T and T - [2003] FMCAfam 296

FEDERAL MAGISTRATES COURT OF AUSTRALIA

T & T

[2003] FMCAfam 296

FAMILY LAW – Property – husband increases the mortgage on the matrimonial home post separation – claim that this was to repay a pre-separation loan – finding that there was no pre-separation loan and that the increase in the mortgage was to deny the wife a share of the parties’ property – issue of the husband’s earning capacity – husband claims to have earned and to be able to earn only a small income by reason of an injury – husband represented to the bank advancing the mortgage that he earns a significant income – request that the Registrar forward a copy of the judgment to the appropriate authorities.

Applicant:

P T

Respondent:

G T

File No:

MLM 6643 of 2002

Delivered on:

16 July 2003

Delivered at:

Melbourne

Hearing Dates:

14 & 15 July 2003

Judgment of:

Brewster FM

REPRESENTATION

Counsel for the Applicant:

Mr P.A.Hannan

Solicitors for the Applicant:

Ryan Carlisle Thomas

Counsel for the Respondent:

Mr P. Indovino

Solicitors for the Respondent:

John V Hayes & Co

ORDERS

IT IS ORDERED BY CONSENT:

THAT the Respondent Husband and the Applicant Wife retain the joint parental responsibility for decisions relating to the long term care, welfare and development of the children of the marriage W T born …….. 1994, A T born ……. 1996 and D T born …….. 1997.
THAT the children reside with the Applicant Wife and the Applicant Wife be responsible for their day to day care, welfare and development.
That the Respondent Husband have contact with the children:
(a)each alternate Sunday from 12.00 pm until 6.00 pm; and
(b)as otherwise as may be agreed.
THAT all contact changeover takes place at the Applicant Wife’s father’s home situated at ………...

IT IS ORDERED:

THAT the Respondent Husband forthwith takes all steps necessary to sell the former matrimonial home situated at 29 S Road, L (“the home”).
THAT the sale price and other commissions and charges to be agreed between the parties or in default of agreement as ordered by the court.
THAT the Applicant Wife’s solicitors are to be responsible for the sale of the home and the implementation of these orders.
THAT the proceeds of sale are to be applied as follows:
(a)in payment of agents commissions and conveyancing costs of sale;
(b)to pay to Westpac Banking Corporation (“the bank”) the sum of $104,000.00 secured by a deed of priority between the bank and the Applicant Wife of 11 June 2003 together with the interest accrued on the amount;
(c)to pay to the Applicant Wife 85% of the balance less an amount equivalent to one-half of the amount owing on the Respondent Husband’s Visa Card provided that this one-half does not exceed $4,150.00;
(d)to pay to the Respondent Husband the balance less one half of the amount owing on his Visa Card provided this one half does not exceed $4,150.00;
(e)to pay the Respondent Husband’s Visa Card debt up to the amount of $8,300.00
THAT each party is against the other be entitled to all chattels in that party’s possession and all choses in action in that party’s name.
THAT the Respondent Husband is restrained from damaging the home pending completion of the sale.
THAT the Respondent Husband pay to the Applicant Wife the costs incurred by her solicitors in arranging with the bank the deed of priority referred to in order 8(b). In default of agreement I direct those costs to be taxed on the scale provided for in the Family Court Rules.
THAT I give liberty to either party to relist this matter and this can be done by telephoning my Associate on (02) 6267 0526.
THAT when my judgment is taken out I direct that the Registrar forward a copy of that judgment to the Victorian Police and pursuant to Rule 2.08 I give leave to the Victorian Police to inspect the records of the court relating to this matter.
THAT if a request is made by the Police of the transcript of these proceedings I direct that transcript be ordered and made available to the Police.

AND THE COURT NOTES:

THAT pursuant to section 65DA(2) of the Family Law Act 1975 the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders are set out in Annexure A and these particulars are included in these orders.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 6643 of 2002

P T

Applicant

and

G T

Respondent

REASONS FOR JUDGMENT

This matter concerns an application by the wife for settlement of property. In addition at the end of the case I was asked to make consent orders as to children’ matters which I have done.
The husband is aged 34 and the wife 31. They were married on

22 October 1989. They separated for a few months in early 2001 and separated finally in September of that year. There are three children of the marriage, W who aged nine, A aged seven, and D aged 6. On separation the wife took the children with her and they continue to live with her. There has been no contact with their father since November 2002.
The main item of property is the former matrimonial home situated at 29 S Road, L. It was purchased in 1997 for $93,000. For reasons which I need not discuss it was purchased in the husband's name alone. All the monies required to purchase the home were borrowed. There was a mortgage from St George Bank of $90,000 and $7,000 was borrowed from the husband's accountant Mr W. In 2000 the home was refinanced to Citibank. $105,000 was borrowed and the additional monies were used to pay debts, including discharging the debt to Mr W.
The matrimonial home was refinanced by the husband again in 2002. On this occasion he borrowed $160,000 from the Bank of Melbourne. The mortgage to Citibank, which then stood at $104,000, was discharged. The reasons the husband gave for borrowing these additional monies were as follows:
(a)He said that in 1997 he had borrowed $50,000 from Mr W. The reason he gave for this was that he proposed to buy a business. He said that he could not find a suitable business and gradually spent the $50,000 such that it no longer exists.
(b)He said that in late 2002 Mr W was pressing for repayment of the loan and he refinanced the home so as to be able to pay him the monies owing.
From the monies lent by the Bank of Melbourne the husband paid $54,000 to Mr W. $4,000 of this was said to be for interest owing. The balance of $2,000 is not accounted for but I imagine it went on brokerage fees and other incidentals.
Mr W gave evidence corroborating the husband's account, although he said that he had not pressed for the loan to be repaid.
At the time the loan from the Bank of Melbourne was advanced there was an order of this Court made on 2 September 2002 restraining the husband from further encumbering the home. The question of whether or not the husband knew there was such an order is one that I need not explore. The wife had also lodged a caveat on the title of the home. It appears that the Bank of Melbourne when confronted with these matters reached an agreement with the wife, the effect of which was that it would limit its mortgage to $104,000, the amount owing to Citibank at the time of the transaction.
The wife maintains that there never was a $50,000 loan to Mr W and says that this transaction was a sham designed to deprive her of a share of the parties' property.
In the end, the issue of whether or not there ever was a loan of $50,000 from Mr W to the husband comes down to whether or not I believe them as opposed to the wife. The wife maintains she knew nothing of this loan. The husband says that she did know of it. Moreover he said that the loan was advanced in cash and that he gave this cash to the wife. I interpolate here that Mr W's evidence was that the loan was advanced partly in cash and partly by cheque.
I do not propose to dilate on this issue of credit. Suffice to say that I accept the evidence of the wife and that I was not impressed with the testimony of either the husband or Mr W. I would not be prepared to accept the evidence of the husband or Mr W unless it were corroborated by some independent evidence. It was not. A written agreement was produced signed by Mr W and the husband dated December 1997. There is no way of independently verifying when that document was drawn up. Independent evidence should have been available. The agreement should have been stamped. This would have corroborated the husband's account of the loan. Indeed it would have put the issue beyond doubt. The agreement was not stamped. I found the evidence of the husband and Mr W lacking in credibility and I reject that evidence.
In summary, I find there never was a loan in 1997 and the transaction in 2002 was a sham designed to deprive the wife of her share of the parties' property.
I should add that even if I had been satisfied that there was a loan in 1997 it would not have made a great difference to the outcome of this case. I would not have been satisfied that the money so borrowed was ever used or applied for the benefit of the family. I would not have ordered its repayment prior to dividing the parties' property. I would have left the difference between the $104,000 secured by the deed of priority entered into between the Bank of Melbourne and the wife and the total debt to the bank as a debt for which the husband would be solely responsible. I would have then taken that factor into account when considering section 75(2) matters.
I will now proceed with the usual three-stage process under section 79. The first stage is to ascertain the pool of property, the second stage to consider the contributions of various types as set out in section 79 and the third stage involves a consideration of such matters in section 75(2) as may be relevant.
The parties agree that the former matrimonial home is valued at $177,000. The mortgage I fix, taking into account what I have previously said, at $104,000 and the equity therefore is $73,000.
Both the husband and wife have furniture. I am satisfied the husband retained the furniture acquired during the marriage. This furniture has not been valued. In his financial statement he gives its value as nil, although I should mention that in the loan application to the Bank of Melbourne in 2002 he gave the value of his household contents as $45,000. If I were to apply what is sometimes called the Elias principle I would hold the husband to this valuation. However, I do not propose to do this. Both parties have furniture. None of it has been valued. The wife, I am satisfied, bought hers from $2,000 taken by her at separation. In the circumstances I propose to ignore the parties' household contents.
The wife has a motor vehicle which she values at $6,000. The husband says he has no car, although again in his loan application in 2002 to the Bank of Melbourne he said he owned motor vehicles to the value of $26,000. Again, however, I do not propose to hold him to this value. However, there is a dispute as to a Mercedes motor vehicle which the parties had at separation. It is common ground that this was registered in the name of the wife. The wife says that prior to separation the husband had her sign a blank transfer form and says that she left the Mercedes with the husband at separation. The husband's version is that the wife took the vehicle on separation and later sold it. I found the wife's testimony in this respect unconvincing, but given the fact that I found the husband to be a witness totally lacking in credibility, with some reservations I accept the evidence of the wife. I propose to disregard the wife’s motor vehicle.
The wife has a small amount of superannuation. At separation this was in the order of $3,500 but she later was able to withdraw $1,500 from this. Her superannuation is to be treated as property pursuant to the amendments to the legislation that came in force at the end of 2002 but in reality it is not property in the usual sense. The wife will not be able to access it in the ordinary course of events until she is aged 55 and has left the workforce. Given its small size I propose to disregard this as well.
The wife has a Mastercard debt of $500 and the husband has a Visa Card debt of $8,300. The wife says that only a small proportion of the Visa card debt was incurred by her or was used for the benefit of the family. I accept this evidence. I shall return to the issue of the Visa Card later in this judgment.
I turn to contributions. It is common ground the wife was the primary parent during the marriage and I infer that she was also the person who performed most of the household tasks. I will not dilate on her evidence which leads me to this conclusion. In circumstances where a wife stays at home and performs the role of homemaker and parent and her husband is the breadwinner I would not usually ascribe a greater weight to the contributions of one as opposed to the contributions of the other. I shall discuss the issue of the husband's income during the marriage later in this judgment, but it will be seen from what I will say that I think it likely that the husband earned money during the marriage which he has not disclosed.
To some extent I find this income was used for the benefit of the family. For example, there were some home improvements which the husband says were paid for by the loan monies from Mr W but which I think more likely to have been funded by earnings. In the main, however, I believe the bulk of the husband's earnings were used for his own purposes. The wife says he was away from home most nights.

I accept that evidence. The wife maintains that he was a gambler and I accept that evidence. Nevertheless, again with some reservations, at the end of the day I am not satisfied that the wife's contributions as a homemaker or parent should be treated as having more significance than the husband's financial contributions which he did apply for the benefit of the family. I find that contributions during marriage were equal. As will be seen, this finding is rather theoretical.
As far as post-separation contributions are concerned, as I have indicated, since separation the children have lived with the mother. No child support has been paid by the father. It has been now almost two years since separation. Again the issue of post-separation contributions, as will be seen, is rather theoretical. If it were a matter of substance I would make a 7.5% adjustment in favour of the wife.
I turn to section 75(2) factors. There are two significant matters here. The first is the parties’ income earning capacities and the second is the responsibility the wife has for caring for the three children of the marriage.
So far as the wife's income earning capacity is concerned, she is not working at present and has not worked for some years. She is doing a course at Victoria University in information technology and she hopes to obtain some part-time work when she has completed that course. In view of her responsibilities to care for the children I accept that the decision to engage only in part-time work is appropriate. She struck me as a capable person. I think it is likely that she could if she wished obtain employment.
The husband says he is unable to engage in any significant paid employment. He says that in 1986 when he was resident in Lebanon he was shot in the knee. He says that this restricts his movement. He has experience as a vehicle spray painter and a panel beater, but he says that his knee injury severely impacts on his capacity to perform these tasks. It should be noted that no medical reports were put into evidence. I have only the husband's word to go on as to the extent of any disability he suffers. It is common ground that the husband was in receipt of social security payments during the marriage, but it is also common ground that he worked as a spray painter and panel beater from his home during the marriage.
The husband's evidence to the court was that he earned very little from this backyard business, if I may call it that. He said that he might work on perhaps one vehicle a month. I am not prepared to accept his evidence in this respect however. In tax returns and other documents drawn up for the purpose of evidencing his income to enable him to borrow he has painted a different picture. For example in his loan application made to the Bank of Melbourne in 2002 he stated that his taxable income for the year ended 30 June 2002 was $54,586. He said in evidence that this was a lie. He attempted to deflect the blame for this. He said that the wife had, in effect, taught him to make misleading statements to lending institutions and he also, as I understood it, blamed the finance broker he engaged to secure the loan. I do not accept his evidence insofar as it implicates the wife. In the end result however nothing hangs on issues of blame.
I accept the husband's evidence that the figures that he gave to the bank were false. However, in the end, I am left with a considerable degree of uncertainty as to the extent of his income earning capacity. In particular I have considerable doubt as to whether the income he earns from his business is as minimal as he states. If he were able to continue his business operating from home I am satisfied that, irrespective of what he earned, he would not declare that income and would not be assessed as liable to pay child support.
I am conscious of the fact that, as a result of the orders that I propose to make, the former matrimonial home will be sold and that, as a result, there will, for the time being at least, be no home that the husband will have access to to carry on a backyard business. That will, in the short term at least, impact on his capacity to run such a business. I take that into account but nevertheless he may be able to realise any income earning capacity in another way. In the result I am not prepared to accept that he has a minimal income earning capacity and to take that into account in his favour under section 75(2). I do not propose to make any adjustment by reason of any disparity in the income earning capacities of the parties.
I turn now to the care of the children. As I have indicated, the wife has the responsibility of caring for these children. The youngest is five, going on six. It will be some 12 years before that child turns 18. There is a small pool of $73,000. The wife of course will be responsible for the children for many years. To date she has received no child support and, to put it at its lowest, I am not confident that she will ever receive any child support in the future.
The wife's application is that the former matrimonial home be sold and from the proceeds of sale I order that, firstly, the costs of sale be paid, secondly, that the Bank of Melbourne be paid $104,000 and thirdly, that she receive 85% of the remaining proceeds. The balance of the proceeds would go to the husband and he would be responsible for his Visa card debt. In theory, in my opinion, this is a proper result. The section 75(2) factors in favour of the wife are overwhelming. As cases such as Clausen (1995) FLC 92-595 remind me, a division is not just a matter of percentages. The real dollar value must be looked at. In this case even giving the wife the whole of the property would not adequately compensate her for the financial and non-financial burdens she will bear in caring for the children in the future.
However, if I were to do this the reality is the husband would be left with nothing. I have been very critical of the husband in relation to his conduct. However, it is not my role to punish wrongdoers. I do not consider it just to deprive him of any share of the former matrimonial home to which he has made not insignificant contributions.
I propose to make an order that will give the wife 85% of the proceeds of the sale of the home but I also propose to order that the Visa Card be paid from the proceeds of sale. When I delivered my extempore judgment I indicated that I would make an order that simply provided for the payment of the Visa debt from the proceeds of sale prior to their being distributed between the parties. On reflection I believe that this would be unjust to the wife. It would have the effect of her paying 85% of that debt. Given that I accept that she obtained only limited advantages from the expenditure on the Visa Card this would not be appropriate. The way my orders were ultimately framed they have the result of the parties sharing equally in the payment of this debt. The wife’s Mastercard debt is minimal by comparison and I propose to ignore it.

The husband's counsel asked that the orders I make give him the opportunity to buy out the wife and retain the former matrimonial home. I do not propose to do this. The only way that the husband could conceivably buy out the wife given the orders that I propose to make would be again to make false representations to a lending institution and I do not propose to be, in effect, a party to this.
I add a postscript. It is obvious that the husband has either fraudulently represented to the Bank of Melbourne that he earns a significant income and thereby obtained a financial advantage by deception or has made false statements in his affidavits and financial statement. He says the lies were to the Bank, not to this court. In either case I believe the court should not ignore this. On his own evidence he has committed a criminal offence. This is not an academic exercise. I think it likely that the Bank of Melbourne will suffer loss as a result of the husband's conduct. I propose to request the Registrar of the Court to forward a copy of this judgment to the appropriate authorities and, pursuant to Rule 2.08 of the rules of this court I propose to give leave to the Victoria Police to inspect the records of this court. If requested by the police I direct that a transcript of the evidence in the case be made available to them.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Brewster FM

Associate:

Date: