Townsend and Seger
[2012] FMCAfam 336
•20 April 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TOWNSEND & SEGER | [2012] FMCAfam 336 |
| FAMILY LAW – Ten year marriage – five children – property dispute – husband alleging significant business difficulties – husband’s assertions unconvincing – small pool – tax debt in husband’s name alone – whether debt should be part of the pool – consideration of just and equitable outcome. |
| Family Law Act 1975, s.60I |
| In the marriage of Kowaliw (1981) FLC 91-092 |
| Applicant: | MS TOWNSEND |
| Respondent: | MR SEGER |
| File Number: | MLC 3723 of 2011 |
| Judgment of: | Burchardt FM |
| Hearing date: | 22 March 2012 |
| Date of Last Submission: | 22 March 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 20 April 2012 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Ms M. Mandelert |
| Solicitors for the Respondent: | Barbayannis Lawyers |
IT IS NOTED that publication of this judgment under the pseudonym Townsend & Seger is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 3723 of 2011
| MS TOWNSEND |
Applicant
And
| MR SEGER |
Respondent
REASONS FOR JUDGMENT
Introductory
This is a property dispute in which the biggest issues (which are interrelated) are, first, whether, as the applicant wife seeks, the former matrimonial home should vest solely in her possession or, as the husband seeks, be sold. The other major issue is what should happen to a capital gains tax liability of approximately $60,000 which presently stands in the husband’s name alone. He seeks that that be discharged out of the proceeds of the sale of the matrimonial home and the wife says he should pay all of it. The wife also seeks $500 per week spousal maintenance.
For the reasons that follow, I am going to make orders that will pay the husband $60,000 but the wife will otherwise retain almost all the assets of the parties. The claim for spousal maintenance will not be granted because despite my reservations about the husband and his financial position I am unable to find that he can pay it.
The parties and their history
The wife was born [in] 1974 and is, therefore, 37 years old. The husband was born [in] 1976 and is 35 years old. The parties did not cohabit before they married [in] 2000 and it seems clear that they separated under the same roof in 2010.
The parties have five children, [name omitted] born [in] 2000, [name omitted] born [in] 2002, [name omitted] born [in] 2002, [name omitted] born [in] 2005 and [name omitted] born [in] 2007.
Pursuant to consent orders ultimately reached between the parties, the children live with their mother and spend time with their father from Friday to Monday in one week and for various of amounts of time in the alternative week but essentially one night.
There is little said about the parties’ antecedents in the materials but it seems clear that while they were both born overseas, they now both live in Melbourne and have extended family here. At the commencement of the relationship, the husband owned three properties; in [suburbs omitted]. Given that they were all sold quite some years ago, there is no direct evidence of their value at the time but the husband has sworn (paragraph 25 of his affidavit filed on 23 May 2011) that their net unencumbered value was between $110,000 and $120,000. He also swore to having a new vehicle and about $40,000 in savings.
While the wife was not prepared to accept these valuations, the husband was not moved from them and although I am unable in the circumstances to establish any precise values, it is clear that there was a reasonably appreciable amount of equity in the properties. It is also clear that the wife came into the relationship with no assets of any value.
The parties purchased a home in [suburb omitted] in about 2001 and sold it in 2006 when they moved to rental accommodation in [suburb omitted]. In 2007, the parties purchased an investment property in [O] which was placed in the sole name of the husband for tax reasons. It was sold in 2009 generating a net profit of about $180,000 (see paragraph 30 of the husband’s affidavit filed 23 May 2011).
What happened to that money is far from clear.
In 2009, the parties bought the former matrimonial home in [omitted] shortly before the sale of the investment property in [O]. It was placed in the sole name of the wife but the mortgage in respect of the property was in joint names.
The property appears to have been bought for $367,000 (see wife’s trial affidavit, paragraph 63) and it appears to have been wholly financed by borrowings, save that the [O] property was used as security.
The husband asserts, and the wife denies, that the wife was always aware that she was jointly liable for the mortgage. Both of these parties are highly intelligent (they both have Masters Degrees) but it was the wife’s position that all financial matters were left to the husband during the currency of the relationship. I will deal with the question of the credit of the witnesses later but would say at this stage that I accept that the husband controlled the finances of the parties during the relationship almost completely, however, I do not accept (to the extent that it is of any significance) that the wife was unaware that she had signed the mortgage documentation. She is simply too intelligent not to have some idea of what she was doing.
Husband’s businesses
The wife has essentially ceased work since the marriage to look after the children and, given their number and the regular dates of their arrivals, this is scarcely surprising. The husband says that he was far more involved as a father than many would be, but it is quite clear that the wife was the homemaker and looked after the children while he earned the money.
The husband has had a number of business initiatives which operate under the umbrella of his business [R] Pty Ltd (see husband’s affidavit sworn 2 February 2012, paragraph 96). The husband has operated for many years an [omitted] business, the two major clients of which are [omitted]. Quite what has happened to them of more recent times remains unclear.
The husband has also had a number of other initiatives and is clearly a man of considerable energy and determination. He says that his “[C]” business is essentially defunct and although I have my doubts about this I am not in a position to reject the husband’s sworn evidence to this effect.
He also has a business which involves [omitted].
The husband was not cross-examined as to the methodology of these figures but from the schedule it would seem that the outgoings were essentially rental to the landlords paid by the husband.
The husband’s evidence was that the downturn had occurred as a result of [omitted] in Australia. I will return to this assertion in due course. It should be noted, however, that the husband would seem to me, even on figures involving seven ninths of those in Exhibit A4, to still have a not insignificant income from this source. The wife asserted that the husband had received income in excess of $100,000 during the relationship but the husband denied that his income had ever been so high.
If one extrapolates from the figures in Exhibit A4 at a point where the husband had [omitted], income of over $100,000 is highly likely.
The course of separation and interrelated financial events
The wife’s first affidavit asserts that the parties separated under one roof on 18 March 2010.
The husband’s responding affidavit, filed on 23 May 2011, says that they separated on 14 April 2011. Whatever the relationship was like between the parties in the year between April 2010 and April 2011, it is clear from the husband’s own account (paragraph 12 of his 23 May 2011 affidavit) that the wife moved out of the family home on 5 March 2011. That departure was not wholly unheralded because on 6 April 2011 (Exhibit RT-1 to the wife’s affidavit filed on 4 May 2011), it is apparent that Ms F, family dispute resolution practitioner, signed a certificate pursuant to s.60I of the Family Law Act 1975 (“the Act”) noting that 30 March 2011 was the last attempted attendance at family dispute resolution (it would appear neither party attended). On 12 April 2011, the wife obtained an interim intervention order (subsequently extended for a year) and on 14 April 2011, the husband vacated the home. The wife and children moved back in and they are still there.
On 8 March 2011, the husband made a withdrawal of $98,000 from the re-draw facility of the mortgage account. Prior to the redraw, the balance of the mortgage was $201,000. It therefore rose to $299,000.
In fact, in whatever way, the mortgage had been very substantially reduced following the initial purchase for $370,000, all borrowed. Exhibit A8 shows that on 1 January 2010 the mortgage was as low as $129,000. By July 2010 it was up to $178,000 and by 1 January 2011 it had gone up to $197,000. The increases up to that time appear to have been (in the main) incremental, and support the husband’s contention that his businesses were not performing well.
Nonetheless, as at 14 January 2010, the redraw facility was $182,000 but following withdrawal of the $98,000 to which I have referred, by 20 April 2011 the mortgage had a drawdown credit of only $582. It is clear that the husband cleaned the account out.
What did the husband do with $98,000?
According to paragraphs 31-39 of his affidavit filed on 23 May 2011, the moneys obtained from the $98,000 drawdown were applied as follows:
·Loan to Mr & Mrs K - $24,000;
·Loan to Mr P - $2,000;
·Solicitor’s fees (in total) - $10,800;
·Rental expenses in relation to [omitted business] and associated costs - $12,736;
·Deposit into husband’s superannuation - $20,000;
·Repayments of mortgage on the family home - $3,736;
·Repayment of company income tax - $18,304.
The $24,000 loan, which appears one of a number of such loans made by the husband from time-to-time, has been repaid and of the $31,000 thereby generated, $26,000 has been given to the wife’s solicitors. The husband says that a further $5,000 was applied to the mortgage on the matrimonial home. It should be noted that the husband appears to be a usurer as the interest charged to Mr and Mrs K was 4 per cent per month with default interest of 6.2 per cent.
It is also worthy of note that the $20,000 round figure paid into superannuation is curiously precise. The husband’s affidavit describes this as mandatory, and it may well be mandatory in the sense that if he was employed by his company, the company was obliged to pay money into his superannuation. Nonetheless, there is no information before the Court to indicate as to when this liability had accrued, nor why it was so imperative to repay it at precisely this time.
Additionally, the husband repaid to his company, in about June 2011, the sum of $57,839 to repay an alleged loan from his company to him. Given that he was the sole director and shareholder of the company, this elimination of what was only a book debt, likewise, is somewhat startling.
The husband, likewise, asserts that to the extent that the drawdown facility on the mortgage was eventually taken up again between 2010 and 2011, this was as a result of lifestyle costs. It is wholly impossible from the available records to work out the degree to which this was the case, although I note that the husband was in the habit of transferring large sums of money between his various accounts from time-to-time for reasons that have remained wholly unclear.
The credit of the witnesses
The wife represented herself and impressed me as a person under considerable strain. She said over and again that she was conducting the case for the benefit of her children and implored the Court to enable the children to retain their home. She roundly denied the proposition that she could quite readily move in with her own mother who, it appears, has a four bedroom home and lives alone.
The mother struck me as being a person prone to high emotion (even making allowance for the stress of the proceeding and being self-represented) and prone to exaggeration and overstatement. Nonetheless, she did not strike me as being deliberately dishonest, even though I found some of her answers, such as her assertion that $450 a week was an appropriate amount of money to spend on food alone for her and the five children (bearing in mind that they are all fairly young) to be very unpersuasive.
The husband, on the other hand, formed a far more negative impression. His answers were self-serving and, on occasion, involved attempts to offer information and comment that had not even been asked for.
One has to approach the issue of demeanour with some caution, particularly in circumstances where a party is only being cross-examined by a former spouse with whom relations are poor. It is to be expected that the husband might be exasperated by the direct interaction with his wife, at least to an extent.
Nonetheless, I formed the clear picture that the husband was altogether a smart alec. His demeanour was smug. His answers about where money had gone were evasive and unbelievable. They seemed to me to be inconsistent with the objectively ascertainable facts.
The reality is that the mortgage had gone from approximately $370,000 down to $119,000 between 2009 and the beginning of 2010. Most of the money from the sale of the [O] property must have gone into that reduction but even so, it shows a significant income stream on the husband’s part to be able to achieve reductions of this order, bearing in mind the costs of running a household (albeit that he only gave the relatively parsimonious sum of $220 a week to the wife to do so).
It seems clear to me that the marriage was under strain from 2010 onwards and while some measure of increase in the mortgage may reflect business adversity on the husband’s part, there is no doubt in my mind that the withdrawal of the $98,000 which took place almost immediately after the wife moved out of the matrimonial home was a deliberate act on the husband’s part to advantage himself and disadvantage the wife.
The net result is that the wife’s position is wholly parlous. She can scarcely pay her bills as they come in from time-to-time and the husband’s declared income is so low that he has virtually no child support to pay.
The pool
The pool can be dealt with shortly. It consists of:
Matrimonial home value $450,000, mortgage $299,000;
Wife’s car (leased by the husband’s company) $31,000 value, lease payout $19,000;
Husband’s car negatively financed;
Husband’s superannuation $23,000;
Husband’s capital gains tax debt approximately $60,000;
(the figure seems to be slightly higher but I will fix it at this level).
Husband’s outstanding fine $27,000 (figures of between $26,000 and $28,000 are asserted in the affidavits and oral evidence).
It should be noted that the last of the above matters is a fine incurred by the husband for some form of misconduct in running his [omitted] business and it is accepted by his counsel that he alone should have responsibility for it.
It should further be noted that I have disregarded the loan to Mr D as it seems excessively unlikely that it will be repaid.
Contribution
As earlier indicated, in the ordinary way of things, the parties’ contributions to their financial circumstances would be reasonably assessed as being equal. The husband worked and provided the money and the wife looked after the children in the home.
Nonetheless, in a very real sense, the husband’s conduct since separation has radically altered the parties’ financial position. It is his case that all his businesses have fallen on hard times but I do not believe him. I think he has a far greater income than he has revealed, both in the [omitted] business where it is clear he has an income, and in the [omitted] work which he has either deliberately run down or concealed. I have no doubt the husband has deliberately paid money into his superannuation and into his company by repaying the loan in June 2011 (a figure markedly similar to that which he owes the Tax Department) with a view to disadvantaging the wife. What should be done about this is a matter to be considered, in my view, under the question of just and equitable.
Future needs
The wife has kept her training up to date and will be able to obtain, it would appear, some small amount of part-time work within the foreseeable future, advancing to greater work when all the children are finally at school. Nonetheless, her income will always be limited to that of [occupation omitted], at best. It may well be that such income she is able to make from full-time work will be diminished by childcare costs because if she works full-time, she will likely be required to have childcare after school to enable her to collect the children.
The husband’s earning capacity is, in my view, substantial. As I have indicated, I think he has fabricated the current situation where his finances are in poor condition. I would not be in the slightest bit surprised if he has squirreled money away from the funds that he has drawn-down on the mortgage account and simply not revealed them to the Court.
I have not in this judgment thus far dealt in any detail with the husband’s failure to comply with orders for discovery and the like. The file is replete with endeavours by the wife to get documents from him and while some of the husband’s defences are reasonable enough (a lot of the documentation he was asked to provide is now so ancient that it is in no way surprising he does not have it), the clear picture I get is that he has failed to comply with his obligations to discover.
The health of each of the parties is unremarkable and they are of roughly the same age. The husband has a substantial period of full-time employment available to him.
The mother will, in any event, be primarily responsible for the upbringing and upkeep of the five children and I note that, at least at the present time, the husband has produced a set of circumstances where his child support obligations are trivial.
Just and equitable
This brings us to the nub of the problem. It is clear that the wife’s car should be sold and the proceeds given to her. She says she needs a large car to transport the children and I accept that that is so, but the fact is the husband will not continue to pay the lease on the car and it will be repossessed and, if so, sold as a fire sale. Far better it be sold now and the wife be given the proceeds as the husband suggests. The husband will keep his own car (or cars, it is not entirely clear), but they are of no positive value even though I have little doubt he will be able to continue to afford his lease payments.
The chattels, as are agreed, will all stay with the wife and while the wife thus notionally gets an asset worth money, in practical terms there is no resale value in these items.
The real question then becomes whether the Court should order the payment of the husband’s tax debt out of the sale of the matrimonial home or simply order that the wife retain the home solely. No other positions were propounded by the parties and, in the circumstances of this case, I accept that that is a sensible way of looking at it.
Ordinarily, debts of the parties stand to the joint credit or discredit of the parties. Nonetheless, as long ago as In the marriage of Kowaliw (1981) FLC 91-092, Baker J made the point that liability should be shared between the parties (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 the 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.
Here, I have no doubt that the former of these two situations obtains. The husband has produced an outcome, ironically enough very much against his own interest, where there is a substantial debt which he wants to have taken into account jointly even though it is in his name alone.
I should make it clear that I have the greatest sympathy for the wife. I have no doubt that the husband has engineered a situation where he is deemed to have very little income even though I suspect he has much more than he owns up to and certainly has the capacity to make far more money than he is. I likewise accept that he has deliberately dissipated funds, for example into his own superannuation fund, out of the moneys he wantonly withdrew in March 2011. I was initially strongly attracted to the proposition that the husband should simply be left with his tax debt and that the house should stay with the wife.
Nonetheless, that is not an outcome that can properly be said to reflect justice and equity in the circumstances of this case. This is a relationship that endured for quite a number of years during which the husband provided all or almost all of the income. More importantly, he went into the relationship with assets worth well over $100,000 and the wife had nothing. Although it would appear that the ultimate outcome in terms of the parties’ finances has been remarkably unsuccessful (bearing in mind that we are now talking about a net equity in the property of only $150,000 ten years after the parties had sums of about that exact same amount), the fact is that what they do have has plainly sprung originally from the husband’s capital investment.
An outcome that gave the husband no positive asset whatsoever in circumstances where the major and only capital contribution has come from him after a period of some ten years or more of marriage, leaving him with $87,000 or so of debt, could not be said to be just and equitable.
In the circumstances, it seems to me that the $60,000 tax debt must be paid out one way of the other. The fact that the debt was incurred did not emerge out of some frolic on the husband’s part, but rather it was the consequence of a commercial investment that was profitable for the parties. The fact that the husband has dealt inappropriately and spitefully with the assets of the parties does not gainsay the fact that in the ordinary way of things a debt of this sort would plainly fall to be considered as a responsibility of the parties jointly.
If there was more money available to divide I would be minded to give the wife more money but I think an outcome that gives the husband only debt simply cannot be sustained.
The course of action urged by the husband will leave the wife with about $90,000 and the husband with a debt of about $27,000 with the wife obtaining the proceeds of the sale of her car.
In my view, given that $20,000 of the $23,000 in the husband’s superannuation appears to be entirely related to the $20,000 he so wantonly withdrew from the drawback facility on the matrimonial home, it is appropriate that the $20,000 be apportioned wholly to the wife. Her future needs and relative income capacity make this entirely appropriate.
Thus the outcome of the proceeding, which turns on its own very particular and unusual facts, will be that the wife retains the chattels of the house, the net proceeds of the sale of her car, some $20,000 in superannuation, and the proceeds of the matrimonial home. The husband will achieve the payment of the tax debt that presently stands in his own name and will end up with a debt of $27,000.
Given the husband’s conduct as I described it, what would otherwise be thought a much skewed outcome in the wife’s favour is, in my view, in the context of what I emphasise again are very unusual and particular facts, entirely appropriate.
Should the wife desire to retain the matrimonial home I will give her 60 days to refinance the mortgage and raise the $60,000 to pay the tax debt.
Should she fail to do so, the house will have to be sold and the proceeds thereof, following the usual deductions and the $60,000, will be payable to the wife.
I direct counsel for the husband to draw up minutes of orders to give effect to these conclusions.
I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 20 April 2012
0
0
1