Serifovic and Serifovic
[2006] FMCAfam 420
•15 August 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SERIFOVIC & SERIFOVIC | [2006] FMCAfam 420 |
| FAMILY LAW – Property – application for property adjustment pursuant to section 79 – how to treat losses from failed litigation – add back in relation to debts arising from litigation – section 75(2) adjustment. |
| Family Law Act 1975 |
| AB & GB (No. 2) [2005] FMCAFam 402 Omacini & Omacini (2005) FLC 93-218 |
| Applicant: | ULFETA SERIFOVIC |
| Respondent: | EMIN SERIFOVIC |
| File Number: | SYM 3601 of 2006 |
| Judgment of: | Sexton FM |
| Hearing dates: | 1 & 2 June 2006 |
| Delivered at: | Sydney |
| Date of Last Submission: | 2 June 2006 |
| Delivered on: | 15 August 2006 |
REPRESENTATION
| Counsel for the Applicant: | Ms S Christie |
| Solicitors for the Applicant: | Armstrong Legal |
| Solicitors for the Respondent: | Self represented |
THE COURT ORDERS THAT:
Within 14 days, the parties sign all documents and do all things necessary to list for sale the property situated at 146 Belgrave Esplanade Sylvania Waters in the State of New South Wales, being all the land contained in Certificate of Title Folio Identifier 172/224044 (“the Sylvania home”) and for the purpose of effecting the sale:
(a)The parties to agree on a real estate agent and failing agreement within 14 days of Order, the parties to request the President of the Real Estate Institute to appoint an agent to act on their behalf and this decision shall be binding on the parties and any costs of appointment shared between them equally; and
(b)Within 21 days of order the parties to appoint a solicitor to act on the sale and failing agreement as to a solicitor, the parties to request the President of the Law Society of New South Wales to appoint a solicitor to act on the sale and this decision shall be binding on the parties.
Upon settlement of the sale, the net proceeds to be distributed in the following order and priority:
(a)In payment of all costs associated with the sale including but not limited to legal costs, valuation fees, real estate agent’s commission and expenses;
(b)In payment of the amount necessary to discharge the mortgage to the Commonwealth Bank of Australia secured over the Sylvania home;
(c)In payment of $68,660.00 to Watkins Tapsell, solicitors;
(d)In payment of $2,280.00 to Complete Construction Engineering;
(e)In payment to the wife of $128,097.00;
(f)In payment of the balance then outstanding as to 55% to the husband and 45% to the wife.
In the event the Sylvania home is not sold by private treaty within 3 months of being listed for sale, each party to take all necessary steps to cause the Sylvania home to be sold by public auction at the earliest possible date with the same real estate agent at a reserve price to be agreed and failing agreement at the price recommended by the real estate agent, and the proceeds of sale to be distributed in accordance with Order (2) herein.
Pending settlement of the sale of the Sylvania home the husband shall continue to pay, as and when they fall due, all mortgage instalments, council rates, household insurance and outgoings on the Sylvania home.
Within 7 days of Order, the parties do all things necessary to cause the amount held in trust by the wife’s solicitors from the sale of the parties’ property at 13/323 Christine Avenue, Varsity Lakes, Queensland, be paid as to:
(a)55% to the husband; and
(b)45% to the wife.
Simultaneously with payment in accordance with Order (5) herein, the wife pay to the husband from her share of the trust funds, the sum of $225.00 being half the costs of the expert report of Professor Barnes.
The parties forthwith do all things necessary to close the Commonwealth Bank account held in their joint names, being account number 10083931 and share equally the proceeds of that account whether credit or debit.
In the event the parties or either of them receive a deposit refund from the Local Council, such refund to be divided equally between the parties.
The husband be entitled to the funds owed to the parties by the husband’s brother Fehret.
There be no alteration to the interests of the wife or husband in their respective superannuation funds.
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 s.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.
All outstanding applications otherwise be dismissed and the matter removed from the list of cases awaiting finalisation.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 3601 of 2006
| ULFETA SERIFOVIC |
Applicant
And
| EMIN SERIFOVIC |
Respondent
REASONS FOR JUDGMENT
Introduction
This case concerns property adjustment only. The parties agreed prior to hearing that neither sought parenting orders. After an approximately 20 year marriage, including a separation of 7 months during 2003/04, the parties finally separated in March 2005. After separation, the parties lived in their jointly owned home at Sylvania Waters until February 2006 when the wife moved to Burleigh Waters with the parties’ two daughters, Elmedina now 13 and Emina 19. The children do not communicate with the husband.
In 2004, the parties retained a builder to renovate their Sylvania home which resulted in the parties initiating a claim against the builder at the Consumer Trader and Tenancy Tribunal (CTTT) for faulty workmanship. The parties retained Watkins Tapsell, solicitors to act on their behalf in the building dispute. The wife says she was always opposed to the litigation and 3 months after both parties signed a costs agreement with Watkins Tapsell, the wife advised the firm she did not wish to proceed with the litigation. The matter was finally settled in February 2006 on the basis the claim be dismissed and each party pay their own costs. There is a substantial debt owing to Watkins Tapsell and a small debt owing to Complete Construction Engineering relating to the litigation. The husband says the parties should be equally responsible for payment of the debts. The wife says the debts are the husband’s responsibility from the time she advised the solicitors she was not proceeding with the litigation and should be excluded from the asset pool to be distributed between them. This dispute between the parties is the central issue in the case.
The husband remains living in the Sylvania Waters home. On 15 July 2005 the parties entered into consent orders which provided for the sale of the Sylvania Waters home within 2 months of the resolution of the proceedings against the builder. Although the home has been on the market, it has not been sold and was not on the market at the time of hearing. The parties’ investment property in Queensland has been sold and the net proceeds of sale are held in trust by the wife’s solicitors.
The parties were born in Bosnia. The wife is 40 and the husband 43. After their marriage in August 1985, the parties migrated to Australia in 1986. Neither party has re-partnered.
The husband would like to purchase the wife’s interest in the Sylvania home and retain his superannuation entitlement, but he is unable to borrow enough money to do so. He says he intends to bid for the property when it is sold at auction. The wife asks that the home be sold, the proceeds divided and that the parties retain their respective superannuation entitlements.
At hearing, the wife was represented by counsel, the husband represented himself.
Issues
The approach to the determination of an application under s.79 of the Family Law Act 1975 is well established by authority (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) and involves consideration of these questions:
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-s.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 wife has incurred but not paid any legal fees and as the husband was self-represented he has not incurred legal fees. Legal fees in relation to these proceedings are therefore excluded from the table of assets and liabilities.
The parties agree the wife owes the husband $225, being half the costs of the expert medical report fees paid in full by the husband. I have ordered the wife to pay this amount to the husband from her share of the sale proceeds of the Queensland property, held by her solicitors. This figure is not included in the table of assets and liabilities.
The parties agree that they have the assets and liabilities with values set out in the following table:
| Assets at the date of hearing | $ |
| Property situate at and known as 146 Belgrave Esplanade Sylvania (joint) | 800,000.00 |
| Proceeds of sale of 13 Christine Avenue, Varsity Lakes Queensland (joint) | 258,000.00 |
| Proceeds wife’s Commonwealth bank account 10091392 | Negligible |
| Wife’s Toyota Echo motor vehicle | 10,000.00 |
| Household contents (joint) | 10,000.00 |
| Joint Commonwealth bank account 10083931 | 10.00 |
| Proceeds husband’s Commonwealth bank account 10143193 | 1,600.00 |
| Husband’s Suzuki Sierra motor vehicle | 3,500.00 |
| Monies owed to the parties by husband’s brother Fehret | 3,500.00 |
| Holding deposit (local council) | 1,000.00 |
| Mortgage on Sylvania property to Commonwealth bank | (315,000.00) |
| Mortgage on Queensland property | (209,000.00) |
| Sale costs on Queensland property | Not known |
| M & H Kadric for wife’s Toyota Echo | (16,000.00) |
| Wife’s Commonwealth bank visa account | (5,117.00) |
| Husband’s Commonwealth bank visa account | (22,550.00) |
| Wife’s Coles Myer credit card | (1,410.00) |
| Husband’s St George visa credit card | (10,276.00) |
| Legal fees (CTTT) owed from Mar 05 | (68,660.00) |
| Debt owed to Complete Construction Engineering (2,205 incurred after March 2005) | (2,280.00) |
| Wife’s Superannuation (REST) | 38,220.00 |
| Husband’s Superannuation (Mercer Super Trust) | 258,466.00 |
| Financial Resources | |
| Husband’s annual leave | 8,299.00 |
| Husband’s long service leave | 22,572.00 |
The Sylvania home. The parties agree that any further renovation work needed on the home is taken into account in the valuation of $800,000.
The Queensland property had been sold by the time of hearing, but the sale had not settled. Neither party adduced evidence as to the costs of sale. The property sold for $258,000 with a mortgage debt of $209,000. By consent the court made orders at the time of hearing that the net sale proceeds be held in the wife’s solicitors trust account on behalf of both parties pending final determination of these proceedings. There is no evidence before me as to the amount held in trust.
Refund from Local Council. The wife’s counsel submits the sum of $1,000 is refundable to the parties when the renovations are complete. As there is no evidence before me upon which I can make a finding as to whether this sum will be refunded to the parties, I have ordered any amount refunded be divided equally between the parties, but have otherwise omitted this figure from the list of assets.
Household contents. The wife does not seek an order in relation to division of household contents. The husband asks that the parties each retain the household items resulting from the division they agreed in January 2006. I have therefore omitted this figure from the list of assets and each party will retain what is presently in that party’s possession.
Proceeds of joint account. The parties agree there is $10 in the account. There may be bank fees payable on the account. I have ordered the account be closed and the proceeds divided between the parties. Given the negligible current balance in the account, I have omitted the figure from the list of assets.
Monies owed to the parties by husband’s brother Fehret. The parties agree they lent the husband’s brother $5,000 in 2001/2 to help him buy a residential unit and that he still owes the parties $3,500.00. In the absence of evidence to the contrary, I find on balance the husband is likely to be in a better position to enforce this debt than the wife and I have therefore included that sum in the assets the husband will retain.
Superannuation entitlements. The parties agree that their respective superannuation interests are accumulation interests. Neither party seeks a splitting order although the husband says in his Case Outline “superannuation splitting order shall be made if any adjustment is going to be made under section 79(4) in favour of the wife”. The husband made no submissions as to what he meant by this and provided no evidence of giving the Trustee of his Superannuation Fund notice of his intention to seek a splitting order. Given the nature of the parties’ superannuation interests as accumulation interests, all of which were accumulated by the parties after marriage, and given neither party formally seeks a splitting order, I find it appropriate to adopt an integrated approach to the superannuation and non-superannuation assets of the parties. The wife’s counsel submitted the same percentage division should be applied to both the superannuation and non-superannuation assets, and that either the one or two list approach was open to the court. The husband did not submit on this issue. The majority of the Full Court in Coghlan & Coghlan (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.
The debt to Watkins Tapsell. In December 2004 the parties together retained Watkins Tapsell, solicitors, to act on their behalf in proceedings against their builder Mr Cosic, in the Consumer Trader and Tenancy Tribunal. Having initially quoted fees of approximately $11,000, Watkins Tapsell charged a total of $91,998.00 to act in the matter between December 2004 and February 2006. In March 2005 the wife advised Watkins Tapsell she did not intend to proceed with the litigation and thereafter Watkins Tapsell acted for the husband alone. On 24 January 2006 the husband and Mr Cosic entered into Terms of settlement and the claim was dismissed on 15 February 2006 on the basis each party pay his own costs. The parties agree that between December 2004 and March 2005 when the wife advised Watkins Tapsell she did not intend to proceed, the legal fees incurred amounted to $12,380. There is no dispute that the parties should share that part of the debt. The wife’s counsel submits that the wife should not bear any responsibility for the difference between the total legal fees of $91,998 and $12,380 (= $79,618) as well as the debt of $2,280 owed to Complete Construction Engineering. I find from the invoice from Complete Construction Engineering for $2,280, annexed to the one of the husband’s affidavits, that $75 was incurred prior to March 2005, the remainder thereafter. The wife’s counsel submits the amounts accrued after March 2005 should be excluded from the asset pool available for distribution between the parties. Counsel contends these liabilities arose because of recklessness or negligence by the husband and had the husband followed the wife’s lead in March 2005 and withdrawn from the litigation, an amount of $81,898 ($79,618 + $2,280) would have been part of the asset pool available for distribution. Counsel submits it would unfairly prejudice the wife for these liabilities to be included when identifying the pool.
The parties agree that of the total fees charged by Watkins Tapsell, an amount of $23,338.10 has been paid and an amount of $68,660.00 is still owing. The parties agree the amount of $23,338.10 was paid in part from the husband’s credit card accounts: $12,519.10 from the husband’s CBA Visa account and $8,885 from his St George Visa card account and in part in cash. The husband entered into a mortgage with Watkins Tapsell to secure the outstanding fees. Watkins Tapsell have lodged a caveat on the Sylvania home to protect their mortgage interest.
The parties also owe $2,280.00 to Complete Construction Engineering for an expert report required for the litigation. To do justice to the wife, the wife’s counsel contends the court should exclude the husband’s credit card debts in so far as they relate to payments to Watkins Tapsell, exclude the debt of $68,660 still owed to Watkins Tapsell, and order the wife to pay the husband a proportion of the $12,380 incurred while she was still instructing Watkins Tapsell until March 2005. Counsel contends this is the only way to avoid ‘double dipping’ and to ensure the wife bears no responsibility for the ‘wastage’ incurred by the husband in pursuing the litigation after March 2005.
Many of the facts about the building dispute are not in issue. In May 2004, upon reconciling after a 7 month separation, the parties decided to renovate their home at Sylvania Waters. By verbal agreement with the parties, a friend, Serif Cosic agreed to perform the renovation work for $120,000. The husband says he paid $2,550 to the Local Council for the Development Application. The parties made it clear to Mr Cosic they could only spend $120,000. However, they extended their loan with the Commonwealth Bank from $152,000 to $320,000 to pay for the renovations in three separate amounts. The husband says they later used an additional $10,000 from his Visa Card to finance additional renovation expenses. By August 2004 the parties had paid Mr Cosic $70,000.00 for the work done. The husband was dissatisfied with Mr Cosic’s work and terminated the contract with him in the same month. In September 2004 the parties made a complaint to the Office of Fair Trading although the wife says she was opposed to making the complaint. The wife agreed with the husband at the time there were defects in the building work. In cross-examination, the husband says the wife acknowledged to him that they had a valid reason to take the matter to a court and they attended conferences with the solicitors together. He said “she was convinced we had a valid reason because we were chasing $30-40,000, because it’s our money.” On
22 September 2004, having terminated the contract with Mr Cosic, the husband became an “owner-builder” for the purpose of completing the renovations.
On 13 December 2004 the parties entered into a costs agreement with Watkins Tapsell, solicitors to act on their behalf in the claim against Mr Cosic for defective building work. The wife told her solicitor at Watkins Tapsell on 31 January 2005 she was against the litigation. The file note from the firm reads [Exhibit 3]:
“she thinks that it is crazy bringing the dispute. I said that she was one of the owners of the property and she was one of my clients. I said that I need her instructions as well. I asked her whether she wanted to proceed with this. She said yes, she does because she could not live with Emin if she did not.
…..
I confirmed that she wanted to proceed with the claim. She said yes, she does
…
She said she thinks his whole plan is a waste of time and she would prefer not to get involved. I advised her that this claim involved her. She is an owner of the property and she is my client, she must give me instructions as well. She said yes, she wants to proceed as she has agreed that she will support Emin and they are trying to reconcile their marriage.
…
She said his choices are very slim as to succeeding. I said yes, there was (sic) risks and I had advised him of those risks from the beginning… She said she does not see any point in this claim, the costs are going to be higher than what they are going to get. I said it was likely that the costs will be higher than what we estimated.
The husband deposes to the parties having the following conversation on 10 March 2005:
Husband:
our solicitor wants us to sign the affidavits so she can lodge it to the Tribunal.
Wife:
I don’t want to sign my affidavit. That court case has nothing to do with me.
Husband:
But we are trying to recover our money. I need you to sign it.
Wife:
I won’t.
On 11 March 2005 the wife advised Watkins Tapsell she would not pursue the claim and that they were now acting for the husband alone. The wife agrees she did not notify the respondent Mr Cosic and did not notify the husband in writing she was withdrawing her instructions from Watkins Tapsell. The parties agree however, they spoke about it. The parties separated in March. On 28 April 2005 the wife received a letter from Watkins Tapsell, copied to the husband, confirming her instructions of 11 March 2005 that she “did not wish to proceed with this matter.” The letter said:
In accordance with our Legal Services Agreement you are responsible for the costs and disbursement up to and including 11 March 2005.
It is not clear on the evidence whether the wife or her solicitors notified the CTTT that she was no longer a party to the proceedings. The husband is adamant the wife was always a joint claimant. Although the Terms of Settlement dated January 2006 disclose the only parties at that point as the husband and Mr Cosic, I am unable on that evidence alone to make a finding as to whether or not the wife formally discontinued her claim and withdrew as a party. The husband acknowledges he was aware of his wife’s attitude to the litigation but had difficulty understanding her position and tried to persuade her to reconsider. He says she kept changing her mind as to what to do. From the husband’s demeanour in the witness box, it was clear to me he held a very strong view that he and his wife had together been wronged and together they should right the wrong through legal channels. As it was always his understanding his wife remained a party to the proceedings, he always believed she was involved. The wife deposes to having said to the husband, though does not say when she said it:
I don’t want to continue with the building dispute. I don’t want anything to do with it. If you continue with it and you lose then I think you should pay all the costs. If you win then you have the money from it. I don’t want to continue. I just want to sell the house and move on.
The husband denies the wife ever told him she would not want to share in any award of damages. Whether or not such a conversation occurred, I am satisfied the husband regarded the wife as equally entitled to any damages award and that the wife would have been so entitled. I am equally satisfied however, that the wife regarded herself as out of the proceedings when she advised Watkins Tapsell of her position in March and that the wife was opposed to the litigation. It is clear from the interim orders of the Family Court of July 2005 which provided for the husband to keep the wife informed monthly of the progress of the proceedings, that the wife was not by that time, participating. I accept the wife’s evidence that she did not read the report of Complete Construction Engineering. However, the wife had made a statement for the proceedings and following a summons, gave evidence at the hearing. The wife recalls the husband asking her for support. She also recalls offering the husband a meal during the hearing as he was so distressed.
The question is whether on the basis of these findings of fact the husband should be held solely responsible for the whole of the costs of litigation accrued after March 2005 as argued by the wife’s counsel.
The husband says he was told by his lawyers he had a good case. In January 2005 he was advised about limitations on costs recovery in relation to the amount claimed, but was told he had a good cause of action to recover the cost of completion of the building work on the basis there was a fixed price contract which had been repudiated. The letter of 20 January 2006 from Mr Tapsell to the husband, summarises other advice the husband received during the course of the litigation. While the husband received advice as to costs risks, Watkins Tapsell were also advising he was entitled to succeed on his claim. In the January 2006 letter when the matter was about to settle, Mr Tapsell, setting out the risks of the husband having to pay the costs of the other side, writes:
We are sorry that this is the way the proceedings have concluded because we consider that you had been deceived by Mr Cosic, and that you had a good cause of action against him.
The husband was cross examined about advice he received during the course of the litigation. The husband agreed he was told by his lawyer that if he lost he would get a costs order against him and that he told his solicitors he understood that but had said “it’s not just money”. He agreed he told his lawyers that whether he won or lost he would shake hands with them and wanted them to run it anyway. He agreed the matter was listed with him fully understanding possible costs implications. He agreed he was told costs would increase if an expert report was needed and those costs were in fact incurred. He agreed that the expert report showed the builder had completed work to a value of $59,000, only $11,000 less than the amount the builder had been paid. By letter of 3 November 2005 he was advised that the further costs of hearing would be in the vicinity of $10,000-12,000. However, as already noted, there is no evidence the husband was advised against proceeding until the time of settlement in January 2006 when it was made clear to him, there was a risk of a costs order against him of the same magnitude as his own solicitors’ costs. He was advised in that letter to accept Mr Cosic’s offer that each party pay their own costs and the proceedings be otherwise dismissed. In January 2006 the husband accepted the offer that the proceedings be dismissed and each party pay their own costs. On 15 February 2006 the CTTT dismissed the application in accordance with the terms of settlement.
There is no evidence before me as to the amounts accrued in legal fees periodically between March 2005 and February 2006. It is not therefore possible to assess with any accuracy at what point in the litigation it would have been plain to the husband that the proceedings were not commercially viable, whatever the rights or wrongs of the cause.
The wife’s counsel submits that had the husband withdrawn from the litigation in March 2005, the parties would have saved over $80,000. I am not persuaded to make such a finding for these reasons:
a)Even if both parties had discontinued the proceedings in March, there may well have been a costs order against them in which the wife would have shared;
b)There is no evidence to establish that the wife formally withdrew as a party to the proceedings, which may or may not have been possible given the parties were joint owners of the home, the subject of the claim; and
c)The husband was advised he had a good cause of action against the builder and I am satisfied he always intended sharing any damages award with the wife.
I am however satisfied, that there was a point at which the husband should have been aware the proceedings were not cost-effective and that point could be no later than October 2005 when he tried to settle the matter unsuccessfully on the basis Mr Cosic pay $5,000 inclusive of costs. From at least that time, the husband must have known his costs were much higher than any possible damages, his costs were mounting, he faced a significant costs risk and had poor prospects of a costs order in his own favour. The husband tells the court that he was very stressed at the time, his children were not speaking to him and he was at the end of his tether: “I thought I would give up, give up my job. I was stretched to the limit.” I accept that the litigation coupled with separation and estrangement from his children must have caused the husband a great deal of stress and may have affected his sense of judgment. However, I also accept that the wife did not want to proceed with the litigation, regarded it as a waste of money and that the husband was well aware of her attitude.
The question as to whether or not a debt should be attributed to one or both parties, in whole or in part is a discretionary one. In Kowaliw (1981) FLC 91-092, His Honour Justice Baker said in the usual course, financial loss incurred by parties in the course of a marriage, whether or not a joint liability, should be shared between them. His Honour said that if losses were suffered by the parties while attempting to gain assets, such losses should be shared by the parties, although not necessarily equally. He said the following were the exceptions to the usual rule:
Where one of the parties embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
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.
The wife does not suggest the husband set out to minimise or reduce the assets of the parties and there is no evidence to support such a proposition. In fact, it is clear the husband set out to be reimbursed for monies he believed had been lost due to the faulty workmanship of the builder. The wife contends that the husband has, however acted “recklessly, negligently or wantonly” resulting in a reduction of the matrimonial assets. It is true that the $94,278 spent on costs and disbursements resulted in a total debt in that sum, but the question is whether the facts support a finding that the husband should bear that loss in a greater proportion than the wife. On the basis of my findings set out above, I find he should, but not to the extent sought by the wife.
I have given careful consideration to the various ways in which the economic consequences of the building litigation might be taken into account to ensure a just and equitable result. Ms Christie for the wife says in submissions:
The appropriate way to treat them (the debts amounting to $81,898) is as a liability on the husband’s side but not a liability which your Honour takes into account when calculating the entitlement of the parties…
(you) must consider it for the purposes of ss 75(2) and 79(2) but it would be inappropriate to have it diminish the pool and thereby have the wife share in it in the same proportion as the husband…
You have to exclude legal fees from the table and make an order that the wife pays to husband x% of $12,000 from what dollars she receives so he can use it to meet his debt to Watkins Tapsell. It’s the only way I can think of to avoid double dipping.
Counsel refers me to Federal Magistrate Ryan’s (as she then was) decision in AB & GB (No. 2) [2005] FMCAFam 402 in which Her Honour summarised a number of decisions dealing with waste and notional add backs. Her Honour set out the principles (at page 95) which arise from these cases. In particular, the wife’s counsel referred to two of those principles:
(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.
Ms Christie concedes that one approach might be to leave the debt in the pool but to say the wife made the greater contribution post-separation because she did not incur the debt, or the whole of the debt. I agree that is one approach. Another would be to leave the debt in the pool and make any adjustment pursuant to s.75(2)(o), the approach adopted by his Honour, Baker J in Kowaliw & Kowaliw (1981) FLC 91-092. In Townsend & Townsend (1995) FLC 92-569 the Full Court determined the wasted property should be notionally added back to the pool of assets on a precise dollar basis. In Townsend’s case, the husband had sold a taxi and used the sale proceeds for himself alone. 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 s.75(2)(o).
The Full Court in Omacini and Omacini (2005) FLC 93-218 referred to three categories of cases where it is appropriate to notionally add back to the pool of assets. They are:
(a) Where the parties have expended money on legal fees [DJM and JLM (1998) FLC 92-816];
(b) Where there has been a premature distribution of matrimonial assets [Townsend and Townsend (1995) FLC 92-569]; and
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092.
One of the difficulties in this case, not addressed in a practical sense by the wife’s counsel or by the husband, is that on a sale of the home, Watkins Tapsell must be paid the monies owed them to guarantee the lifting of the caveat. Yet the wife seeks an order that the home be sold, that the husband pay the debt outstanding, and that the wife receive 70% of the net pool, excluding the debts of $81,898. She submits the husband’s superannuation cannot be split given the husband gave no notice of any intention to seek a splitting order. Even if I were minded to do so, the approach sought in counsel’s submissions could not be achieved in a practical sense. The husband does not have the funds to repay Watkins Tapsell and the caveat will prevent any sale. For the wife to achieve 70% of the net pool without the litigation debts being included, would necessitate a superannuation splitting order.
Given I cannot make a precise finding as to how much of the debt should be attributed solely to the husband, I have decided the approach most likely to give a just and equitable outcome to both parties is to add back the whole of the disputed amount, being $81,823, include that sum on the husband’s side of the ledger, and make an adjustment in favour of the husband pursuant to s.75(2)(o) to ensure the wife shares to some extent in the loss which is added back. In this way, the husband will receive some realisable assets at settlement as well as his superannuation entitlement and the debt to Watkins Tapsell and Construction Engineering will be repaid at the time of sale of the home.
It follows that the parties have the following assets and liabilities available for distribution:
| Assets at the date of hearing | $ |
| Property situate at and known as 146 Belgrave Esplanade Sylvania (joint) | 800,000.00 |
| Net proceeds of sale of 13 Christine Avenue, Varsity Lakes Queensland (joint) held in trust by wife’s solicitors | $258,000 (less $209,000) less sale costs = not known |
| Proceeds Wife’s Commonwealth bank account 10091392 | Negligible |
| Wife’s Toyota Echo motor vehicle | 10,000.00 |
| Household contents (joint) | Already divided |
| Joint Commonwealth bank account 10083931 | Disregarded |
| Proceeds husband’s Commonwealth bank account 10143193 | 1,600.00 |
| Husband’s Suzuki Sierra motor vehicle | 3,500.00 |
| Monies owed to the parties by husband’s brother Fehret | 3,500.00 |
| Add-back to husband of $2,205 + $79,618 = 81,823 | 81,823.00 |
| Holding deposit (local council) | Disregarded |
| Mortgage on Sylvania property to Commonwealth bank | (315,000.00) |
| M & H Kadric for wife’s Toyota Echo | (16,000.00) |
| Wife’s Commonwealth bank visa account | (5,117.00) |
| Wife’s Coles Myer credit card | (1,410.00) |
| Husband’s St George visa credit card | (10,276.00) |
| Husband’s Commonwealth bank visa account | (22,550.00) |
| Legal fees owed to Watkins Tapsell | (68,660.00) |
| Debt owed to Complete Constructions (2,205 incurred after March 2005) | (2,280.00) |
| 499,130.00 | |
| Wife’s Superannuation (REST) | 38,220.00 |
| Husband’s Superannuation (Mercer Super Trust) | 258,466.00 |
| NETT ASSETS including superannuation | 795,816.00 |
| Financial Resources | |
| Husband’s annual leave | 8,299.00 |
| Husband’s long service leave | 22,572.00 |
I find the parties have total net assets including superannuation entitlements with a value of $795,816.00.
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. The Full Court said in Aleksovski & Aleksovski (1996) FLC 92-705 (at 83,437):
It is therefore necessary…[to] weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation and then translate such assessment into a percentage of the overall property of the parties.
Financial contributions
The parties substantially agree on the financial history of the marriage. They had no assets of significance when they married in 1985. In or about 1986, the wife contributed $12,000 in compensation funds from an injury she received in a car accident towards the purchase of the parties’ first car. In May 1990 they jointly purchased a home at 81 Shakespeare Street, Wetherill Park for $145,000 using joint savings and a loan from the Commonwealth Bank. The parties discharged the mortgage in early 1996. In mid 1999 they sold the Wetherill Park home and used the net proceeds of sale to purchase their home at Belgrave Esplanade, Sylvania Waters for $475,000. They borrowed $230,000 from the Commonwealth Bank to complete the purchase. In February 2003 the parties purchased an investment property at 13/323 Christine Avenue, Varsity Lakes in Queensland for $205,000, borrowing the purchase funds from the Commonwealth Bank. The rental income from that property was paid to the husband’s account from which the mortgage payments for Sylvania Waters and expenses for the Queensland property, including mortgage payments were paid.
The parties separated between October 2003 and May 2004. The wife moved to her parents in Queensland with the children for the first 3 months of that period. The husband remained in the home and used the joint mortgage facility to pay the mortgage loan repayments. In November 2003 the husband sold some shares. In February 2004 the husband says he paid $3,983 in legal fees relating to the breakdown of the parties’ marriage. The mortgage on Sylvania Waters was in arrears when the parties reconciled. The unchallenged evidence of the husband is that he paid $3,700 to the mortgagor in May 2004 from the sale of shares in November 2003 to meet the mortgage arrears. There was a dispute as to what the husband did with the rent from the investment property during the 7 month period, but I accept the husband’s evidence that he continued to meet the mortgage payments on the Queensland property. During the 7 month separation, the husband sent the wife only $600 towards expenses for the children. The wife returned to Sydney in January 2004 owing her parents $5,000.00. The husband was cross-examined about his lack of financial support to family expenses during the 7 month separation. While I accept the husband did not meet the home mortgage payments during that period from his income, he paid the arrears of mortgage when the parties reconciled and I am not persuaded the parties suffered financial loss.
The parties gave detailed evidence of their banking arrangements and how they managed their financial affairs. There is considerable acrimony between them and a resentment about the fairness of their financial arrangements during the marriage. The husband deposes to the parties opening a joint bank account at the Commonwealth Bank in May 2004 as a precondition to reconciliation and acknowledges the parties agreed to closing all other accounts. The husband, however, kept his own account open from which he regularly transferred funds to the joint account. The wife says she was unaware until early 2004 that the husband had kept a bank account in his own name. The husband was extensively cross-examined about deposits and withdrawals in his commonwealth account from 2001. He explained all large withdrawals. I found no reason to make any adjustment as a result of the parties’ financial arrangements during marriage. Despite the wife’s distrust of the husband, I found no basis in the evidence for the wife’s assertion that the husband had failed to disclose his financial position.
The husband was employed full time from a few months after his arrival in Australia. Since 1988 he has worked full time for Nathan Lion (Tooheys). The wife was employed during the whole of the marriage, taking maternity leave for the birth of the two children. The wife worked shifts to minimise her time away from the children, including evening shifts. The wife has earned less than the husband.
I am satisfied both parties worked hard during the marriage for the benefit of the family.
The parties finally separated in March 2005. At that time the husband owed Visa over $9,000 which he says had been spent to meet renovation expenses. In April 2005 the husband paid $2,000 to Mr Albin Bosankic of Fairfield for work completed on the home. After separation, although the parties continued to live in the matrimonial home until February this year, they separated their finances, although there is some dispute between them as to whether or not both parties or only the husband thereafter used the joint account. The husband received the rental income and met the mortgage payments and all expenses on the Queensland property including council rates and body corporate fees until it was sold shortly before hearing. With the exception of one month, the husband has continued to meet the mortgage repayments on the Sylvania home. He has paid home warranty insurance and home inspection fees of over $2,000.00 and for additional improvements to the home. He annexes documents to his affidavits for verification of his post-separation expenses. The husband has had the benefit of the parties’ home since February 2006. The husband seeks reimbursement from the wife for post-separation expenditure.
Since separation, the husband has paid child support in accordance with the Child Support Agency assessment. He currently pays $139 a fortnight. The wife’s counsel submits that the assessment was less than it would have been, as a result of the husband’s responsibility for the two mortgages, and because at the time of assessment the parties lived under the one roof. Although this is no longer the case, the assessment remains the same. Counsel submits the wife also gave evidence of her expenses post-separation including providing the financial support for the two children. I am not satisfied the husband is entitled to an adjustment for post-separation financial contributions nor that he has established a basis to be reimbursed for post-separation expenses.
The husband continues to work full time for Lion-Nathan, Tooheys on a salary of $78,000.00. His taxable income for the 2005 financial year was $70,870.00. The wife stopped working in February 2006.
Contributions by wife’s parents
The parties lived with the wife’s parents for 5 months rent-free when the parties arrived in Australia in 1986 and both acknowledge the wife’s parents’ generosity in this regard. In addition, the wife’s mother assisted with the care of the children without receiving payment. The husband frankly acknowledged the significant assistance given to the parties by the wife’s parents. His Honour Justice Mullane in Brew & Brew (2003) FLC 93-140 points out that section 79(4)(c) which concerns contributions made by a party to a marriage to the welfare of the family does not include contributions made by third parties, such as a grandparent. I find no basis for any adjustment as a result of these arrangements.
Other factors
From the time of their marriage, the wife says the parties sent between $50 and $200 a month to the husband’s mother in Bosnia. During the war in Bosnia from 1991 until 1996 the parties sent funds to the husband’s brother in Germany and he would onsend it to his mother and brother in Bosnia. The wife deposes to the parties sending on average $500 a month and on one occasion after the war, sending $2,000. The wife estimates the parties sent the husband’s family between $15,000 and $20,000. The husband estimates the parties sent approximately $7,000 to his family in Bosnia. In cross-examination the wife agrees the parties transmitted $7,059.55 to Bosnia between September 2003 and February 2006. The Western Union Transaction Summary for the period January 2000 to May 2006 [Exhibit 2] confirms the husband transmitted $7059.55 during this period, which included periods when the parties were no longer living together. The husband acknowledges that $700 of this sum was paid to two women he met on the internet and to the grandmother of a third woman while he was separated from the wife. The wife says she never opposed the husband sending money to his mother though she objects to funds being sent to women met on the internet. The parties agree they made gifts with a value of approximately $4,000 to the wife’s family. The wife complains that the husband had 4 overseas holidays while she only accompanied him on one of them. She complains the husband spent two months overseas in 1997 without her or the children. The husband took the eldest child on one of the trips and both children on another.
Weighing these factors, I am satisfied, as a result of his continuous employment on a higher salary than the wife, and having added back the to the pool the whole of the post-separation legal debt for the building litigation, the husband has made the greater financial contributions to the assets of the marriage during and post-separation.
Non-financial contributions
The wife deposes to managing the parties’ finances during the marriage, with the exception of the mortgage which the husband paid. The wife says she did all the cleaning, washing and ironing including cleaning the windows. She says the husband “cut the grass.”
The husband deposes to doing tasks outside their home in Wetherill Park including painting the house and maintaining a vegetable garden. The husband says he organised taxation returns, loan repayments, registration, insurances, maintenance and general repairs for home and car. He says he organised the sale of the Wetherill Park property and the purchase of the parties’ new home at Sylvania Waters. He deposes in 2001/2 to taking the majority responsibility for finding the Queensland investment property and organising the finance. In 2002/3 he says he spent a lot of time organising the depreciation schedule for the investment property and preparing tax returns. The husband says in 2004/5 he was actively involved with the tradespeople renovating the home and sometimes performed tasks himself to save the parties money. The husband negotiated the extension of the mortgage with the bank to enable the parties to proceed with the renovations.
I am satisfied the party’s non-financial contributions were approximately equal.
Contributions as homemaker and parent
The husband did not challenge the wife’s evidence that she accepted the responsibility for caring for the children day to day with assistance from her mother who cared for the children while the parties were working and gave the wife considerable domestic assistance. The husband concedes the wife performed most of the household tasks assisted by her mother for no charge.
The husband says he also made significant contributions to the care of the children: “I would take the kids to school even after I was exhausted from night duty.” I am satisfied the wife has had some assistance from the husband in relation to these duties.
Since separation, the children have lived with the parties under the one roof until February this year, when the children moved away with the wife. The children do not communicate with or spend time with the husband for reasons not explained during the hearing. I find the wife’s contributions as homemaker and parent are greater than the husband’s.
Superannuation
Neither side adduced any evidence to suggest the parties’ contributions to these interests should not be treated in the same way as their contributions to the other assets. As already noted, I have applied an integrated approach to the superannuation and non-superannuation assets in this case.
What is the effect, if any, of any proposed order upon the earning capacity of each party?
The property orders that I propose making in this matter will not affect the earning capacity of either party.
I agree with the wife’s counsel’s submission that the parties’ contributions should be assessed as equal if the debt to Watkins Tapsell accrued after March 2005 is taken out of the equation.
The husband submits he is entitled to 70% by way of contributions, without taking the debt to Watkins Tapsell out of the equation. He submits he should be given some compensation for continuing to pay both mortgages, for keeping the parties’ credit ratings in tact after separation and “keeping the bank at bay”. As already noted, while I acknowledge the husband’s hard work and significant financial contributions, I am not satisfied those contributions outweigh the contributions made by the wife, both financially and in relation to her care of the children and household.
In assessing their respective contributions overall and adding back the full amount of the debt to Watkins Tapsell after March 2005, I find the assets of the parties should be apportioned equally.
What matters referred to in sub-section 75(2) of the Act are relevant?
I have considered each of the relevant factors listed in s.75(2) of the Act. The husband is 43 and the wife 40. The husband is a brewery technician having worked full time for the same company for 17 years. He has an income of $78,000 but sometimes receives an additional bonus. The bonus is not guaranteed. The wife is presently in receipt of a disability support pension but intends to study or do a real estate course. The wife has the care of the parties’ 13 year old daughter. The parties eldest daughter is over 18 though still living with the wife.
The wife deposes to suffering from depression but adduces no medical evidence of such a condition nor as to the impact of any medical condition on her capacity for employment. I am satisfied the wife is well capable of regaining employment. She worked in a responsible well paid position until February 2006 and shortly plans to start a new career. I find no basis for any adjustment on the basis of the wife’s health.
The husband suffers from severe lung disease. Professor David Barnes, respiratory and sleep physician in his report to the wife’s solicitors dated 4 April 2006 provides this opinion following his examination of the husband on 4 April 2006:
Mr Serifovic has objective evidence of severe lung disease which seems to have commenced following his episode of pneumonia in 1975…There is no effective treatment for his condition which is likely to be progressive in nature. …(he has) a very severe degree of respiratory impairment. Lung transplantation may well be indicated within the next 5 years. At his current level of respiratory impairment he is able to carry out sedentary activities but any job requiring more than minor physical activity is not likely to be feasible.
He says he coughs, suffers headaches and breathing difficulties and tires easily as a result of his lung problems. He says he uses Spiriva and an Oxis puffer. The wife recalls a Doctor Despus at Westmead recommending her husband work less and improve his diet and says she assisted him to improve his diet. The husband says he enjoys his work, is well regarded by his employer and intends to keep working at Tooheys as long as his health permits.
The wife’s counsel submits, and I agree, there is no evidence to suggest the husband has a current incapacity for work. She submits he has been working despite his impairment. She says there is no evidence of certainty about the husband’s future health or that his condition will affect his ability to earn income. He is not on a list for a lung transplant. She says the husband has applied to borrow further funds and acknowledges he would have to keep working to meet the payments. She says there should not be an adjustment having regard to a theoretical possibility that the husband will not work. I do not agree that the possibility is merely theoretical. I accept the husband’s submission that there is no guarantee he will be able to work long term. Although Professor Barnes says it may be 5 years before the husband needs a lung transplant, I am satisfied the husband does suffer a condition which will, at least within a few years, impact on his capacity for work. I accordingly make an adjustment of 3% in the husband’s favour.
The wife stopped working in February 2006 and says she hopes to study teaching or do a real estate course. I conclude that the wife regards herself as having good employment prospects in the future. She has the care of the parties’ 13 year old daughter. I accept her current earning capacity is less than that of the husband and that she is not presently accruing superannuation as is the husband. I am satisfied the husband has the capacity to earn more than the wife at least in the foreseeable future, and that she has to an extent compromised her work arrangements to accommodate the children’s needs. I make an adjustment of 3% in favour of the wife for this factor.
While I accept the husband has annual leave and long service leave and they are financial resources available to him, the husband deposes to an intention to use his leave on an extended trip to Bosnia after these proceedings have been finalised. I find no basis for an adjustment on this issue.
In light of the wife’s involvement in the litigation which contributed to the debt of $81,823 which has been added back to the pool against the husband, I have made an adjustment in favour of the husband pursuant to s.75(2)(o) of 3.5%.
I make a further adjustment pursuant to s.75(2)(o) in favour of the husband of 1.5% because he will receive $81,823 as a notional rather than a realisable asset and because he will receive the majority of his assets as superannuation, unlikely to be available to him for many years.
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?
There are no parenting orders. The husband pays $139 a fortnight in child support in accordance with the Child Support Assessment and is not in arrears. The wife’s counsel submits that the husband’s assessment is reduced because the husband has been paying the two mortgages and at the time of the assessment the parties were still living under the same roof with the only child under 18. I am not satisfied the husband has demonstrated an irresponsible attitude to his financial responsibilities as a parent. I find the husband is likely to meet his child support obligations in accordance with the assessment which will now increase.
In assessing the s.75(2) factors, I find a just and equitable result requires the husband to receive by way of adjustment in his favour a further 5% of the matrimonial assets. The husband will therefore receive 55% overall of the net assets of the parties which includes the notional sum.
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 agree with Ms Christie’s submission that on the evidence it is clear the husband cannot afford to purchase the wife’s share of the home and the home will be sold. Both parties will therefore be required to re-house. Much of the husband’s entitlement will be tied up in his superannuation fund for the foreseeable future and he will have very little, after payment of debts, with which to re-establish himself. However, the debts to Watkins Tapsell and Complete Construction Engineering will be paid from the sale proceeds of the home and the husband will be free of them. The wife will have cash resources available to her and will be in a position to repay debt.
As already noted, I have given consideration to splitting the husband’s superannuation entitlement despite neither party asking the Court to do so. However, on balance I decided the approach most likely to result in justice to both parties is the one I have taken.
I have not been provided with the amount held in trust by the wife’s solicitors as a result of the sale of the parties’ Queensland property. I have therefore ordered those funds be distributed in accordance with the overall percentage division. The same will apply to the sale proceeds of the home which has not yet been sold. There is a further $341,756 in the ‘other assets’ or non-real estate assets. The wife must receive 45% of those assets which equals assets to the value of $153,790. The wife already has $25,693 made up of her superannuation and car and less her debt on car and credit cards. She therefore needs a further $128,097 from the husband’s share of the sale proceeds of the home, before the balance is divided in accordance with the parties’ percentage entitlements.
The husband will have assets set out in the following table:
| Assets to be retained by husband | $ |
| 55% of funds held in trust for the parties from sale of Qld house | No figure available |
| 55% of net proceeds of sale of the matrimonial home | No figure available |
| Payment to wife to ensure wife receives 45% of ‘other assets’ | (128,097.00) |
| Suzuki Sierra motor vehicle | 3,500.00 |
| Add back for legal fees and disbursements after March 2005 | 81,823.00 |
| Funds owed to the parties by the husband’s brother | 3,500.00 |
| Proceeds of bank account | 1,600.00 |
| Superannuation entitlement | 258,466.00 |
| Visa card debt (1) | (10,276.00) |
| Visa card debt (2) | (22,550.00) |
| TOTAL | 187,966.00 |
The wife will have the assets and liabilities set out in the following table:
| Assets to be retained by wife | $ |
| 45% of funds held in trust for the parties from sale of Qld house | Figure not available |
| Payment from husband at time of sale such that wife receives 45% of ‘other assets’ | 128,097.00 |
| 45% of net sale proceeds of Sylvania home | Figure not available |
| Toyota Echo motor vehicle | 10,000.00 |
| Superannuation entitlement | 38,220.00 |
| Total credit card debts | (6,527.00) |
| M & H Kadric for debt on wife’s Toyota Echo | (16,000.00) |
| TOTAL | 153,790.00 |
I am satisfied that in all the circumstances, the orders I have made are just and equitable.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Sexton FM.
Associate: Collette McFawn
Date: 15 August 2006
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