Schwarz and Schwarz
[2008] FMCAfam 1190
•6 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SCHWARZ & SCHWARZ | [2008] FMCAfam 1190 |
| FAMILY LAW – Property – identifying net pool – add backs - allegations of non disclosure – allegations of waste. |
| Family Law Act 1975 |
| AB & GB (No.2) [2005] FMCAFam 402 Aleksovski & Aleksovski (1996) FLC 92-705 C& C (2000) FLC 93-220 Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 In the Marriage of Clauson (1995) FLC 92-595 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Lee Steere (1985) FLC 91-626 In the Marriage of Luciano (2000) FamCA 401 Kennon v Kennon (1997) FLC 92-757 Kowaliw v Kowaliw (1981) FLC 91-092 Norbis and Norbis (1986) 161 CLR 513 AJO & GRO (2005) FLC 93-218 Pierce (1999) FLC 92-844 Sippel & Sippel [2004] FamCA 201 Townsend & Townsend (1995) FLC 92-569 Weir and Weir (1993) FLC 92-338 Williams v Williams (1985) 10 Fam LR 355 |
| Applicant: | MR SCHWARZ |
| Respondent: | MS SCHWARZ |
| File number: | SYC 1470 of 2007 |
| Judgment of: | Sexton FM |
| Hearing dates: | 13 & 14 August 2008 |
| Date of last submission: | 14 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 6 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Stephen Thomas |
| Solicitors for the Applicant: | Coleman & Greig |
| Solicitors for the Respondent: | In person |
UPON NOTING THAT the company known as [D] Pty Ltd (“the company”) was joined as a party to these proceedings by order of Federal Magistrate Altobelli in this Court on 8 May 2008:
THE COURT ORDERS THAT:
The wife be entitled to:
(a)The whole of her interest in the property known as and situate at Property E;
(b)The household contents in her possession; and
(c)The proceeds of bank accounts in her name.
The husband forthwith do all things necessary to transfer to the wife the whole of his interest in the Honda motor vehicle in the wife’s possession and thereafter the wife be entitled to the Honda motor vehicle.
There be no alteration to each party’s entitlement to superannuation.
The husband be entitled to or responsible for:
(a)The shares in his name in [D] Pty Ltd;
(b)The Suzuki Sierra motor vehicle;
(c)The proceeds of sale of shares in [G] Pty Ltd;
(d)The household contents in his possession;
(e)His share in the horse known as [A];
(f)The liability for capital gains tax from the sale of the shares in [G] Pty Ltd; and
(g)The worker’s compensation debt.
In relation to the Plymouth Fury motor vehicle, (the Plymouth) the following occur:
(a)The husband (if the Plymouth is registered in his name) forthwith transfer the whole of his interest in the Plymouth to the wife, subject to the debt to [S] Manufacturing.
(b)The wife forthwith upon receipt of the transfer, make all necessary arrangements with [S] Manufacturing to enable the wife to sell the Plymouth for the best price obtainable and simultaneously discharge the debt relating to the Plymouth to [S] Manufacturing.
(c)The wife forthwith upon sale, pay the husband 24% of the net sale proceeds.
(d)The wife be entitled to the balance.
In relation to the 1936 Vauxhall motor vehicle, the following occur:
(a)The husband forthwith deliver the Vauxhall, registered in the wife’s name, to the wife.
(b)The wife forthwith sell the Vauxhall at the best price obtainable.
(c)The wife, forthwith upon sale, having deducted sale costs and sales commission only, pay the husband 24% of the sale proceeds of the Vauxhall.
(d)The wife be entitled to the balance.
In relation to the publicly listed shares in the name of the husband, the wife or the parties jointly, the following occur:
(a)The husband forthwith transfer his interest in all shares to the wife.
(b)The wife sell the shares.
(c)The wife forthwith upon sale pay the husband 24% of the net proceeds of sale of the shares.
(d)The wife be entitled to the balance.
In relation to the plant, equipment and vehicles owned by the company the following occur:
(a)The husband do all acts and things necessary and cause all motions and meetings of [D] Pty Ltd (the company) to be called, to authorise the company to take steps required by this order.
(b)Within 28 days of order, the husband cause the company to pay to the parties the sum of $106,990 by way of part-repayment of their loan account in the company.
(c)Forthwith upon receipt of funds referred to in (8)(b) the parties pay $106,990 to reduce the balance of their lines of credit with Firstmac Finance Pty Ltd secured on the former matrimonial home at Property K being the whole of the land contained in Folio Identifier [6] (the home).
(d)In the event the husband does not comply with (8)(b) herein for any reason whatsoever by the due date, the husband forthwith cause the company to sell all items of plant, equipment and motor vehicles, after payment of debts secured on the motor vehicles, owned by the company, as listed in the valuation report of Rodney Hyman Asset Services dated 14 May 2008 at a price to be agreed or, in default of agreement after 28 days, at a price nominated by a nominee of Rodney Hyman Asset Services.
(e)Forthwith upon receipt, the company pay the funds realised on the sale in (8)(d) to the parties.
(f)Upon receipt of funds referred to in (8)(e), the parties forthwith pay those funds to reduce the balance of the parties’ lines of credit with Firstmac Finance Pty Ltd secured on the Property K home.
The parties forthwith do all things necessary to effect a sale of the property known as and situate at Property S in the State of New South Wales being the whole of the land contained in Folio Identifier [8] by private treaty with a real estate agent agreed between the parties or failing agreement within 7 days by an agent appointed by the Real Estate Institute of New South Wales at a price agreed between the parties and failing such agreement at a price to be determined by the President of the Australian Property Institute of New South Wales or his nominee at the husband’s cost.
Upon completion of the sale the proceeds be distributed in the following order and priority:
(a)In payment of all legal costs, commissions, and agent expenses (including advertising expenses) in relation to the sale;
(b)In adjustment of rates and other outgoings in accordance with usual conveyancing practice;
(c)In discharge of the loan secured by way of mortgage to Permanent Custodians Limited;
(d)In payment of any capital gains tax liability arising from the sale;
(e)In payment of the balance to the parties’ lines of credit to Firstmac Finance Pty Ltd.
In the event the Property S property has not been sold by or before a date two (2) months from the date of Order then the husband and the wife shall make all such arrangements and do all such acts and sign all such documents and pay all monies equally, necessary to procure a sale by public auction of the property upon the following terms:
(a)The auctioneer shall be a real estate agent;
(b)The reserve price shall, unless agreed between the parties, be as proposed by the auctioneer;
(c)Upon completion of the sale the proceeds shall be distributed in accordance with Order (10) herein.
The Property S property shall remain on the market until sold.
Upon Orders (8) –(11) inclusive being implemented, the husband and the wife forthwith do all things necessary to effect a sale of the Property K home by private treaty with a real estate agent agreed between the parties or failing agreement within 7 days by an agent appointed by the Real Estate Institute of New South Wales at a price agreed between the parties and failing such agreement at a price to be determined by the President of the Australian Property Institute of New South Wales or his nominee and the parties share equally any fees involved.
Upon completion of the sale the proceeds be distributed in the following order and priority:
(a)In payment of all legal costs, commissions, and agent expenses (including advertising expenses) in relation to the sale;
(b)In adjustment of rates and other outgoings in accordance with usual conveyancing practice;
(c)In discharge of the loans secured by way of mortgage to registered on the title of the home;
(d)In payment to the wife of $46,738.52;
(e)In payment to the wife of 76% of the balance then remaining;
(f)In payment to the husband of the balance.
In the event the home has not been sold by or before a date three (3) months from the date Order (13) becomes operative then the husband and the wife shall make all such arrangements and do all such acts and sign all such documents and pay all monies equally, necessary to procure a sale by public auction of the home upon the following terms:
(a)The auctioneer shall be a real estate agent;
(b)The reserve price shall, unless agreed between the parties, be as proposed by the auctioneer;
(c)Upon completion of the sale the proceeds shall be distributed in accordance with Order (14) herein.
Pending completion of the sale of the home the wife have exclusive occupation of the home.
The husband indemnify and keep indemnified the wife in relation to any liability whatsoever of the company [D] Pty Ltd.
Except as otherwise provided in these orders, the husband and the wife retain all other items of property currently in the possession or control of each of them respectively.
Except as otherwise provided in these orders, the husband and the wife remain liable for any debts, howsoever arising, in their own name at the date of these Orders and in this respect shall indemnify, keep indemnified and hold harmless the other from any liability in relation thereto.
In the event the husband or the wife refuses or neglects to comply with any of the Orders herein, the Registrar of this Court at its Sydney Registry be appointed pursuant to section 106A of the Act to execute, in the name of the husband or the wife as the case may be, all deeds and instruments necessary to give effect to the orders herein, or any of them, and do all acts and things necessary to give validity and operation to the said deeds and instruments.
All exhibits tendered in these proceedings be returned at the expiration of one calendar month unless an appeal is lodged.
IT IS NOTED that publication of this judgment under the pseudonym Schwarz & Schwarz is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 1470 of 2007
| MR SCHWARZ |
Applicant
And
| MS SCHWARZ |
Respondent
REASONS FOR JUDGMENT
Introduction
This case concerns property adjustment. It has been a difficult case to determine because of the way the case has been conducted and because the evidence is inadequate.
After living together for 16 years, the parties separated in August 2006 when the husband left the former matrimonial home at Property K. There are three children of the marriage, [names omitted] aged 14, 11 and 9. The children live with the wife in the Property K home and attend private Catholic schools. They do not spend time with the husband. The wife obtained an apprehended violence order against the husband at the time of separation which expires in April 2009.
The husband initiated these proceedings for property settlement in the Family Court in December 2006. The matter was transferred to this court in February 2007. The husband was legally represented until June 2008. At hearing, the husband represented himself and the wife was represented by counsel. The husband took a minimal role in the proceedings. He did not cross-examine the wife.
Each party is 41 years of age. They started living together when they married in November 1990 and separated in August 2006. The husband had been previously married. The wife migrated from Uruguay with her parents in 1973. The wife has not worked outside the home since 1998, apart from taking an administrative role in the husband’s business. The wife now relies on Centrelink benefits and limited child support for income. The husband lives in the Sydney suburb of [omitted] in rental accommodation and is employed [occupation omitted].
The husband claims to be a manual worker with no knowledge of business, record-keeping or accounting. He says the wife always knew more about his business affairs than he did:
I don’t know anything about any paperwork or anything to do with business, paperwork, invoicing, things like that, I do not know anything about it.
For her part, the wife says the husband did not consult her during the marriage about financial decisions, and while she undertook book keeping tasks for the company, she always did as the husband directed in relation to financial matters. The wife claims the husband became abusive and violent if she asked questions about his decisions or about the financial affairs of the company.
The parties’ significant assets are the former matrimonial home, a property in Property S and the husband’s business interests. The parties also have substantial liabilities secured by mortgage on these properties, in particular lines of credit with HSBC which became Firstmac Finance Pty Ltd in 2007. However, the wife claims the husband has operated their business affairs in such a disorganised, dishonest and reckless fashion it has been impossible for her to give the court a clear financial history or a clear statement of the parties’ current asset position. The wife strongly believes the husband has withheld financial information from her since separation, hidden and disposed of assets and obstructed her genuine efforts to obtain the information required by the court to determine the dispute. The husband gave no assistance to the court at hearing.
At interim hearing on 8 May 2008, his Honour Federal Magistrate Altobelli made detailed orders, as sought by the wife, for the husband to provide the wife with information about the contracts of his company [D] Pty Ltd and its financial position. The court ordered the company be joined as a party to the proceedings. The court restrained the husband from disposing of any interest held by him in the company, any asset or item of plant and equipment owned by the company or from further encumbering the company pending a final determination of the proceedings. The court also restrained the husband from withdrawing amounts in excess of $500 from any company account except in connection with legitimate business operations. The court ordered the company to pay $53,494.46 to the lines of credit held in the joint names of the parties with Firstmac Finance Pty Ltd. The court ordered the parties to sell their real estate at Property S and to sell a number of motor vehicles and to use the proceeds to reduce the parties’ debts to Firstmac Finance Pty Ltd. The court ordered the husband to make all payments on the mortgage to Firstmac secured by the former matrimonial home, and to pay the wife’s costs of $3,009.15 within 15 days.
On 12 May 2008, the company paid the $53,494.46 to Firstmac Finance, though the husband adduces no evidence as to the source of those funds or the impact of that payment on the parties’ loan account with the company. On 19 June 2008, the wife’s solicitor advised the court the company and the husband had otherwise failed to comply with the orders of 8 May 2008. I am not satisfied those orders have yet been complied with. The parties have not sold the property at Property S nor any of the motor vehicles. At hearing, the husband showed an indifference to criticism of his conduct including his failure to comply with court orders, and a cynical attitude to the proceedings.
The wife seeks orders that she be entitled to the whole of the known assets, excluding the shares in [D] Pty Ltd and the Suzuki motor vehicle, which would involve the husband transferring to the wife the whole of his interest in the former matrimonial home, subject to mortgage, and the whole of the husband’s superannuation entitlement. The wife says that although she is supported by government benefits, and the debt secured on the Property K property is substantial, her brother or other members of her family, may assist her to retain the home. In his initiating application filed in December 2006, the husband sought an order for the Property K and Property S properties to be sold and after an adjustment in his favour, for a sixty/forty division of net proceeds in his favour. The husband sought orders for the sale by the company of the two blocks of land held in the company’s name, which have since been sold. He sought an order that the wife account to the company for funds used by her after separation. At hearing, the husband did not update the orders he sought.
Issues
The approach to the determination of an application under section 79 of the Family Law Act 1975 is well established by authority[1] and involves consideration of these questions:
[1] In the Marriage of Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595; Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143
a)What were the assets, liabilities and financial resources of the parties and their values at the time of hearing?
b)What were the financial and non-financial contributions made directly or indirectly by or on behalf of each party to the acquisition, conservation or improvement of the property of the parties?
c)What was the contribution made by each party to the welfare of the family including contributions made in the capacity of homemaker or parent?
d)What is the effect, if any, of any proposed order upon the earning capacity of each party?
e)What matters referred to in sub-section 75(2) of the Act are relevant and what adjustment, if any, should be made as a result of these factors?
f)Have there been any other orders made affecting a child or either party and is child support payable or likely to be payable in the future for the children of the marriage?
g)After consideration of these matters, is it just and equitable to make the actual orders?
What were the assets, liabilities and financial resources of the parties at the time of hearing and their values?
The parties ask the court to make findings about the following assets and liabilities:
Former matrimonial home at Property K. In March 2008, Mr B, a qualified real estate valuer, valued the former matrimonial home at Property K, a three acre property, at $950,000. At the request of the wife, Mr B prepared an updated valuation in August 2008, and valued the property at $750,000. The husband disputed the valuation. In cross examination, Mr B says the significant change in value in a 5 month period arose because of deterioration in the property itself, and a deterioration in the property market. Mr B says the property now has a significant water problem, the cause of which he could not assess, and is in need of urgent remedial maintenance. Mr B used comparable sales in the area to prepare the two reports. The husband adduces no other evidence as to the current value of the property. I accept Mr B’s latest valuation of $750,000 as the value of the former matrimonial home at Property K.
Shares in [D] Pty Ltd. The company was incorporated in November 1994 to perform [omitted] work. The husband is the sole director and shareholder. The husband has been employed full time by the company from its inception in 1994. The wife was employed part-time in an administrative capacity and as book-keeper. The husband’s evidence is not clear as to whether or not the company continues to trade, although he says he would not consent to the company being wound up. Mr Nick Gaudion, a forensic accountant, was retained to prepare a valuation of the husband’s shares in the company. Mr Gaudion states at clause 3.8 of his report [2] that according to the husband, the company’s contracts ceased around May 2007. However, in a letter to the wife’s solicitors dated 16 June 2008 the husband says “the company has ceased trading earlier this year.” This was not the advice provided in a letter dated 21 May 2008 to Mr Gaudion, signed by the husband and his accountant, Mr Z, which said:
…there have been no significant changes in key people or operation of the company…;
and
…the company started with 2 employees and in better times increased to 6 employees and over last few years reduced to two employees…
[2] Affidavit of Mr Nick Gaudion sworn 13 August 2008
In their letter to Mr Gaudion of May 2008, the husband and his accountant did not advise Mr Gaudion the company had ceased operation. I am not satisfied it has.
Mr Z did not include the company BAS statements in the material he produced in answer to a subpoena for “all financial records, documents, correspondence and file notes…” because he says he did not consider “BAS statements” financial documents and they were not specifically asked for. Mr Z says in any event, information contained in Business Activity Statements is included in the company balance sheet and profit and loss statements. I found Mr Z’s evidence unhelpful.
Mr Gaudion found a number of inconsistencies in the information provided to him by the husband and his accountant. The husband did not respond to Mr Gaudion’s questions about these inconsistencies. At clause 2.7 of his report, Mr Gaudion states:
As a result of the lack of responses to my requests for information and the inconsistencies in the information provided to date, I am unable to form a concluded opinion on the value of the Husband’s interest in [D] Pty Ltd.
Mr Gaudion then prepared a preliminary valuation based on the financial statements of the company as at 30 June 2007, assuming the business did not conduct an actively trading business from that date. The company has not lodged its 2008 taxation return. Mr Gaudion forms the view that at 30 June 2007, the company’s liabilities exceeded its assets. Mr Gaudion attributes a net liability of ($100,000.00) to the interest held by the husband as at 30 June 2007[3]. To calculate this result from the balance sheet of the company as at 30 June 2007, Mr Gaudion includes the sale figures for the Property C and Property W properties, net of sale costs and legal fees, and the loans relating to those properties. He includes the value of the plant and equipment in accordance with the Hyams valuation report [4] as well as the book value of assets not included in the Hyams valuation report [5]. He includes the value of the motor vehicles owned by the company in accordance with the Hyams valuation report, excluding the Vauxhall and the Plymouth Fury which are owned by the parties, not the company. He includes all the current liabilities and the non-current liability of $37,500 which relates to one of the motor vehicles. He assumes the $8,945 owed to the husband (unsecured shareholders loan) will not be repaid so excludes that figure. He includes a debt of $193,626 payable by the company to the parties, at least in part, as a result of advances made by the parties to the company from the parties’ personal borrowings from Firstmac Finance Pty Ltd lines of credit.
[3] Schedule C1 of Gaudion Report.
[4] Appendix E of Gaudion Report.
[5] As detailed in the depreciation schedule of the company.
The parties are in dispute as to how much of the $193,626 had been used by the husband to purchase equipment and machinery for the company. The wife says a substantial portion of those funds were used for company purposes to buy a bobcat, a dual cab utility, a tipper and other vehicles. The husband says a substantial portion of those funds was used to build sheds and an office at the former matrimonial home and for other renovations and capital improvements at the Property K property. Mr Gaudion says the company’s financial statements do not record sheds, office or other capital improvements at Property K in the company assets and these improvements are likely to be included in the value of the Property K property.
At hearing, the parties agree the plant and equipment owned by the company, including motor vehicles, has a net value of $106,990.00. This compares with a figure of $104,321 used by Mr Gaudion from the June 2007 company balance sheet. The husband says the items of plant, equipment and motor vehicles are stored at the premises of [G] Pty Ltd and are being maintained and used by [G] Pty Ltd. The husband says he wants to sell the items on the basis the proceeds of sale are paid to the company account, but has been restrained from doing so by court order. The husband believes there would be tax implications if the sale proceeds were paid directly to the parties’ loans to Firstmac Finance Pty Ltd. Mr Gaudion says if the company sells its plant and equipment including vehicles, those sale proceeds could be paid to the parties to offset the company’s debt to the parties and the parties can use those funds to repay the Firstmac Finance Pty Ltd. In these circumstances, Mr Gaudion says the company would pay tax on any profit realised on the value of the plant and equipment but there would be no tax implications for the parties.
As already noted, as at 30 June 2007, according to the company balance sheet, the company owed the parties $193,626.00, itemised as Term Loan No 3 at that time[6]. Mr Gaudion says it is therefore necessary to include $193,626.00 in the parties’ assets. I agree with Mr Gaudion that this loan account is an asset of the parties. Assuming the sale of the company’s plant and equipment realises its agreed value of $106,990, and that sum is paid by the company to the parties, the company’s net tangible asset value will not change, but the parties asset position will increase by an amount of $106,990. I therefore include the sum of $106,990 in the list of assets and liabilities available for division between the parties.
[6] Schedule C1 of Gaudion Report.
[G] Pty Ltd. [G] Pty Ltd was incorporated in August 2004. The husband and his associate Mr F established this business to provide services for excavation and demolition including the hiring out of plant and equipment. The husband and Mr F were originally the only directors and shareholders. The husband contracted his services through [D] Pty Ltd to perform work for [G] Pty Ltd when [D] Pty Ltd did not have other work and says he used his company’s trucks and equipment to perform the work for [G] Pty Ltd. He says the wife prepared the invoices from the company to [G] Pty Ltd. In February 2007, in breach of an undertaking not to dispose of assets, the husband resigned as a director of the company and transferred his shares in [G] Pty Ltd to Mr F for $65,000. He says Mr F asked him to resign because of the stresses caused by the breakdown of his marriage. The husband says the sale price of $65,000 was negotiated between him and Mr F and that his accountant, Mr Z, told him this amount was a fair market value. The husband adduces no other evidence as to how the figure of $65,000 was agreed and Mr Z produced no documents about the valuation in response to a subpoena requiring the production of such documents.
Mr Gaudion was asked by the wife to consider whether the amount of $65,000 was reasonable consideration for the husband’s share in
[G] Pty Ltd. Mr G says in his report[7] that the husband did not provide the information as he requested to enable him to assess the value of those [G] Pty Ltd shares. On the basis of the figures provided for the year ending 30 June 2007, Mr Gaudion found the revenue of the business, assumed to be plant hire, and the motor vehicle expenses, very high, given the value of the plant and equipment recorded in the financial statements of the company. He concluded the figures were unreliable. Mr Gaudion was therefore unable to assess whether the $65,000 received by the husband on the sale of his shares was reasonable. Mr Gaudion concludes at clause 2.17 of his report:
In the event that the book value of the plant and equipment is greater than that recorded in the financial statements or that some of the expenses do not relate to the business of plant hire, then the consideration received by the husband could be assessed as being less than the value of the shares that were sold.
[7] At page 3 of Gaudion Report
The wife believes the husband sold his share significantly under market value. The wife also claims to have no memory of preparing any invoices from the husband’s company to [G] Pty Ltd for work done. She says, however, that the husband directed her to pay $22,000 to a business operated by Mr F, known as [F], each month. The wife says [G] Pty Ltd had extremely valuable contracts including Railcorp, and the husband’s shareholding has been undervalued at $65,000. The wife’s evidence was not challenged by the husband.
In cross examination, the husband contradicted his affidavit evidence as to how he arrived at a figure of $65,000 as fair market value for his interest in [G] Pty Ltd. The husband says he sold his share in the business for $65,000 because “we thought it was a fair price” and denied receiving advice from his accountant Mr Z as to the value. However, in his affidavit sworn in February 2008[8] the husband says he did get advice from his accountant that the value was a fair value. The wife believes the husband fixed on a figure of $65,000 because he was angry that the wife had withdrawn $65,000 from the lines of credit at the time of separation, and simply matched that figure.
[8] At paragraph 66
Having regard to this evidence, I do not accept on balance that an amount of $65,000 reflects the market value of the husband’s interest in [G] Pty Ltd. I accept the wife’s counsel’s submission that the figure should be significantly higher. As neither party adduces evidence to enable me to assess the market value of those shares, I take its under- value into account as a section 75(2)(o) factor.
The wife’s counsel submits the $65,000 the husband received from
Mr F should be added back to the net asset pool available for distribution between the parties. The husband concedes he sold his shares in [G] Pty Ltd in breach of an undertaking not to do so. The husband concedes he retained the whole of the $65,000 and has since spent it, a significant proportion on his own travel and entertainment.
In the case of AB & GB (No.2) [2005] FMCAfam 402, Federal Magistrate Ryan (as she then was) set out the principles which arise from the cases dealing with waste and notional add backs. Two of those principles are:
(vii) Taking the premature distribution into account in a general way pursuant to s 75(2)(o) and applying the cumulative outcome of the ss 79(4) and 75(2) findings to the smaller depleted asset pool may offend s 79(2) notions of justice and equity.
(xiv) even if it does not involve waste, the economic consequences of a significant reduction in the asset pool must be considered.
The wife’s counsel submits it would be unfair to the wife for the $65,000 to be omitted from the asset pool. In Townsend & Townsend (1995) FLC 92-569 the Full Court determined funds used by the husband alone from the sale of a taxi should be notionally added back to the pool of assets on a precise dollar basis. The court held there had been a premature distribution of marital property and it would not be just to deal with the issue simply by an adjustment under section 75(2)(o). The Full Court in AJO & GRO (2005) FLC 93-218 confirmed that where there has been a premature distribution of matrimonial assets, it is appropriate to notionally add it back to the pool of assets.
In the circumstances of the present case, I find it appropriate to include in the net asset pool the $65,000 spent by the husband from the sale of his shares in [G] Pty Ltd. However, as I am satisfied that some of the funds were used by the husband for reasonable expenses, I will make an adjustment in the husband’s favour under section 75(2)(o).
1996 Plymouth Sports Fury
. The parties agree this vehicle will be sold. Neither party adduces evidence as to the precise value of the vehicle but the wife asks to manage its sale, subject to the debt. The parties accept the vehicle is presently being held by [S] Manufacturing and will not be released until an amount of $8,717.94 has been paid for repairs. I make no finding as to whether that debt relates solely
to repairs on the Plymouth, but am not persuaded such a finding
would be of any significance. In cross examination, Mr S, from
[S] Manufacturing says he invoiced [D] Pty Ltd at Property K in the sum of $8,717.94 on 15 June 2006[9] and the invoice has not been paid. Mr S accepts the vehicle is owned by the parties, not the company, but says he always invoices the company for work done on vehicles. While the wife and Mr S give different versions of what occurred when the wife attended the [S] Manufacturing workshop recently, I am satisfied the debt to [S] Manufacturing will have to be paid before the car is released. As I have no evidence as to the value of the vehicle, I do not include a specific figure for the net value of this vehicle in the asset pool.
[9] Exhibit 3
1936 Vauxhall. Neither party adduces valuation evidence in relation to the Vauxhall. The husband says he has not been successful in attempts to sell it. He believes it has a value of between $800 and $1,000 but any net proceeds, after the costs of sale, would be negligible. The wife deposes in her financial statement sworn in June 2008 to the car being registered in her name. Given neither party seeks to retain the vehicle and there is no evidence before me as to its value, I have ordered its sale.
1/6 share “[A]”. In 2003 the husband says he purchased a one sixth share in a race horse called “[A]” for $8,000. The husband annexes a valuation to his affidavit[10] which states the horse has a value as at July 2007 of $25,000, a sixth share being $4,166.00. The husband says he has received approximately $39,000 in prize money while meeting fees of approximately $1,000 a month since he bought his interest. The husband says he cannot afford to meet his share of the upkeep so has now given his share to the other owners to avoid ongoing fees. The husband adduces no evidence as to what he owes in fees. In the absence of any other evidence as to value, and in the absence of any evidence as to an amount owed by the husband for arrears of fees, I include the value of $4,166 in the list of assets.
[10] Annexure 1 to husband’s affidavit sworn February 2008
Boat.
The husband says the only boat the parties have ever owned was in the wife’s name and was sold in 2006. He adduces no documentary or other evidence of the sale. The wife deposes to the husband telling her he sold the boat to Mr F for $20,000 in cash and never accounting to the wife for the money. However, in her Financial Statement sworn in June 2008 the wife deposes to the husband retaining the proceeds of sale of the boat of $25,000. The wife also alleges the husband purchased a bigger boat in 2005. The husband denies purchasing a bigger boat, but says he did store a boat owned by Mr F at the
Property K property for about two weeks. In light of this contradictory evidence, I am not satisfied I should have any regard to the existence or sale proceeds of a boat.
Husband’s accounting fees
. While both the husband’s accountant,
Mr Z, and the husband claim the husband owes accounting fees, neither can say how much is owed, and neither adduces any documentary evidence as to amounts owed. Mr Z says the husband owes him fees and “he pays me when he has the money to pay me.” The husband says he owes the accountant $5,000, but in cross examination says he does not know how much he owes. The husband says he has not had the funds to pay his accountant for the last 6-8 months. Given the paucity of the evidence on this issue, I do not include a liability for accountant’s fees in the list of assets and liabilities.
Debt on Honda. The husband says the parties bought the Honda car in June or July 2006 when they were still living together. He says $36,000 was used from the parties’ line of credit with Firstmac Finance Pty Ltd to purchase the car. As the parties agree on the amount owed to Firstmac Finance Pty Ltd, I am satisfied this debt is included for the purpose of identifying the net asset pool of the parties.
Company debt to Westpac guaranteed by husband in 2006. The company borrowed $50,000 from Westpac Bank in 2006 to purchase a Dodge Ram motor vehicle. There is no dispute between the parties that the balance of the debt is included in the 30 June 2007 balance sheet of the company as $37,500. In his Financial Statement sworn in February 2008, the husband deposes to a debt balance of an estimated $30,000. The wife did not challenge the husband’s evidence[11] that he guaranteed the loan. Mr Gaudion makes clear that whatever the fate of the company, to the extent the parties have personal guarantees, or are otherwise personally liable, loans to third parties must be repaid. However, as the husband adduces no evidence as to whether the Westpac debt has been discharged or as to the current balance of the debt, I do not include it in the net asset pool.
[11] Annexure N to husband’s affidavit sworn February 2008
Legal fees
. Neither party seeks to add back paid legal fees and I do not do so. However, I find the evidence on this issue from both parties inadequate. Neither party adduces evidence as to whether or not the husband has paid legal fees. In her Financial Statement sworn in June 2008, the wife deposes to using funds withdrawn from the parties’ joint line of credit with Firstmac mortgages to meet legal fees. The wife does not specify the amount she paid in legal fees from that source. The wife also relies on an affidavit of her brother, Mr N, to verify that he has transferred funds to her from London, where he lives and works, to assist with her legal fees. While I find it odd that Mr N has sworn his affidavit on 7 August 2008, yet refers to a transfer of funds on
25 August 2008, I accept Mr N has lent money to the wife to pay legal fees. The wife says her legal fees have amounted to approximately $94,000. Her brother deposes to transferring $43,500 as at August 2008. While I am unable to make a finding as to the amount the wife paid in legal fees from the parties’ joint line of credit, I have regard to the fact that she paid some of her legal fees from the parties’ joint line of credit when dealing with section 75(2)(o) factors later in these Reasons.
Neither party made submissions as to whether the court should adopt the one or two list approach to the parties’ superannuation assets. The majority of the Full Court in C & C (2000) FLC 93-220 said there is no binding principle as to the exercise of the Court’s discretion in deciding which approach should be adopted:
Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as ‘the first step’ in the determination of proceedings under s79, whether or not a splitting order is sought in those proceedings..
Neither party claims to have had an entitlement to superannuation at the commencement of cohabitation which means their present entitlements have been accumulated during the period of cohabitation and since separation. Neither party has a significant superannuation entitlement. In these circumstances, I have decided to adopt an integrated approach to the superannuation and non-superannuation assets of the parties.
I therefore find the total known net assets available for distribution between the parties to be $388,935 as identified in the following table:
| Assets and liabilities at the date of hearing | $ |
| Property K in joint names | 750,000.00 |
| Property S (J) (on the market) - agreed | 215,000.00 |
| Property E (W) (one third interest) - agreed | 8,300.00 |
| 2006 Honda Accord (wife) - agreed | 24,000.00 |
| 1990s Suzuki Sierra (husband) - agreed | 500.00 |
| 1966 Plymouth Fury (husband or wife) including debt to [S] Manufacturing. | Not known – to be sold |
| 1937 Vauxhall (wife) | Not known- to be sold |
| [D] Pty Ltd – Goodwill | Nil |
| [D] Pty Ltd – Plant & equipment including motor vehicles - agreed | 106,990.00 |
| Husband’s shares in [G] Pty Ltd added back | 65,000.00 |
| Wife’s CBA account proceeds - agreed | 500.00 |
| Husband’s ANZ Bank Account proceeds - agreed | Negligible |
| Wife’s Gateway Credit Union proceeds - agreed | Negligible |
| Wife’s home contents - agreed | 5,000.00 |
| Husband’s home contents – agreed | 2,000.00 |
| Husband’s 1/6 share in horse “[A]” | 4,166.00 |
| IAG shares in the name of the husband | To be sold by agreement |
| Telstra shares in joint names | To be sold by agreement |
| Telstra shares in the name of the husband | To be sold by agreement |
| Firstmac credit facility secured on Property K in joint names - agreed | (727,855.00) |
| Bluestone credit facility secured on Property S property in joint names - agreed | (99,977.00) |
| Outstanding CGT liability re sale of [G] Pty Ltd - husband - agreed | (15,872.00) |
| Workers compensation insurance debt owed by company, payable by husband - agreed | (4,425.00) |
| Finium Superannuation in name of husband - agreed | 30,116.00 |
| Spectrum Superannuation in name of wife - agreed | 25,492.00 |
| Total net pool including superannuation | 388,935.00 |
Contributions
The court must consider all the contributions, both financial and non-financial to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family before and after separation[12].
[12] Aleksovski & Aleksovski (1996) FLC 92-705; Sippel & Sippel [2004] FamCA 201
With the exception of the wife’s interest in the Property E property, neither the husband nor the wife’s counsel invited me to deal with this matter on an asset by asset basis. Given that the parties’ assets have accumulated during and after the marriage I have adopted the global approach. In Norbis and Norbis (1986) 161 CLR 513, the High Court held that either approach is legitimate but also said:
…there is much to be said for the view that in most cases the global approach is the more convenient…
In this case, I have given separate consideration to the parties’ contributions during cohabitation and after separation before assessing each party’s contribution entitlement overall.
Financial contributions during cohabitation
Initial contributions
. At the time of marriage in 1990, the husband says he owned a motor vehicle, furniture, savings and personal effects. He is unable to recall the amount of his savings. The wife says the husband had only personal effects. The wife owned a car with a value of an estimated $8,000, a one third share in a block of land at
Property E purchased in 1986 for $7,000, and savings of $20,000. The wife deposes to contributing her savings to the purchase of the parties’ first home in Queensland at Property B. The husband does not challenge the wife’s evidence.
The weight to be afforded to initial contributions is comprehensively discussed in Pierce[13], where the Full Court said the court should have regard to the use made by the parties of any initial contribution.
[13] (1999) FLC 92-844 at 85,881 and in particular at paragraph 28
The wife contributed her savings to the purchase of the parties’ first home, and the net proceeds of that home were used to improve the Property K property. I have regard to this contribution. In addition, the wife still owns her share in the property at Property E and the husband does not claim to have made any contribution to that property. The parties agree the value of the wife’s interest has increased since its purchase. I make a small adjustment in favour of the wife as a result of these initial contributions.
Neither party challenges the other’s evidence as to rent free accommodation provided by family members. The parties lived with the wife’s parents rent free for a period of several months when they first married and again in 1993 for a few months. In 1991 the parties lived rent free with the husband’s brother in Queensland for approximately 6 months.
Income from employment. The husband says he was working as a [omitted] at the time of the parties’ marriage. The wife says at the time of marriage, the husband was unemployed, living with his mother and sister, and had lost his driver’s licence for drink driving. Despite this factual difference, there is no dispute that the husband has worked hard during the marriage as a [occupations omitted]. He was initially employed before establishing his own business in 1994. Since then, he has worked for his own company, [D] Pty Ltd, for the company known as [G] Pty Ltd, which he jointly owned with an associate Mr F, and for a business known as [M] Pty Ltd which he and Mr F established with a Mr T. The husband resigned as a director and transferred his shares in that company to Ms D in August 2005[14]. The husband claims [D] Pty Ltd is not currently trading and that he is working for a company known as [X].
[14] Annexure F to husband’s affidavit sworn February 2008
The wife worked as a receptionist until the parties’ first child was born in March 1994. After maternity leave of 12 months, the wife says she worked full time as a clerk with the [omitted] Bank while her mother cared for the baby. The wife remained in that employment until the parties’ second child was born in 1997 and returned for 2 months after her period of maternity leave. At about this time the husband established his business and as well as caring for the children, the wife managed the company accounts, paid the staff, paid bills, did the banking, issued invoices, reconciled accounts, and liaised with the accountant. The husband says[15]:
[Ms Schwarz] [the wife] had full knowledge of the financial and general affairs of the company. I left all the book keeping, accounting and financial matters to [Ms Schwarz]. ..
[15] At paragraph 54 of husband’s affidavit sworn February 2008
In addition to income from the company, the wife received Family Tax Benefit at least from October 2004[16].
[16] Annexure A2 of husband’s affidavit sworn February 2008
The wife alleges the husband wasted income on excessive alcohol consumption, taking friends and associates to restaurants and gambling. However, I am satisfied, and there is no real challenge to the fact, that the husband earned most of the parties’ income during the marriage.
Real estate. The parties bought and sold real estate during the marriage in their own names and in the name of the company.
In June 1991 the parties purchased a home at Property B in Queensland where the parties lived, for $87,000 with savings and a loan from ANZ Bank of approximately $67,000. The parties returned to Sydney in 1992, tenanting Property B to meet the mortgage repayments and expenses on that property. In 1993 the parties purchased a home in joint names at Property G using funds borrowed from Westpac Bank secured by the Property G and the Property B properties. While not referred to by the husband, the wife deposes to the husband purchasing a property at Property H in 1998 for $285,000 jointly with a Mr C and to selling the property in 1999 for a profit to the parties of approximately $25,000-30,000. In 2000 the parties sold the Property G property for approximately $285,000. In early 2000 the parties purchased the property at Property K in joint names for $430,000 using the net proceeds of the sale of Property G and mortgage funds. In July 2002 the parties bought a property at Property S in joint names for $165,000 using funds borrowed from Bluestone mortgages and the line of credit with HSBC secured over the Property K property. In 2004 the parties sold the Property B property and used the net proceeds for improvements on the Property K property, including the installation of a pool shell by Blue Haven pools at a cost of $25,000. The parties lived in the Property K home until separation in 2006.
The company. In 1994 the husband set up business as a [omitted] contractor incorporated as [D] Pty Ltd. The company borrowed $20,000 to buy a bobcat, tip truck and tools and leased a motor vehicle. The wife’s brother was a director and shareholder with the husband for the first 1-2 years. Thereafter the husband has been the sole director and shareholder. The husband negotiated contracts with Pioneer Homes, Department of Housing, Devine Homes, CSB Homes and others. The husband developed the business and undertook the physical work. The company has employed up to 8 people. The husband says from 1994 until 2005 he often worked 7 days a week. In 2005, the company’s fortunes deteriorated when there was a downturn in the building industry. The husband says they lost the contracts with the Department of Housing and Pioneer/Devine Homes closed its NSW business. The company laid off staff to meet its expenses.
The wife says numbers of company customers paid in cash, and private and company expenditure was intermingled, which was not appropriately accounted for. For example, the company supplied materials and funds for the improvements and renovations to the parties’ properties at Property G and Property K. The wife says the parties used company funds to meet private expenses, and that she used to write “temporary loan” or “fuel” on company cheques of several thousand dollars which were used to draw cash for private purposes including the husband’s entertainment. The wife identified from the HSBC accounts (the lines of credit) payments she made at the husband’s request from the HSBC account to [D] Pty Ltd She says that[17] “[Mr Schwarz] frequently said to me things such as: ‘draw $20,000 from the line of credit and pay into [D] Pty Ltd” In particular, the wife identifies an amount of $195,000 on 20 November 2003 paid from one of the lines of credit to the company[18].
[17] At paragraph 71 of wife’s affidavit sworn 31 July 2008.
[18] Exhibit 8.
Real estate purchased by company. In about April 2003 the company purchased vacant land at Property C for $220,000 with borrowed funds. The company borrowed $160,000 from HSBC by way of mortgage secured over the Property C land. The balance was paid from the parties’ private line of credit with HSBC. In August 2003 the wife says the husband or the company (it was not made clear) bought a factory unit in Queensland for $230,000 using the HSBC line of credit and sold the unit in November 2004 for $290,000. In about June 2004, the company purchased vacant land at Property W on the south coast of NSW for $145,000 by drawing down the purchase funds from the parties’ line of credit with HSBC. The Property C and Property W blocks of land were sold in 2008 and after payment of the mortgage loans, the company retained the sale proceeds in relation to both properties.
Plant and equipment and vehicles purchased by the company. The wife claims the husband purchased a large variety of tools, trucks, trailers and excavation equipment between 2000 and 2006 in the name of the company using funds from the HSBC lines of credit. In 2005 the wife claims the husband “bought several Suziki Sierras”, the Plymouth Fury for $29,500, a vintage Holden HR utility and a family caravan. In March 2006 the husband leased a new Dodge Ram truck for the company with a lease value of $53,000. The wife claims the husband spent recklessly, by drawing down on their lines of credit, to buy his “toys” without consultation with her and without regard to need or affordability. She claims the husband became aggressive when she questioned him. In 2005 the wife says the parties argued because she was against the husband drawing more funds from the lines of credit and states that:
[Mr Schwarz] pushed me to the ground and I hit the wall on the way. My head went through the gyprock in the wall and made a hole. For approximately 3 weeks afterwards, I couldn’t move my arm.
At separation, the wife’s unchallenged evidence is that the husband demanded she sign the Plymouth Fury vehicle over to him, threatening her with a pair of scissors when she refused. The husband’s conduct led to an apprehended violence order against him for the wife’s protection for 2 years, extended in April 2007 for another 2 years. The police removed the husband’s firearms from the property.
Shares. The wife purchased shares on behalf of the parties at different times during the marriage and was allocated some Commonwealth Bank shares as part of her salary package. The wife sold her Bank shares after separation and paid the proceeds toward the parties’ mortgage.
Having regard to this financial history while the parties lived together, I am satisfied the husband made the greater financial contribution.
Non-financial contributions during cohabitation
There is no challenge to the husband’s evidence that he undertook renovations and improvements to the three properties in which the parties lived during the marriage which improved the value of those properties. However, while the wife claims to have worked with the husband on the renovations, the husband claims the wife gave no assistance at all.
In relation to the property at Property B, Queensland, the husband undertook tiling, concreted pathways, landscaped the garden and painted the whole of the inside and outside. In relation to Property G, the husband installed a new kitchen, bathroom and laundry, built a new garage, built a deck on the home, paved a driveway and patio, rebuilt a fence, painted the interior and exterior, undertook plumbing and electrical work and landscaped the exterior. In relation to Property K, the husband built on a 4th bedroom, double garage and rumpus room, installed a new laundry, two new bathrooms, tiled a number of rooms, built a front fence, built a chain wire fence around the perimeter of the three acre property, build a two room office, a large machinery shed, installed a driveway with turning circle to accommodate 20 cars, built a cabana over an inground pool, supervised the installation of the pool shell, then completed the tiling and installation of the pool and surrounds, installed a 200 square metre patio/pergola and a large carpark to park semi-trailers. In relation to Property K, the husband says[19]:
The original house was an average brick veneer house sitting on a bare three acres of land. The renovations and improvements I did changed it to a four bedroom house with double garage, a twelve metre by six metre cabana with twelve metre by 4 metre in ground pool, and two room office building, and large 300 square metre machinery shed, two horse stables, dog kennels and pens, together with fully landscaped and manicured gardens.
[19] At paragraph 34 of husband’s affidavit sworn February 2008
The husband says he had an exchange arrangement with friends and work mates to use each other’s skills to effect improvements and renovations to their properties. The company supplied materials and paid many of the costs. The husband was not cross-examined on his evidence concerning renovation work.
In relation to the wife’s contributions, it is common ground the wife undertook the company book work and was engaged in the administration of the company for wages, and that she undertook this work from the home. I therefore find it highly unlikely the wife did not assist with the organisation of the renovation work in the homes in which the parties lived. While I accept the husband largely undertook the physical work involved, I do not accept the husband’s evidence that the wife did nothing to assist.
I am however satisfied that the husband made the significantly greater non-financial contributions during the marriage as a result of applying his manual skills to the improvements of the parties’ various properties.
During cohabitation – contributions as homemaker and parent to the welfare of the family
The husband acknowledges the wife’s majority contribution to the care of the parties’ three children given the long hours he worked. However, he claims to have assisted when available. The wife says the husband made no contribution whatsoever to domestic life and seldom spent any time with either her or any of the three children. She is critical of the husband for excessive drinking and socialising and for excluding her from social events. The wife claims the husband went out frequently and spent significant amounts of money on gambling and other entertainment. The wife also alleges the husband’s conduct was at times abusive and violent, particularly after 2002. In 2004 the wife spent a week in a women’s refuge to escape the husband’s violence. In the final years of the marriage, she says the husband spent less and less time at home. At hearing, the husband did not question the wife as to these allegations and makes no reference to the wife’s allegations in his own affidavit evidence. The wife does not adduce evidence as to the impact of the husband’s conduct on her contributions.
In the joint judgment of Fogarty and Lindenmeyer JJ the Full Court in Kennon v Kennon (1997) FLC 92-757 held:
To be relevant, it would be necessary to show that the conduct occurred during the course of the marriage and had a discernible impact upon the contributions of the other party.
Unlike other cases in which a husband works long hours and a wife remains at home to care for children, I am satisfied the wife made these contributions largely without assistance from the husband. I find the wife made the overwhelmingly greater contribution to the welfare of the family as both homemaker and parent during the parties’ marriage. Given the parties have 3 children, this is a significant factor.
On a weighing of the evidence as to each party’s financial and non-financial contributions during the course of the marriage, I am satisfied there should be a small adjustment in favour of the wife.
Financial contributions after separation
The husband says he stopped working as consistently after separation as a result of the stress caused by the marriage breakdown. The wife ceased working for the company and has had no paid employment since. Also, the husband says the company’s contract with the Department of Housing ceased in May 2007 and the company stopped operating. In an affidavit sworn 7 May 2008, the husband deposes to earning wages of $800 a week net. In February 2008, the husband deposes to an income of an estimated $200 a week. He says in early 2008 he did some work through the company for [X] for which the company was paid an estimated $11,000 and from which the company will have to pay GST, workers compensation insurance and wages. He alleges that [X] was not prepared to contract his company after being served with a subpoena from the wife’s solicitors. He says he now works for [X] as an employee. The husband claims the equipment owned by the company is stored in the yard of a friend who uses it “when needed” and maintains it for the company. The wife claims she has seen Mr F and the husband using the company’s vehicles in recent months. In cross examination, the husband denies having the capacity to use the company equipment to earn an income. I find the husband’s evidence as to his employment position since separation inconsistent. The husband provides no verifying documents to satisfy me as to his current employment status, and on the evidence available, I am not persuaded the company is not presently trading.
At separation, the wife withdrew $65,000 from the parties’ lines of credit with HSBC/Firstmac Finance Pty Ltd. She withdrew $35,000 on 1 September 2006 and $30,000 on 4 September 2006. The husband says he knew nothing about it, and did not consent to the withdrawals, and although the wife claims the husband’s brother gave her the husband’s permission to withdraw the funds, correspondence between the parties’ legal representatives satisfies me the wife accepts the husband objected to her actions. There is no dispute that the wife has used the $65,000 to meet living and other necessary expenses, including school fees, from the time of separation until April this year when the funds were depleted. The wife has not used the funds to make regular repayments to the lines of credit though says she has paid $23,149 in mortgage payments to HSBC/Firstmac Finance and Bluestone Mortgages, rates, repairs and maintenance expenses at the Property K home.
The husband does not invite the court to add back this amount of $65,000 to the net asset pool available for distribution, nor do I consider it appropriate to do so, given the evidence as to how the wife used those funds.
In early 2007, as already noted, the husband resigned as a director of [G] Pty Ltd and transferred his share in that company to Mr F for the sum of $65,000. The husband has since spent those funds. He travelled to Italy for 5 weeks in June 2007 at a cost of approximately $25,000. He has enjoyed holidays at Surfers Paradise and in the snow fields and in Tahiti. On 21 February 2007 the husband’s ANZ account shows a balance of $69,000 [20]. On 22 February 2008, the same account shows a debit balance of over $1,000. The wife’s counsel cross examined the husband at length about cash withdrawals from his ANZ account during that period. The husband acknowledges spending large sums at restaurants, on clothing and on other entertainment including gambling on the races. He could not explain a multitude of cash withdrawals, including more than one cash withdrawal on a single day, responding by saying he liked to have cash in his pocket. The husband was obviously irritated by counsel’s questions and at times answered in a dismissive and sarcastic fashion. The following is an example of the exchange between the wife’s counsel and the husband:
[20] Exhibit 3.
Husband:
“I bought clothes and stuff”.
Counsel:
“And what about a withdrawal 3 days later of a $1,000?
Husband:
“Well, I probably didn’t have enough to buy some more shoes, sir, so I went and bought another thousand dollars worth of shoes”
The husband says after separation the company made the repayments towards the loan on Property C. In early 2008 the company sold the block of land at Property C for $175,000 and the block of land at Property W for $95,000. The husband says on 18 April 2008, the net proceeds of Property C, being $6,887.50, were paid to the company. On 7 April 2008, the net proceeds of Property W, being $84,556.13, were paid to the company. The husband says the company paid the ANZ overdraft of approximately $28,000, for which the husband was guarantor, and in payment of the arrears in the debt to Westpac of approximately $2,000. The company was left with a balance in its account of $60,000.
The husband moved to Property S for a period in 2007 and made the majority of mortgage repayments for the Property S property, until January 2008, in the sum of $900 per month. As at February 2008, the parties were in default on their loans with Bluestone Mortgages and Firstmac Finance. On 16 April 2008, the husband paid the arrears owed to Bluestone Mortgages of $4,825.74.
On 12 May 2008 the husband caused to be paid the sum of $53,494 to Firstmac Finance in accordance with orders of 8 May 2008. On 25 July 2008, the wife sold Commonwealth Bank shares in her name for $6,650.58[21] which she paid towards reduction of the parties’ loan with Firstmac Finance.
[21] Exhibit 7
On a weighing of these factors and having regard to the fact that I have added the whole of the $65,000 retained and spent by the husband to the identifiable assets, I find the husband made the greater financial contributions after separation.
After separation - non-financial contributions and contributions as homemaker and parent to the welfare of the family
The husband says he has had no face to face time and no telephone communication with the children for 2 years because he is prohibited by apprehended violence order from going near the wife and he is concerned he will be arrested. He does not explain why he has made no effort to spend time with the children without direct contact with the wife. The wife has therefore carried the full responsibility for domestic tasks and the care of the children since separation.
The High Court in Williams v Williams (1985) 10 Fam LR 355 held the contribution made by a wife to the welfare of the family, by caring for the children after separation is a factor within section 79(4)(c) which should be taken into account.
The husband submits the parties should be entitled to an equal share of the assets overall, whether by way of contributions or otherwise. The wife’s counsel submits the court should assess the wife’s percentage entitlement on the basis of contributions alone at 70%. I find no basis for such an assessment. I assess the wife’s overall contributions at 55% of the net asset pool.
What is the effect, if any, of any proposed order upon the earning capacity of each party?
I have determined the plant, equipment and motor vehicles owned by [D] Pty Ltd will be sold unless the husband pays their value to the Firstmac lines of credit within 28 days of order. If the equipment is sold, I take into account that this is likely to affect the husband’s capacity to earn income from his company. The wife earned wages from the company during the marriage and has not earned an income since the parties separated in August 2006. I also take this factor into account under section 75(2).
What matters referred to in sub-section 75(2) of the Act are relevant?
I have considered each of the relevant factors listed in section 75(2) of the Act.
Each party is 41 years and neither party adduces evidence as to health issues. Neither party has re-partnered.
The husband holds licences to work as both a [occupations omitted]. He has the capacity to work either through his company or as an employee. He deposes to an income of $800 a week in May of this year but adduces no evidence as to his income at the date of hearing. The wife is not in the paid workforce and relies for hers and the children’s support on Centrelink payments and limited child support from the husband. The wife says she would require training to work as an employed book-keeper and has no present prospects of employment.
The Full Court in In the Marriage of Clauson (1995) FLC 92-595 said:
It has long been recognised that in most cases the most valuable “asset” a party can take out of the marriage is a substantial, reliable income earning capacity.
I am satisfied the wife’s earning capacity is significantly less than that of the husband and she will accrue less superannuation in the future as a result. I make an adjustment in the wife’s favour as a result of this factor.
As already noted, although the wife and children have remained in the former matrimonial home, I am satisfied the wife has carried almost the whole emotional and financial responsibility for the parties’
3 children since separation. The husband adduces no evidence to persuade me that this situation is likely to change in the foreseeable future. I make a substantial adjustment in the wife’s favour as a result of this factor.
As already noted, there are other factors to which I have regard under section 75(2)(o).
a)
I find the husband undervalued his shares in [G] Pty Ltd when he sold them in early 2007. On the material available to him,
Mr Gaudion was unable to form a view as to a fair market value of those shares and I am unable to speculate as to the fair value of those shares. I make an adjustment in the wife’s favour as a result of this factor.
b)I have added back to the pool available for division the whole of the funds the husband received on the sale of his shares in [G] Pty Ltd, being an amount of $65,000. After receipt of these funds, I am satisfied the husband spent an estimated minimum of $30,000 on holidays. In addition, I am satisfied the husband used substantial cash withdrawals from ATM’s on entertainment including gambling. However, I am not satisfied the husband used the whole of those funds for indulgent purposes. I make a small adjustment in the husband’s favour as a result of this factor.
c)The husband deposes to the wife advancing thousands of dollars to her brother and father during the marriage but adduces no verifying evidence of such transactions. I have no regard to this assertion.
d)As I have already had regard to the manner in which the husband spent funds he obtained and retained after separation, I make no further adjustment in relation to the husband’s expenditure after separation. The wife, however, also alleges the husband wasted funds on gambling during the marriage although is unable to quantify the amounts involved. The wife alleges the husband went out 6 nights a week and wasted money on alcohol and entertainment during the marriage. Although he concedes withdrawing funds for gambling, acknowledging drawing funds from numbers of hotels including the Star City Casino, the husband says he has no way of precisely quantifying the amounts spent in this way. The husband says “I did own a share of a racehorse and I’m into horses.” He says he might spend $100 in a day and would occasionally have dinner at a restaurant. Baker J in Kowaliw v Kowaliw (1981) FLC 91-092 held:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Although I accept the difficulty of quantifying funds used for gambling, the wife adduces no specific evidence of the husband’s spending on gambling and entertainment during the marriage, as she does post-separation. I am not satisfied the evidence provides a basis for any further adjustment on this issue.
e)As already noted, the wife deposes to meeting some of her legal fees from the parties’ lines of credit before her brother commenced transferring funds to her in December 2007 to assist in payment of those fees. Neither party adduces evidence as to quantum. I make a small adjustment in the husband’s favour for this factor.
f)The wife alleges the husband failed to comply with many of the orders made in May 2008 for him to provide financial information to the wife as requested by her and the expert accountant. I am satisfied on the evidence of Mr Gaudion, that the husband did not give full and frank disclosure as required in cases of this kind. The wife also alleges the husband has removed items of plant and machinery since separation, not valued in these proceedings and has not accounted for these items, whether sold or retained. In particular, she alleges the husband owned a slasher and tractor and a caravan which she believes he has sold. It is well established by the authorities that each party has an obligation to make full and frank disclosure of his/her financial affairs in proceedings of this kind. The Full Court in Weir and Weir (1993) FLC 92-338 held[22]:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black v Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs…
It seems to us that once it has been established that there has been a deliberate non-disclosure… then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature…
In the Marriage of Luciano (2000) FamCA 401, O’Ryan J included the following in his summary of principles emerging from this line of authority:
The obligation [to make full and frank disclosure] arises because of the necessity for the court in such proceedings to consider all aspects of the financial circumstances of each party.
If there is non-disclosure in the relevant sense then the failure to disclose undermines the whole process of adjudication of the proceedings in relation to financial matters.
A finding of non-disclosure may in appropriate cases, depending on the circumstances, result in the other party being granted without more, the relief sought.
[22] At 79,593
In the present case, I find the husband has not been entirely frank in relation to the state of his business or in relation to his potential for income. I find the husband has not cooperated appropriately with
Mr Gaudion to enable him to prepare a valuation of the shares in the husband’s company or to assess the fair market value of [G] Pty Ltd. I find the husband has not fulfilled his legal obligation to provide full and frank disclosure of his financial affairs during the marriage and since separation. The wife was not cross-examined and her evidence was therefore untested. On balance, I accept her evidence that the husband has not disclosed all items of property held either by himself or the company for the purpose of valuation or consideration in these proceedings. While I am not persuaded that the items or amounts not disclosed by the husband are of a substantial nature, I am highly critical of the husband for this conduct. I am satisfied it is appropriate to make a further adjustment under section 75(2)(o) in favour of the wife as a result of the husband’s non-disclosure.
Have there been any other orders made affecting a child or either party and is child support payable or likely to be payable in the future for the children of the marriage?
The child support payee transaction statement for the period 31 July 2007 to 4 August 2008[23] shows no arrears of child support payable, and payments by the husband totalling $3,351.75 in that period. Even accepting the husband’s evidence that he deposited another $3,000 directly into the wife’s account at separation, I find it likely the husband will pay only modest child support in the future.
[23] Exhibit 4
On the basis the court accepts that the wife is entitled to 70% by way of contributions, the wife’s counsel submits the court should make a further adjustment in favour of the wife of 15%. As already noted, I have assessed the wife’s contributions at 55%, not 70%. On a weighing of all the factors under section 75(2), I have decided the wife should receive an adjustment in her favour of a further 21%. This will give the wife 76% of the identified net asset pool of the parties overall.
Is the result just and equitable?
Section 79(2) provides that:
The Court shall not make an Order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
The Court must be satisfied that the actual orders provide for a just and equitable distribution of the property of the parties.
I find the net assets of the parties as able to be identified total $388,935.00. This is a relatively modest pool. On the figures presently available, the wife’s entitlement of 76% will give her net assets with a total value of $295,590.60 and the husband $93,344.40. However, these figures are not fixed as the funds realisable on the sale of a number of items which will be sold, are not yet known.
The wife seeks to retain the former matrimonial home at Property K. The wife’s counsel submits I should give her this opportunity on the basis her brother or members of her family may be in a position to assist her to achieve this result. However, the wife adduces no evidence at all as to whether this is possible. She adduces no evidence as to her borrowing capacity or as to how she would meet her financial obligations if the court made an order for her to retain the Property K home. Given the size of the debt secured on the home, even after the sale of Property S and sale of the company plant and equipment, and the wife’s dependence on Centrelink for income, I am not satisfied the wife can retain the Property K home. The home will therefore be sold. Should the wife’s family be in a position to assist her to purchase the home, it is open to the wife to make those arrangements.
To assist in the drafting of orders to give effect to my determination, given the number of variables, I have divided the assets and liabilities into three categories.
Firstly, the wife will receive a number of assets the value of which will not change. They are the Honda, the home contents, her bank account proceeds, her interest in Property E and her superannuation entitlement. These items total $63,292. The husband will also receive a number of assets and liabilities the value of which will not change. They are the Suzuki, the add-back of shares in [G] Pty Ltd, the home contents, his share in [A], his CGT liability, his worker’s compensation debt and his superannuation. These fixed value items total a net $81,485. The total value of the parties’ fixed value items is therefore $144,777.00. If the “fixed” value items are divided on a 76/24 basis in favour of the wife, the wife is entitled to $110,030.52 and the husband $34,746.48. This means the husband must pay the wife $46,738.52 to give the parties a 76/24 division in favour of the wife of these “fixed” value items. This adjustment will be made from the net sale proceeds of the Property K home.
Secondly, there are items which will be sold and which will not affect the balance of the debts secured on the parties’ real estate. I have ordered the sale of the Plymouth Fury, re-payment of the debt to [S] Manufacturing, the sale of the Vauxhall and the sale of the publicly listed shares. The total net proceeds of those sales will be divided 76/24 in favour of the wife.
Thirdly, the values of items which cannot be ascertained with certainty at this stage are the net value of Property K, the net value of
Property S, and the value of the company’s plant, equipment and vehicles. The amounts realised on a sale of the company plant, machinery and vehicles and the sale of Property S will affect the balance of the debts owed to Firstmac Finance. This debt balance will affect the net value of Property K which will in turn, affect the amount the wife will be required to pay the husband by way of property settlement when the husband transfers his share in the property to the wife, or, if the property is sold, will affect the amount each party will receive from the sale proceeds.
It will be necessary for the wife’s solicitors to ensure the figures are calculated correctly to ensure the wife receives her entitlement to 76% and the husband receives his entitlement to 24% once the sale proceeds of the various items to be sold, have been ascertained.
I have given the husband the option of retaining the company plant, machinery and vehicles by giving him 28 days to pay the parties the agreed value of $106,990 for those items. Should the husband decide to pay those funds to the parties, the parties will be required to pay that sum to Firstmac Finance Pty Ltd to reduce those debts. This will give the husband the opportunity to retain the plant equipment and vehicles owned by the company and enable the husband to continue to operate his business through his company. If he is unable or unwilling to do this, the plant, equipment and vehicles must be sold and the funds distributed to the parties for payment to Firstmac Finance Pty Ltd.
The Sanctuary Point property will be sold immediately and the net sale proceeds, after payment of sale costs and the debt to Bluestone Credit facility, will be paid to Firstmac Finance. Once the orders relating to the company plant and equipment and the sale of Property S have been implemented, the wife will be given the opportunity to purchase the husband’s interest in the Property K home, or the home will be sold.
I am satisfied that the orders set out at the beginning of these Reasons are just and equitable.
I certify that the preceding one hundred and three (103) paragraphs are a true copy of the reasons for judgment of Sexton FM.
Associate: Skye Owen
Date: 6 November 2008
0
2
1