’s involvement with the trust, whenever any such liability arose, and without limiting the generality of this order, indemnify the wife against all claims by the Australian Taxation Office in respect of superannuation guarantee payments.
That in the event a party refuses or neglects to comply with a provision of these orders :
(a)pursuant to s.106A of the Family Law Act 1975 a registrar of the Family Court of Australia in Melbourne is hereby appointed to execute all deeds and documents in the name of the defaulting party, and do all acts and things necessary to give validity and operation to these orders; and
(b)the party in default is ordered to pay any and all foreseeable damages to the other party caused by the default; and
(c)the party in default is ordered to pay all reasonable costs incurred by the other party for the purpose of enforcing this order and proving his or her damages.
That it shall be sufficient authority for a registrar to act pursuant to paragraph (11) hereof to have before him or her an affidavit sworn by a solicitor for a party in which the solicitor deposes that the other party has refused or neglected to comply with a provision of this order and such default has continued for no less than seven days, and detailing the relevant provision, the acts undertaken to have him/her comply and his/her response (or lack of a response).
That each party be at liberty to file and serve any written submission in relation to the costs of the applications for final and interim property and spousal maintenance orders, including reserved costs, within 28 days hereof, and :
(a)each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party; and
(b)each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
That within 24 hours of the filing of any submissions pursuant to this order, the party filing it fax a copy to the associate to the Honourable Justice Brown on facsimile number ….
That the court requests the solicitors for the wife to provide to the husband, within seven days hereof, a copy of any correspondence addressed to them by the former solicitors for the husband which could reasonably be found to constitute an offer in writing to settle the proceedings, as described in s.117(2A)(f) of the Family Law Act 1975.
That all extant applications be otherwise dismissed, save applications for costs.
That these proceedings be removed from the List of matters awaiting finalisation.
That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.
IT IS NOTED that publication of this judgment under the pseudonym O’Malley & O’Malley is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 2831 of 2006
| MR O’MALLEY |
Husband
And
| MS O’MALLEY |
Wife
REASONS FOR JUDGMENT
On 29 September, 2006 the husband filed the application which commenced these proceedings. In it he sought final parenting orders in respect of the parties’ son, now aged 12, and final property orders. He was represented by Kennedy Wisewoulds who remained on the record until filing a Notice of Ceasing to Act on 1 October, 2008. The husband was represented at most of the hearings between the initiation of the proceedings and the concluding trial.
As this judgment will relate, the husband failed to comply with numerous orders and directions made in the course of the proceedings, including directions made on 7 August, 2008 fixing a timetable for the filing of evidence in the trial, which was to commence on 15 December, 2008. His solicitors having filed the Notice of Ceasing to Act on 1 October, 2008, the husband appeared without legal representation on 15 December, 2008 and having filed no material. Counsel for the wife sought that his application be struck out and the wife’s case proceed on an undefended basis, an application which was not granted. Instead, the husband was ordered to file and serve a letter setting out with specificity the final financial orders sought by him and a statement of his financial circumstances by 12 noon on 17 December, 2008, and was given leave to give oral evidence in chief. He complied with the directions. The statement of the final orders sought by him is annexed to this judgment marked “A”; also annexed, marked “B”, are the final orders sought by the wife.
EVIDENCE
Findings are made on the balance of probabilities having regard to the evidence and my observations of the demeanour of witnesses. In what follows, statements of fact constitute findings of fact.
At the time the husband filed his initiating application, he also filed a financial statement, sworn on 29 September, 2006. He subsequently filed four affidavits, affirmed (variously) on 7 December, 2006, 5 March, 2007 and 30 January, 2008 (two affidavits). These affidavits related to applications for interim spousal maintenance, interim property orders and applications by the wife for enforcement of earlier orders. Between 30 January, 2008 and the trial, no documents were filed by or on the husband’s behalf. I allowed the husband to rely on the financial statement and affidavits filed when he was represented insofar as they were relevant to the issues to be determined in the trial, and on the basis that no adverse inferences would be drawn against the wife were her counsel not to contest assertions made in those earlier affidavits, as it was not until the trial commenced on 19 December, 2008 that leave was given to rely on them.
The wife relied on an affidavit and a financial statement filed on 8 December, 2008.
Also in evidence was a single expert report containing an assessment of the husband’s interest in the O’Malley Family Trust. It was prepared by Mr. Y and is dated 30 April, 2008.
I must find that the court can have little confidence in the husband’s capacity for objective recollection. He tended to blame others for problems laid at his door; “others” included the wife, his accountant, solicitors, barristers, this court, a magistrate and police. His numerous assertions of willingness to make payments to creditors and the wife were at odds with objective reality, as were his assertions of compliance with court orders. At times he presented as petulant and he may well have dealt with the proceedings in an immature way, simply ignoring those aspects he did not like and, as he said, getting on with his life. Nevertheless, his distress at events since separation was real.
As the wife sought to rely on the husband’s failure to make full financial disclosure, it is useful to summarise the relevant statutory provisions.
Rule 13.01 of the Family Law Rules 2004 contains the general obligation to give full and frank disclosure of all information relevant to the case, in a timely manner.
Division 13.1.2 relates to the duty of disclosure in financial cases. Rule 13.04(1) contains a comprehensive list of matters which must be disclosed. Rule 13.04(1)(g) requires disclosure about any disposal of property made by the party, a legal entity (as defined in paragraph (c)), a corporation or a trust (as defined in paragraph (f)) that may affect, defeat or deplete a claim in the twelve months immediately before the separation of the parties or since the final separation of the parties. Rule 13.04(1)(h) requires advice of liabilities and contingent liabilities which must include liabilities to the Australian Taxation Office.
Part 13.2 provides for the disclosure of documents in all cases. The duty of disclosure applies to each document that is or has been in the possession, or under the control, of the party disclosing the document and is relevant to an issue in the case. A note to the rule contains a cross-reference to rules relevant to the documents which must be disclosed at a conference in a property case (Part 12.2) and at a trial (Chapters 15 and 16).
Rule 13.15(2) provides that a party commits an offence if he or she makes a statement or signs an undertaking which the party knows, or should reasonably have known, is false or misleading in the material particular.
Rule 12.02 provides that at least two days before the first court date in a property case, each party, must as far as practicable, exchange with each other party a copy of a number of specified documents. These include a copy of the party’s three most recent taxation returns and assessments and documents relevant to superannuation interests, including, if a member of a self-managed superannuation fund, a copy of the Trust Deed and the three most recent financial statements for the fund.
Further, the rule requires the provision of documents relating to any corporation or trust in relation to which a party has a duty of disclosure under Rule 13.04, including financial statements for the three most recent financial years.
Rule 12.05 then sets out the documents which must be exchanged before a conciliation conference. The list includes, if they have not already been exchanged, a copy of all the documents mentioned in Rule 12.02 as well as the documents specified in Rule 12.05(2)(c).
Thus, the rules provide a blueprint for production of documents. A person who acts for him or herself can be left in no doubt of what is required. The husband was legally represented until late 2008.
The husband relied on the fact that he either authorised his accountant to co-operate with the wife’s solicitors and provide documentation or took no steps to block her solicitors from obtaining documents from the accountant. While there will be circumstances where it is appropriate to provide an authority to a third party to produce documents requested by another party, this is not a means by which one can abdicate from one’s own responsibility to make full financial disclosure. Further, what the husband did was to put the costs of seeking documents which he was required to produce on to the wife; it was her solicitors who had to chase up the documents from his accountant, or at least attempt to do so. It was they who had to contact him when documents were not forthcoming. It was they who had to resort to preparing and serving subpoenas.
The evidence on which the husband relied made it very clear that he had numerous documents which he did not produce until trial, which were relevant to the proceedings. Numerous documents, equally relevant, which must have been within his possession or control, were not produced at all.
The husband candidly admitted the wife knew little or nothing of their financial situation prior to separation.
In Weir & Weir (1993) FLC 92-338 the court pointed out (at 79,593) a line of cases leading up to the decision of the Full Court in Black & Kellner (1992) FLC 92-287 in which the court discussed the duty of a party involved in property proceedings in this jurisdiction to make full disclosure of their financial affairs. The Full Court found that once it was established that there has been a deliberate non-disclosure, then the court should not be duly cautious about making findings in favour of the innocent party, pointing out that “to do otherwise, might be thought to provide a charter for fraud in proceedings of this nature”.
In Chang & Su (2002) FLC 93-117 the Full Court upheld the approach of the trial judge in that case who, the Full Court determined, did the best she could with limited material. At 89,196-7 Kay and Dawe JJ. (with whom Finn J. agreed) found that due to the findings of non-disclosure by the husband, the only imperative the trial judge could fall back upon was that the order be just and equitable. The Full Court quoted with approval the passage from Weir and Weir referred to above.
In K & K [2002] FamCA 1150 the Full Court considered an argument that the non-disclosure needed to be deliberate before the court could rely on it to make findings adverse to the non-disclosing party. At para.51 the Full Court rejected this argument, finding :
Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute.
Since that time, the obligation to make full financial disclosure has been spelt out even more clearly in the Family Law Rules 2004.
Full financial disclosure is not only important in cases where it is alleged that a party has dealt improperly with assets or hidden assets, or lied about cash flow or earning capacity. It can be particularly important when parties have structured their business dealings through a trust. It is important to know the real status of asserted debtors and creditors and where liability would lie in a liquidation or winding up. It is important to know the origins of taxation obligations, and to ascertain who had the benefit of funds to which they relate and whether funds which might have been available to meet them, have been used in other ways. It is important to know the nature of all relevant assets, and income earned. Until the very end of the trial the husband sought to introduce fresh documents to support claims he then sought to make, but he made no attempt to produce the documents earlier and in a number of areas the court was left with nothing but his assertions of indebtedness.
Overall, I find force in the wife’s submissions about the husband’s failure to make full and frank financial disclosure. The husband was legally represented for most of the proceedings. He acted for himself in the trial, as he is entitled, but he is not entitled to use that as a shield to deflect obligations cast on litigants. It is reasonable to find that his failure to make full financial disclosure stemmed from a reluctance to lay his past and current financial affairs open for inspection and analysis.
The wife’s case was meticulously prepared, her solicitors doing their best to fill the gaps left by the husband’s failure to make full financial disclosure. As the husband was not represented, the wife was not cross-examined by counsel. Asked questions by the court, she demonstrated little insight into the husband’s position. Her lack of involvement in financial matters during the marriage meant she had little personal understanding of the financial complexities of their situation. She was keen to retain the matrimonial home, and the lifestyle that went with it, and communicated a sense of entitlement to that lifestyle. Her concessions about the husband’s contributions were grudging. Nevertheless, I do have more confidence in her evidence than that of the husband.
PARTIES
The husband was 46 at the time of the trial; although he said he was 47 and, at one stage, 50, he deposed in an earlier affidavit to having been born in January, 1962. He has worked as a builder for most of his adult life and continues to do so. During the week he lives at N Street in C with his mother, in a home owned by her and which he built during the marriage. During the weekends he lives with Ms J, in her home in P.
The wife was 49 at the time of the trial, having been born in January, 1959. She lives in the former matrimonial home at W Street, C, with the parties’ son, aged 12. She has been out of the paid workforce for about 18 years.
CHILD
The parties’ son was born in August, 1996. On 1 June, 2006, in the Magistrates’ Court of Victoria, final parenting orders were made, by consent, pursuant to which the parties had joint responsibility for decisions about the child’s long term care, welfare and development. Pursuant to those orders, the child was to live with the wife and she was to be responsible for decisions about his day to day care. The husband was to have contact each alternate weekend from the conclusion of school on Friday until 6:00 pm. Sunday, from the conclusion of school on Wednesday until the commencement of school on Thursday, for half school holidays and on other special days. The orders provided that the husband be in substantial attendance during all contact periods. Both parties were represented in that round of proceedings.
Less than four months later, on 29 September, 2006, the husband sought the discharge of those orders. In lieu, he sought that the child live with him and spend time with the wife, broadly in the terms of the contact orders made on 1 June, 2006.
On 23 January, 2008, counsel for the wife sought to dismiss the husband’s application for parenting orders on the basis of the principles outlined in Rice & Asplund (1979) FLC 90-725. The case was adjourned to 31 January, 2008 and on that day, final parenting orders were made, by consent. Pursuant to them, the parties share parental responsibility for the child, who lives with the wife. The orders provide for the husband to spend alternate weekend with the child (from the conclusion of school on Thursday until the following Monday morning), and, in the alternate week, the period between the conclusion of school on Thursday until the commencement of school on Friday. There is also provision for school holiday periods and time on special days.
The child is enrolled at G School, in Year 7. He sees his father but does not stay overnight with him mid-week, as provided in the orders.
LEGAL PRINCIPLES
I propose to adopt the now well established approach to the exercise of the discretion under s.79. It is appropriate for the judge to identify the assets to be divided between the parties, identify the liabilities to be taken into consideration and then to determine the manner in which the assets ought to be divided having regard to s.79(4)(a), (b) and (c) considerations. Then having considered (d) to (g) of s.79(4) the court should determine what further adjustments should be made having regard to s.75(2) considerations, and consider whether the outcome is just and equitable.
CHRONOLOGY
To determine the present asset pool and the relevant contributions made by each of the parties, it is necessary to consider the parties’ personal circumstances prior to their marriage, during it, and after its demise.
The wife married her first husband in January, 1979. They had two children; daughters born in January, 1984 and July, 1985. She separated from her first husband in April 1989 and they were divorced in 1991. Final parenting and property orders were made, by consent, in 1990. Pursuant to them the wife had sole custody of the daughters, who saw their father on alternate weekends and during school holidays. The wife received $500,000 cash (in instalments, of which $250,000 was characterised as spousal maintenance), as well as the former matrimonial home in E, valued at approximately $341,000, and a car valued at $40,000. Until the daughters left home in January 2002, the wife received child support from their father, who also paid their private school fees until the completion of their secondary schooling.
In about 1988 the husband acquired a property at R Street, on which he built three units. When the parties met he was working as a builder for a company incorporated in 1975, of which the husband’s father was an initial director. The husband became a director in June, 1986 but held no shares in the company. He remained a director until October, 2008, when the company was deregistered.
The parties married in November, 1991. From the outset, the wife’s daughters lived with them. The husband owned the units in R Street; I am unable to find what equity he had in that property, but as he built the units, it may have been substantial. He owned a work ute and a Porsche, as well as the tools of his trade. He also brought to the marriage his skill and reputation as a builder. There is no reason to doubt his evidence of contracts made, and honoured, on a handshake and that neither he, nor those for whom he built, ever needed to resort to litigation.
At the time of their marriage the wife still owned the house in E, which was unencumbered, and was receiving cash instalments from her former husband of $12,500 a quarter, until 1995. The parties bought the land in W Street in 1991, for approximately $175,000. In March 1992 the wife sold her E home for $341,000. The proceeds of that sale, and the cash instalments received from her former husband, were applied towards building a home on the W Street property. In 1995 the wife received the balance of her cash entitlement pursuant to the property orders; two payments of $125,000 were made that year. The parties drew against those sums as they needed to complete and furnish the house. The husband built the family home, with the assistance of sub-contractors. The parties shifted into a caravan on site and the wife assisted with odd jobs, when she could.
The parties resolved to acquire investment properties, utilising the husband’s acumen as a builder. The first of these properties was B Street, which was registered in the wife’s sole name. The husband built a number of units on that property, which were let.
In 1994 or 1995 the parties bought a property at G Street, in the wife’s sole name. On the property was a home and four units, which were rented.
In 2000 the husband purchased a commercial property at A Street on which he built an office complex and a subsequent extension, the latter without proper permits. The property was tenanted during the marriage.
In 2000 the husband created the O’Malley Family Trust, a vehicle through which his business of MC Pty Ltd traded. The husband managed all financial aspects of that business and their investment properties.
In about 2003 the husband’s mother transferred a property at H Street to the husband as part-payment for work done by him constructing the home in which he now lives with her, in N Street. The property in H Street was tenanted during the marriage.
In March 2004, after a period of increasing unhappiness, the parties separated under the one roof. The home in W Street is large and it seems they resided at opposite ends. The husband’s office was also in that house. Whether before or after that separation under the one roof (it matters little), the husband commenced his relationship with Ms. J and began to travel to Melbourne every weekend, to live with her in her home in P.
While the parties both remained in the former matrimonial home, they sold units 2, 3 and 4 at B Street to reduce NAB debt. From mid-2005 solicitors representing the parties negotiated on their respective behalves. It is probable both wanted to stay in the former matrimonial home.
The wife deposed that at the time of separation the parties owned the following assets :
·Units 1, 2 and 3 at R Street $440,000
·H Street $270,000
·A Street $650,000
·Unit 1, B Street $165,000
Units 1, 2, 3 and 4 and a house at G Street $720,000
·Husband’s superannuation entitlements, approx. $ 90,000
·Joint share holding $ 8,267
·Wife’s share holdings $ 63,691
·Husband’s share holdings $ 28,429
·Ford Utility 2001 $ 10,000
·Porsche $ 65,000
·Ski boat $ 15,000
·Motor bikes and dirt bikes $ 10,000
·BMW $ 13,000
·O’Malley Family Trust, trading as MC Pty Ltd (value not known)
·Building work in progress (value not known)
The values are those attributed by her.
At the time of separation the parties had debts of some $1,030,000 made up of a business mortgage overdraft ($244,000), business and mortgage calculation loan ($126,000), market rate loan ($80,000) and home loan ($580,000). They may well have been living above their income.
In addition to income earned as a builder, the parties received rental from the various investment properties, which was handled by the husband. The wife’s evidence was of receipt of the following weekly rentals :
·G Street
Units 1, 2, 3 and 4, $130 per week each
House, $175 per week
·A Street, $350 per week
·H Street, $195 per week
·Unit 1, B Street, $160 per week
·Unit 1, R Street, $150 per week
·Unit 2, R Street, $140 per week
·Unit 3, R Street, $145 per week
The total gross rentals were thus $1,835 per week.
In the five years preceding separation the average income derived by the family trust from the husband’s employment as a builder was approximately $115,000 per annum.
On 8 May, 2006 there was an altercation between the parties; the wife alleged she was assaulted. On 9 May the wife obtained an ex-parte interim intervention order which required the husband to vacate the home. It was served on him that day. The wife’s application for an intervention order was listed for hearing on 1 June, 2006, having been adjourned from an earlier date of 16 May. Both parties were represented and further negotiations were conducted at the Magistrates’ Court. By consent, the intervention order was continued, without admission on the husband’s part. The intervention order made that day remained in force until 5 June, 2007.
The husband attached a copy of that order to his application filed on 29 September, 2006; it notes he was at court when it was made. The order, amongst other restraints, prohibited the husband from being at or within five metres of the home at W Street, save in the company of a police officer or to exercise child contact by prior agreement or pursuant to a court order.
As found, each of the parties had earlier consulted solicitors and those solicitors were involved in negotiations over a period prior to the application for an intervention order. On 1 June, 2006 (the day the continuing intervention order was made) final parenting orders were made, by consent, in the terms set out in paragraph 6 of this judgment.
From the husband’s perspective, he was thrown out of his home, for no legitimate reason. More than two years later, anger and distress permeated his evidence and it is probable that anger and distress motivated much of his conduct in, and during, this litigation, including his refusal to comply with orders for the payment of spousal maintenance, sales of property and procedural directions.
While maintaining his rage about the circumstances in which he was forced to leave his home, the husband did little to help himself. He appealed against the intervention order of 1 June, 2006 but failed to attend the County Court when the appeal was listed. The appeal was dismissed in his absence. Although the order allowed him to enter the home in the company of a police officer I am satisfied he made no attempt to arrange for police to accompany him so he could retrieve papers from his office. Initially he said the police were too busy to do this but then made it clear that he was not prepared to ask them to accompany him in what he saw as a humiliating role.
Prior to the parties’ separation the husband often worked on a Saturday; it is clear that he worked very hard. After forming the relationship with Ms. J, he travelled to Melbourne on Fridays and did not return to C until the following Monday; on his own account, he reduced the number of hours worked each week from 60 to 40. It is not possible to make detailed findings about his financial position at the time of trial, but I am satisfied he had been working regularly, building villas at the G development. Of the two hundred villas initially envisaged, he has built around seventy.
Until their separation, the wife paid household and personal expenses by drawing funds from an overdraft facility and using credit cards. The husband’s personal and family expenditure came from the same source. In the period in which they lived separately under the one roof, that arrangement continued; the husband continued to support the wife and the child, as he had throughout the marriage.
On 21 August, 2006 the husband opened a NAB account in his sole name, into which he deposited all income from his business and investments. By the time he filed his initiating application on 29 September, 2006, he was making no direct provision for the support of his wife and child. In the financial statement sworn on 29 September, 2006 and filed the same day, the husband made no mention of the new NAB account in his name; only by the issuing of subpoenas did the wife learn of its existence and that at 22 September, 2006, a week prior to the date on which the financial statement was sworn, some $21,000 was in that account.
On 21 November, 2006 the wife filed a response in which she sought spousal maintenance and final property and parenting orders.
In late 2006 the wife was advised by the Australian Taxation Office that two liabilities required immediate payment; the family trust had an outstanding assessment of some $60,000 and there was an outstanding assessment of some $33,000 in her name, being a capital gains tax liability on the sale of one of the units at B Street, which had been registered in her sole name. She proposed the sale of Unit 1, B Street to meet the taxation liabilities, given the husband’s advice that he had no funds to do so. The property was sold but the husband was not prepared to agree to release any of the funds to the wife to assist with her and the child’s living expenses.
On 7 December, 2006 orders were made for the disbursement of the proceeds of sale of Unit 1, B Street. From the nett proceeds of $157,000 were to come the costs associated with the sale, and payment of three ATO debts, being the $33,000 and $60,000 referred to earlier, plus a debt in the husband’s name of $26,000. From the residue, the husband was to receive $5,000 and the wife the balance, being $18,105.
I cannot say what the husband did with the $5,000 paid to him; it may well have gone towards legal expenses. Of the $18,105 received by the wife, she paid $4,191 in counsel’s and filing fees, $12,213 on living and household expenses for herself and the child and the balance on incidentals such as milk, newspapers and other day-to-day things for which she did not keep receipts.
Orders made on 7 December, 2006 also required the husband to meet the current mortgage instalments, household utilities and registration, insurance and maintenance costs of the wife’s car. The wife’s application for periodic spousal maintenance was adjourned to 7 March, 2007.
On 7 March, 2007 the spousal maintenance application was heard by Senior Registrar FitzGibbon, who reserved his judgment. Prior to judgment being delivered, the wife received disconnection notices relating to electricity, gas, Big Pond and Telstra and on 13 March, 2007 her phone was disconnected. It was her evidence that on 14 March, 2007 the husband attended the former matrimonial home and scattered unpaid bills over the front porch; I accept that occurred. At the request of the wife the matter was relisted urgently before Senior Registrar FitzGibbon on 19 March, 2007. The Senior Registrar directed the husband to comply with the orders of 7 December, 2006 and pay all sums and arrears by 21 March, 2007. In default of compliance he was to transfer shares to the wife on a trust for sale to meet his obligations. The categorisation of the proceeds of sale was to be determined by the trial judge.
The husband failed to comply with the orders of 7 December, 2006 and on 28 March, 2007, pursuant to s.106A of the Family Law Act 1975, a registrar of the court signed the documents necessary to transfer the shares to the wife.
On 30 March, 2007 Senior Registrar FitzGibbon delivered a judgment and ordered the husband to pay $400 per week, or $1,733 per calendar month, by way of spousal maintenance. If he failed to comply, the wife was to be at liberty to use funds from the sale of the shares.
The wife eventually sold a number of parcels of shares for $36,857 and that sum was deposited in her lawyer’s trust account. By mid-2007 the Local Council had issued a Complaint for outstanding rates, due and payable on 15 February, 2007. Funds were released from trust to allow the wife to pay outstanding rates, plus car repairs, car insurance and water rates; $6,103.25 was utilised for that purpose. On 7 December, 2007 the wife received final notices from the Water Company in respect of outstanding water rates, totalling $2,339.65. As it was clear the husband would not pay the outstanding sums, further money was taken from the monies held in trust. Sums were drawn down to pay other obligations of the husband pursuant to the orders of 7 December, 2006 and 30 March, 2007; by June 2008 the whole of the amount in trust had been used for these purposes. Since then the wife has received two payments of spousal maintenance (sent by the husband with the child) for August and October 2008.
On 20 November, 2007 the wife was served with two writs from NAB seeking to take possession of the former matrimonial home and the property at G Street as a result of mortgage defaults.
While the wife struggled to deal with creditors and used a capital sum to pay obligations imposed by the court on the husband, he went on a holiday to France with Ms. J and her family. He asserted he spent about $10,000 on that trip but as he produced no documents referable to it, the court can say nothing of the source of those funds. He said he was prepared to put that sum back into the pool.
The portfolio of investment properties had been negatively geared, secured by a facility to the NAB. The interest on the loans was some $2,500 per week and the debt rose as the husband failed to make payments on the loans, including the overdraft. On 3 December, 2007 the solicitors for the wife wrote to the husband’s solicitors requesting that all the properties, save the matrimonial home, be placed on the market for sale and that after payment of the NAB mortgages and provision for capital gains tax, the nett proceeds be invested pending trial. The NAB was advised of the proposal and asked to stay proceedings pending either agreement with the wife’s proposal or a hearing in this court. As the husband failed to respond to the wife’s proposal, she sought orders from the court.
On 31 January, 2008 orders required the parties to do everything necessary to place units 1 to 3 R Street, A Street, H Street and the four flats and residence at G Street on the market for sale. The proceeds were to be applied to discharge all liabilities encumbering the properties, including overdrafts and guarantees to NAB, and the balance was to be placed in trust to pay the costs of sale, capital gains tax when assessed and otherwise disbursed, as ordered by the court, or with the consent in writing of the parties. A number of properties were sold, after registrars signed documents in the name of the husband.
Units 1, 2 and 3 at R Street were sold for $336,500, with settlement taking effect on 12 May, 2008. The balance after expenses of $317,523.63 was applied to reduce the NAB debt. These were the units the husband brought to the marriage.
The flats and the residence at G Street were sold for $448,000 with settlement taking effect on 27 June, 2008. After payment of expenses, $427,103.16 was paid to reduce the NAB debt.
The property at H Street sold for $224,000 with settlement taking place on 27 June, 2008. This was the property transferred to the husband by his mother. $202,166.84 was paid to NAB, leaving a nett balance of $10,491.05. By agreement, part of this sum was applied to pay the costs of two single experts’ reports being a report by forensic accountants costing $4,191 and sworn valuations costing $2,500.
In all, $946,792 was paid to NAB, which reduced the outstanding liability to $319,642 as at 6 August, 2008. This was the current overdraft in the name of MC Company, secured by cross collateral mortgages against the two remaining properties, being A Street and the matrimonial home. In addition, there were two Visa cards in the name of the husband, with limits of $19,000 and $4,000 respectively.
The parties obtained a single expert valuation of the property at A Street, which valued it at $405,000. The valuation took into account the fact that the extension built by the husband was illegal. On about 1 June, 2004, soon after the parties had separated under the one roof, the husband executed a lease of this property to SD Pty. Ltd., for five years, commencing on 5 June, 2004. The initial rent was $22,885 plus GST per annum, rising to $23,815 plus GST per annum in the fifth year, being 5 June, 2008 to 5 June, 2009. The lease required the lessor to offer the property for sale to the lessee at the end of the first lease period, at the then current market price. That option would arise on 5 June, 2009.
On about 13 August, 2008 the wife became aware that the husband had not been making payments on the overdraft facility to NAB for the last four months and it had grown to approximately $320,000. The Supreme Court proceedings brought by NAB remained on foot and the bank was not prepared to settle, notwithstanding the payment to it of considerable sums from the sale of the other properties. On 25 August, 2008 the tenant offered to purchase the A Street property for $450,000, which was $45,000 higher than the single expert valuation.
The orders of 31 January, 2008 had required the parties to do everything necessary to place that property on the market for sale; that would, of course, have had to be subject to the existing lease, and the option. The wife’s solicitors put the offer to the husband’s solicitor on 2 September, 2008 with a request that the property be sold on those terms, in compliance with the earlier order. On 10 September, 2008 the husband formally advised he was not prepared to agree to a sale of the property.
On 12 September, 2008 the wife filed an application seeking the sale of A Street to Mr D and or SD Pty. Ltd. for $450,000. The matter was heard by Watts J. on 25 September, 2008; the husband appeared in person although his solicitors remained on the record. Watts J. ordered that the wife have sole conduct of the sale of the property upon the terms and conditions set out in the letter dated 8 September, 2008 (being the offer to purchase) and that the proceeds of sale be applied in accordance with paragraph 3 of the orders of 31 January, 2008. Pending the settlement of the sale the husband was by himself and his servants and agents, restrained from attending at the A Street property and from damaging, destroying, demolishing or otherwise interfering with the sale property and any buildings on it. The orders provided for a registrar of the court to sign all necessary documents to sell and transfer the property if the husband failed to sign within 48 hours of presentation. The husband refused to sign any documents, all of which were signed by a registrar of this court. Settlement took place on 27 November, 2008.
From the sale proceeds of $450,000 a sum of $338,487 was paid to NAB, made up as follows :
·Balance owing on overdraft account $333,270.57
·Interest to the date of settlement $ 3,383.43
·Administration fee $ 1,333.00
·Discharge fee and settlement fees $ 500.00
The balance of $109,352 remains in the trust account of Dawes & Vary, Lawyers; their costs will be deducted from it. The nett figure is likely to be $104,291.
The husband provided no documents referrable to the MC Company overdraft facility; asked whether he had statements for the account for the period 2006 to 2008 he said he was not sure, and agreed he had never produced them. Despite this lack of documentation, he made numerous assertions about the overdraft.
The wife’s evidence was that the overdraft stood at approximately $244,000 on 24 April, 2006 but she was unable to trace the pattern of drawdowns. Prior to separation the parties lived, to some extent, out of this overdraft. The husband asserted it stood at some $200,000 when it was shut down on about 4 July, 2006; by this he meant the bank refused to allow further drawdowns.
The husband’s then position in respect of the overdraft facility was set out in an affidavit affirmed by him on 30 January, 2008, when he was represented. That affidavit was filed in support of his response in interim proceedings and in it he sought that the three units in R Street and the property in H Street be sold and the nett proceeds applied towards discharging all NAB bank liabilities, including the overdraft but not including the home loan secured against W Street. The husband deposed that on 23 January, 2008 the overdraft account stood at $271,276. He said that, in all, $1,221,717 was owed to NAB. In that affidavit he swore that he had not had the capacity to make repayments on the overdraft since 2007 but that prior to that time he had reduced it from $290,000 to just over $200,000.
In the absence of documentation and in the light of the general unreliability of the husband’s assertions about financial matters, I cannot say what part of the eventual debt of $333,270.57 represented interest or chart the payments and withdrawals which resulted in the pay out figure.
All up, $1,285,279 has been applied to discharge NAB liabilities. Only the home loan was in joint names.
In 2007 the wife’s BMW was damaged in a car accident. She replaced it with a second-hand BMW, using the insurance payout of approximately $16,000. She continues to drive that vehicle. The husband continues to drive a Porsche.
PRESENT ASSETS AND LIABILITIES
Agreed assets
The value of some assets is not in dispute. The matrimonial home at W Street is valued at $1,200,000. The balance of the proceeds of sale of A Street are $104,291 and the sum of $3,308 is held in trust by Kennedy Wisewoulds, being the balance from H Street left after paying the experts.
Shares
Most of the shares which were registered in the husband’s name were sold to meet his spousal maintenance obligations pursuant to the orders of 30 March, 2007. Those sales netted $36,857. The wife submitted that this sum should be added back into the pool as the husband’s default required capital assets to be sold to meet payments which, a court had found, he had the capacity to pay. It was her submission that elective expenditure, such as the trip to Paris and entertaining his partner in Melbourne, illustrated that capacity to pay; the $10,000 spent on overseas travel in 2007 alone would have funded 25 weeks of spousal maintenance. The husband opposed that course.
In Chorn & Hopkins (2004) FLC 93-204 the Full Court, at 79,322-3, summarised earlier Full Court authorities on the issue of notional inclusions in the asset pool, including the inclusion of sums expended by a party on legal costs, to which I will refer later. The Full Court approved a statement made by an earlier Full Court in M & M [1998] FamCA 42 (Baker, Kay and Chisholm JJ.) as follows :
There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law requires that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support.
The Full Court in Chorn & Hopkins also approved statements of another Full Court (Nicholson CJ., Chris and Kay JJ.) in C and C [1998] FamCA 143 where they said :
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding moneys reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
However, in this case these shares were sold to meet liabilities imposed on the husband, pursuant to a default clause. The court had found he had a capacity to pay spousal maintenance and other outgoings; when he failed to do so, the default provision was invoked. If he had complied with his obligations, the shares would not have been sold and would have formed part of the asset pool. In these circumstances I am satisfied these shares should be notionally included in the pool and, in due course, form part of the husband’s entitlement.
A few shares remain, registered in joint names. At the time of trial the parties’ Telstra shares were valued at $4,230, Coles Myer shares at $2,451 and AMP shares at $1,207. The value of shares in Amazon was not known. Telstra and CBA shares registered in the wife’s name were valued at $45,696 at trial.
Capital sums received by the parties
Each of the parties received capital payments pursuant to orders of 7 December, 2006; the husband received $5,000, the wife $18,105. The wife submitted the husband’s capital sum should be notionally included in the pool, but resisted the inclusion of the sum paid to her on the basis that most of it was utilised to meet living expenses for her and the child. Her counsel conceded the potential for funds expended by her on legal costs to be returned to the pool.
In Chorn & Hopkins (2004) FLC 93-204 the Full Court noted, at 79,322-3, that the treatment of funds used to pay legal costs remains ultimately a matter for the trial judge but regard should be had to the source of the funds. If the funds used existed at separation, and are such that both parties can be seen as having an interest in them, then such funds should be added back as a notional asset of the party who has had the benefit of them.
There is no doubt the $4,191 applied by the wife to pay her legal expenses came from the sale of an asset which was in existence at the times the parties separated, and was matrimonial property. The husband failed to disclose his application of the $5,000 but it is as likely as not that all or part of it, too, went on legal expenses. In these circumstances, I do not propose to add either the $5,000 or $4,191 back to the pool.
The wife expended the balance of just under $14,000 on living and household expenses for herself and the child. The spousal maintenance order was not made until 30 March, 2007, and was not backdated. There was thus a period of some months when she was without direct support. Although paid from the proceeds of the share sales, she did then receive maintenance until mid-2008 but has only received two months’ maintenance since. The husband was not assessed to pay child support for the child until recently and arrears accrued. Mindful of the admonitions in Chorn & Hopkins, I do not find it appropriate to notionally add the $14,000 to the pool. Nor do I propose to add back the $10,000 the husband said he spent on the holiday in France. The sum was not referred to in the final submission of counsel for the wife. I make it clear I am not critical of that course, which acknowledged the realities of post-separation life.
Cars, boat, bikes
The wife submitted that the husband’s Porsche should be included in the pool at $65,000. In his financial statement he attributed a value of $45,000 to it. The husband referred a number of times to a valuation of $45,000 for the Porsche; this was probably a reference to a trade-in figure on an undated note on Porsche Centre Melbourne paper, setting out three potential Porsche purchases, for a changeover figure of between $89,900 and $134,900. The note was in a folder of documents tendered by the husband as exhibit H-2, relating to child support. He agreed the Porsche is insured for $60,000 and I propose to include it at the insurance figure.
The wife’s BMW will be included in the pool at $16,000, the insurance payout on the one she drove at separation having gone into the car she drives.
The husband bought a utility in July 2008 to use in the business, for $38,700. It is funded through AAMI, to whom he pays $160 per week. He traded in an earlier model Nissan Ute for $6,000. The new lease is for five years. The husband may have some equity at the end of the lease but that is speculative and I do not include that car in the asset pool.
When the parties separated the husband owned a ski boat and a number of motor bikes and dirt bikes. The wife valued the boat at $15,000 and the bikes at $10,000. In the financial statement he swore on 29 September, 2006 the husband included the speed boat and accessories, together with the motor bikes, at $21,000. An injunction made on 7 December, 2006 restrained the parties from dealing with any assets in their names or standing in the name of the trustee of the family trust, other than in the usual course of business. Notwithstanding that injunction, the husband’s evidence was that he sold the boat and bikes in 2008. He produced no documentation. There is no mention of these sales in Part M of the financial statement he swore on 15 December, 2008. The wife learnt of these sales on the day on which the trial was listed to commence. I propose to include them in the pool at the husband’s initial valuation of $21,000.
Work in progress
The wife was unable to estimate the value of work in progress of the building business conducted by the husband. The husband agreed that in early 2006 the business had about $125,000 work in progress. When Mr. Y did his assessment, he estimated work in progress at $50,000. The husband denied that he had deliberately stopped invoicing clients but his failure to make full financial disclosure means the court cannot estimate current work in progress. Given his evidence of a steady stream of work from separation until at least mid-2008 (he said that there was no alteration in the operation of his business in that period) his evidence of his cash flow is improbable. Nevertheless, I do not act on the basis that he is owed a substantial sum.
Superannuation
In a fax dated 15 December, 2008 Mr. T advised the solicitors for the wife that the husband’s current superannuation investment balance was $90,138.89 and although the husband attributed $80,000 to this interest in his financial statement sworn on the same day, he did include a handwritten note on another page advising that Mr. T was making enquiries, and a later note confirming a figure of $90,328.89. This is $190 higher than Mr. T’s figure and it is likely the husband mistranscribed it. The husband’s evidence was of either not making any superannuation payments since separation or “paying what was left over”. I will include his superannuation interest at the figure given by his accountant on 15 December, 2008, being $90,138.
In the circumstances of this case it is convenient to consider superannuation and non-superannuation assets in one pool.
LIABILITIES
The solicitor for the wife made valiant efforts to fill the holes left by the husband’s failure to make full financial disclosure and corresponded with an accountant, Mr T, who co-operated with her enquiries. During the marriage and after separation Mr. T prepared tax returns for the wife as well as the husband and trust. On a number of occasions the husband said the wife could have found out anything she wanted by ringing Mr. T and it is clear he authorised him to provide information referable to the trust, and his personal returns. However, it was his obligation to disclose his financial position.
Capital gains tax
There are outstanding capital gains tax liabilities as a result of the sales of A Street, R Street, H Street and G Street. In a letter dated 10 December, 2008 Mr. T advised the wife’s solicitor that his firm had completed income tax returns for the husband and wife for the year ended 30 June, 2008 and based upon those returns Mr. T calculated that the parties would be assessed to pay (by way of capital gains tax, income tax and Medicare levy) the sums of $15,032 (the husband) and $9,088.20 (the wife). Those calculations took into account the capital gains tax payable upon the sale of the properties in G Street, R Street and H Street.
Mr. T also advised in that letter that the firm had received information from solicitors relating to the sale of the commercial property in A Street, held in the husband’s name. They estimated that the total amount of capital gains tax and Medicare levy payable by the husband on that sale in the 2008/2009 financial year would be $6,488. They noted that did not take into account the effect of any additional taxable income received by the husband in that year and that further income could affect the calculations.
The wife agreed that the amounts assessed as payable in respect of those sales should be considered a joint liability, and provision made for payment. The minute of proposed orders marked “B” provides for the payment of $30,608 to the A.T.O.
Rates
The evidence about the rates on the family home was confusing. In his financial statement sworn 15 December, 2008, the husband noted personal expenditure of $3,000 (presumably an annual figure) on rates payable to the Local Council. He included no figure for unpaid rates in the liability section of that form.
Significant sums were taken from funds held in trust to pay outstanding rates to the Local Council and Water Company. I cannot say what sums are presently due.
The wife’s material assumed an obligation to pay the rates had been imposed on the husband. In the minute of final orders sought, she sought that the husband pay outstanding household utilities and outgoings including home and contents insurance, and council rates on the home, prior to the discharge of paragraph (2) of the orders of 7 December, 2006. Paragraph (2) required the husband to pay :
(i) current mortgage instalments;
(ii) household utilities and insurance as they fall due;
(iii) registration, insurance, maintenance costs of the wife’s motor vehicle.
The orders of 7 December, 2006 were made by consent so no judicial ruling exists. It may have been agreed that “utilities” included municipal and water rates; that may have been the tenor of affidavits filed by the wife at that time. Certainly, some outstanding municipal and water rates were paid from the proceeds of sale of the shares.
Whatever the prior order I am satisfied any municipal rates and water rates or charges owing should be treated as a joint debt.
The wife was cross-examined about allowing a neighbour to use water and a broken pump, possibly referable to water rates. That cross-examination added nothing of probative value.
Accountancy Fees
Mr. T advised the wife’s solicitors that he was owed $29,634 for invoices dating back to 31 March, 2005, issued to the husband and wife in respect of work done for them and the business. Although some of that work may be personal to the husband since separation, I am satisfied that sum should be treated as a joint liability, and paid from the sums held in trust, as envisaged in the minute of orders proposed by the wife.
A.T.O.
In a fax dated 15 December, 2008 Mr. T advised the solicitors for the wife of outstanding liabilities of the husband as at 15 December, 2008, relating to his business activities. He advised that the ATO was owed $72,117.90 for GST, PAYG withholding tax and interest to 30 September, 2008, and $50,278 for unpaid superannuation guarantee payments in respect of employees to 30 September, 2008. Those figures did not take into account a number of expected liabilities. Mr. T estimated that GST, PAYG withholding tax and interest in respect of the December quarter of 2008 would be $4,500 and superannuation guarantee payments for that quarter $350.
The parties’ then tax liabilities were paid out in full in 2007, pursuant to the orders of 7 December, 2006. These were personal and trust liabilities. The husband took the view that the wife should share responsibility for personal and trust tax liabilities accrued since then, and unpaid superannuation guarantee payments, despite having received no share of the income from the business which gave rise to those liabilities since a few months after physical separation in May 2006. The present and anticipated liabilities were obtained by the wife’s solicitors from Mr. T. No assessments or A.T.O. demands were in evidence.
Although Mr. T advised the wife’s solicitors on 10 December, 2008 that the income tax returns of the parties to 30 June, 2008 had been completed, copies were not provided by the husband until, at the suggestion of the court, he contacted his accountants in the course of the trial and a copy was faxed to the court. With it were interim financial statements for the family trust for the period ending 31 March, 2008.
A party who seeks an order for matrimonial funds to be used to pay a debt carries the onus of proving the debt and satisfying the court that it should be deemed a joint liability. Save for the assertions of Mr. T (to Mr. Y and the wife’s solicitor) the court has no evidence on which it can determine when and how the A.T.O. obligations accrued. In the absence of that evidence I do not find it appropriate to characterise the husband’s or trust’s A.T.O. liabilities as joint liabilities.
Superannuation guarantee
When Mr. Y prepared his assessment he had income tax returns for the trust and the parties from 2004 to 2007 and “background to the business” provided by the husband’s accountants, S Group. At paragraph 4.8 Mr. Y observed :
We are advised that the business has not paid its superannuation obligations for several years. [S Group Accountants] advises this was approximately $45,479 as at 30 June, 2007.
The court cannot say what “several years” means save that “several” in this context routinely means “more than two but not many”; see Oxford Dictionary of English (2nd edition). The default may thus have included a short period prior to 30 June, 2005 but the court could not find it more probable than not that some part of it predated the parties’ separation in March 2004. As it cannot know when the husband stopped making these payments or chart the allegedly accounting debt, it cannot know whether the debt post-dates the parties’ physical separation in 2006.
In a fax sent to the wife’s solicitor on 15 December, 2008, Mr. T advised of outstanding superannuation guarantee sums “in respect of employees (to 30/9/08)” of $50,278, an increase of $4,799 from the 30 June, 2007 figure. He estimated superannuation guarantee payments of $350 for the December quarter of 2008.
The wife was never involved in the building business; the husband was responsible for all aspects, including financial ones. He carries the onus of establishing the quantum of any alleged debt and of satisfying the court that its origins and accrual make it appropriate to treat it as a joint liability. I cannot find the husband has satisfied that onus in respect of superannuation guarantee payments.
Borrowings and legal expenses
The inadequacy of the support provided to the wife resulted, she said, in her borrowing $10,000 from her mother, $3,000 from her sister and another $3,000 from her former husband to meet living expenses. She also borrowed $27,000 from her mother and sister to meet legal fees. The evidence was of paid legal bills for the wife of some $45,000, an estimated $23,500 of unbilled work plus fees for counsel and solicitor for the trial.
The husband’s evidence was of owing $191,500 on “legal bills”. He borrowed from Impact Financing, and that money may have been paid to Kennedy Wisewoulds. In his financial statement he said that he owed Kennedy Wisewoulds $62,295 plus interest at 15 December, 2008, and there was another note that those solicitors were owed “further $20,000”. In the witness box he said that he was being sued in the Supreme Court by his former solicitors. Eventually, a letter was tendered, dated 15 December, 2008 from White Cleland, solicitors acting for Kennedy Wisewoulds in respect of the unpaid fees. The husband was advised of $67,133.56 owed (being $62,295.78 for services provided between 26 March, 2007 and 26 September, 2008, plus interest) and that legal proceedings would be issued without further notice or delay if the full sum outstanding was not received by 22 December, 2008.
The parties’ respective legal liabilities will be taken into account when assessing their financial circumstances.
Credit cards
The husband submitted that outstanding credit card debts should be paid from joint funds. In his financial statement sworn on 15 December, 2008 he disclosed $17,591.86 due on a Visa Citibank card, $18,643.70 on an NAB Gold Visa card and $4,189.03 on an NAB Visa card. Those balances were said to be current to 15 December, 2008 and total $40,424.59. In the earlier financial statement sworn on 29 September, 2006 the husband disclosed a debt of $40,000 due to Citbank Visa; no other credit card debts were reported.
The husband complained that the wife continued to draw down on the overdraft and use credit card payments after he left the matrimonial home in May 2006. It is probable this did occur. It was a continuation of the pattern of expenditure during the marriage, which – with his approval – continued after their separation under the one roof; there is no evidence the parties moderated their pattern of spending. Although living at opposite ends of the house they continued to operate, financially, as they had prior to that separation. Pending agreement as to financial arrangements in the future, after their actual separation, it was not unreasonable for the wife to continue to do so. The husband’s financial contribution in this period will be taken into account when assessing all contributions pursuant to s.79(4).
After his case was closed the husband sought to tender a large folder of credit card statements for various accounts in 2004 to 2006. These had not been provided earlier and the contents were not known to counsel for the wife. The statements illustrate the pattern of spending, credit cards being used for everyday purchases from supermarkets, fast food outlets, chemists and clothing stores, as well as for occasional donations and items which may relate to the husband’s business or could be for house maintenance (such as paint). The statements do not reveal who bought what and I am not satisfied the wife’s use of the credit card and the overdraft facility after the separation was inappropriate. When the husband cancelled those facilities he did so without notice to the wife, and without making any arrangements for her support, and the support of the child.
These statements were allowed to be tendered on the basis that they showed the pattern of spending, but nothing further. The husband tendered no credit card statements rendered since late May 2006 and it is impossible to establish the rises and falls in the sums allegedly due. It was the husband’s obligation to establish relevant liabilities by the production of evidence, not assertions. Given the disparity between his lifestyle and his asserted financial position, the court cannot have confidence in such assertions. I am not satisfied the wife should share responsibility for the husband’s current credit card debts.
ASSET POOL AS FOUND
Assets
W Street $ 1,200,000
Balance of proceeds of sale of A Street 104,291
Held in trust at Kennedy Wisewoulds 3,808
Shares sold pursuant to orders 36,857
Shares – joint names 7,888
Shares – wife 45,696
Porsche 60,000
BMW 16,000
Boat and bikes sold by husband 21,000
Superannuation – husband 90,138
Total $ 1,585,678
Liabilities
Capital Gains Tax (estimated)
G Street, R Street, H Street.
· husband 15,032
· wife 9,088
A Street 6,488
Outstanding accountancy fees 29,634
60,242
Unpaid rates and water rates NK
Without provision for unpaid rates, nett assets total $1,525,436.
SECTION 79(4)(a) to (c)
I turn to the second of the steps in the exercise under s.79, namely an assessment of the parties contributions within the context of s.79(4)(a) to (c). These provisions are as follows :
79(4)In considering what order (if any) should be made under this section in proceedings with respect to any property of the parties to a marriage or either of them, the court shall take into account -
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of the, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent;
In Pierce v. Pierce (1999) FLC 92-844 at p. 85,873 the Full Court considered the weight to be given to initial financial contributions, as follows :
25:In addition to referring to a short passage from the judgment of Fogarty J in Money and Money (1994) FLC 92-485, the trial judge noted that the passage was cited with approval by the Full Court (Nicholson CJ, Baker and Tolcon JJ) in Bremner and Bremner (1995) FLC 92-560.
26.In Way and Way (1996) FLC 92-702, the Full Court (Barblett DCJ, Finn and Butler JJ) said at 83,404 :-
‘In the subsequent full Court decision in Bremner all three Judges expressly preferred the approach taken by Fogarty J in Money over that taken by Lindenmayer J in the same case. Thus, and notwithstanding the attempts by Counsel for the husband in this case to demonstrate that there was some inconsistency between what Fogarty J said in Money and what was actually said in the joint judgment of the Full Court in Lee Steere, we regard the law in this area as now settled by the statement by Fogarty J in Money (and subsequently accepted by all members of the Full Court in Bremner) that ‘… an initial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party’.’
27.However, it is important to put that quotation in it correct context. Fogarty J in Money and Money (supra) said at page 81,054 :-
‘I am unable to agree with the criticism in his Honour by the passage in his judgment immediately after that quotation or of his analysis of the issues involved. In an appropriate case, in my view, an initial substantial contribution by one party may be ‘eroded’ to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party. I feel, if I may say so with respect, that his Honour'’ formulation to the contrary is unrealistic and does not correspond with common experience in the Court in many of these cases.
I think it is legitimate for me to say, as I was a member of the Full Court in Lee Steere and Lee Steere (1985) FLC 91-626 that His Honour has read too much into the passage to which he refers and that the term ‘off-setting contribution’ does not necessarily mean ‘greater contribution’. It simply reflects the circumstance that the respective contributions of the parties over a long period of marriage ‘offset’ the significance which might otherwise be attached to a greater initial contribution by one party. This is, in my view, made clear by the Full Court in White and White (1982) FLC 91-246 where that court pointed out that the principle in Crawford and Crawford (1979) FLC 90-647 is that the original contribution should not be carried forward as a mathematical proportion; ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be later factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.’
28.In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weight the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: See also Campo and Campo (unreported, Full Court (Ellis, Lindenmayer and Finn JJ), Sydney, delivered 19 May 1995 at pages 21 and 22 of the joint judgment) and Zahra and Zahra (unreported, Full Court Sydney, delivered 3 October 1996, per Ellis J at page 10).”
Each of the parties brought assets to the marriage but those of the wife significantly outweighed those of the husband. The value of his equity in the property he brought to the marriage cannot be quantified. When that property was finally sold in 2008, the sum of $317,523.63 was paid to NAB. The assets the wife brought to the marriage fed into the former matrimonial home. It is the parties’ major residual asset but that is attributable to the fact its retention was prioritised and other assets sold to discharge the hefty NAB liabilities.
When together the parties operated on the basis the husband was the breadwinner and the wife was significantly responsible for homemaking and childcare. Her children from the earlier marriage lived with them for most of their marriage and while their father made appropriate financial provision for them, the husband also financially supported them to a significant extent and made non-financial contributions, through care and activities. Although the husband submitted that the wife could have obtained employment since 2006, he made it clear that he was content (while they were married and in the period when they lived under the one roof) with the arrangement which prevailed. Until their actual separation in May 2006 he was thus the sole financial provider, putting aside the funds the wife received through her property settlement with her first husband. For her part, she contributed fully in the non-financial sphere. Insofar as material in the earlier affidavits filed by the husband suggested that the wife was a neglectful parent, I place no weight on it.
The property the husband received from his mother was consideration for work done by him for her, being the construction of her home. That physical work was done during the marriage; if done for a third party, he would have been properly remunerated. I cannot say how much the property was worth on transfer or how that figure related to a reasonable charge for the construction work undertaken but his labour led to the property’s acquisition.
From the time the litigation commenced the husband resisted the obligations imposed on him by the court. At one point the wife was assessed to pay child support to the husband at the rate of $473 per annum. He complained (albeit, to his credit, without much conviction) that she never paid that sum. That year, the wife was assessed on a taxable income of $28,485 and the husband on a taxable income of $nil. In fact, the wife had no income in 2007, save the amount attributed as capital gain and the assessment was reversed when this was recognised. The current child support assessment requires the husband to pay $93.50 per month; a document produced by him dated 22 August, 2008 showed $105.07 overdue, together with the monthly figure for August. His evidence was that he had paid the overdue sum. I am satisfied that by the time of trial, the wife had not received it, but cannot say if it was en route from the Child Support Agency.
As the sum produced by the sale of the shares has been added back to the pool, the court needs to operate on the basis that the husband did contribute that sum (albeit involuntarily) by way of periodic spousal maintenance and payment of rates and other utilities and expenses of which the wife received the benefit. She also received the benefit of living in the substantial family home from mid-2006 until the trial some two and a half years later. That is not an insignificant benefit.
It should not be forgotten that the husband built the family home. He was assisted by sub-contractors and the wife assisted, where and when she could, but his was the significant physical contribution. The husband’s labour and skill should be recognised.
Counsel for the wife submitted that the wife should be found to have contributed between 65 and 70% overall, taking into account her significant initial contribution, equal contribution during the marriage and allegedly significant contribution after separation. In my judgment that over values the initial contribution at the expense of the regular and significant financial contributions made by the husband during their fourteen and a half years under the one roof, including his contribution as a step-father and through building the home. I say fourteen and a half years on the basis that he continued to support the wife and the child after the separation under the one roof, as he had before. It was only when the parties physically separated in May 2006 that that situation changed and even then, the wife was able to use credit cards and the overdraft for a few months. Their marriage, both agree, was effectively over in March 2004. Nevertheless, some acknowledgement must be given to the significant initial contribution made by the wife. I am satisfied contributions of all types, assessed to the date of trial, should be allocated 57.5% to the wife and 42.5% to the husband.
SECTION 79(4)(d) to (g)
I turn to the matters referred to in s.79(4)(d) to (g).
(d)the effect of any proposed order upon the earning capacity of either party to the marriage;
The husband has maximised his earning capacity during the marriage; he worked very hard and was successful. Despite his age and the economic downturn, he retains a significant earning capacity.
I will consider issues relating to the wife’s earning capacity in the context of s.75(2) factors.
(e)the matters referred to in sub-section 75(2) so far as they are relevant;
I will consider each of the relevant paragraphs :
(a)the age and state of health of each of the parties;
Although the husband suggested that his increasing age was relevant to his income earning capacity now, no evidence supports that proposition. He said he has some arthritis in his wrists and that may be the case; he adduced no medical evidence. On his own account, any downturn in his business fortunes is not attributable to his health or personal physical capacity but to problems in the economy and, to some extent, his desire to spend weekends with his partner in Melbourne, which militates against weekend work in the C area. His physical capacity will lessen as he ages.
There was no evidence that the wife’s health is, of itself, a detriment to her employment. What is more relevant is the time she has been out of the paid workforce and her lack of any formal qualifications.
(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 wife has no income, other than government benefits referable to the child. Although not in receipt of income, the wife has been ineligible for Centrelink payments, as investment properties were registered in her name. That is no longer the case.
The wife last worked in paid employment some eighteen years ago, in a part-time position involving teller duties. Her evidence was of applying for four jobs in the couple of months prior to the trial as a secretary/administrator in a real estate firm, as a receptionist at a hotel and as a shop assistant. There was no evidence of earlier attempts to obtain employment and the impression she imparted was that obtaining paid work has not been a priority for her since separation. If the parties had remained together, it is unlikely the wife would have needed to obtain paid work and it was clear that, absent need, she has no interest in doing so. Nevertheless, circumstances have changed and the court could not find that she has no capacity for paid employment. It is probable that her lack of employment history and qualifications will mean she will never be in a position to obtain anything other than a modestly paid job. While she may need to structure employment around her child rearing responsibilities, the child is now twelve and while supervision remains important, she will increasingly have some flexibility in those respects.
In the financial statement sworn on 29 September, 2006, when he was legally represented, the husband deposed to nil income from the O’Malley Family Trust, based on 2005/2006, and a rental income of $124 per week. In the financial statement sworn on 15 December, 2008, he deposed to an average weekly income of $450 from his self-employment as a builder. The court could have no confidence in the accuracy of either set of figures.
The husband’s evidence about his employment was inconsistent and fragmentary. In the document tendered as H-1 he wrote “I am sorry for leaving court in a hurry all time, feel I have to get back to work”. Asked about his current situation, he spoke of the time he spends with his partner in P, on weekends. His own evidence was that he does not stay with her during the week because “I have to work at the resort”. He agreed that he had admitted that his working hours dropped from 60 hours per week to 40 hours per week and that he spends $200 to $300 per weekend in Melbourne, a figure which may well be an underestimation.
Relying on a letter from the resort owner, the husband asserted that the building of villas at the resort had not been suspended for the short period envisaged (the letter, dated 16 June, 2008, referred to a cessation of work from 16 May, 2008, for approximately three weeks) and spoke of construction resuming in the new year. Pressed about recent work, he said he had started work on a family home for a Mr. BN in August 2008 and that was completed recently. Pressed further, he said that work at the resort stopped for twenty weeks and resumed “a few weeks back, to finish off a few jobs”. According to him, he draws a weekly wage of $400 and pays $100 per week to his mother for board, a figure not included in the section of his financial statement dealing with personal expenditure (Part G) or average weekly expenses (Part N). In Part N of the financial statement he did not fill in the columns relating to himself and the children, but put some figures in the column headed “Other adults”. Although described as weekly expenses, some appeared to be annual (for example, $2,000 for holidays, $1,000 for clothing and shoes, $1,500 for car maintenance) whereas others (gas, electricity and heating) appear to be weekly. I cannot say to what the “other necessary commitments” of $5,240 relate as that is not the total of personal expenditure set out in Part G.
The husband’s evidence was that when the spousal maintenance application was heard in early 2007 he was paying his mother $300 per week, not $400 per week as his own barrister submitted. The weekly wage he asserted in his oral evidence ($400 gross) would be expended (on his current evidence) on the board presently paid by him and his Melbourne expenses, making no allowance for his own upkeep, personal expenses and expenses associated with the time he spends with the child. The situation would not be very different if the court accepted the figure of $450 in the financial statement of 17 December, 2008. It is clear he must have access to other funds. On his own account, he stopped drawing down on the overdraft in mid-2006 but his failure to make financial disclosure means the court cannot make findings as to the size or sources of his income.
The interim financial statements for the family trust for the period ended 31 March, 2008, provided by the husband’s accountants, disclose a nett loss from trading activities of $47,173. The letter from Mr. T, dated 3 June, 2008, noted that the statements included $64,905 NAB interest and $4,171 ATO interest and that prior to interest charges, the business earned a profit of $21,903. Mr. T advised the husband that once the debts owing to the ATO and NAB had been repaid, the business should return to a profitable trading outcome. He also noted that it was “interesting” to note that the wages expenses incurred in recent years have increased substantially and the margins on contracts have diminished.
The court should not minimise the potential effect on the building and construction industry of the present economic downturn. However, on the husband’s own account he has been working on the resort project in recent weeks and, absent any evidence to the contrary from the developers, it is reasonable for the court to assume he will continue to build villas there. Prior to separation he was taking some $115,000 per annum out of the trust; the recent diminution in his income is largely attributable to a change in his working habits and uncontained debts. It may be affected in the future by financial matters beyond his control. Nevertheless, I am satisfied he has an earning capacity which is significantly in excess of that of the wife and a number of working years ahead of him.
I do take into account the parties’ respective personal liabilities and the fact the husband will be left with significantly higher debts than the wife.
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
Although the husband did seek that the child live with him at one point in the proceedings, orders provide for the child to live with his mother. The husband spends time with him on each second weekend and during school holidays, but does not spend the overnight time envisaged by the orders, an omission the husband attributed to his own mother not supporting the child’s presence in her home.
The wife should have consulted the husband about the child’s schooling; given their financial dealings since separation, she must have realised it was unlikely he would willingly pay school fees and his reluctance could only be exacerbated by unilateral decision making. Nevertheless, the bulk of the child’s care will fall to the wife until he is eighteen.
(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;
Each of the parties has the usual commitments to support him or herself and the child. The child lives with the wife and she will bear the brunt of supporting him.
(e)the responsibilities of either party to support any other person;
Neither party has a legal obligation to support any person other than the other (in the event the other does not have a capacity to do so him or herself) and the child.
(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 wife has no superannuation; the husband has a modest superannuation interest. The wife has not been eligible for Centrelink benefits; whether she will be in the future will depend on the outcome of this case, as income available for investment would affect her entitlement.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
This is a relevant factor. The wife has remained living in the matrimonial home, which is large and expensive to maintain, and there may be substance in the husband’s evidence of a decline in its maintenance in his absence. The husband had sought to live there himself and he was never less convincing than when giving evidence of his belief that it would be better for the child to leave that home and live in a smaller space. Asked about his own lifestyle, the husband said he had “moved on” and had “to be happy for [the child]”. He said he had to live his life; this was in the context of him continuing to maintain a reasonably expensive car and spend time, in Melbourne with his partner, at restaurants and other activities requiring money. In C he lives with his mother and has so for two and a half years, but much of his time is spent in Melbourne, in a home maintained by someone other than him.
Counsel for the wife framed his submissions on the basis that the wife sought to retain the family home. On his own figures, this would be tenuous, and it would certainly not leave her with any funds to generate an income, or any sum from which to repay family debts and maintain the property.
The standard of living of parties often falls after separation; what is important is that the drop not be borne disproportionately by one party. That does not mean that one party is entitled to remain in a lavish and large property if justice requires a more equitable distribution.
(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 a business or otherwise to obtain an adequate income;
Whilst this factor is referable to spousal maintenance it can be considered as relevant to the property application. However, there was no evidence the wife proposed undertaking any course of education or training.
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
This sub-paragraph may have been relevant earlier in the proceedings, however the NAB Supreme Court action has been settled and there is no evidence referrable to it at this time.
(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;
The wife’s acceptance of the primary role of home-maker and parent enabled the husband to prosper in his building business. It is clear his job was no sinecure; he worked long hours and probably experienced considerable work-related pressure. His capacity to do so was part of (and a result of) the parties’ agreed “partnership”. It is not suggested that the family, as a whole, did not benefit from these arrangements but they had the effect of removing the wife from the paid workforce and, perhaps, instilling in her a sense that that would not be her lot in the future.
(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;
As found, the wife’s commitment to the family freed the husband to concentrate on the building business.
(l)the need to protect a party who wishes to continue that party’s role as a parent;
The wife’s evidence was that the absence of before and after school facilities at the child’s primary school meant that she had been unable to look for fulltime work in the past. There was no evidence she had sought part-time work and the evidence of job applications related to the months prior to trial, and not to (for example) the two year period after separation in May 2006. As the parties resolved the application for parenting orders there was little evidence about the child before the court, save some evidence indicative of a strong minded child, in need of boundaries. During the marriage the parties operated on the basis the wife would be available as a fulltime parent and while financial constraints may mean that is no longer possible, and she will need to obtain some paid work, the importance of her parenting role should not be forgotten.
(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;
Although the husband spends part of the week in C, he is in Melbourne from Friday afternoon until Monday morning, living with Ms. J. He adduced no evidence whatsoever of her financial circumstances; he said she practices a profession and she is apparently engaged in fulltime employment. According to him, he makes no financial contribution towards the three nights a week he spends in Melbourne, save for taking Ms. J out to dinner. If that is so, he has the benefit of a significant financial contribution by her and it is likely that will continue. It is also probable that the husband has not seen the need to establish independent living quarters in C, as that is now merely the base from which he works, rather than the place in which he sees himself as living.
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, or is to provide, or might be liable to provide in the future, for a child of the marriage; and
I have made findings about child support elsewhere. The present assessment is modest and probably in arrears. It is unlikely the husband will ever pay more than he is assessed to pay for the child’s support; on past history, the wife may struggle to receive even the assessed child support.
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
References have been made to the economic downturn and the potentially adverse effect on the building industry and, thus, the husband’s earning capacity. While there was no specific evidence of this before the court, I am satisfied the court can and should take judicial notice of the global financial crisis and the potential for it to impact on employment, property development, house prices and the financial markets.
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
The only relevant orders are the parenting orders, to which I have adverted, and the existing orders for periodic spousal maintenance and the payment of other expenses.
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, or is to provide, for a child of the marriage.
These provisions have been considered in relation to s.75(2)(na).
CONCLUSION
Counsel for the wife submitted that the wife should receive an adjustment of 10-15% for these factors, resulting in her receiving 80% of the nett asset pool and the husband 20%. On the figures found that would mean an entitlement of $1,220,348 (if no rates were outstanding) and, it was argued, allow her to retain the former matrimonial home. That ignores assets in her hands (the BMW and shares) which total $61,696.
The husband’s submission was that the wife should receive 60% of the nett assets and he 40%; to be fair to him, that was made in the context of there being some $1,000,000 to distribute, after payment of tax and credit card debts and his legal expenses, in which case she would receive about $600,000. Sixty percent of $1,525,436 is $915,261.
The husband will be left with responsibility for significant debts owed to the A.T.O., including superannuation guarantee debts and debts to a litigation funder and solicitors for legal fees. He has credit card debts which he deposed are significant. Some $57,857 of his eventual entitlement will be notional (shares and boats/bikes sold) and he is too young to access his superannuation benefits, absent hardship. The wife will be left with outstanding legal fees and debts to family members.
The husband’s earning capacity is significantly higher than the wife’s, despite the economic downturn, even if the building industry may be in the doldrums for a period. The wife’s earning capacity is modest and the child is only twelve.
I am satisfied an adjustment should be made in the wife’s favour of 7.5%. That brings her entitlement to 65%, which represents $991,533 of the found pool. She has assets totalling $61,696 so would be entitled to another $929,837. These figures are indicative only as the final pool will depend on the sale price of the home and jointly owned shares, the quantum of outstanding rates and capital gains tax, and confirmation of the sum held in trust for the parties by solicitors.
On this analysis the husband would receive 35% of the pool, or $533,903. Assets, actual and notional, in his hands total $207,995 (including superannuation of just over $90,000) so the balance would be $325,908.
Both parties have outstanding legal fees; the husband’s are higher than the wife’s. Both have other debts; the husband’s are higher than the wife’s. Whilst the wife may have little sympathy with the disparity, the court’s obligation is to make orders which are just and equitable and it cannot ignore the parties’ personal liabilities. The 7.5% adjustment in the wife’s favour takes these realities into account.
The husband owes the wife $1,600 pursuant to a costs order of 19 March, 2007. That sum will be deducted from his entitlement and paid to the wife.
Orders will provide for the wife to relinquish any entitlements as a beneficiary of the family trust and for the husband to indemnify the wife against all trust liabilities.
SPOUSAL MAINTENANCE
In her response the wife sought spousal maintenance, relying generally upon an incapacity to support herself adequately and the shortfall between her expenses and income.
In Bevan and Bevan (1995) FLC 92-600 at 81,981 to 982 the Full Court stated the law as being :
. . . that an award of spousal maintenance requires:
1.a threshold finding under section 72;
2.a consideration of section 74 and 75(2);
3.no fettering principle that pre-separation standard of living must automatically be awarded where the respondent’s means permit; and
4.discretion exercised in accordance with the provision of section 74, with ‘reasonableness in the circumstances’ as the guiding principle.”
Section 72 imposes a duty on a party to maintain the other if reasonably able to do so and if that other party is unable to support himself or herself adequately by reason of one of the factors set out in the section. Section 74 enables the court to make such order as is proper and it is further required to take into account the matters referred to in s.75(2), one of which (s.75(2)(n)) provides that the court shall have regard to the terms of any order made or proposed to be made under s.79 in relation to the property of the parties.
As the Full Court noted in Mitchell and Mitchell (1995) FLC 92-601 at 81,995 the threshold question of whether an applicant can support him or herself “adequately” is not to be determined by any fixed or absolute standard, but having regard to the matters referred to in s.75(2). Nor is the question to be determined upon a “subsistence” level.
In final submissions, counsel for the wife submitted that $50,000 of the sum awarded to the wife could be characterised as lump sum spousal maintenance. It was put that she retained a need for maintenance as presently ordered ($400 per week) and should receive that sum for the next three years, discounted to $50,000 for lump sum payment.
The court cannot simply allocate a part of a sum awarded by property settlement as spousal maintenance. It must consider whether the wife has the capacity to support herself adequately and, if she does not, whether the husband has the capacity to contribute to her support. If so, a figure must be fixed, after having considered the factors set out in s.75(2). The court may later capitalise the maintenance and order payment of a lump sum.
Pursuant to the property orders, on the pool as found, the wife will receive assets of $991,533. The actual figure will depend upon the price realised on the sale of the W Street property, capital gains tax assessed, and the rates due, as well as confirmation of the sums held in trust. Whatever the figure, it is a significant sum.
While there was no evidence before the court of current house prices in the C area, the court does have the evidence of the sales of the investment properties and can assume that the wife would be able to acquire accommodation for herself and the child at a price which would leave a capital sum available for investment. It is true such a property will be significantly less grand than the large home in W Street, but the court must do justice between the parties.
I cannot say how the wife proposed to support herself had she been successful in her application to have the former matrimonial home transferred to her name alone, unencumbered. Without income she could not pay the rates and other outgoings, nor maintain the property.
In her financial statement sworn on 5 December, 2008 the wife deposed to an income of $115 per week and personal expenditure of $700 per week. Although she sought spousal maintenance, Part N was not completed; it may be that at that time she accepted that an order for ongoing spousal maintenance was unlikely or she may have considered that the issue was dealt with in her trial affidavit in sufficient detail. I cannot say.
While I have been sceptical about the husband’s financial position, he will be left with significant personal debts and little capital. The capital available to the wife, coupled with modest employment, may allow her to support herself. If she cannot, I am not satisfied the husband will have the capacity to pay continuing spousal maintenance for her. The existing order will be discharged forthwith. The orders sought by the wife made no provision for the payment of arrears of spousal maintenance. Arrears to date will be discharged.
COSTS
Towards the end of the trial the husband asked whether he could make an application that the wife pay his costs. On several occasions he spoke of offers made by him and by his lawyers and he was advised he could not tell the court the content of those offers during the trial. On being advised of the legislative provisions relating to costs, he sought to do so after the trial, although he himself apparently does not have copies of the relevant offers, copy letters remaining with his former solicitors.
The wife, too, sought costs against the husband. Orders will provide for the filing of written submissions in relation to costs, including any reserved costs. The wife’s solicitors will be asked to provide to the husband a copy of any offer made by his then solicitors on his behalf which could be relevant when considering s.117(2A)(f).
I certify that the preceding
192 paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.
Dated the day of 2009.
…………………………………………
Associate.
Key Legal Topics
Areas of Law
-
Family Law
-
Property Law
-
Tax Law
Legal Concepts
-
Costs
-
Damages
-
Remedies
-
Statutory Construction
-
Jurisdiction
0