Valadez and Valadez
[2008] FMCAfam 121
•17 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VALADEZ & VALADEZ | [2008] FMCAfam 121 |
| FAMILY LAW – Property – waste – non-disclosure – nature of conduct associated with non-disclosure – add-backs – contribution – future needs. |
| Family Law Act 1975, ss.75, 79 |
| Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Kowaliw & Kowaliw (1981) FLC Norbis & Norbis (1986) 161 CLR 513 Weir (1993) FLC 92-338 |
| Applicant: | MS VALADEZ |
| Respondent: | MR VALADEZ |
| File number: | PAM 5277 of 2006 |
| Judgment of: | Altobelli FM |
| Hearing date: | 5-6 December 2007 |
| Date of last submission: | 6 December 2007 |
| Delivered at: | Sydney |
| Delivered on: | 17 February 2008 |
REPRESENTATION
| Solicitor Advocate for the Applicant: | Mr Brown |
| Solicitors for the Applicant: | Browns the Family Lawyers |
| Solicitors for the Respondent: | Self Represented |
ORDERS
The children JMLSDlive with the mother.
Each party have the sole responsibility for making decisions about the day to day care, welfare and development of the said children for each of the periods in which the children live with or spend time with that party respectively pursuant to these orders.
The parties have equal shared parental responsibility for the children.
The father spend time with the said children as follows:-
(a)During school term, one week night (and if there is no agreement every Wednesday) per week from 5.00 pm to 8.00 pm;
(b)Every alternate weekend commencing from 5.30pm Friday until 6.00pm Sunday, with such period to be suspended during school holiday periods;
(c)From 9.00am to 5.30pm on Australia Day, Good Friday, Easter Monday, the Queen’s birthday, ANZAC day and labour day in 2008 and each alternate year thereafter;
(d)For one half of all school holidays in every year provided that if the husband is not available to be primary care giver of the children whist they are in his care, he shall place them in the same vacation care provider as that which the wife has placed the children for vacation care. Where the parties cannot agree on which half of such holidays such period should take place, such period shall occur in the first half of such holiday in every year ending in an even number and for the second half of such holiday in every year ending in an odd number. Zero is deemed to be an even number.
(e)Unless otherwise as agreed between the parties, such period of spending time with the children pursuant to this paragraph:-
(i)Shall commence at 9.00am on the first day of such period.
(ii)Shall conclude at 5.00pm on the last day of such period.
(iii)Will be calculated from the day after the last day of school until and including the day immediately before school resumes.
(iv)Pupil free days are deemed to be part of school holidays.
(v)After the school holidays end, the periods upon which the father spends time with the said children outside of school holiday periods shall resume on the first weekend after school has resumed if the parent with whom the children do not live has exercised contact during the first half of the holidays AND on the second weekend if the parent with whom the children do not live has exercised contact during the second half of the holidays.
(vi)Where the number of days in the school holidays is an odd number then the number of days deemed to form the holiday period shall be rounded down to the nearest even number.
(vii)Where Mother’s Day falls on a period in which the father spends time with the children pursuant to these orders, such period shall terminate at 9.00am on that weekend.
(viii)Where Father’s Days falls on a period in which the father would not usually spend time with the children pursuant to these orders, the father shall spend time with the children from 9.00am to 6.00pm Father’s Day in every year.
(ix)At such other times as the parties mutually agree.
Property Orders
Within 28 days of the date of these Orders the husband do all things necessary to transfer to the wife all his right title and interest in the former matrimonial home known as Property W in the State of New South Wales (“the property”).
Within 28 days of the date of these orders the wife shall do all things necessary to refinance the mortgage secured over the property to the Community First Credit Union.
The parties do all acts and things and sign all documents necessary to obtain the repayment to them of monies in a sum of approximately $160,000.00 (together with any interest due thereon) lent through Lxxx and cause such monies to be applied to the reduction of the mortgage on the former matrimonial home to Community First Credit Union (or, if the said debt be re-financed by the wife in accordance with these Orders then to the wife, but only in the sum that would have been payable in accordance with these Orders). Any amount recovered beyond $160,000 is to be split as between the wife and the husband in the ratio 75:25.
The husband be declared the sole owner of his interest or the interest of any company in which he has a controlling interest in a Mitsubishi Pajero motor vehicle and be solely responsible for any liability in relation to the said vehicle.
The wife be declared the sole owned of the Toyota Tarago Motor car in her possession and be solely responsible for any liability in relation to the said vehicle.
Order 10(a) take effect from the operative time.
(a)That, pursuant to paragraph 90MT (1)(a) Family Law Act 1975 whenever a splittable payment becomes payable in respect of the Husband’s interest in the First State Super Fund – fund the Wife shall be entitled to be paid a base amount of $136,000 calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, and that there be a corresponding reduction in the entitlements the husband would have had in the First State Super Fund but for this order.
(b)That, having been accorded procedural fairness, these orders bind the trustee to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
(c)The operative time for these orders is 7 days from the service of these orders upon the trustee.
The husband indemnify the wife and keep her indemnified in relation to the credit card debts of the husband and the joint credit card debts of the husband and wife including but not limited to:-
(a)Virgin Visa Credit Card.
(b)Monies owing in relation to overdrawn Westpac Classic Plus.
(c)Westpac Visa Card.
Within 28 days of the making of these Orders, the husband cause the outstanding debt owing by the parties to T School to be paid and shall indemnify and keep the wife indemnified in relation to that liability.
In the event that either party refuses or neglects to execute any deed or instrument required to give effect to these Orders, the Registrar of the Court or their appointee pursuant to Section 106A of the Family Law Act may execute such deed or instrument in the name of such party and do all acts and things necessary to give validity to the operation of such deed or instrument.
In relation to Exxx Pty Ltd (“the company”) the husband shall indemnify the wife in relation to any liability of or in relation to the company, including any loan account in the name of the wife.
Except as otherwise specified in these Orders, each party be declared the sole owner in law and equity of all items of property and financial resources presently in their respective names, possession or control and that this term shall be taken include all superannuation entitlements and life insurance policies presently in their respective name.
The parties have leave to re-list as regards the interpretation, implementation or enforcement of these Orders including any order for the sale of the family home.
IT IS NOTED that publication of this judgment under the pseudonym Valadez & Valadez is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 5277 of 2006
| MS VALADEZ |
Applicant
And
| MR VALADEZ |
Respondent
REASONS FOR JUDGMENT
Introduction
This case deals with limited parenting issues, and quite complex property issues. The latter involves determining questions of fact and law relating to add-backs, and the apportionment of liabilities. There is a strong undercurrent of non-disclosure and waste undertaken by the husband, especially in the later years of the marriage and after separation. The husband represented himself in the proceedings, and the orders he sought and submissions made reflected the absence of legal advice. In the context of financial applications in this Court, the philosophy of this Court is that all litigants must come to the metaphorical table and put down all their cards face up. That obligation extends to all litigants ‑ rich or poor, represented or unrepresented, malicious or merely ignorant. It is the cornerstone on which justice and equity is constructed.
Background
The wife is the applicant in this case. She was born in 1968 and is 39 years old. She works in the field of Social Work part‑time. The respondent is the husband, born in 1965, currently 42 years old. He works in the field of Engineering. The husband's salary is $2,212 per week, and the wife's is $535 per week. She also receives family assistance by way of a single parent pension, as well as child support from the husband. In addition to his salary, the husband earns income from a business which he calls Oxxx Pty Ltd. The parties married in 1991 and separated, finally, in 2006. They thus cohabited for a period of approximately 15 years. There are five childrenJMLSD of the relationship.
Just a few months before marriage the husband became employed by the NSW Government, where he has worked continuously since then. He supplemented his income, during the early years of the marriage, by undertaking tutoring work. Before the birth of the children, the wife was employed on a full‑time basis, switching to part‑time after the children were born. In a general sense, they both worked industriously in the roles that they had chosen for themselves in the marriage. There is no doubt that the husband was the main breadwinner in the family. The wife was working part‑time, as well as raising the children. They had purchased a home together shortly before marrying for $142,000, and then sold that in 1999 for $240,000. They purchased Property G and thereafter built a new house on it. The husband clearly had an entrepreneurial streak to him. By early 2000 he had established a company, Exxx Pty Ltd which operated some businesses including a consultancy business for the husband himself, and a business known as Oxxx Pty Ltd. In 2001 land was bought at Property A for development purposes, and sold at a profit. In 2002 land was purchased in Property W, subdivided, with one block again being sold at a profit. The parties improved their home at Property G. A Pajero motor vehicle was acquired by Exxx Pty Ltd. By 2005 the husband had found some property in Western Australia and placed a deposit on it. The purchase did not go through and, it appears, the deposit may well have been forfeited. In 2006, before separation, the husband established a partnership with Mr H called Fxxx Pty Ltd.
The parties’ first separation was between March and June 2006 when he firstly left the former matrimonial home, but then returned on a number of occasions. Final separation was on 16 June 2006. Not withstanding their final separation the parties decided to invest $160,000 in Lxxx, which seems to be the trading entity of a finance company known as Yxxx Pty Ltd. Whilst the parties both agreed to make this investment, it seems as if the husband forged the wife's signature on the relevant documents. This will be discussed below. This investment was a high‑risk/high‑return investment and almost immediately proved to be highly problematic. Right up until shortly before the hearing of this matter in December 2007 efforts were made to recover payments of interest and or principal from the Lxxx investment and some money was recovered which was used to reduce the mortgage on the properties owned by the parties. After separation the Pajero driven by the husband was repossessed but he managed to re-acquire it at a later time. In April 2007 the former matrimonial home at Property G was sold and the wife and the children moved to Property W where they still reside. Since separation, partly but not exclusively because of the failure of the Lxxx investment, the family has been under considerable financial duress. The children were taken out of T School because the parents could no longer afford to pay the fees. In July 2007 the wife obtained employment at a local hospital, working two eight‑hour shifts a week.
Property Issues
Apart from the parenting issues that I will deal with first, which are relatively confined, the other issues relate to property. Once the pool of assets available to the husband and the wife, or either of them, is established the main issues are contribution, future needs, and how to frame an order that does justice and equity under the circumstances. Establishing the pool of assets is, however, quite problematic and involves making findings on a number of issues. The issues may then be conveniently expressed as a series of questions, as follows:‑
(i)Was there non-disclosure by the husband?
(ii)What is the true value of the former matrimonial home at Property W?
(iii)What is the value of the husband's interest in Exxx Pty Ltd?
(iv)What is the value of the parties' investment in the Yxxx Pty Ltd investment?
(v)What is the value of the parties' furniture?
(vi)Should the proceeds of the Volvo sold by the husband be added back to the pool of assets?
(vii)Should the money withdrawn by the husband from his credit union accounts at the time of separation be added back to the pool of assets?
(viii)Should the money that the husband used to pay a deposit on the purchase of land in Western Australia be added back to the property pool?
(ix)How should the husband's personal liabilities arising out of his Virgin Visa credit card, Westpac Visa credit card and Westpac Classic Plus account be dealt with?
(x)Is the wife indebted to Exxx Pty Ltd, and if so how should that liability be treated?
(xi)How should the diverse contributions of both the husband and the wife be assessed, for the purposes of s.79(4) of the Family Law Act?
(xii)How should the s.75(2) factors operating in favour of the wife in this case be quantified?
(xiii)What is the just and equitable order to make in this case, also taking into account the existence of both superannuation and non‑superannuation assets?
Parenting Issues
A comparison of the parenting orders sought by both parents indicates that, in essence, this issue is about how much time the father is able to spend with the children during school holidays. In effect, the husband only wants to have the children during school holidays up to three weeks each year, whereas the wife wants the children to spend time with the father for up to half of their school holidays. This has important implications both for the children, and the parents, especially the wife, whose evidence I accept is that she works part‑time, out of necessity, in order to care for the children. The husband's evidence about this issue is he did not want to have the children for more than three weeks. He only receives four weeks' leave and he needs to have his own recreational time. Indeed, he would prefer to have an order that enables him to have the children for periods not exceeding five days in duration. He agreed in evidence, however, that he could take leave without pay. He also agreed that if the wife had the sole responsibility for caring full‑time for the children during school holidays, it would make it very difficult for her to hold down full‑time employment. He agreed with the principle of shared care for the children. He agreed in cross‑examination that he could make alternate arrangements to care for his children when he is at work. Not withstanding all of these admissions, his evidence continued to be that he would still only prefer an order for four weeks of the children's school holiday time, preferably over the summer period.
It is common ground between the parents, however, that the children spend each alternate weekend with their father, and time during the alternating week. There seems to be no issue that the children have a good relationship with their father. He did not come across to me as a disinterested father, but rather one who was preoccupied with the practical difficulties that he would have to face if he were to care for the children during school holiday periods. He agreed, however, that he could make alternate arrangements for their care and this would mean that the children would have the benefit of time with him before and after work, as well as weekends.
I believe it is in the best interests of the children that they spend as much time as possible with each parent during their school holidays. School holidays provide a range of opportunities for parents and children to interact that is not available on weekends. I am satisfied that the husband can make alternate arrangements which are suited to the needs of the children and that he will in fact do so. I understand that there is the risk that I am making orders that he will say, at some future time, that he cannot abide by in the sense that he will not be able to take up the time available to him. The choice is his. For the sake of his children, I trust he chooses to spend as much time with them as possible.
I note that the father expressed the desire to travel interstate with the children but also expressed concern that it would be impractical to take all of them at the same time. The mother indicated through her solicitor that she had no difficulties with this, provided that he made up by way of additional time for any of the children who missed out.
I simply note these matters and trust that the parents will be able to act in their best interests to resolve these issues, should they arise.
Applicable law
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole.
My discretion in this regard should be exercised having regard to the facts of this case.
The wife raised what is, in effect, a waste argument. A succinct statement of the law in this regard is the statement by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76 644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
A significant issue in this matter was the alleged non-disclosure on the part of the husband. Attempting to deal with non-disclosure often puts the other spouse, in this case the wife, to considerable difficulty with regards to investigating their financial affairs. The Full Court in Weir (1993) FLC 92-338 at 79,593–4 made the following statement regarding the duty to disclose and the Court’s powers where non-disclosure has been found:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC 91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature…
We appreciate that this is something of a broad brush approach, but, as we have said, where there is clear evidence of non-disclosure as there was here, the Court should not be unduly cautious about making findings in favour of the other party. It has been said by one commentator (O'Ryan and Broadfoot, 5th National Family Law Conference Handbook, p 249) the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors.
Was there non-disclosure on the part of the husband?
As I indicated in the introduction to these reasons, there is a strong undercurrent of non-disclosure by the husband, especially in the later years of the marriage and after separation. I expand on these comments in this section because I think it is important to establish the foundation for these concerns. However, the comments I make here need to be considered in the light of the evidence I set out below, and the findings I make, about the various other issues that I need to decide.
Non-disclosure is often described as the failure to produce, in a timely manner, documents or other information that is relevant or might reasonably be relevant for the determination of issues before the Court. It is possible that that description, in fact, over-simplifies what is involved in non-disclosure. Non-disclosure might include behaviour during or after a relationship that is characterised by secretive, misleading or deceptive conduct, both in the form of acts and omission. That conduct must be intended to, or might reasonably result in, another spouse being disadvantaged should the relationship later break down. I accept that in many relationships the parties accept a division of roles that might result in one spouse being "kept in the dark" particularly about financial matters. Whatever parties may accept within intact marriages, they need to understand that in this Court when relationships end it becomes, in essence, retrospectively unacceptable if conduct by one spouse has disadvantaged another spouse. The above statements may well be criticised for being a very expansive description of non-disclosure in family law matters. However, experience indicates that the sheer diversity of financial transactions undertaken by a party to a relationship during the period of the relationship or after its conclusion, that brings with it a disadvantage to the other spouse, is so diverse, that a broad description is required.
In this case the strong undercurrent of non-disclosure is manifested by a litany of conduct by the husband including:‑
·Non‑production of relevant documents;
·The acquisition and disposal of a Volvo motor vehicle;
·Aspects of the operation of Exxx Pty Ltd, particularly as regards a Pajero motor vehicle;
·His withdrawals from the home loan account;
·The purchase by Exxx Pty Ltd of a property at Axxx in Western Australia;
·The transactions involving the Lxxx investment, both in terms of the original investment, and then the subsequent failure by the husband to mitigate the loss that will be incurred.
In this section I will only deal with the husband's non‑production of documents, because each of the other points are dealt with below. At paragraph 10.2 of the wife's affidavit filed 19 November 2007 she annexes the correspondence between her solicitor, and the husband, seeking disclosure, for the period 31 August 2006 to 16 October 2007. There are 10 such letters. I am satisfied that each letter is, in fact, relevant to the issue of disclosure. I am further satisfied that any self‑represented litigant, let alone the husband who is clearly an intelligent and articulate professional man, would understand what was being sought.
The husband does not satisfactorily deal with these issues in his affidavit material. It is true that some of the information requested by the wife is in fact attached to his very substantial affidavit filed
16 November 2007. Disclosure is still non-disclosure if it was not given in a timely manner.
The clearest evidence of the husband's non-disclosure is his own evidence in cross‑examination. He agreed that he was only able to produce a balance sheet and profit and loss account for Exxx Pty Ltd at the hearing itself. He agreed that he answered outstanding notices to produce on the first day of the hearing by producing various credit card statements. He agreed that he knew that it was always part of his wife's case that the expenses that he had incurred on various credit cards should not be treated as joint liabilities for property settlement purposes, and that he understood the significance of producing these documents. He also agreed how some of these documents might assist in establishing the real value of Exxx Pty Ltd. He agreed that he had many of these documents in his possession before the date that they were produced. On the first day of the hearing, in cross‑examination he agreed that he even had further statements at home that he had not produced on the day. When he was challenged about whether he had met his obligations for full and frank disclosure his response was, in effect, that he had sent information that had been requested and that otherwise the term "full and frank disclosure" meant nothing to him.
It was clear from his evidence that the husband had a highly technical view of what was required in terms of production of documents. The husband complained of being asked to provide disclosure in generalised terms but was then confronted with the painful reality of very specific requests for information, such as for copies of BAS statements. The financial statement for Exxx Pty Ltd for the 2005, 2006 and 2007 financial years, were sent to the wife's solicitor, by the husband's accountant on Tuesday 4 December 2007 by way of an e‑mail which is timed 3.54pm. This was the first time that those documents have been produced, notwithstanding their significance in these proceedings. The husband agreed that the first time that he had communicated to his accountant and authorised the accountant to provide the wife's solicitor with information relating to disclosure was by way of an e‑mail dated 29 November 2007 at 11.49 am. His explanation for that is that he had given authority to the accountant to provide the information to the wife's solicitor, after the Court case was started in 2006, but that he did not tell the wife's solicitor because he did not believe he needed to. The husband later admitted in cross‑examination, however, that even if the solicitor had been given direct access to the accountant at a much earlier stage nothing would have been produced because of fees outstanding to the accountant. And yet, I am left in no doubt whatsoever that having regard to the husband's financial circumstances, and particularly having regard to the nature of the expenses incurred on the husband's bank and other accounts including credit cards since separation he could easily have paid the outstanding accountant's fees at any time. It was not a priority for him and it clearly did not become a priority until literally the eve of the hearing. It was only on the second day of the hearing that the husband produced evidence indicating the amount of and nature of liabilities owed on credit cards.
His evidence about the accountant's fees was that he owed $2,700 which he gradually paid off. The debt was cleared a week prior to the hearing. He agrees that he could have asked his father for a loan to pay this amount.
Overall, the husband's non-disclosure in the form of not producing in a timely manner relevant documents provides a graphic insight into the husband's cavalier, almost indifferent attitude about production of documents. It took far too long, and came far too late, and this was much to the disadvantage and prejudice of the wife. The quality of production was highly dubious, and the husband will have to suffer the consequences in a legal sense of his non-disclosure.
I repeat, once again, this section is merely designed to establish a foundation for my concerns about the husband's behaviour and attitude about the financial aspects of these proceedings. The evidence dealing with the other issues will also provide further evidence to support the finding that he has engaged in non‑disclosure and, moreover, that this reflects poorly on his credit as a witness.
Value of the former matrimonial home
The only evidence I had about the value of the former matrimonial home at Property W is the valuation provided on affidavit by Simon Azar who is a registered valuer of 11 years experience. He looked at comparable transactions, and the condition of the property, and concluded that it had a value of $375,000. Not withstanding the husband's insistence that the home was worth much more, the only independent expert evidence I have is that of Mr Azar. I accept Mr Azar's evidence and accordingly find that the former matrimonial home has a value of $375,000.
The value of the husband's interest in Exxx Pty Ltd (“The Company”)
The ASIC company extract indicates that the company commenced in November 1999 and that its sole director, secretary and shareholder is the husband. The ASIC search also indicates that in December 2002 the company granted a fixed and floating charge to Pxxx Ltd. The ASIC company extract, which was dated 16 November 2007, does not indicate that this charge has been discharged. I have no other evidence before me about this charge, and whether it continues to secure some form of liability to Pxxx Ltd. The husband does not refer to such a liability in any of his evidence. Given that the onus was on the husband to produce evidence of any liability secured by this charge, and he has failed to do so, I am entitled under the circumstances to infer that there is no such liability.
The husband's evidence is that in about 2000 he established the company as the vehicle to conduct a business called Oxxx Pty Ltd,. Indeed, the business name Oxxx Pty Ltd was registered on 24 November 2000 and the corporation carrying on the business is the company. This evidence is apparent from the business names extract attached to the wife's affidavit. Not only did the company conduct the business called Oxxx Pty Ltd, but it also was the company under which some of the property development work undertaken by the husband was channelled. He gives evidence that it was also in a partnership with Mr M in relation to the Property A development. He used the company as the vehicle to purchase a three‑bedroom unit in Axxx, in Western Australia. The wife gives evidence that in October 2003 the company acquired a Pajero motor vehicle on lease. She deposes to the fact that she drove the car up to separation, but by November 2006 the husband took the car when he had the children, and the wife would drive his Volvo. She deposes that a creditor, possibly St George Bank, repossessed the Pajero motor vehicle some time in 2006, but she then later saw the husband driving the vehicle once again.
Whilst the evidence is not clear, it is possible that the husband also used the company as the vehicle to conduct a further business which he carried on in partnership with Mr H in 2006. Having regard to the various activities in which the company was involved it must have been clearly apparent to the husband that establishing its value was an important issue in this case. The only evidence of this was produced at the hearing itself and was sent by the husband's accountant to the wife's solicitor on 4 December, the day before the hearing. This evidence consists of balance sheets and profit and loss statements for the company for the 2005, 2006 and 2007 financial years. These documents were exhibit A6. The 2007 profit and loss account shows a net loss of $12,576, increased from a loss of $3,313 the year before in 2006, but substantially lower than the $49,006 profit made in 2005. The 2007 balance sheets shows total equity of $86,909.60 down from $99,486 in 2006, and $102,799 in 2005.
On behalf of the wife it was asserted that the best, and indeed the only indication of the value of the company was the 2007 balance sheet which was produced by the husband and had been prepared by his own accountants. The 2007 balance sheet shows the total assets of the company valued in the balance sheet at $152,725, and liability of $65,815, leaving net assets of $86,909. In each case I have rounded the figures to the nearest dollar. The balance sheet is highly problematic and, quite frankly, raised more questions than it answers. For example, one of the assets is described as ECS and BM $206,891.14. In his evidence the husband tried to explain that that figure is probably incorrect and in any event it represents the proceeds of the Property A development which had been conducted in partnership with Mr M. He provided in evidence, exhibit H5, a settlement statement dated 25 May 2005 relating to the sale of Property A by the company, and Mr M to a named purchaser. Whilst the payments to the company referred to in this settlement statement do not appear to add up to precisely $206,891, the figures are not all that different and it is certainly not inconceivable that the husband's assertion that this item of the balance sheet represents the proceeds of this development is, in fact, correct. But we will never know. The only one who could prove this was the husband. It is curious that this amount appears in the 2007 balance sheet when it also appears in the 2006 balance sheet as what appears to be an intercompany loan. The husband's evidence is that the profits from the Property A development, which he says were around $150,000 at paragraph 41 of his affidavit, were used to reduce their indebtedness to the mortgagee over Property G. Indeed, the statements annexed to the husband's affidavit tends to confirm this, subject to the deposits totalling $209,351, not the $150,000 to which he refers in his affidavit. The discrepancy is substantial, but is unexplained. In any event, it does appear that the profits from the Property A development were deposited into an account in the joint names of the parties with the Community First Credit Union Limited which seems to have offset their mortgage to the said credit union. What is unclear, however, is that the same statement indicates redraws from that account, which are again unexplained.
Has the husband adequately explained why the company's balance sheet, prepared by his accountant, on his instructions contains an asset of $206,891? In my opinion, his attempts to explain this entry are inadequate, and do not satisfy me that I should ignore this item on the balance sheet. Even if the husband's explanation was correct, and the monies were then advanced in some way from the company to the husband and the wife personally, that would surely be expressed in some other fashion on the balance sheet?
The balance sheet is the husband's own document. I accept the submission made on behalf of the wife that it is the best, and indeed, the only evidence relating to the value of the company. This evidence is clearly inconvenient to the husband who, as a result of his own tardiness in dealing with this issue no doubt wishes that he now had more time to produce evidence that explains this significant asset appearing on his company's balance sheet. As I indicate above, I am more than satisfied that this information has been sought for most of 2007, that the husband knew of its significance, and yet he failed to take reasonable and adequate steps to ensure that the financial information was prepared and produced in a timely fashion. He cannot now complain that his own financial information is inadequate and incorrect. He is hoisted on his own petard, so to speak. Accordingly, I find that the value of Exxx Pty Ltd is $86,909.60, and this is an asset available to the husband.
Before leaving the company, and its balance sheet, I refer to a liability appearing in the balance sheet which appears to indicate that the wife owes the company $18,350. The husband was cross‑examined about this. He indicated that he was not proposing to offer an indemnity in favour of his wife as regards this liability, and that he expected the company to recover it from her. At that point in time, on the application of the wife's solicitor, I granted leave to the wife to amend her application to seek an indemnity as regards this alleged debt. The fact is that in cross‑examination the husband simply could not explain what this liability was about. He simply said that his accountant had prepared the balance sheet. In re‑examination, however, he tried to explain this liability as arising from the wife's use of the company Pajero vehicle for three and a half years, and that the liability represents the lease payments made by the company through to repossession. I simply do not accept the husband's explanation in this regard. It comes far too late in the proceedings and he produces no documents in support of the explanation. Given the inadequacy of the evidence, I think it is appropriate under the circumstances to order the husband to indemnify the wife, and keep her indemnified as regards this liability appearing on the company's balance sheet.
The value of the parties' investment with Yxxx Pty Ltd
This investment was a financial disaster for the parties. The husband's evidence is that the principal of Yxxx Pty Ltd, Mr D, approached him to advance funds to the company for investment purposes, which would be returned in a very short period of time, and at a very high rate of interest. There is conflicting evidence between the husband and the wife about the precise circumstances of this investment, and to a certain extent they each blame the other for the failed investment. I am satisfied that both agreed, in principle, to make $160,000 available for the purposes of this investment, such monies being drawn on their mortgage from the Community First Credit Union. I am satisfied that the attraction of high returns was irresistible for both of them, and that they were prepared to take the requisite risks. However, the reality is that even though the wife agreed to participate in this risky investment, the husband forged her signature on the documentation. Separation took place shortly after the investment was made. There was almost immediate default. In fact, no payment, of either interest or capital, was received before 18 August 2006. A capital repayment of $50,000 was made on 27 January 2007, and this was deposited back into the mortgage loan account with the Community First Credit Union. The husband gives evidence at paragraph 52.16 of other payments made by Mr D, all of which went to the Community First Credit Union. The wife gives similar evidence at paragraph 8.7 of her affidavit.
A number of issues arise out of this very risky investment undertaken by the parties. An issue that does not arise, in my opinion, is any allegation of waste by one spouse against the other. I am satisfied they both went into this high risk/high possible return investment willingly and with all knowledge of the risks involved. The significance of the forgery of the wife's signature is the very poor reflection on the husband's credit and character. It is conduct that is entirely consistent with his cavalier approach to disclosure for the purposes of these proceedings. But the fact is that the wife knew about the transaction and had agreed in principle to participate in it, so the husband's act of forgery, whilst being deceitful, does not amount to waste on his part.
The husband attempted to argue that the wife's actions in trying to mitigate their loss, and recover as much as possible of their debt, was, in fact, wasteful. It is clear that the wife mounted a fierce and perhaps a personal campaign against Mr D and his companies to ensure a repayment to them. I am satisfied that without this pressure no payment of $50,000 would have been made in January 2007. Rather than this being waste, it was the wife acting to mitigate their loss. Whilst she did enter into separate contractual arrangements with Mr D and his companies, it does not in any way prejudice the rights of recovery of the balance that the husband and the wife have. Each accused the other of lack of diligence in their efforts to recover the investment and to mitigate their loss. There is no evidence about this on behalf of the wife. As for the husband, I am satisfied that he adopted a cavalier approach in terms of seeking recovery, but that, at the end of the day, such conduct does not amount to waste.
On the Friday before the hearing a further payment of $50,000 was received from Yxxx Pty Ltd. It likewise has been used to reduce the home loan debt. I am quite sceptical about the prospects of recovery of any further funds, but it is important for both parties that they continue to take all reasonable efforts to recover the same and, if they do so, there will be adequate incentive to the husband in the orders I make.
In relation to the husband's cavalier approach to seeking to recover this investment he admitted in cross‑examination that he could not produce any e‑mails between himself and Mr D between June 2006 and 27 January 2007, even though he was in the habit of communicating with him principally by e‑mail, but also by telephone and the occasional visit. The husband insisted that there may well have been other e‑mails, but he is unable to produce them. I do not accept this. It was apparent from the husband's documentation that most of his record keeping was quite meticulous, when he deigned to actually produce records to the wife and to the Court. I find it highly unlikely that the husband left six or seven month's worth of important e‑mails at home. I find it more likely that there were no such e‑mail communications between him and Mr D between 16 June 2006 and 27 January 2007. His explanation, indeed, is that there was no imperative to put pressure on Mr D because they were receiving a handsome rate of interest on their investment. The husband clearly does not accept that it is unlikely that the investment will be returned in full. One can only hope that he is right and that the husband's optimism in this regard does not match the level of indifference that he seems to have displayed about recovery for most of the period since the investment was made.
Accordingly, I am unable to quantify the value of the Yxxx Pty Ltd investment. If the parties are able to recover $160,000 then that amount should be used to reduce the Community First Credit Union loan which was, after all, the source of the funds. Any recovery beyond $160,000 is to be shared between the husband and the wife in a proportion that reflects my findings about contribution and future needs. It follows from what I have said above that I consider it inappropriate to include this investment in the pool of assets.
Value of the furniture
In the wife's financial statement filed 23 November 2007 she attributes a nil value to household contents. In the husband's amended financial statement filed 4 December 2007 the husband asserts that a 50 per cent share of the contents of the former matrimonial home has a value of $15,000. In the wife's case outline document she asserts the furniture has a value of $5,000, and in the husband's case outline document he asserts it has a value of $20,000. I have no independent evidence about this. I find that the alternatives available to me are to order a sale of the furniture and division of the sale proceeds, to order a division in specie of the furniture, or to adopt the husband's figure of $20,000 in the case outline document. As it turns out the final judgment will not be significantly influenced by arbitrarily choosing the figure of $20,000. By adopting the husband's figure, he certainly cannot complain. Of course, I acknowledge I run the risk of making a finding that is adverse to the wife, and in respect of which I have no independent evidence. Nonetheless, having regard to everything that this family has been through to date, I do not feel it is appropriate to order a sale of the furniture, or for it to be divided in specie. In this regard, the wife will, no doubt, take such action as she is advised to take.
Should the proceeds of the Volvo sold by the husband, be added back to the pool of assets?
The wife's evidence about the Volvo is contained at paragraph 7.2.9 of her affidavit, and the husband's evidence at paragraph 77 of his affidavit. She says, in effect, that the husband purchased a Volvo motor car unnecessarily with what he asserted were the profits from the business. She asserts it was purchased for $57,800 at about the time when Property A was sold which, from the evidence, was 25 May 2005. The husband says that the Volvo was sold for $11,500 and this money was used to repay a loan that the company had arranged from the S family, some time in October 2006. The loan agreement between the company and the S family is in evidence as the annexure AG to the husband's affidavit. In that document the purpose of the loan was stated as follows:‑
Supply Exxx Pty Ltd with funds to provide for the shortfall, as a result of nonpayment of interest and capital by Mr D, who has loaned $160,000 from the Valadez family, and is late in repaying it.
The loan is clearly after separation. There is no satisfactory evidence from the husband about what, precisely, the S family loan was used for and why he had to sell the Volvo in order to repay the loan. The husband provides no other details about the purchase and subsequent sale of the Volvo. On behalf of the wife it is submitted that the monies received by the husband for the sale of the Volvo, namely $11,500, according to his own evidence, should be added back to the property pool. Under the circumstances I find it is just and equitable to do so. His failure to explain precisely what the S family loan was used for means that I am unable to determine whether the wife could be deemed to have received any benefit from the sale of the Volvo, or whether the sale was otherwise justified for the purposes of meeting the husband's reasonable living expenses.
Should the money withdrawn by the husband from the credit union accounts at the time of separation, be added back to the pool of assets?
On behalf of the wife it was submitted that there should be an add-back of $26,000 in this regard. In cross‑examination the husband was taken to the Annexure E to his wife's affidavit which comprises a bundle of statements from their Community First Credit Union account for the period from 1 May to 31 August 2006. The husband was specifically taken through a series of withdrawals from the various accounts which totalled not less than $26,000, and for the most part agreed that he could have drawn those funds out and that possibly some of it was used to make lease payments on the Pajero which was then owned by the company and it is possible that some of the money went to the benefit of the company. He agreed that it could be the case that indeed he made all of these withdrawals. When it was put to him that his wife asserts that she did not make any of the withdrawals he acknowledged that that is what her evidence is but asserted that she always had the capacity to do so, even by telephone. He agreed when pressed that at least some of this money was used to re-establish himself. I find that, in fact, the husband had drawn all of these funds and used them for his own purposes. In the absence of any clear evidence from the husband about what, precisely, these payments were used for, it is appropriate to add them back in the circumstances.
Should the money that the husband used to pay a deposit on the purchase of the land in Western Australia be added back to the property pool?
The husband's evidence about this transaction is contained at paragraphs 47 ‑ 49 of the husband's affidavit. He asserts that the wife agreed with him that they should put a deposit of $31,134 on a property at Axxx in Western Australia as it was being constructed. This off the plan purchase was not, apparently, completed and the husband's evidence was that the deposit was no longer retrievable. His evidence was that the building company had gone broke. The wife's evidence is contained at paragraph 7.3.1 ‑ 7.3.2 of her affidavit. There are differences in the evidence which relate primarily to the extent of the wife's knowledge. She says that she knew nothing about the transaction referred to in the husband's evidence until the conciliation conference in these proceedings. Nothing turns on the extent of the wife's knowledge of this transaction. The husband was carefully cross‑examined about his evidence in relation to this transaction. He agreed that the contract to purchase the property was with a company that was separate and distinct from the building company that went into liquidation. He said in cross‑examination that the contract was finally cancelled at the end of October 2007 but agrees that that is not the evidence that was set out in his affidavit and this information was contained in a letter which he had at home. He was challenged about the circumstances in which he asserted that the deposit was not recoverable. His evidence in cross‑examination created the strong impression that there was nothing that he had done to default on the contract but he could not explain why, therefore, the deposit was not recoverable. He agreed that he knew and understood that this was an issue from the wife's perspective, and that she was seeking to sheet home this loss to him. He agreed that even though it was company funds, the monies lost were less monies available to the company, and therefore to the property settlement. He agreed that in seeking to recover the deposit he had only chased the building company, and the real estate agent, but had not made any approach to the vendor, at all.
The husband's evidence in cross‑examination was that he still may have the opportunity to recover the deposit. Indeed, that is the impression that was formed throughout the cross‑examination of the husband on this issue. I form the impression that he was being less than frank. The husband was himself a property developer, albeit on a small scale. I remain deeply suspicious about the so‑called irretrievability of the deposit paid. It is appropriate under the circumstances to add back the deposit of $31,000 into the property pool. If the husband can recover the deposit he will have the exclusive benefit of it.
How should various personal liabilities of the husband be treated in this case?
The husband has a number of personal liabilities and it is part of his case that the wife should contribute towards the repayment of them.
In his case outline document provided at the hearing he itemises these as follows:‑
·A liability arising from the business known as Fxxx Pty Ltd $2,500
·Westpac Visa card $9,900
·Virgin Visa card $8,464
·Westpac accounts overdrawn $1,050
It is apparent from the husband's financial statement filed 4 December 2007 that the amount owed on the Westpac and Visa credit cards is significantly higher, so the amounts referred to above represent what the husband asserts was owing at the time of separation on these cards. Indeed, the husband's case outline document only seeks to apportion liability for the Westpac Visa card. He has a number of other personal liabilities which are clearly personal and post‑separation, including the St George Finance debt on the Pajero that he drives, monies owed in respect of utilities, accountancy fees, and a loan from his father. As they are clearly post‑separation, and he does not seek to attribute any part of them to the wife, they will be the husband's sole responsibility.
There are outstanding school fees to T School which are joint in nature, and will clearly need to be paid as part of these orders.
In the cross‑examination of the husband relating to these liabilities it became apparent that the husband had been quite dilatory in producing documents in support of these liabilities. When cross‑examined on the statements the husband asserted that the balance on the Westpac Visa card at about the time of separation was $5,000, and that the Virgin Visa card was used as to 65 per cent for business purposes and
35 per cent for personal purposes. This is inconsistent with the position adopted in the case outline where the husband asserts that all the Virgin Visa card was his liability, and none should be attributed to the wife.
The Westpac Visa credit card statements were in evidence and I am satisfied that at about the time of separation the balance was approximately $5,000, and that this should be treated as a joint liability of the parties as it was used for the benefit of the family. The same cannot, however, be said of the Virgin credit card statements. The nature of the expenditure on this card statement is different to that for Westpac. Most of the expenses seem to be business, and to the extent that there are personal expenses as well, the husband has failed to establish that they are joint expenses.
Accordingly, the only personal liability of the husband that I find to be a joint one is the Westpac credit card up to $5,000 and the wife will need to contribute towards its repayment, subject to other matters to be adjusted as between the parties.
How should the diverse contributions of both the husband and the wife be assessed for the purposes of section 79 (4) of the Family Law Act?
During the period of 15 years the husband and the wife together, and putting aside specific issues of acts of financial irresponsibility, particularly at about the time of separation and afterwards, both the husband and the wife worked very hard. There is no doubt that the husband was the principal breadwinner in the family and as a result of his main employment, together with supplementary entrepreneurial activities, he was a good financial provider for the family. Likewise, the wife's contribution was substantial. Not only did she work at most times of the marriage, either full time or part‑time, but she also bore the primary responsibility for raising five children. The contribution they made to the marriage was different, but in my opinion those contributions should be assessed, in terms of weight, as being equal and I propose to do so. In this regard I make no distinction between superannuation and non‑superannuation assets. I have no doubt that the husband will feel that a conclusion of equality of contribution devalues the financial contribution that he made up until the time of separation. Section 79(4) of the Family Law Act looks at both financial and non‑financial contribution, as well as contribution made directly and indirectly, as well as contribution to the welfare of the family. It encourages a holistic look at contribution and recognises the great diversity of contributions made by spouses within a marriage. To place more weight on the husband's financial contribution in this case would be to seriously devalue the other forms of contribution made by the wife.
How should the section 75 (2) factors operating in favour of the wife in this case, be quantified?
On behalf of the wife it was asserted that the s.75(2) adjustment should be 25 per cent. The husband conceded it should be about 15 per cent. The obvious s.75(2) factor operating in favour of the wife is the fact that she will have the primary care of five children, the youngest of whom is four. This will substantially affect her ability to find employment. The husband's salary is about four times greater than that of the wife, and I accept that this reflects in approximate terms his far greater capacity to earn as compared to the wife. He pays child support for the children of about $550 a week, and whilst this is a substantial contribution it does not cover all of the costs attributable to the care of the children or even a substantial part of the costs. The husband has the capacity to generate additional income from entrepreneurial activities. As I have indicated at various points in my reasons I am satisfied that the husband has not been forthright in terms of his financial circumstances, and, accordingly, his financial circumstances may well be even better than that which he depicts in his amended financial statement filed 4 December 2007. In short, from the financial perspective, both on a week to week basis and in the long‑term the husband will cope and, indeed, his financial circumstances will probably continue to improve. By contrast, the wife faces a bleak financial future, even if I make the orders that she seeks. She will bear the primary responsibility for accommodating the children, and meeting most of their living expenditure.
Having regard to all of these matters I am satisfied that a section 75 (2) adjustment in favour of the wife of 25 per cent would be just and equitable.
What is the just and equitable order to make in this case, also taking into account superannuation and non‑superannuation assets?
As a result of the findings that I have made above, it is possible to create a schedule of assets and liabilities and I do so below:‑
| Item of property/liability | Ownership | VALUE ($) |
| Non-superannuation Assets | ||
| Exxx Pty Ltd | Husband | 86,909 |
| Property W | Joint | 375,000 |
| Furniture | Joint | 20,000 |
| Total | 481,909 | |
| Add backs | ||
| Monies received by husband from Volvo | Husband | 11,500 |
| Monies Husband withdrew from Credit Union at time of separation , and which are not accounted for | Husband | 26,000 |
| Deposit money on Western Australia | Husband | 31,000 |
| Total add backs | 68,500 | |
| Total Gross Non-superannuation Assets and add backs | $550,409 | |
| Liabilities | ||
| Community First Home Loan | Joint | 243,222 |
| Westpac Visa Card at separation | Husband | 5,000 |
| T School Fees | Joint | 4,010 |
| Total Liabilities | -252,232 | |
| Net Assets | 298,177 | |
| Superannuation | ||
| H Superannuation | Wife | 27,467 |
| Husband’s First State Superannuation | Husband | 136,342 |
| Gross value of Superannuation Assets | 163,809 | |
| Gross value of all Assets | 461,986 | |
For obvious reasons the wife is keen to retain for the benefit of the children and herself the former matrimonial home at Property W including its furniture and contents. She will need, of course, to take over the Community First home loan, and I am satisfied from the evidence that she will have the capacity to do so provided she can borrow funds. I certainly intend to give her the opportunity to refinance.
I have found that the wife is entitled to 75 per cent of the assets, both superannuation and non‑superannuation. As indicated above I think it is appropriate to apply 75 per cent across the board to both superannuation and non‑superannuation assets. This gives to the wife an entitlement of $346,489 and to the husband $115,496.
The difficulty in framing an order and checking whether the final outcome is just and equitable is that in giving to the wife 75 per cent of the value of superannuation and non‑superannuation assets, she will be left with most of the "tangible assets" including all of the superannuation, and the husband will be left with notional assets in the form of the company and the addbacks arising from the disposal of the Volvo, monies withdrawn from the credit union at separation, and the deposit money paid on the West Australian property. I have no doubt that the husband will feel that this is a harsh result. He maintained throughout the hearing that, for example, attributing a value of $86,000 to the company was artificial in the extreme, because no‑one would pay that amount to him for the businesses operated by the company. I am left in no doubt that the husband has not been full and frank in his disclosure of financial matters to the Court. He was cavalier in his approach to some of his financial dealings including seeking to recover and mitigate the disastrous investment with Yxxx Pty Ltd. His cavalier approach to production of relevant financial documents means that I have no certainty about the accuracy of any evidence that he gives to me about finances. The husband cannot now complain about the logical consequences of findings that I am forced to make as a result of how he chose to conduct these proceedings. The husband himself admitted in cross‑examination that he still may be able to recover the deposit paid on the land in Western Australia. Even though I am sceptical about this, it is possible that both parties will be able to recover further funds from Yxxx Pty Ltd, and if they do so once the entire amount invested, i.e. $160,000 has been repaid to the Community First Credit Union, the balance can be divided as to 75 per cent to the wife and 25 per cent to the husband. A one hundred per cent super split of the husband's superannuation fund in favour of the wife is required by these orders. I am satisfied that it is still just and equitable. The husband is only 42 years old and has a good earning capacity and I have no doubt that he will be able to accumulate substantial superannuation entitlements by the time he retires at age 65. By contrast, the rate at which the wife is able to acquire superannuation is significantly lower and what she now receives from her husband's super fund will represent a major proportion of what she has in the future.
Overall, despite what might appear on the surface to be a harsh result for the husband, I am satisfied that the orders I make are just and equitable, particularly having regard to the findings of non-disclosure that I have made.
The wife’s entitlement of $346,489 is therefore made up as follows:
Property W $375,000
Furniture $20,000
H Superannuation $27,467
First State Superannuation $136,342
$558,809
Community First Home Loan ($243,222)
$315,587
It is apparent that there is a short fall in tangible assets with which to meet the wife’s claim. This was a scenario clearly apparent to the wife and her solicitor at the hearing. It is open to me to try to make up for this by giving to the wife an even greater claim to any moneys recovered from the Yxxx Pty Ltd investment. I decline to do so, however, as recovery of any money at all seems unlikely to me and in any event to give the wife an even greater share would remove any incentive for the husband to seek to recover those funds.
The husband’s entitlement of $115,496 is therefore made up as follows:
Exxx Pty Ltd $86,909
Add-back sale proceeds Volvo $11,500
Add-back withdrawals Credit Union $26,000
Add-back deposit paid West Australia $31,000
$155,409
Westpac Visa Card ($5,000)
T School ($4,010)
$146,399
It is apparent that the husband actually gets more than I regard as his entitlement, but this is a product of the add-backs of notional property.In real terms the split between the wife and husband is 68:32. That is just and equitable under the circumstances of this case. The husband will have to pay the outstanding debt to T School, and the Visa card.
If the wife cannot refinance the home loan debt on the family home, thus removing the husband’s indebtedness in this regard, she will have to sell it. The case was conducted on her behalf on the basis that she should have no difficulty in doing so. I will thus not make orders at this stage for a sale of the home, but will grant leave to re-list for this purpose.
I certify that the preceding sixty three (63) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate: Lisa Molloy
Date: 27 February 2008
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