Parkes and Parkes

[2013] FCCA 2431

FEDERAL CIRCUIT COURT OF AUSTRALIA

PARKES & PARKES [2013] FCCA 2431

Catchwords:
FAMILY LAW – Property – undefended – husband’s actions diminished available asset pool – add backs.

Legislation:

Family Law Act 1975, ss.79, 75(2)

Applicant: MS PARKES

Respondent: MR PARKES

File Number: ADC 4615 of 2011

Judgment of: Judge Kelly

Hearing date: 15 March 2013

Date of Last Submission: 21 March 2013

Delivered at: Adelaide

Delivered on: 21 March 2013

REPRESENTATION

Counsel for the Applicant: Mr B McQuade

Solicitors for the Applicant: Hume Taylor & Co

The Respondent: No appearance

ORDERS

In full and final settlement of the wife’s application for settlement of property pursuant to the Family Law Act 1975.

1. Within 28 days the husband do pay to the wife the sum of TWO HUNDRED AND TWENTY THOUSAND DOLLARS ($220,000) (“the settlement sum”) care of her solicitor’s Trust Account, Hume Taylor & Co.

2. Thereafter the property in the following:

   (a)furniture and effects in the husband’s possession;

   (b)the husband’s separate savings and investments;

   (c)any life insurance and/or life assurance of the husband;

   (d)any motor vehicle in the husband’s possession;

   (e)any other real and/or personal property and/or financial resources in the husband’s possession

   shall vest in the husband absolutely free of all further claim or demand or right or entitlement of the wife.

3. Henceforth the property in the following:

   (a)furniture and effects in the wife’s possession;

   (b)the wife’s separate savings and investments;

   (c)the wife’s superannuation entitlements;

   (d)any life insurance and/or life assurance of the wife;

   (e)the wife’s motor vehicle;

   (f)any other real and/or personal property and/or financial resources of the wife in the wife’s name and/or possession not otherwise specified herein

   shall vest in the wife absolutely free of all further claim or demand or right or entitlement of the husband.

4. Each party is restrained from pledging any credit of the other.

5. The husband is restrained and an injunction is granted restraining him from further encumbering or in any way dealing with the equitable interest of the parties in the house situate at and known as Property V, including but not limited to extending any existing loan facility secured against the property and from obtaining any of the parties’ assets as security and from pledging credit against any asset howsoever held whether solely or jointly with any other person SAVE AND EXCEPT as may be necessary for the husband to raise the credit to meet his obligations pursuant to these Orders PROVIDED that the written consent of the wife’s solicitors has been obtained and provided to the (omitted) Credit Union.

6. If the husband shall default in payment of the settlement sum as provided for in paragraph 1 hereof then and in such event the husband shall pay to the wife interest at the rate provided for in the Family Law Rules from the date of default until the date of payment.

7. If the default shall continue for a period of two (2) months THEN the following shall apply:

   (a)the property situate at and known as Property V shall be sold by such manner and such price as the wife shall nominate and the net proceeds of sale to be distributed as follows:

   (i)the settlement sum together with such interest as may occur thereon to the wife;

   (ii)in discharge of any costs order in favour of the wife;

   (iii)the balance then remaining (if any) to the husband;

   (b)the husband forthwith deliver up to the wife his (omitted) motor vehicle and any boat in the husband’s possession with the wife at liberty to sell those items in such manner and at such price as she may nominate and the net proceeds of sale to be distributed as follows:

   (i)in discharge of the settlement sum together with such interest as may occur thereon to the wife (or any balance of that sum still outstanding);

   (ii)in discharge of any costs order in favour of the wife;

   (iii)the balance then remaining (if any) to the husband;

8. The husband is restrained from selling, disposing, dealing with or encumbering any motor vehicle or boat currently in his possession.

9. Pursuant to s.90MT(4) of the Family Law Act 1975 (as amended), this Honourable Court do allocate to the wife the specified amount of ONE HUNDRED AND THIRTY THOUSAND DOLLARS ($130,000) out of the husband’s splitable interest in (omitted) Super, Member Number: (omitted); and

   (a)pursuant to section 90MT(1) of the Family Law Act 1975 (as amended) whenever the trustee of (omitted) Super (“the trustee”) makes a splitable payment in respect of the husband’s interest in (omitted) Super, Member Number: (omitted), the trustee shall pay to the wife her executors, administrators, beneficiaries, heirs or assigns the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations2001 using the base amount of $130,000 and that there be a corresponding reduction to the entitlement that the husband would have had in the Fund but for this order;

   (b)a copy of this Order be served upon the (omitted) Super Fund by the wife’s solicitors within 14 days;

   (c)the trustee has liberty to relist this matter within a further 28 days in the event the trustee is unable to comply with subparagraph 9(a) above but otherwise the operative time for this order is 6 May 2013;

   (d)if no objection is received by the trustee within 28 days of the service of these Orders, then this splitting order becomes binding on the trustee;

   (e)the trustees of the said (omitted) Super Fund shall do all such acts and things and sign all such documents as shall be necessary so that in accordance with the Family Law Act 1975 (as amended) and that the Family Law (Superannuation) Regulations2001 the trustees can calculate the entitlement of and make payment to the wife in accordance with this Order;

   (f)the terms of this sub paragraph should be binding upon the executors, administrators, beneficiaries, heirs or assigns of the husband.

10. In the event either party fails to take a necessary step in accordance with these orders then a Registrar of this Court may sign any documents necessary to give effect to this order, upon filing of an Affidavit establishing a party’s failure to comply with same.

11. The husband pay the wife’s costs thrown away in relation to the hearing on 21 November 2012.

12. Liberty to the wife to apply within 14 days in relation to further costs order.

IT IS NOTED that publication of this judgment under the pseudonym Parkes & Parkes is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADC 4615 of 2011

MS PARKES

Applicant

And

MR PARKES

Respondent

REASONS FOR JUDGMENT

[These reasons were delivered orally and have been edited and corrected from transcript.  I have endeavoured to correct grammatical errors, clarify any citations and generally make my oral reasons easier to read.]

1. Before the Court is the wife’s application for property settlement which was filed on 6 December 2011.  I am satisfied the husband was served with these proceedings and there is an affidavit of service on the file.  Indeed, on the first return date, 17 February 2012, the husband was represented by a solicitor, Mr Wilson.  On that occasion, usual directions were made for the parties to attend a financial conciliation conference on 10 May 2012.

2. The husband was directed to file answering documents and the usual orders regarding informal discovery and valuations were made, in preparation for a conciliation conference on 10 May 2012.  No documents were filed by the husband prior to the conciliation conference.  He did file a request to attend the financial conciliation conference by telephone.  Both parties participated in that conference on 10 May 2012 and not surprisingly no agreement was reached, given the absence of any answering documents from the husband.

3. The husband has not since taken any part in these proceedings.  He did not attend on the adjourned hearing date on 11 July 2012.  A further order was made for the husband to file answering documents within 28 days and the matter was listed for a one-day hearing to 21 November 2012 with a further directions hearing on 4 September 2012.  Again, the husband failed to attend and failed to file any documents and the matter then was directed to proceed by way of an undefended hearing on 21 November 2012.  I note that copies of all Court orders have been posted to the husband at his residential address, which is the former matrimonial home at Property V.

4. The wife issued various subpoenae shortly prior to trial and discovered that the husband had borrowed significant funds that were secured against the former matrimonial home, one way or another.  Those borrowings appear to have occurred both pre-separation and post-separation, and the wife gave evidence that all of those borrowings occurred without her knowledge.

5. When the matter came before me on 21 November 2012, it became clear that the hearing could not proceed, even on an undefended basis.  The preliminary inquiries indicated that further subpoenae were required to properly clarify the extent of indebtedness incurred by the husband.  Orders were made restraining the husband from further encumbering the former matrimonial home and the trial was adjourned to 15 March 2013 when the hearing proceeded before me on an undefended basis.

6. A sealed copy of the orders of 21 November 2012 was forwarded by prepaid post to the husband at the former matrimonial home where he is residing.  There is also an affidavit of service filed 5 December 2012 in relation to service of certain subpoenae upon him. This clearly put the husband on notice that the wife’s application was proceeding, with or without his participation. 

7. The hearing proceeded on an undefended basis on 15 March 2013.  The wife’s evidence is uncontested, both as to the financial history during the marriage and as to the loans that were taken out or extended by the husband without her knowledge, both prior to and after separation.

Background

1. The husband was born on (omitted) 1961 and the wife was born on (omitted) 1968. They began living together in 1988 and married in (omitted) 1989.  There were three children from the marriage:  V, who is now 22 years old, X, who is 21 years old and Y, who is nearly 16 years old.  The parties separated on 23 August 2007 after living together for 19 years. 

2. In 1988 the parties purchased the former matrimonial home at Property V for the sum of $73,000 (the “former matrimonial home”).  The property was purchased in the husband’s sole name.  The husband owned two blocks of land at (omitted) prior to the marriage and he sold them in 1990 and 1991, achieving net sale proceeds of approximately $27,000 in total.  The wife also sold her car early in the marriage and all of these funds from sale of the husband’s assets and from the wife’s car were directed into the family finances, one way or another. 

3. The husband worked full time for (employer omitted) throughout the marriage.  The wife worked full time prior to the birth of the oldest child and resumed part-time employment in approximately 1994, when the middle child, X, was approximately two years old.  Y was born in 1997 and the wife again returned to part-time casual employment a year or so later.  As the children grew older the wife increased her participation in the paid workforce. 

4. The original loan secured by mortgage against the former matrimonial home was paid out in 1996 and a Discharge of that mortgage was registered in 2000.  A new mortgage was taken out with the (omitted) Credit Union in the sum of $60,000 at that same time, and this is the first of the transactions that the wife says occurred without her knowledge.

5. The wife says the husband undertook a range of other financial dealings prior to separation without her knowledge.  One such example is that the husband negotiated a payout from his superannuation fund of approximately $58,000, which was received by him on 9 August 2007, just two weeks prior to the date of separation.  These financial transactions are not the only facts that the husband was keeping secret from the wife, however. 

6. The wife was aware that the husband had a child, W, from a previous relationship with Ms A.  W was born in 1983.   The husband paid child support for W and eventually W began to spend regular time with his father, with the support of the wife.  However, the wife was unaware that the husband had continued a relationship with Ms A during their marriage and had another child with her, Z, in 1993.  The parties were already experiencing difficulties in their marriage but it was this discovery that finally led to their separation.

7. At the time of separation the children V and Y remained in the wife’s care.  V was 17 years old and Y was only 10 years old.  X remained living with the husband.  He was approximately 15 years old at that time.

8. The wife continues in full-time employment and earns approximately $52,000 per year.  As best we know, the husband also continues in full‑time employment, but the only information in that regard comes solely from the wife through her various Child Support Assessments across the years.  These records indicate that the husband’s income has fluctuated in the years since separation.  It was as high as $144,000 in 2008 and the last known taxable income for the husband was approximately $80,000 in the 2011 financial year.

Discussion

1. For the reasons that follow, I am satisfied that it is just and equitable to make an order altering the parties’ interests in the property that is available for distribution between them. Accordingly the Court must identify the matrimonial asset pool and then assess each party’s contribution to that asset pool, including their financial and non financial contributions and their contribution to the overall welfare of their family in the role of homemaker or parent, in accordance with s.79(4) of the Family Law Act 1975. 

2. The Court must also consider the matters set out in s.75(2) of the Act and consider the parties’ future needs, including any impact the proposed orders may have on the parties’ earning capacity. After taking into account all of these matters, the Court must then ensure that the orders for property settlement are just and equitable.

Assets and Liabilities

1. I am satisfied that a two pool approach is appropriate in this matter, given that there is a modest tangible asset pool – even more modest now, due to the husband’s actions – comparative to the value of the parties’ superannuation interests.  It is important also to identify the asset pool at separation as well as at the time of trial because it is clear that the husband has withdrawn or accessed various funds which have reduced the equity in the former matrimonial home and have otherwise reduced the net matrimonial asset pool.

2. The wife believes the husband held shares, including shares in (employer omitted), arising from his employment.  We have no evidence about any shareholdings and it is impossible to take them into account when identifying the asset pool.

3. I accept the wife’s evidence that the husband’s borrowings prior to separation and again after separation were all unknown to her.   Her evidence is uncontested, as the husband has chosen not to take any part in these proceedings.  The wife conceded that it is unlikely the Court will exclude the pre-separation borrowings.  Even though the wife was unaware of those drawings, it is possible that those funds were somewhere else reflected in the assets held by the parties at separation or otherwise used to benefit the family in some way.

4. The husband also accessed and withdrew funds from his superannuation just prior to separation, some of which were paid towards the mortgage balance.  At that point, just prior to separation, the relevant mortgage balance was approximately $61,000. 

5. The wife argues that the funds borrowed by the husband after separation should not be treated as matrimonial debts, whether the borrowings were by way of loan or refinanced by way of mortgage against the former matrimonial home. She argues that she was unaware of all of these drawings and certainly received no benefit from them. She further argues that the borrowings have simply diminished the asset pool available for distribution between the parties now.

6. The Court should always be cautious when considering whether to add back and include notional funds or assets within the asset pool.  It is well understood that parties should be able to get on with their financial arrangements post-separation in a reasonable manner.   However, I do not consider there is anything reasonable about the husband’s actions in dramatically increasing the liabilities secured against the former matrimonial home without any notice to the wife.

7. I conclude that it is appropriate to add back the funds used by the husband since separation, or accessed by him since separation.  The husband may have bought and sold various assets from the funds drawn down by him, but there is little information in that regard.  For that reason I conclude it is appropriate to calculate the difference between the amount owing on the mortgage owing at separation (approximately $61,000), as opposed to the amount owed now (approximately $181,000) and to add back the difference between the two figures, in the sum of $119,000.

8. The husband has been living in the former matrimonial home.  In the normal course of events one would expect that the amount owing on the mortgage would be decreasing across the years.  The wife sought to include an adjustment in this regard as well, but the Court cannot allocate an unknown or imprecise figure into the asset pool.  I consider this issue is better dealt with when considering the parties’ contributions.

9. The wife says that the husband had two motor vehicles at separation – a Ford motor vehicle and a Commodore motor vehicle.  The wife believes the husband subsequently sold the Commodore and purchased a (omitted) motor vehicle for approximately $65,000.   The husband also owned a trailer worth an estimated $6,000 and purchased a boat for an estimated $30,000.

10. Therefore, at separation, I summarise the asset pool as follows:

    Former matrimonial home in husband’s name (E)                 $350,000

    Husband’s Commodore (E)  $30,000

    Husband’s Ford (E)  $4,000

    Husband’s trailer (E)  $6,000

    Husband’s household effects (E)  $5,000

    Husband’s shares  value unknown

    Wife’s household effects (E)      $1,500

    Estimated total assets   $396,500

11. The amount owing on the mortgage as at 21 August 2007 stood at $61,368 and therefore the net assets were approximately $335,142 at the time of separation, plus the value of any shares owned by the husband. 

12. The husband held superannuation valued at approximately $303,000 and the wife held a much more modest entitlement of approximately $18,200, to a total combined value of $321,403.

13. The assets have not altered greatly at trial but there are some significant issues that need to be taken into account. The wife provided an appraisal from a real estate agent estimating the value of the former matrimonial home at $330,000. I accept that the figures for each party’s household effects should remain unchanged. The wife does not know whether the husband still owns any shares and as mentioned, I am unable to include a potential asset of unknown value in the asset pool.

14. The husband still owns two motor vehicles and I accept the (omitted) figures provided by the wife regarding these vehicles, together with the wife’s estimated value for a boat purchased by the husband after separation. The wife owns a Holden motor vehicle valued at $9,000.

15. I accept the wife’s evidence that the husband also sold the trailer for the sum of $6,000 and I will include that figure as an add back, together with the sum of $119,000, representing the husband’s post separation borrowings against the mortgage.

1. It is possible that some of the borrowings that the husband has refinanced against the mortgage are reflected elsewhere in the asset pool.  It is equally possible that he sold shares and used those funds to purchase further assets, or that there are other assets unknown to the wife.  The husband has not chosen to put any evidence before the Court on this topic or, indeed, on any topic relevant to these property settlement proceedings.  He is free to choose not to participate in this Court process but, by doing so, he is at risk of the Court making findings adverse to his position.  

2. Taking into account all of the above, I find that the identifiable asset pool at trial is as follows:

   Former matrimonial home in husband’s name (E)                 $330,000

   Husband's (omitted) motor vehicle (E)  $30,000

   Husband’s Ford (E)  $4,000

   Husband’s boat (E)   $30,000

   Husband’s household effects (E)  $5,000

   Wife’s household effects (E)  $1,500

   Wife's Holden (E)  $9,000

   Total tangible assets  $409,500

   Addbacks

   Proceeds of sale of trailer (E)   $6,000

   Husband’s re-draw of mortgage  $119,000

   Total Known Assets  $534,500

3. The current mortgage balance is approximately $181,000, leaving a net tangible asset pool of $353,500.

4. In relation to the superannuation, the wife has provided relatively current figures for the husband’s superannuation entitlements in the sum of $324,682.  Her own superannuation entitlements stand at $38,874, and therefore the total superannuation pool is valued at $363,556.  The parties’ superannuation interests exceed the value of the net tangible asset pool.

Contributions

1. I consider the parties generally contributed equally during their married life together. The wife was understandably distressed to discover that the husband had been maintaining another relationship and had a second child within this relationship. No matter what the circumstances of those children’s births, the husband still had a legal obligation to provide financial support for those children. 

2. The husband brought assets of greater value into the marriage, but the weight to be placed upon this contribution diminishes over the decades, given the contributions made by the wife across the years.  He also earned a higher income than the wife during the marriage, but his ability to engage fully in the workforce was only possible because of the wife’s efforts in supervising and caring for the children.  

3. I am satisfied that the wife’s contribution as parent and homemaker was significantly greater than the husband’s contribution in this regard during the marriage. It could be said that the parties lived a reasonably traditional married life where the husband was the primary breadwinner and the wife was the primary parent and caregiver.  However the wife also worked in the paid workforce and made a direct financial contribution to the marriage.

4. The child X remained in the husband’s care at separation and the two girls remained with the wife. Y was still in primary school at the time of separation, whereas X was in high school. I am satisfied that the wife’s ongoing parenting responsibilities for Y were considerably greater than the husband’s parenting responsibilities for X, given Y’s young age. In practical terms, the husband was free to continue his career without the demands of caring for a young child.

5. Clearly the husband’s additional borrowings after separation have increased the actual matrimonial debt still outstanding.  The Court has taken this into account by adding those funds back as a notional asset and must be careful not to “double count” this issue.  Leaving aside the increased borrowings however, the husband’s actions have also undermined the anticipated debt reduction that would otherwise have occurred in the usual course of events, had he continued making repayments against the mortgage balance outstanding at separation.  Given the significant increase in the debt and that the parties separated five years ago, this is a relevant factor.

6. At the end of the day, I assess the wife’s contribution at 54% and the husband’s contribution at 46%. 

7. Slightly different considerations apply to the superannuation pool. The wife has made an indirect post-separation contribution to the husband’s superannuation through her role as Y’s primary carer, which enabled the husband to continue working full time and contributing to his superannuation interests. The other factors relevant to my adjustment regarding the parties’ contributions simply do not apply to the superannuation pool and I therefore assess the parties’ contributions as equal.

Section 75(2) factors and future needs

1. Both parties are working and there is no evidence to suggest that either party has any health issues.  Both will retain assets in accordance with these orders.  The wife does not own any other significant assets and we have no further information about the husband’s overall financial circumstances.  He may own some shares but we simply do not know. 

2. There is a very modest asset pool available for division between the parties.  The wife has had the ongoing parenting responsibilities for Y, albeit she is now in high school.  The husband is paying child support for Y. 

3. The husband earns a higher income than the wife. He has been able to make greater contributions to his superannuation by virtue of his higher income and will continue to benefit from his greater capacity in that regard.

4. I am satisfied that the additional parenting responsibilities borne by the wife and the difference in the parties’ income earning capacity warrants a further adjustment in the wife’s favour, on account of s.75(2) factors. The husband’s conduct in these proceedings is also relevant, pursuant to s.75(2)(o). He has failed to participate in this process in any meaningful way, leading to the wife incurring unnecessary delay, stress and expense. I conclude that a further five per cent adjustment in the wife’s favour is appropriate and should apply to the tangible assets and to the superannuation pool.

5. I therefore conclude that the wife should receive 59% of the tangible asset pool and 55% of the superannuation pool. 

Conclusion

1. The relevant net tangible asset pool is valued at $353,500, including the two amounts added back into the asset pool.  The wife is entitled to retain assets to the value of $208,565, or 59%.  The wife already holds assets to the value of $10,500, being her car and modest household effects, requiring a cash adjustment in her favour in the sum of $198,065. 

2. In relation to the superannuation, the total superannuation pool is $363,556.  The wife will retain 55% of the superannuation, to a value of $199,956.  The wife currently holds superannuation to the value of $38,874.  Therefore, a splitting order in the sum of $161,081 would be required in the wife’s favour.

3. The wife is seeking a larger cash adjustment, in order to maximise her capacity to re-enter the property market.  I agree that some greater adjustment is appropriate in the circumstances to assist the wife in re-entering the property market, but not to the extent sought by her in the aide-mémoire made available by counsel prior to this hearing.

4. I have already taken into account the impact of the husband’s conduct when adding back in the post-separation borrowings and it is important the Court does not inadvertently double-dip in terms of these issues.  At the same time, the reality has been that the wife has been effectively trapped in the rental sector since the parties separated. Monies that she has paid towards rent could have been directed to her own mortgage and increasing her own equity in a home if the parties had been able to negotiate a proper property settlement or if the husband had participated in the Court process, enabling the matter to be finalised much more quickly.

5. On that basis alone, I consider that there is justification to allocate to the wife a greater share of the tangible assets and a reduced superannuation splitting order. The order I intend making is that the wife will receive an increased cash adjustment to the value of $220,000, approximately $20,000 more than she would otherwise have received.

6. Obviously the wife will enjoy immediate access to these funds and will not have to wait until her superannuation vests at retirement.  This is a considerable benefit to the wife and should be reflected in a larger reduction in her entitlement to a superannuation split.  I will order that the wife receive a superannuation splitting order in the sum of $130,000, a reduction of approximately $30,000.

7. It appears unlikely that there is sufficient equity in the former matrimonial home to meet the wife’s entitlements.  This poses some real issues for the husband, but these are problems of his own making by virtue of the fact that he has drawn down or borrowed against the equity in the former matrimonial home in the way that he has done.   Notwithstanding these difficulties, I am satisfied the orders I now make are just and equitable.

8. Regarding any costs application, I have already taken the husband’s conduct in these proceedings into account to some extent. Therefore it would not be appropriate to now allow the wife to pursue costs at large, in my view. However, taking into account s.117(2A), particularly s.117(2A)(c) and (d), I conclude that the husband should pay the wife’s costs thrown away for the hearing on 21 November 2012. That adjournment would not have been necessary had the husband made any effort to disclose his financial circumstances. As it was, the wife discovered his post separation borrowings and the hearing needed to be adjourned to enable the wife to clarify the situation by way of further subpoenae. Similarly, the wife’s costs incurred in tracing the husband’s borrowings may be the subject of a further costs application, but not otherwise.

9. I now make orders as pronounced by me and published at the commencement of these Reasons.

I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of Judge Kelly

Associate: 

Date:       4 September 2014