Rooney and Rooney
[2007] FamCA 179
•13 March 2007
FAMILY COURT OF AUSTRALIA
| ROONEY & ROONEY | [2007] FamCA 179 |
| FAMILY LAW - PROPERTY – Final – Contributions – Husband alcoholic |
| Family Law Act 1975 (Cth), s.79(4) |
Pierce v. Pierce (1999) FLC 92-844
| HUSBAND: | Mr Rooney |
| WIFE | Mrs Rooney |
| FILE NUMBER: | MLF | 6723 | of | 2003 |
| DATE DELIVERED: | 13 March, 2007 |
| PLACE DELIVERED: | Melbourne |
| JUDGMENT OF: | Brown J |
| HEARING DATE: | 31 October, 2, 3 November, 2006 |
REPRESENTATION
| COUNSEL FOR THE HUSBAND: | Mr Mawson |
| SOLICITOR FOR THE HUSBAND: | CE Family Lawyers |
| COUNSEL FOR THE WIFE: | Ms Smallwood |
| SOLICITOR FOR THE WIFE: | McDonald, Slater & Lay |
Orders
That on or before 13 June, 2007 the wife pay to the husband the sum of $74,886 (“the payment”).
That upon the payment :
(a)the husband do all such acts and things and sign such documents as may be required to transfer to the wife at her expense all of his right, title and interest in the real property situated at and known as C, in the State of Victoria, being the whole of the land more particularly described in Certificate of Title Volume … Folio … (“the real property”);
(b)the wife shall indemnify the husband against all rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind;
(c)the wife do all acts and things and sign all such documents as may be required to :
(i)transfer to the husband her entire shareholding in S Pty. Ltd.;
(ii)resign as a director of S Pty. Ltd.;
(iii)transfer to the husband any interest in any loan account in her name in S Pty. Ltd.; and
(d)the husband shall indemnify the wife and forever thereafter keep her indemnified in respect of all or any liabilities of or in respect of S Pty. Ltd. including any liability of the wife to the Commissioner of Taxation, howsoever such liability arises.
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 in default of the payment on or before 13 June, 2007 the real property be sold altogether out of Court (“the sale”) and the husband and wife forthwith do all acts and things and sign all necessary documents to effect the sale of the real property and by way of consequential arrangements that shall be made for the purpose of effecting the sale :
(a)the listing price for the real property shall be as agreed between the parties and if there is no agreement shall be as advised by a valuer (who is also a practising real estate agent) appointed by the President of the Victorian Division of the Australian Property Institute;
(b)the real property shall be listed for sale by private treaty 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; and
(c) in the event the real property has not been sold within three months of the date of default of the payment the husband and wife shall make all such arrangements and do all such acts and sign all such documents to procure a sale by public auction of the real property without reserve, such auction to take place within a further period of three months by an agent to be agreed and failing agreement to be nominated by the husband.
That upon completion of the sale the proceeds of the sale shall be applied as follows :
(a)first, to pay all costs, commissions and expenses of the sale and to pay any council and water rates and maintenance levies outstanding of the real property;
(b) second, the sum of $74,886, together with compound interest thereon at the rate of 10 percent per annum adjusted monthly from the due date to the date of payment to be held on trust for the husband in an interest bearing account, to be disbursed as provided in paragraph (16) hereof; and
(c)third, the balance to the wife.
That pending the pending the payment or completion of the sale :
(a)the wife have the sole right to occupy the real property and that during such right of occupation she pay all rates and taxes and like apportionable outgoings of the real property as they fall due;
(b)the parties hold their respective interests in the real property upon trust pursuant to these orders; and
(c) neither party encumber the real property without the consent in writing of the other party.
That in the event a party refuses or neglects to comply with a provision of this order :
(a)the registrar of the Family Court of Australia in Melbourne is hereby appointed to execute all deeds and documents in the name of the party in default 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 his or her 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.
IT IS DECLARED
That the husband holds the Charles Blackman painting in his possession on trust for the children of the marriage, W born in February, 1991, Y born in February, 1993, T born in June, 1995 and J born in June, 1998, as tenants in common, until :
(a)the youngest child turns 18; or
(b)with the written consent of the wife and any child who is then 18 or older, an earlier date agreed between the husband and wife.
IT IS FURTHER ORDERED
That the husband pay the wife’s costs of and incidental to the adjournment of these proceedings on 5 June, 2006 including but not limited to :
(a)counsel’s fees for appearing on 5 June, 2006 and for any necessary additional conferences and preparation, at the fees marked on the relevant briefs; and
(b)solicitor’s costs for attending on 5 June, 2006 and for any necessary additional attendances, preparation (including but not limited to preparation of affidavits and other Court documents) and briefing of counsel;
the quantum of such costs to be agreed and, failing agreement, to be assessed pursuant to Part 19.6 of the Family Law Rules 2004, and to be paid :
(c)if the wife makes the payment by the due date, within 30 days of agreement or assessment, whichever occurs first; or
(d)if the real property is sold pursuant to paragraph (4) hereof, then as provided in paragraph (16)(a) hereof.
That the wife have leave to file a written submission in support of her application that the husband pay her costs of and incidental to these proceedings, and such submission be filed and served on or before 13 April, 2007.
That any written submission of the husband in response be filed and served by 26 April, 2006.
That any written submission of the wife in reply be filed and served by 10 May, 2007.
That a party filing a submission pursuant to paragraphs (10), (11) or (12) hereof, endorse on the coversheet of the submission the date on which it was served on the other party and, within 24 hours of filing, fax a copy of the submission to the associate to the Honourable Justice Brown on fax number … .
That in the event the husband seeks to make an application for costs he file and serve written submissions in support of that application by 13 April, 2007 and the provisions of paragraphs (11), (12) and (13) hereof take effect as if the wife were the respondent to the application for costs and the husband the applicant.
That in the event the wife does not file further written submissions pursuant to paragraph (10) hereof, the husband have leave to file and serve a written submission responding to the wife’s application for costs, made in reliance on evidence contained in her affidavit sworn 13 February, 2006 and oral evidence during the trial.
That the sum held in trust for the husband pursuant to paragraph (5)(b) hereof be disbursed as follows :
(a)to pay to the wife costs due to her pursuant to paragraph (9) hereof;
(b)to pay to the wife any costs due to her after the determination of her application for costs, referred to in paragraph (10) hereof; and
(c)the balance to the husband.
That all extant applications be otherwise dismissed.
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.
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF 6723 of 2003
| Mr Rooney |
Husband
And
| Mrs Rooney |
Wife
REASONS FOR JUDGMENT
The parties married in 1988, having lived together since 1985. They separated in May 2003. They have four children, aged between 16 and 8, who live with their mother. The husband withdrew an application for parenting orders on 31 October, 2006. The issue which remains for determination by the Court is the division of the parties’ property.
PARTIES
The husband is 56 and conducts a sound recording business through S Pty. Ltd. He lives in B, in a property rented by S. For much of his adult life (commencing well before he met the wife) the husband has struggled to manage his alcohol use and abuse, a problem he admitted. The husband was previously married to Ms B with whom he had a son, N, who is now 25. He and Ms B separated in 1981.
The wife is 41 and continues to live with the children in the former matrimonial home in B. She runs a small business (of which she is the sole proprietor) called A which sells confectionary and homewares.
The husband has had almost no contact with the children since separation, due to his alcoholism and attempts to manage it. Whilst he alleged that the wife failed to encourage it, his own evidence of problems when the family briefly used a contact centre (for example, workers complained he arrived smelling of alcohol and then spent time on the mobile phone) are illustrative of the difficulties the wife and children faced in this respect, and contact at G ceased in April 2005. Prior to commencing at the contact centre in August 2004, the husband had some contact at the wife’s business premises and then in a park, but that commenced some nine months after separation.
The husband’s problems with alcohol affected not only the parties’ marriage and his relationship with their children, but impacted on these proceedings. In November 2005, frustrated by the husband’s failure to comply with orders and engage with the case, the wife made an application for the appointment of a litigation guardian for him, which was not successful. The case was listed for hearing on 5 June, 2006. Regrettably, but predictably, it was not able to proceed, counsel for the husband having to apply for an adjournment as a result of his client’s state on the first day of the trial. The wife seeks costs of that day and costs thrown away as a result of the adjournment, an application I am satisfied should be granted. The judgment of Guest J discreetly but clearly describes the problem which faced the Court and the wife; responsibility for the adjournment rests squarely with the husband.
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.
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.
The parties relied on affidavits and financial statements sworn by them and each was cross-examined. Neither Ms T who prepared the family report, nor the single experts involved in valuing the former matrimonial home and S were required for cross-examination. The values were not in dispute.
The husband relied on a number of affidavits referrable to the issue of his alcohol abuse sworn, variously, by Dr A (a clinical neuropsychologist), Dr E (consultant psychiatrist), Mr G (the program director of the alcohol Recovery programs), Dr L (a general practitioner) and Mr C (a friend and recovering alcoholic). None was required for cross-examination.
The husband’s demeanour in the witness box was unusual. He often seemed confused and struggled when considering sequential events. The husband’s counsel conceded that the husband was a poor witness, appearing naïve and, often, confused and submitted this was a consequence of his alcoholism rather than a lack of candour. I accept that analysis.
In January 2003 Dr A expressed the opinion that the husband was then competent to make informed decisions and his deficits were mild. However, he would be concerned about the husband’s future cognitive and memory abilities should he continue to drink heavily. There is no doubt that the husband did continue to drink heavily. When Dr A saw him again in August and October 2004 he reported that neuropsychological assessments revealed ongoing deficits consistent with his initial assessment, but no deterioration of function. He reported :
[The husband] was well oriented to person, place, time and current events. His ability to perform routine mental operations was preserved. His capacity for basic attentional tasks was similarly intact. On more complex tasks of attention and working memory, however, [the husband] demonstrated reduced functions. With respect to information processing, [the husband] exhibited slow speed and generalised inefficiencies.
In terms of memory function, [the husband] demonstrated intact short term memory. His new learning was inefficient but there was no evidence of any amnesic syndrome. There was no evidence of any focal impairment, with nothing to suggest any language, perceptual or executive dysfunction.
Whether due to further alcohol induced impairment, the passage of time or other reasons, I am satisfied the husband’s recollection of past events was unreliable. A simple illustration is his recollection of the sum he took from his first marriage and put into the property at P. The husband deposed it was $80,000. The deed approved pursuant to then s.87 of the Family Law Act 1975, signed by him and his former wife, was tendered. Pursuant to the deed the husband was to receive $42,000 of which $1,000 was to be used to pay a debt, and he was to indemnify his wife for a debt due to his mother of $25,000. He confirmed that he paid those two debts, meaning he retained some $16,000, from which he agreed he probably paid legal costs. If one redoes the figures for the acquisition of the property on the basis he put in $16,000 and borrowed the rest, there would have been little or no reduction in the mortgage by the time that property was sold. It was sold in December 1986 for $177,500, not $185,000 as he recalled.
Another illustration was his evidence of using $60,000 of the inheritance he received from his mother to discharge the mortgage on the B property. Despite numerous requests for probate documents, none was provided until the last day of the trial. The only document produced by the husband to support this contention was a statement showing $51,287 paid into the husband’s account on 7 February, 2002 which he said was part of the $140,000 he received over 2001 and 2002. However, statements of the home loan account show that the B mortgage was effectively discharged by 8 December, 2000; on that date $47.88 was outstanding.
The husband’s evidence was of difficulty reading balance sheets and profit and loss schedules, and his evidence differentiating his money from that of S was, at times, confusing. The documents available to the Court were of limited use as it is probable numerous expenses were lumbered together into a category such as “Materials and supplies”. This can be illustrated by the fact that the documents include no reference to the rent paid by S for the husband’s home. In his form 13 the husband deposed to receiving the benefit of rent of $350 per week paid by S; cross-examined, he said that the accountant would apportion this equally between him and the company, half being referrable to the company’s office accommodation.
The wife was much more coherent than the husband although her evidence about the series of transactions after separation referable to the establishment of three businesses was also sometimes confused. However, I have no hesitation in preferring her evidence of events and conduct during the marriage and I am satisfied she was an honest witness.
CHRONOLOGY
The wife conceded that the nucleus of the sound recording business was established by the husband prior to the parties’ marriage. The husband’s evidence was that the business was well established in early 1986 (when he recalled the parties commenced cohabitation) and that it “would have had a reasonable value at that time”. It was incorporated in July, 1987 as R Pty. Ltd., with the husband holding the majority of shares and the wife, one. Under a restructure in October 1995, they became equal shareholders.
The wife worked as a receptionist until their first child was born, in early 1991. The husband’s evidence was that save for “sometimes providing support with book-keeping”, amounting to no more than one or two hours a week, the wife made no direct contribution to the business. Her evidence was that she commenced working with him in the business when their first child was nine months old, and played a significant role in the business from that time on, evidence which I accept.
When the parties commenced living together the husband owned a property in P, bought in 1984 after he separated from his first wife. He deposed that the purchase price was approximately $140,000, funded by $80,000 he received from his first property settlement and the balance by mortgage. He estimated its value in 1986 at $180,000 and the mortgage liability at approximately $60,000. I have earlier referred to the inaccuracy of his recollections and that the sum he retained under the s.87 deed was less than $16,000.
The parties lived in that property until 1987, when it was sold for approximately $177,500. The parties then purchased a property in K for $165,000, using the net proceeds of P and the balance by way of mortgage. It was registered in the husband’s sole name. Later that year the parties married.
The K property was sold in 1992 and the home in B, in which the family lived until separation, purchased for $275,000, funded by proceeds from the K property and a mortgage.
The husband deposed that in 2001 he received an inheritance from his mother’s estate of some $140,000. He deposed that approximately $60,000 went to discharge the mortgage on the B property, $15,000 to discharge a bank loan for company equipment, $8,000 to pay joint credit card debts, $35,000 for a new car and that the balance was placed in joint investments. I am satisfied the B mortgage was discharged in early December 2000, before he received any part of this inheritance.
The husband did not recall telling the wife that his inheritance was some $90,000 but agreed he would have told her the truth. He was a joint executor of the estate. Notwithstanding that, and requests made by the wife and her lawyers from 2002, probate documents and a letter relating to his late mother’s F investments (which did not form part of the estate) were only produced on the last day of the trial.
The inventory of assets attached to the grant of probate noted assets of $133,777. The F investment bonds totalled $94,027. The beneficiaries (named in the will and the bonds) were the husband and his sister, so he probably received about $114,000. The husband may well have mentioned a figure of $90,000 to the wife; the F investment was $94,027 and the bulk of the estate was a bank account in which there was $97,119.
The husband’s evidence was that the balance of the inheritance (which he said had been in joint investments) had been spent. At one point he seemed to suggest that these funds were used to pay two sets of school fees of $9,000; at another he referred to funds going to the wife’s shop to pay bills and to put food on the table; at another, to lending it to S in late 2002 or 2003. The wife accepted that $20,000 was lent to S on 26 June, 2003. The husband’s evidence was that it had not been repaid, although he subsequently conceded that a payment to him from S of $10,000 on 29 July, 2003 was part repayment, and that he often lent money to S and was reimbursed.
While I do not accept that his recollection of the disbursement of his inheritance was accurate, there is no evidence it was squandered and I act on the basis it was spent on business and family expenses.
It is probable that, as time went on, the parties’ lives became increasingly stressful. They had four children in eight years, a business to run which was dependent on the husband’s expertise as a sound recordist, and problems associated with the husband’s increasing dependence on alcohol. The husband’s evidence was of acknowledging the problem and attempting to abstain in 2000 and he did then consult a psychologist and a number of doctors specialising in addiction. An attempt to stop drinking in early 2001 was short lived, he commencing again in June.
The husband’s evidence was of initial support and encouragement from the wife which changed to anger in March 2001; he said she “then ostracised me from herself and our children” and that continued until separation in May 2003. That may be his recollection but I am satisfied the wife tried to support and encourage him to cease drinking. The husband did not see Dr E until late 2004 but, when he did, he told him that the wife had kept him alive. It is probable she did lose patience towards the end.
Dr A reported that the wife attended with the husband for the feedback session after assessment and spoke with him about her husband’s drinking and his increasingly difficult and unusual behaviour. Dr A noted the significant marital conflict over the past 18 months and that both parties reported a happy marriage prior to that, and that the wife was supportive of a trial period in which the husband would try to cease drinking without an admission as an inpatient. The husband’s own evidence was that by the time he arranged an admission to the D Private Hospital in September 2003, a few months after separation, he was drinking between 1.5 to 3 litres of wine a night. The wife’s evidence was of him drinking spirits as well as wine, which I accept.
It is probable that it became clear to both of the parties that separation was inevitable. The wife decided to commence a carpet business, with the aim of providing some financial stability and security after separation. Each accused the other of mismanagement of the S business in the months prior to separation and poor financial management. It is probable there is some truth on both sides.
In January 2003, some months prior to separation, the wife reported to Dr A that the husband had been accusing her of stealing money from the business and of being unable to manage business accounts. She was concerned that his erratic behaviour (including hiding her keys and throwing her mobile phone into the rubbish bin) was worsening and that his behaviour was beginning to affect the business. Dr A reported that the husband’s history, then presentation and neuropsychological profile were consistent with mild borderline effects of alcohol brain impairment and he suspected his altered behaviour, as described by the wife, was further consistent with that syndrome.
Dr E’s opinion was that the marriage breakdown occurred in the context of the husband’s chronic alcoholism (which probably contributed to his previous marriage breakdown as well) and that he had little insight into this fact. Dr E also believed that his drinking was likely to have affected his management of the business and his ability to manage it.
For her part, the wife’s decisions in respect of the carpet business could not be said to have been well thought out. Prior to separation, S provided an income sufficient to support the family and both were drawing funds from that source. After separation, the wife’s salary ceased. The husband cancelled the card she had used for most domestic expenditure. She was left, with four children, without access to funds and with $60 in her purse.
The husband moved to rented accommodation and conducted the business from there. The husband did not commence to pay child support until 15 July, 2003, and then at the rate of $183 per week. He also paid some household expenses, including rates, insurance, gas and electricity. His child support was increased to $415 per week on 10 September, 2003. The husband continued to maintain Medibank Private subscriptions for the family and private school fees for W until the end of 2004, when she left that school. The wife has otherwise supported the children from family allowance and Centrelink payments, and any income from her business, although that it just breaking even.
The S bank account required both parties’ signatures. In February 2003, without notice to the wife, the husband established a second bank account for the company, requiring only his signature; the wife learnt of this some time later, from bank correspondence.
The husband’s evidence was that he opened the second bank account because the wife was drawing massive amounts of money from the company, and it could not pay its bills. He said she had been doing that for about six months prior to the new bank account being opened in February or March 2003. He said this behaviour occurred in the second half of 2002. In an earlier affidavit, sworn on 7 April, 2004, he had deposed to her withdrawing $35,000 between Christmas 2002 and separation, and said nothing about alleged earlier withdrawals.
In schedule 1C.1 to his valuation Mr F included a number of documents provided by the husband as part of a “brief company profile”. Under a heading of abnormal items of income and expenditure the husband listed a number of withdrawals between 8 November, 2002 and 12 May, 2003, totalling $41,101, which he described as : “Large sums of money moved out of the company by [the wife], described as wages in tax return”.
I do not find the wife improperly withdrew funds prior to separation but accept her evidence of doing so after separation.
The wife’s explanation for withdrawing $38,000 (not $35,000 as the husband deposed) after separation was simple. The husband had cancelled the salary he had previously paid her; she said it was some $50,000 per annum, and the accounts show $62,405 gross for the 2003 year. He had cancelled her gold visa card, which had routinely been used for all domestic expenditure, and tried to cut her off from funds. As noted earlier, when he left she had $60 in her purse.
What happened then is indicative of the lack of security surrounding the reissue of credit cards and internet banking. The wife obtained another visa card and kept using it as before, to pay bills and keep the family. She drew funds from the business account to pay the card, by internet transfer. After ten days, she received an emergency payment from Centrelink. After six weeks the husband began to pay $183 per week child support, as set out in paragraph 33. The wife’s evidence was that school fees, uniform, books and other school expenses for the children in 2005 alone cost about $7,000; they would have been less in 2003 but still had to be paid. I am satisfied that of the $38,000, some $14,300 went on payment of S business expenses.
The carpet business was established in a shopping centre in E. Without reference to the husband, the wife sold a number of matrimonial assets to raise funds to inject into the business. Her evidence was of selling a KIA motor car and a Ford Econovan, buying a cheaper Ford car for $14,000, and putting the difference of $9,000 into the business. She said she also sold four paintings, for which she received $22,500 (not $16,000 as she originally deposed). She also took out a personal loan of $10,000, which was later repaid.
With the carpet business failing, the wife decided to move to smaller premises in the same shopping centre, and open a confectionary business. Her evidence of the financial arrangements was confusing. She sold fittings of the carpet business for $8,000 and, eventually, assigned the lease. Her oral evidence was that it cost about $9,500 to change shops and some $20,000 was spent on stock, signage and other aspects of the new business.
The wife had arranged through her solicitor to borrow $25,000 from the M Group, as a short term loan, with an onerous interest rate. $32,500 was to be repaid by 24 February, 2004. She was unable to meet the payments.
On 29 April, 2004, by consent, an order was made for the sum of $30,000 to be drawn against the mortgage over the former matrimonial home. $25,000 was to be paid to the M Group and $5,000 held in trust, pending agreement between the parties or further court order. This sum was subsequently released to the wife on the basis it would be subject to categorisation by the trial judge. The husband repaid the sum of $30,000 to NAB from company funds later that year.
Questioned about the $30,000 and his decision to repay it, the husband said that it was “spousal maintenance in another way”, paid with S funds. He said it was “certainly not” claimed as a business expense, so probably came from takings in 2004/2005. It may have been recorded as what the husband referred to as a “director’s loan”.
In early 2004 the husband employed an office manager for the business, who works approximately 25 hours per week. He also employs a book keeper for one to two hours per month. Although he denied this work was previously undertaken by the wife, it is probable that much of it was, indicative of her greater involvement in the business than he now recalls.
The wife’s father died in July 2003 and she challenged his will in the Supreme Court of Tasmania. An order of that court made on 6 May, 2005 provided for her to receive $200,000 from the estate. After legal fees were paid, she received a total (in three payments) of $186,223. Using those funds she purchased a shop in M for $140,000, a purchase settled in October 2005. An additional $8,200 went on stamp duty, legal fees and other expenses and a further $12,000 on stock for the confectionary and homewares business she opened from those premises, having closed the E shop.
The wife subsequently mortgaged the M property, borrowing $65,000. Of that sum $35,000 went on legal costs, about $2,000 on bank fees, $2,000 on stock for the confectionary business and the balance to pay NAB, Visa and Mastercard debts.
In November 2005 the wife withdrew $37,300 from the S bank account without the husband’s knowledge or consent, by internet transfer. At that time she had been advised that the litigation could not proceed because the husband could not provide instructions and was again in hospital. He had consistently failed to comply with orders and directions relating to financial disclosure. She feared the consequences of his alcoholism. She gave $30,000 to her solicitors in trust (pursuant to an order of 19 December, 2005) and kept the balance. The $30,000 was subsequently returned to the business, the wife using the rest for living expenses.
ASSET POOL
The parties agreed on the value of the following assets and that they form part of the asset pool :
B $597,500
S Pty. Ltd. 193,159
T shares (jointly owned) 1,516
AMP shares (husband) 1,235
The parties also agreed on the value of their respective superannuation entitlements as follows :
Husband $93,251
Wife 23,456
The husband’s statement of financial circumstances reported no current superannuation contributions from his income.
Mr F’s second report is based on figures to 30 June, 2004, only a year after separation. S’s Profit and Loss Statements (schedule 1A) note superannuation contributions of $6,660 in the 2004 year. The figures for 2003 (the last year of cohabitation, in which the wife drew a salary) was $11,683; the figure for 2002 was $3,000. These figures are broken up in a separate item of “Directors Remuneration”. In 2002 each of the parties received superannuation benefits of $1,500 and each received $5,841 in 2003. The husband alone benefited from $6,660 in 2004.
In his first report (based on figures between 2000 and 2003) Mr F noted no superannuation contributions made by S in 2000, and $3,600 in 2001, split evenly between the parties.
The superannuation entitlement figure when the husband swore his financial statement on 24 February, 2006 was $87,033; by consent, his entitlement was included in the pool at $93,251. The difference of $6,218 is likely to be attributable to some small increase by way of interest or other capital increase in the fund and a superannuation contribution at 30 June, 2006. I cannot specify the 2005 or 2006 contributions.
Neither counsel submitted that contributions towards superannuation should be separately assessed, despite the increase in the husband’s entitlement. Given that fact, the relatively small sums involved and the fact neither party sought a splitting order, I do include the superannuations in the general pool in respect of which one finding of contribution will be made.
In his case summary document the husband sought notional add backs totalling $62,568 relating to artwork sold (then believed to have netted $16,000), the sale of the cars ($9,000), the balance of the funds withdrawn from the company in 2005 ($7,568) and the $30,000 paid to M Group. In final submissions his counsel abandoned these “direct add backs” in favour of taking them into account when assessing the parties’ respective contributions. I adopt that course.
There is then the question of the M shop. The husband’s primary submission was that it should be included in the pool at its value (agreed to be $140,000) without (it seems from his list of relevant assets and liabilities) any allowance for the mortgage of $65,000, with an acknowledgment that the husband made no contribution to it. If not included, it should be seen as a significant matter when assessing relevant s.75(2) factors. The submission of the husband was that there would “probably be no difference” to the final outcome, whichever approach was adopted.
The wife submitted that the shop should be quarantined, and not form part of the pool. She conceded its then relevance when assessing her financial circumstances under s.75(2)(b).
I am satisfied the wife’s approach is appropriate and this asset will be quarantined. Her equity in it is clearly relevant to her present circumstances.
The husband did not submit that the $5,000 released to the wife after orders were made in April 2004 should be added back to the pool; I will consider it when assessing contribution.
The pool is thus :
Non-superannuation assets
B $ 597,500
S Pty. Ltd. 193,159
T Shares 1,516
AMP shares 1,235
$ 793,410
Superannuation assets
Husband 93,251
Wife 23,456
Total $ 910,117
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;
The husband submitted that his contribution was greater than that of the wife, having regard to the assets he brought to the marriage, the inheritance from his mother, the sale by the wife of matrimonial assets to put into her first business, the repayment of the $30,000 drawn against the mortgage over the former matrimonial home in April 2004, the $5,000 paid to her in 2004, the funds taken from the business soon after separation and the $7,300 taken (and not returned) by the wife in November 2005.
In his submission, the Court’s finding as to contribution would depend on whether the property bought by the wife, using her inheritance (received in May 2005, well after separation) was included in the asset pool. In his summary of argument (filed 31 October, 2006) the husband sought a global finding that his contributions totalled 55% but that must be seen in context, as in that document he included in the pool notional add backs of $62,568 and the M shop. In final submissions his counsel said that if the shop were included, the parties’ contribution should be assessed as equal. If not included, the husband’s contributions (particularly his financial contributions) should result in a loading in his favour. However, counsel for the husband conceded that if that occurred, it was likely an adjustment in the wife’s favour for s.75(2) factors would be necessary.
The wife submitted that her contribution should be assessed at between 60% to 65%, and more if the M shop was included in the pool. She should ultimately be entitled to between 70 and 75% of the pool, assuming the pool did not include the M property, and more if it did.
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 [Z] and [Z] (unreported, Full Court Sydney, delivered 3 October 1996, per Ellis J at page 10).
The husband sought credit for a significant initial contribution. The business is now valued at $193,159. It is impossible to speculate on the value of the then business of the husband when the parties commenced cohabitation in 1985. I add that I prefer the wife’s evidence of the date of cohabitation. I have earlier referred to the evidence about the equity the husband had available to put into the P property, which he bought the year prior to the commencement of cohabitation. It is probable the equity was small and the mortgage large. Nevertheless, its value increased and his equity, any reduction in the mortgage over the three years of ownership, and the capital increase went into the K property.
The parties lived together for about 18 years. I do take the husband’s initial financial contributions into account; they weigh in his favour. Ultimately their various contributions of all kinds, over the marriage and since separation, must be assessed.
I have no doubt that the husband’s capacity to contribute as a parent and home maker was adversely affected by his alcoholism. It is probable the wife’s recollection of the amount spent on alcohol is more accurate than that of the husband, and she estimated it at around $170 per week. She was the primary carer for the children, in circumstances where his alcohol abuse made that more difficult. Since separation the children have had very little contact with their father and she has borne the brunt of their practical and emotional care.
The wife has made financial contributions since separation, and contributions towards maintaining assets. She painted the whole of the former matrimonial home and carpeted it, and spent some $5,000 on maintaining and improving it. She paid a Visa account of $7,000, which was owing at separation, and a total tax bill of around $1,758 levied against income attributed to her for the 2001/2002 year by payments on 8 October, 3 December and 30 December, 2003, and 18 January, 2004.
The business supported the family throughout the marriage. It relied (and continues to rely) on the husband’s expertise. I accept the wife’s evidence of her involvement and that it was much more significant than the husband now recalls. Nevertheless, his financial contribution outstripped hers.
Since September 2003, when child support was increased, the husband has made proper financial provision for the children and I take into account the additional payments for utilities, health insurance and W’s school fees.
During the marriage the husband paid child support for his son, N, although he did not see him for many years. The sum went from $45 to $450 per month, paid to N’s mother until he was 18 and then to him as orders required it to continue so long as he was studying. The husband’s evidence was of taking the maintenance question back to court in 1999 or 2000 and settling the case with a lump sum of $5,000, “to call it quits”. In 1999 N would have been 18.
The husband himself spoke of the $30,000 as “spousal maintenance in another way”. If one considers the period between separation and trial (approximately three and a half years) that would amount to maintenance of about $165 per week. In one sense that was a generous (and unsolicited) characterisation; in another, it was a realistic acknowledgement of his responsibility to support the wife to the extent she was unable to do so. I adopt his characterisation of it.
I do not find the wife recklessly squandered matrimonial funds after separation and accept that she felt it was necessary to establish a business to provide some security, as the husband’s alcoholism impacted on him. But she did sell matrimonial assets and use matrimonial funds in an ultimately unproductive way, as little benefit (financial or by way of goodwill) came from the two earlier business ventures into her present one. There must be a weighting in the husband’s favour for the funds taken from the business, the assets sold, the $5,000 (to be characterised by the trial judge) and the $7,300 not returned in November 2005. These must be balanced against funds the husband has expended on legal expenses (he paid $32,000 to CE Lawyers).
There must also be a weighting for the inheritance received by the husband which was probably spent on business and family expenses, and the increase in his superannuation since separation.
For her part, there needs to be a weighting in the wife’s favour for her very significant parenting and home making contributions during and after separation, which were rendered more onerous by the husband’s drinking problems when they were together, and have effectively been her sole responsibility since they parted. It is easy to underestimate non-financial contributions; they cannot be quantified like financial contributions. However real, not notional weight, must be placed on this contribution by the wife.
Balancing all contributions I assess the husband’s at 55% and the wife’s at 45%. The 10% differential represents $91,011 of the asset pool.
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;
Neither party made any submission referable to this paragraph.
(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;
I have earlier referred to the evidence of the husband’s alcoholism. He continues to struggle with it. As noted when considering the parties’ financial circumstances, the business is doing reasonably well, as it did during the marriage, notwithstanding the husband’s drinking. He can be under no illusions as to the consequences on his physical and mental health if he lapses back into heavy drinking.
The husband is fifteen years older than the wife but had no plans for retiring in the foreseeable future.
There was no evidence the wife’s health is other than reasonable for her age.
(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;
In his financial statement sworn 24 February, 2006 the husband deposed to an average weekly income of $1,442 ($74,984 per annum) and total personal expenditure of $1,186 ($61,672 per annum). In addition, he deposed to S paying rental of $350 per week and utilities (water, gas and electricity) of $150 per week for his benefit. Some part of the rent may be attributed back to the husband. Included in his expenses were child support and another $150 per week characterised as being for rates, bills and other household expenses for the children. His evidence was that the business is thriving and he intends to continue working for “quite a long time”.
In his affidavit (at paragraph 53) the husband deposed to financial support for the children and the wife of approximately $30,000 per annum out of a net income of approximately $54,000 per annum. His evidence was of an intention to continue paying the utilities and other sums presently paid over and above his assessed child support. No orders were sought to that effect.
S was valued in 2006 at $193,159. His evidence was of maintaining and improving the business, despite his problems with alcoholism, and it is probable it will continue to provide a steady income stream for him. He conceded a downturn in the business around the time of separation and for a period thereafter, for which he effectively blamed the wife, blame which I find to be misplaced.
It would be unsurprising had the business not deteriorated in the period after separation. The husband’s own evidence was of admissions to D Private Hospital for two weeks in September 2003. He was again an inpatient in January 2004. Dr L’s report dated 16 December, 2005 refers to a previous report dated 3 February, 2004, which was not in evidence. However, referring to that period Dr L reported that the husband relapsed a few weeks after leaving hospital in January 2004. At that time he was drinking three litres of wine daily and experiencing blackouts. It appears from the medical evidence that after his discharge in January 2004 the husband endeavoured to manage his alcoholism by taking medication and attending AA meetings. Although he recalled some periods of abstinence in 2004, he was again admitted as an inpatient on 23 March, 2005 for another two weeks. After a brief period of abstinence he relapsed again and requested admission in July 2005, which was agreed on the understanding he made a commitment to attend a 28-day program following his detoxification, which he did. When (due to circumstances beyond his control) he was not able to commence that program on 30 July, he immediately relapsed. After an unsuccessful attempt at home-based detoxification, he was readmitted on 19 August with a place reserved at a 28-day program at U on 23 August. He reported spending the following four and a half weeks there but was readmitted to D on 25 October and reported relapsing to his prior level of drinking within a few days of leaving U. He also reported noticing some impairment of his short term memory. Dr L’s evidence was that he finally appeared to have reached rock bottom as referred to in AA parlance (the point at which recovery can commence) and, for a period, he maintained abstinence after his discharge from D on 6 November, 2005.
The evidence supports a finding that for some decades the husband managed to run the business while drinking to excess. It is probable his drinking increased towards the end of the marriage, and again after separation; the history I have just outlined gives a vivid picture of the state he must have been in over that period. It is hard to imagine that the periods of hospitalisation and the significant relapses would not have impacted on the business, which is probably cyclic in any event.
The wife’s evidence was of the business being adversely affected around the time of separation and for a period thereafter. Mr F initially valued the business on 30 September, 2004 at $62,136. I do note that the plant and equipment were subsequently revalued at a significantly higher figure than appeared in that first report. The second valuation at 2 March, 2006 was for $193,151, including 2004 figures.
The husband’s own evidence was of the business being cyclic; it had its ups and downs. This is consistent with Mr F’s evidence (going to the issue of the appropriate net profits on which to base valuation) in both reports, of inconsistencies in financial results over the respective three year periods. But his evidence was of maintaining and improving it after separation and it provides his income stream.
The funds the wife took from the business after separation and the $30,000 the husband repaid obviously affected cash flow. However, that must be seen in light of the evidence of the finances available to the wife and husband prior to separation.
In the 2002/2003 financial year each of the parties was credited with a salary of $62,405, although the wife received no salary after separation in May 2003. In the following financial year, the husband’s salary was $74,000. Superannuation of $6,500 was paid on his behalf and I have referred to other benefits available to him. That year there was an operating profit of $48,323. It was in that year (according to the husband) that he repaid the sum of $30,000 to NAB, indicative of a significant real income.
The wife’s evidence was of her current business just breaking even. She has the security of the shop premises, albeit now mortgaged to $65,000.
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The wife has responsibility for four children, the youngest of whom is 8. She will have that responsibility for many years. The husband withdrew his application for parenting orders. While it is to be hoped he will be able to rebuild his relationship with his children, those relationships (unlike the business) have not been able to withstand his alcohol abuse and consequential behaviour. There is medical evidence of the husband’s lack of insight into the effects of his alcoholism on his marriage and those parts of his affidavit which went to parenting issues suggest a similar lack of insight into the effects on his children and his inability to prioritise them.
(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;
Neither party has a duty to maintain anyone other than each other (to the extent provided in the Family Law Act 1975) and the children. The husband’s legal obligations to his son N have concluded.
(e)the responsibilities of either party to support any other person;
Neither party has a responsibility to support another person, save family members.
(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;
I have referred to the wife’s Centrelink payments and the parties’ superannuation entitlements.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
It is not unusual for the standard of living of parties to fall after separation. As far as possible, the Court must ensure that the fall is not borne disproportionately by one party, or by the children.
(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 in a property application.
There is no evidence the wife proposes undertaking any further education or training. She is endeavouring to consolidate her current business.
(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 work hard and prosper in the S business. She was able to structure her work in the business around her primary responsibility for the children.
(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;
The wife worked in the business for most of the marriage but did no work for third party employers after leaving her position as a receptionist when pregnant with their first child. She was not successful in her first business ventures and a factor may have been her lack of independent experience. It is to be hoped her current business will fare better.
(l)the need to protect a party who wishes to continue that party’s role as a parent;
The wife has an onerous parenting role but is aware of the need to gain some measure of financial security through the business. I proceed on the basis she will continue to run A and juggle that with her maternal responsibilities.
(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;
There is no evidence either party is cohabiting with another person.
(na)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; and
I have referred to the child support and other payments made by the husband, which he indicated would continue to be made after final property orders have been made.
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
Some evidence went to a Blackman painting that the wife sought the husband return to the children. He agreed it had been purchased for them but resisted its return. Having regard to the precipitate sale by her of paintings soon after separation, without advice to him, his stance is understandable. I propose, consistent with his evidence, to make a declaration that he holds the painting in trust for the children until the youngest turns 18 or an earlier date agreed between the parties in writing.
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
There are no other orders made under the Family Law Act 1975 which affect a party or a child which need to be taken into account pursuant to s.79(4)(f), save for the order providing for this Court to characterise the $5,000 provided to the wife pursuant to the agreement made pursuant to orders of 29 April, 2004, and the parenting orders in her favour.
The provisions of s.79(4)(g) have been considered in relation to s.75(2)(na), a course referred to as “generally convenient” by the Full Court in Clauson and Clauson (1995) FLC 92-595 at 81,911.
CONCLUSION
The wife sought to retain her superannuation and the B house. Together they represent a little over 68% of the asset pool. Whilst her desire to retain those assets is explicable, it cannot be equitable to leave the husband only with assets he cannot access (the business and his superannuation) plus a few shares.
Taking all of these matters into account it is my view that a just and equitable result requires the wife to receive by way of adjustment an additional 15% of the asset pool, resulting in a 60% distribution to her.
Sixty percent of the pool is $546,070. She has superannuation of $23,456, leaving an entitlement of $522,614. That is $74,886 short of the value of the B property.
No evidence went to the wife’s capacity to borrow and she already must service a mortgage of $65,000 on the M property. I will fix a period of three months in which the wife can pay out the husband, at a figure of $74,886, and thus retain the B house. If she is unable to do so, the house will have to be sold, and a more modest one bought with her entitlement.
COSTS
The wife sought costs (in addition to those referable to the hearing on 5 June, 2006) and her affidavit includes a deal of evidence referable to that application. Counsel for the husband dealt briefly with the issue in his final address, submitting that while the husband would find it hard to resist an application for the costs of the adjournment, all other costs should lie where they fall. In order to be fair to both parties I will give the wife an opportunity to make further written submissions, and then provide a period in which the husband can respond.
I certify that the preceding
113 paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.
Dated the day of 2007.
…………………………………………
Associate.
IT IS NOTED that this judgment for all publication and reporting purposes be referred to as ROONEY & ROONEY
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Costs
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Damages
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Jurisdiction
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Remedies
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Statutory Construction
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