VERNOVA & VERNOV
[2010] FamCA 904
•1 October 2010
FAMILY COURT OF AUSTRALIA
| VERNOVA & VERNOV | [2010] FamCA 904 |
| FAMILY LAW –PROPERTY SETTLEMENT – Assets and Liabilities – notional assets – Contributions – period of cohabitation – Adjustments – Just and equitable |
| Family Law Act 1975 (Cth) ss 75 & 79 |
In the Marriage of Hickey (2003) 30 Fam LR 355
In the Marriage of Omacini (2005) 33 Fam LR 134
In the Marriage of Lenehan (1987) 11 Fam LR 615
In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712
In the Marriage of Zyk (1995) 19 Fam LR 797
Mallett v Mallett (1984) 9 Fam LR 449
In the Marriage of Ferraro (1992) 16 Fam LR 1
In the Marriage of Shewring (1987) l2 Fam LR 139
C and C [1998] FamCA 143
Kowaliw and Kowaliw (1981) FLC 91-092
In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569
In the Marriage of Coghlan (2004) 33 Fam LR 414
Jacks and Jacks [2007] FamCA 185
Calverley v Green (1984) 155 CLR 242.
| APPLICANT: | Ms Vernova |
| RESPONDENT: | Mr Vernov | ||||
| FILE NUMBER: | PAC | 1814 | Of | 2008 | |
| DATE DELIVERED: | 1 October 2010 | ||||
| PLACE DELIVERED: | Sydney |
| JUDGMENT OF: | Justice Loughnan |
PLACE HEARD: Sydney
| HEARING DATE: | 13 & 14 September 2010 |
REPRESENTATION
COUNSEL FOR THE APPLICANT WIFE: | Mr Kenny |
SOLICITOR FOR THE APPLICANT: | Solicitors |
| RESPONDENT HUSBAND: | In person |
Orders
Within 21 days from the date of these orders the parties shall do all acts and things and sign all documents as may be necessary to effect the sale by private treaty of the property situate at and known as F property in the State of New South Wales, Folio Identifier …, (“the F property”) and for the purpose of facilitating such sale, the following provisions shall apply:
a)The listing price of the property shall be agreed between the parties and if there is no agreement, the listing price shall be determined by a valuer nominated by the President of the NSW Division of the Australian Property Institute;
b)The property shall be listed for sale by private treaty with an agent to be agreed upon by the parties and failing agreement the agent shall be determined by an agent nominated by the President of the NSW Division of the Australian Property Institute;
c)In the event that the F property has not been sold by or before a date three (3) months from the date the property is listed for sale then the parties shall make all such arrangements and do all such acts and sign all documents as may be necessary to procure sale of the property by public auction upon the following terms:
i.the auction shall take place as soon as practicable;
ii.the reserve shall, unless agreed upon by the parties, be as proposed by the Auctioneer;
iii.the parties shall each pay and be responsible for payment of one-half of auction expenses payable before the F property is auctioned.
Upon sale of the F property the proceeds shall be paid in the following manner and priority:
a)In payment of any amount required to discharge the mortgage to the Commonwealth Bank;
b) In payment of the agent’s commission on the sale;
c) In payment of legal costs on the sale;
d) In payment of 41.4% of the remaining proceeds to the husband; and
e) In payment of the balance to the wife.
Within 28 days after the settlement of the sale of the F property the wife shall discharge the mortgage with the Commonwealth Bank (loan account number …) secured on the property situate at and known as P in the State of Queensland (“the P property”) (Lot … RP…) and shall thereafter indemnify the husband and M Vernov in relation to that mortgage.
Forthwith upon the mortgage discharge in accordance with order 3 herein, the parties and M Vernov shall do all acts and things and sign all documents as may be necessary to effect the transfer of that property into the sole name of the wife.
In the event that the wife cannot discharge the mortgage on the P property within that time specified in order 3 herein, the parties and M Vernov shall do all acts and things and sign all documents as may be necessary to effect the sale by private treaty of the P property and for the purpose of facilitating such sale, the following provisions shall apply:
a)The listing price of the property shall be agreed between the parties and if there is no agreement, the listing price shall be determined by a valuer nominated by the President of the Queensland Division of the Australian Property Institute;
b)The property shall be listed for sale by private treaty with an agent to be agreed upon by the parties and failing agreement the agent shall be determined by an agent nominated by the President of the Queensland Division of the Australian Property Institute;
c)In the event that the P property has not been sold by or before a date three (3) months from the date the property is listed for sale then the parties shall make all such arrangements and do all such acts and sign all documents as may be necessary to procure sale of the property by public auction upon the following terms:
i.the auction shall take place as soon as practicable;
ii.the reserve shall, unless agreed upon by the parties, be as proposed by the Auctioneer;
iii.the parties shall each pay and be responsible for payment of one-half of auction expenses payable before the F property is auctioned.
Upon sale of the P property the proceeds shall be paid in the following manner and priority:
a)In payment of any amount required to discharge the mortgage to the Commonwealth Bank;
b) In payment of the agent’s commission on the sale;
c) In payment of legal costs on the sale;
d)In payment of the remaining net proceeds up to $107,901.15 to the wife;
e) In payment of the 52.5% of any remaining balance to the wife; and
f) In payment of the balance to the husband.
Except as otherwise provided in these orders, the husband and the wife each be declared the sole legal and beneficial owners of all items of property or resource including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively.
In the event that either the wife or husband refuses or neglects to comply with the provision of any order herein a Registrar of the Court is hereby appointed pursuant to Section 106A of the Family Law Act to execute all deeds and documents in the name of either the husband or the wife and do all acts and things necessary to give validity and operation to the said order.
Within 14 days from the date of these orders the solicitor for the wife is to cause a copy of the orders to be served on M Vernov by ordinary pre-paid post to his last known address.
Leave is granted to either party and to M Vernov to apply in relation to the form or implementation of these orders within 2 calendar months on giving at least seven days prior written notice to the associate to Justice Loughnan and to the other party or parties.
IT IS NOTED that publication of this judgment under the pseudonym Vernova & Vernov is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 2489 of 2008
| MS VERNOV |
Applicant wife
And
| MR VERNOV |
Respondent husband
REASONS FOR JUDGMENT
The cohabitation of the parties spanned more than 18 years. They cannot agree on a settlement of their property. Although they are now divorced, for convenience I will refer to them as the wife and the husband.
Applications
The wife seeks orders in terms of a Minute of Orders submitted at the commencement of the hearing as follows:
1.Within forty two (42) days from the date of these orders the Wife shall do all acts and things and sign all documents to transfer to the Husband all her right, title and interest in the property situate and known as [F property] in the State of New South Wales, Folio Identifier […], (“the [F] property”).
2.Simultaneously with the transfer in Order 1, the Husband shall transfer to the Wife his right, title and interest in the property situate and known as […][1] [P] in the State of Queensland (“the [P] property”) (Lot 60 RP141827).
[1] The property is described as number 2 in several places in the parties’ material. It is also described as number 4. The single valuer, Mr E, identifies the property as number 4 and refers to the same title reference - Lot … RP…. I will rely on the expert and describe the property as number 4.
3.Simultaneously with the transfers in Orders 1 and 2, the Husband shall discharge the mortgage with Commonwealth Bank (loan account number […]007) and indemnify the Wife against any liability associated with the property.
4.Should the Husband fail to discharge the mortgage within forty-two (42) days from the date of these Orders, then the parties shall do all acts and things and sign all documents as may be necessary to effect the sale by private treaty of the [F] property and for the purpose of facilitating such sale, the following provisions shall apply:
a)The listing price of the property shall be agreed between the parties and if there is no agreement the listing price shall be determined by a valuer nominated by the President of the NSW Division of the Australian Property Institute;
b)The property shall be listed for sale by private treaty with an agent to be agreed upon by the parties and failing agreement the agent shall be determined by an agent nominated by the President of the NSW Division of the Australian Property Institute;
c)In the event that the [F] property has not been sold by or before a date three (3) months from the date the [F] property is listed for sale then the parties shall make all such arrangements and do all such acts and sign all documents as may be necessary to procure sale of the [F] property by public auction upon the following terms:
i. the auction shall take place as soon as practicable;
ii. the reserve shall, unless agreed upon by the parties, be as proposed by the Auctioneer;
iii. the parties shall each pay and be responsible for payment of one-half of auction expenses payable before the [F] property is auctioned.
5.Upon sale of the [F] property being effected pursuant to the previous order the proceeds shall be paid in the following manner and priority:
a.In payment of any amount required to discharge the mortgage to the Commonwealth Bank;
b.In payment of the agent’s commission on the sale;
c.In payment of legal costs on the sale;
d.In payment of the balance to the Wife.
6.That the Husband pays the Wife’s costs of and incidental to these proceedings.
The husband seeks orders in terms of his Response to an Application For Final Orders filed 5 February 2010 as follows:
1. I oppose the Orders sought by the Applicant.
2. I oppose the interim Orders sought by the Applicant.
3.I have evidence to prove that the Applicant had fabricated her “evidence” to enhance her chances to obtain the properties concerned (for further details please refer to my Affidavit and attached evidence, documents and declarations).
4.Therefore the Orders I am seeking are as follows:
5.That the Applicant (the Wife) do all acts and things and sign all documents to transfer to the Respondent (the Husband) all his right, title and interest in the property situate and known as […][2] [P property] in the State of Queensland.
6.In exchange for Order (5), the Respondent will agree that the property situated and known as [F property] in the State of New South Wales be sold and proceeds from the sale will be equally divided between the Applicant and the Respondent.
7.In exchange for Order (5), the Respondent will not seek any Orders regarding the Applicant’s superannuation fund.
8.I am a sole owner of the business known as [Vernov Business]. Therefore the Applicant is not entitled to ‘do all acts and things and sign all documents to transfer to the Husband her right, title etc’. However, as the value of the mentioned above business is NIL, I do not oppose any orders the Applicant may seek in relation to that business.
9.That each party shall retain to the exclusion of the other party any other real estate properties or proceeds from the sale of any other real estate properties, motor vehicles, furniture, any funds in bank or in any other financial institution, cash in hand.
10.That the Applicant pays the Respondent’s costs of and incidental to this matter.
[2] See 1 above.
In the course of final submissions the husband proposed different orders. Through his interpreter he said that having listened to the case for two days he thought a proper order would involve the parties dividing the net sale proceeds of the F property equally and transferring the P property to their sons.
I explained to him that the latter order (in favour of the sons) was not warranted on the evidence. I said that I was required to divide the assets between the parties but that he and his ex-wife were free to bequeath their assets to their sons.
The hearing
At the hearing the wife was represented by solicitor and counsel. The husband was without legal representation and was assisted by an interpreter in the Russian language.
At the commencement of the hearing I described the task involved in a decision under section 79 of the Act, to the husband. I explained the sequence of events that would be followed during the hearing, indicating that, although the wife is the applicant, I would ask her counsel to make any objections before the husband embarked on his and would reverse the usual order of cross-examination so that the husband would better understand the process of cross-examination before he cross-examined the wife. As it transpired the wife’s counsel took no objections. The husband commenced taking objections but it was very slow. Although I described the basis for objections to him the husband persisted in objecting to statements simply on the basis that he disagreed with them. The process of objections by the husband involved the interpreter translating each paragraph in turn of the wife’s affidavit to the husband and then a discussion between them about the contents. I put a halt to that after about 30 minutes and asked the husband to turn his mind to his objections at the luncheon adjournment and after 4.30 pm on the first day of the hearing. I gather that was never done. He subsequently stated that he simply disagreed with much of the wife’s material. Although I excluded some material from the wife’s documents of my own initiative, formal objections were never completed by the husband.
At times the husband made reference to feeling unwell. After lunch on the second day of the hearing the husband said that he thought overnight that his cancer had come back, he had taken a number of tablets and had not slept well.
Suffice it to say, the husband was at a substantial disadvantage during the hearing.
Documents read
The wife relied on the following documents:
1. Amended Application for Final Orders filed 29 April 2009.
This document is supplemented by a Short Minute of Order attached.
2. Affidavit of the wife filed 18 December 2009.
3. Financial Statement of the wife filed 12 November 2008.
4. Affidavit of Mr E filed 18 December 2009.
5. Affidavit of M Vernov filed 29 April 2009.
6. Affidavit of the Wife filed 10 September 2010.
7. Financial Statement of the Wife filed 10 September 2010.
The husband relied on the following documents:
1.The green book being a bound collection of:
· Response filed 27 March 2009;
· Affidavit of the husband sworn 26 March 2009;
· Husband’s Financial Statement sworn 26 March 2009 and filed 27 March 2009; and
· Affidavit of V Vernov sworn 25 March 2009 and filed 27 March 2009.
2.Affidavit of the husband sworn 3 July 2010 and filed 5 July 2010
The green book also included an affidavit by M Vernov sworn 25 March 2009 and filed 27 March 2009. I excluded that document on the objection of the wife, as the deponent was not available for cross-examination.
Short history
As at the date of the hearing the wife was 48 years of age and the husband was 55. The parties were married in Belarus in 1983. The husband contends that the parties separated in 2001. The wife says that she and the husband separated in October 2004. The divorce of the husband and wife was granted by the Federal Magistrates Court and became final on 3 July 2008.
Children
There are two children of the marriage:
M Vernovwas born in 1984 and as at the date of the hearing he was 25 years of age; and
V Vernovwas born in 1989 and as at the date of the hearing he was 20 years of age.
Issues in dispute
It appears that there are the following issues:
·The date of final separation;
·Two add-backs pressed on behalf of the wife;
·Whether the matter should be dealt with asset by asset or globally;
·Whether contributions overall were equal or whether the wife’s contributions are properly recorded as half of the contributions to the F property only;
·Whether there should be an adjustment to the wife of 10% or no adjustment; and
·The form of the orders.
Background facts
The husband was born in 1955.
The wife was born in 1962.
The parties were married in Belarus in 1983.
The parties had no assets.
The wife worked as a teacher in Belarus.
In 1984 the parties’ son, M was born.
The parties separated in 1985 for one year. The wife lived with her mother and the child, M.
In 1989 the parties’ son, V was born.
The parties migrated to Australia, arriving in October 1997. It is the husband’s evidence[3] that they had no assets at that time. They stayed with friends and then rented for about 12 months.
[3] Paragraph (b) of the husband’s affidavit sworn and filed 5 July 2010.
In Australia, the wife worked in a housekeeping role in various hotels in Sydney and Queensland.
In 1999 the parties purchased the former matrimonial home at F for the sum of $135,000.00. They had $30,000 for a deposit and borrowed the balance.
In 2001 the husband purchased in his own name, two properties near Brisbane, (L Street and N Street) for $79,500.00 each. The husband borrowed $150,000 in order to complete the sale.
The husband contends that the parties separated in 2001 when the husband moved to live in a garage.
In July 2003 the husband sold the property at N Street. He cleared $51,295.00 on the sale.
On 6 October 2003 the husband purchased in his own name a property at W, in the State of Queensland, for the sum of $325,000.00. They utilized some of the funds received from the sale of the N Street property for the deposit and jointly borrowed the balance.
In October 2003 the wife and V moved to the W property.
In November 2003 the parties purchased a property at P, near Brisbane, for the sum of $266,500.00. That property was bought in the name of the husband, the wife and the parties’ son, M. The parties borrowed $270,000.00.
In December 2003, M moved into the Queensland property.
The husband visited the wife twice and she contends that the marriage remained on foot, although the husband was working in Sydney.
In October 2004 the wife and children returned to Sydney and recommenced residing at the F property. The wife contends that the parties separated at that time.
Separation
As to the issue of separation, it is the husband’s evidence that the parties separated in 2001. Not that there is much by way of evidence. In his two affidavits the totality of the evidence is:
From the husband’s affidavit sworn 26 March 2009 and filed 27 March 2009 the relevant passages are:
Paragraph 4
“August or September 2001 The Applicant and I permanently separated. I moved to live in a garage.
My comments The Applicant stated that the separation occurred in 2004. The statement is fraudulent. It contradicts the children’s accounts. Moreover, it does not correspond with the fact that since November 2003 the Applicant and children moved to live in Queensland while I went on living and working in Sydney.
From the husband’s affidavit sworn 3 July 2010 and filed 5 July 2010 the relevant passages are:
“a) We cohabited for about 18 years (got married in 1983, separated in 2001.
AND
e) In 2001 we separated. We agreed that we would live our own lives, that we would not interfere in each other’s business and so on.”
By way of corroboration the husband relies on the evidence of V in his affidavit sworn 23 March 2009 and filed 25 March 2009. V was about 11 years of age in 2001. His entire evidence in chief is:
1. My parents [the husband] and [the wife] separated in winter (August or September) 2001. Since August 2001 up until October-November 2003 my father lived in the garage at [F] (when he was in Sydney). Since around 2002 my father lived in canberra. He returned to [F] just once a week (usually on Saturdays or Sunday). On October–November 2003 my mother moved to Queensland. My father remaind in [F], NSW. My mother returned to [F] in the start of 2005 from October-November 2004 (right after my mother returned from Queensland) until 2008 my father and mother were living under the same roof but in different bedrooms. In June 2008 my mother moved out.
The evidence of the husband is that separation occurred in 2001. However, exhibit 1 is a letter sent by the husband to the wife’s solicitors dated 13 November 2008. At paragraph 4 the husband says:
“It appears that your client provided you with incorrect information. Your client and I permanently separated in 2002 (about 1.5 (sic) prior (sic) she moved to live to Queensland) not on 26 October 2004 as stated by your client. Your client is aware that we stopped living as husband and wife in 2002.”
The wife contends that the parties separated on 26 October 2004.
From the wife’s affidavit sworn 17 December 2008 and filed 18 December 2008 the relevant passages are:
“5. The respondent and I separated on 26 october 2004, although we lived under the same roof at [F] until June 2008.
6. We both considered the relationship was over as of 26 October 2006.
AND
29. In October 2003, I moved to Queensland and lived in the [W] property with my younger son, [V], who was completing Year 8 at the local High School. For some reason which I still do not understand, the respondent told me that I had to live in the [W] property for at least one year and that it could not be rented out during this period. My husband at the time was continuing his contract work in Sydney and out older son, [M], worked with him. They lived in the [F] property. Within two months, [M] came to Queensland with the respondent. The plan was that we would all move and live in Queensland but the respondent went back to Sydney to work. The children remained with me in Queensland. The respondent visited us from time to time in 2004.
30. In early 2004, the respondent suggested that we all move back to Sydney but [V] had just started Year 9 at his new school and I started a new position at [a hotel]. [M] was working [and] was studying part-time.
31. In October 2004 the respondent insisted that we all move back to Sydney and he assisted us with the move. [M] continued to reside in the [W] property a little longer and moved back in 2005. The property was leased to friends until October 2008.
The wife was asked to explain her evidence in paragraph 6 and said that the parties lived from time to time under one roof after 26 October 2004 and she contends that she felt that there was no hope for the relationship from October 2006.
The wife has given consistent evidence about this issue. She applied for and was granted a divorce in 2008 and in the divorce application shows the date of separation as 26 October 2004. She was asked about alterations made to the application and it is her evidence that the document was completed by hand by a Duty Solicitor and that gave rise to an error.
Further support to the wife’s versions of events comes from the fact that the husband filed no Response in relation to the wife’s divorce application and did not challenge the separation date asserted by her in her application. Exhibit 14 contains records from the Department of Immigration and Citizenship. In February 2004 the husband applied for citizenship and in his application he showed his current residential address as the F property but his postal address the property at W in Queensland. It is the husband’s case that at that time he did not live at that property but it was occupied by his estranged wife. Exhibit 2 is a photograph apparently taken at W in Queensland on 18 October 2004 showing the husband with his arm on the wife’s shoulders. Exhibit 3 comprises family photographs taken in Belarus after 2001 showing the husband and the wife in a group comprising members of the husband’s family. Although the wife’s evidence seems more consistent than that of the husband, she says nothing about the event or events that marked to point of separation.
The issue of the date of separation is not critical. In a sense it does not matter whether period of cohabitation was 18 years or 21 years. The main focus of the proceedings is on contributions and there is no dispute that contributions were made after 2001, for example the boys lived with the wife in Queensland for much of 2004, largely without the husband. Under paragraph 12 on page 5 of his affidavit the husband says:
“5.In October or November 2003 the Applicant moved to Queensland. She and the children lived, worked, went to school in Queensland until 2004/2005 while I remained in Sydney (for more information see paragraph 10.).
On the basis of the implicit finding in the divorce proceedings, I am satisfied that the parties separated on 26 October 2004. I am also satisfied that they rarely lived together under one roof after October 2001.
Returning to the chronology:
In September 2005 the husband sold the L Street property, netting $201,306.00.
On 17 December 2007 the wife suffered a back injury at work.
On 19 June 2007 the husband paid $20,000 into the mortgage. On 15 April 2008 the husband drew $20,000 down from mortgage.[4]
[4] Exhibit 11.
In May or June 2008 the wife moved out of the former matrimonial home, moving into rented accommodation with the parties’ son, M.
The parties were divorced by an order of the Federal Magistrates Court which became final on 3 July 2008.
In October 2008 the husband sold the W property for $425,000.00. He cleared $142,488.00 on the sale.
From late 2008 the wife received workers compensation payments. At the rate of $1,050 per fortnight.
On 19 March 2009 the solicitor for the wife made a request for detailed information about various financial transactions (Annexure “E”) following a Case Assessment Conference.
On 6 May 2009 the Registrar ordered the husband to provide documents to the wife about $200,000 he alleges he invested following the sale of the L Street property.
On 22 September 2009 the wife filed an Application in a Case in an endeavour to seek further information and particulars from the husband.
On 19 October 2009 the husband failed to attend on the return date of the Application in a Case and matter was stood over for undefended hearing.
From January to August 2010 the wife’s workers compensation payments were reduced to $730 per fortnight. At some point in that period the wife left her rental accommodation and moved into a room in the accommodation of friends from her Orthodox church. M thereafter lived between the husband’s home and the home of his girlfriend.
On 8 June 2010 the matter was listed for undefended hearing. On that date the husband attended and said that he wanted to defend the proceedings. The matter was listed on 7 July 2010 as to readiness and on that date was listed for final hearing over 2 days commencing on 13 September 2010.
Credit and Submissions
The evidence of the witnesses
The only witnesses called for cross-examination were the parties and their sons.
The wife was not successfully challenged in cross-examination. Her written evidence contains some apparent inconsistencies. In her primary affidavit she said that the parties separated in October 2004 and that the parties considered the marriage over some time in 2006. She was asked about that during cross-examination and explained that the parties were spending some time together over that period but that by 2006 the marriage was definitely over.
The husband was a poor witness. English is not the husband’s first language and he gave his evidence (and otherwise took part in the hearing) through an interpreter in the Russian language. Even allowing for the artificiality of translation, during cross-examination the husband was argumentative and was reluctant to answer questions.
During cross-examination the husband was asked about his receipt of the wife’s Case Outline document, said to have been sent to him by email on the Saturday immediately preceding the trial. He responded to the effect that he did not have an email address and said “I never use internet, never.” Later in his cross-examination the husband was asked a question to the effect: “You told the court before lunch that you never used the internet.” And he responded, forcefully “I don’t use the internet, no.” On 7 November 2008 an email[5] was sent by the husband ([…]@gmail.com) to the wife’s solicitors in the following terms (formal parts omitted):
“I refer to your letters dated 29 May 2008, 13 June 2008, 22 July 2008, 5 November 2008.
As I have already stated, in order to process your request I need the following information:
1. The exact period of time your client, [the wife] lived in Queensland in 2003 – 2004.
2. The reason she moved to live in Queensland in 2003.
Could you please forward your reply to my email address shown above as soon as possible?
Due to the fact that I am about to travel to Belorussia (medical treatment) I wish all correspondence regarding the matter to (sic) sent to my email address only.
Furthermore, my son [M] said to me that on 5 November 2008 you contacted him and talked to him in a rude manner (forcing him to persuade me to resolve the matter peacefully). I consider such conduct to be totally inappropriate. Therefore, I specifically request (sic) to stop telephoning me or my children. All information are (sic) to be in writing.
Should you have any quires (sic) regarding the matter, please contact me at any time convenient for you (email only).”
[5] Exhibit 5.
A letter[6] dated 13 November 2008 was sent by the husband to the wife’s solicitors. The letter included the following sentence:
“As I already mentioned all correspondence regarding the matter is to be sent to my email address.”
[6] Exhibit 1.
Having previously insisted that the only form of communication with him was to be via email, it seems perverse that the husband would insist that he never used the internet and did not have an email address. It might be that the nuances were lost in translation. The husband went on to say that a friend had helped him with the emails.
It became apparent that in the husband’s mind, the parties separated in 2001 and he feels that that his accountability to the wife (and to the Court) about financial matters ended at that time. He answered many questions in cross-examination to the effect – “that is a strange question”. He initially refused to answer questions that he felt, fell outside certain boundaries. I had to direct him to answer various questions. For example, to reveal the name of his brother in Belarus. The husband proved himself almost entirely incapable of making any concessions in favour of the wife. Thus although he worked in paid employment for long hours for much of the marriage, when he was asked about the wife’s contributions by way of cooking, cleaning and caring for the children, he would only refer to his own contributions of those types. If learned counsel for the wife wanted information about the wife’s contributions, the husband suggested that he should ask the wife. It was put to the husband that the wife did something and he conceded, to the effect: “she probably did”.
Sadly, the parties’ sons are witnesses in the case. M swore an affidavit for each of his parents. The affidavit he swore for the wife was not challenged by the husband – that is to say, M was not required by the husband for cross-examination. However, he was required for cross-examination on behalf of the wife in relation to an affidavit he prepared for his father. M attended at Court on the first day of the hearing but, without any explanation, not on the second. He spoke to his mother by telephone on the middle evening of the trial and told her that he would not attend at Court on the second day. Neither of his parents could contact him by 2.15 pm on the second day. On the basis that his evidence could no longer be tested, I excluded the affidavit he swore for his father on 25 March 2009. It is consistent with various statements made by the parties and fact of M’s absence on the second day of the hearing, that M felt very uncomfortable in being called to give evidence, let alone by both of his parents.
V Vernov was cross-examined. He was not a credible witness. At one point V looked towards his father while giving evidence, as if he sought assistance or support with his testimony. He was argumentative and, like his father, on several occasions met questions with his opinion that the topic was not relevant to the proceedings. V was not an effective corroborative witness. Indeed, his evidence directly contradicts that of his father in relation to the way in which the proceeds of the W property sale were withdrawn from V’s bank account. The husband was asked: “did you go to the bank with [V] to get the money out?” and he responded: “yes”. It is V’s evidence that he drove himself to the local Branch of the Commonwealth Bank; that his father was not present; that he withdrew $142,488 in cash; that he put the cash into his bum bag and drove away. At first he said that he drove home but then that he went elsewhere. He said that he later gave the money to his father and that at that time or at some time or times thereafter, his father gave some of it back to him. V wore the same bum bag to Court. It was a tapered bag on a belt and was about 30 cms by 15 cms in size. It was put to V that $142,000 would not fit into the bag and he responded to the effect that it would and did. V was a bit hazy about some of the details. In an effort to anchor the events in the mind of the witness, counsel asked him whether he had carried similar sums in cash on other occasions. In what I hope was bravado, 20 year old V declared that he had. On one such occasion his friend had asked him to mind about $100,000 for part of a day, to avoid the money being stolen. V was told that his father had given different evidence about the occasion of withdrawing $142,488 from his bank account and he said that his (V’s) evidence was correct.
I accept that like his older brother, by being called to give evidence in these proceedings, V too was put in a very difficult position.
Submissions
The written submissions on behalf of the wife are:
Assets
Former matrimonial home at [F] $290,000.00
Property at [P] $350,000.00
Husband’s motor vehicle and contents $4,500.00
Wife’s superannuation $23,874.00
Add-backs
Husband’s drawdown from mortgage (W’s aff, Annexure “I”) $20,000.00
Sale proceeds of [W] property (W, p.32, Annexure “H”) $142,488.00
Proceeds of sale of [L Street](W, p.20) $200,000.00
Total assets $1,030,862.00
Liabilities
Mortgage on [P property] $257,000.00
Wife’s Visa $15,000.00
Total liabilities $272,000.00
Net assets $758,862.00
E. OUTLINE OF SUBMISSIONS
Contributions
1. The parties married in 1983, some 26 years ago.
2.Separation occurs in October 2006 but parties continue to live under the one roof under June 2008.
3.The parties had nil assets when they arrived together in Australia in October 1997 and the assets have been accumulated since then.
4.The wife has engaged in paid employment at most times during the marriage (p.12).
5.The parties have raised two children. At various times the wife was solely responsible for the care of the children when the husband was working away from home and at other times the wife has been primary carer of the children.
It is submitted that contributions would be assessed as equal provided the sum sought to be added back to the pool of assets by the wife, are in fact added back.
If such sums are not added back, the wife would seek to vary her submissions on the question of contribution.
Section 75(2) factors
1.The husband continues to work in his business.
2.The wife has a back problem meaning she is unable to engage in paid employment.
3.The husband has failed to disclose his financial position in a full and frank manner.
There should be an adjustment to the wife of up to 10%.
F.ORDERS SOUGHT BY THE WIFE AND THE EFFECT OF THOSE ORDERS
The wife seeks orders that she retain the property at [P] unencumbered and her superannuation. This would place the wife in the position of receiving $373,874.00 worth of assets, less her Visa debt at $15,000.00.
Thus she would receive net $358,874.00.
This represents 47% of the net pool at $763,862.00.
This amount is clearly lower than the amount to which the wife contends she is entitled, having regard to her contributions and s.75(2) factors. The wife, however, is fearful of the husband and will accept the amount as sought.
It is sought that the husband be ordered to discharge the mortgage over the [P] property within two (2) months, failing which the [F] property is to be sold, and from the proceeds of sale the [P property] mortgage discharged and the husband to retain the proceeds.
The husband did not provide written submissions.
The approach in proceedings under section 79
The case law reveals that there is a permissible approach to the determination of an application brought pursuant to the provisions of s 79. That approach involves four inter-related steps. First, I am to make findings as to the identity and value of the property, liabilities and financial resources of the wife and husband at the date of the hearing. Second, I should identify and assess the contributions of the wife and husband within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the wife and husband expressed as a percentage of the net value of their property. Third, I should identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the wife and husband established at step two. Fourth, I should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case. [7]
[7] This summary of the effect of the authorities is paraphrased from the comments of the Full Court in In the Marriage of Hickey (2003) 30 Fam LR 355 at 370.
There is no mention of steps in section 79 but it is convenient to approach the exercise of discretion in a structured way. The Full Court has supported such an approach.
The property of the wife and husband at the date of the hearing
The Court is required to make a finding as to the property of the wife and husband. That involves identifying assets, liabilities and financial resources and their values.
There are circumstances whereby assets are included in the list for division although they no longer exist. The same logic would apply to the exclusion from the relevant list of liabilities, debts that do exist at the date of the hearing. In the Marriage of Omacini (2005) 33 Fam LR 134 the Full Court noted:
[30] To date, three clear categories of cases have emerged where the court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees. In In the Marriage of DJM and JLM (1998) 23 Fam LR 396; (1998) FLC 92-816; [1998] FamCA 97 the Full Court said at [11.6]:
[11.6] For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.
(b) Where there has been a premature distribution of matrimonial assets. In In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at Fam LR 509; FLC 81,654:
In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.
(c) In the circumstances outlined by Baker J in In the Marriage of Kowaliw (1981) 7 Fam LN N13; (1981) FLC 91-092 at FLC 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.
Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under s 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.
That is not to say that the Court should struggle to find bases for add-backs. In an unreported decision the Full Court comprising Nicholson CJ, Ellis & Kay JJ in C and C [1998] FamCA 143 said:
“Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.”
Here the parties were not able to settle a joint balance sheet.
At the commencement of her oral evidence the wife revealed that on the Friday prior to the hearing she had been paid about $8,000 in the form of a redundancy payment. Subsequently a document[8] was tendered evidencing a payment of $8,444.05. The payment was largely for annual leave but $3,654.84 was by way of a tax free, redundancy payment. The matter was not later referred to in submissions on behalf of either party but it is proper that that sum be included in the list of assets.
[8] Exhibit 9.
The issues to be determined are:
Proceeds of sale of the property at L Street
The husband claims that, in addition to other funds, he invested $200,000 from the proceeds of sale of the L Street property with G Finance Pty Limited and the investment was lost. The wife claims that the husband was reckless in the sense discussed in Kowaliw & Kowaliw, with matrimonial funds and that as a result, $200,000.00 should be added to the list of assets as a notional asset in the hands of the husband.
In July 2003 the husband sold the property at N Street. It is the husband’s case that he invested $200,000 with an entity variously described in the husband’s material as G or G Finance or several other names. It is his case that he relied on the assistance of an intermediary and that he gave two credit cards or the details of two credit cards to G Finance and that G Finance drew on those credit cards in some thousands of dollars. It is the husband’s evidence that although he received dividends from his investment ultimately the body of the invested sum was lost and he has variously reported in excess of $300,000 and in excess of $400,000 to have been lost in that investment.
It is the husband’s evidence that his investment after the sale of the N Street property was not his first investment with G Finance. There is in evidence a receipt dated 28 January 2003 from G Finance Pty Ltd for $50,000. In cross-examination the husband said that those funds were moneys provided to him by his sister and by others associated with her. Exhibit 7 also incorporates a copy of a loan agreement between the husband and G Finance Pty Ltd dated 28 January 2003 whereby the husband agreed to lend $50,000, at 3% interest per month, with the money to be held in an account of K Pty Ltd, a company recorded as being related to or associated with G Finance Pty Ltd. Also part of Exhibit 7 is a further Loan Agreement dated 4 October 2005 whereby the husband agreed to lend $200,000 to G Finance Pty Ltd at the same interest rate for 12 months. The Exhibit also includes a cover sheet from a Fraud Report Form which is undated but has a Police reference number …. The details of the report are not in evidence.
Exhibit 4 is a Witness Statement by the husband to Police dated 24 March 2010, in the matter of “[G Finance] Pty Ltd – Fraud”. In that statement the husband declares to the following effect:
· in January 2003 a friend of his, Mr KV, had advised him to invest money into a company called G Pty Ltd;
· on 25 February 2004 he received a cash sum of $18,000 being interest on his invested $50,000 and that he used that money for day to day expenses and a few overseas trips to Belarus;
· on that same date he re-invested the original $50,000 and recalls signing a further Loan Agreement but could not locate that document;
· in March 2004 G Finance Pty Ltd said that they would need his credit cards to manage his investments properly and that they would manage all the repayments and would return the cards as soon as the Agreement expired. He said that they gave him a document which he signed which said something like “I [the husband] give authorisation for [G Finance] Pty Ltd to make purchases on my behalf using my Commonwealth Credit Card No. (the number is set out in the statement) with a limit of $20,000”. The husband said “they took a photocopy of my credit card to keep it on file”. They gave him a second document which said the same thing but in respect of another Commonwealth Bank Credit Card, which he says had a limit of $15,000;
· he did receive $1,760.00 on 29 April 2005 and $1,884.00 on 30 April 2004 being interest on the credit card with the $15,000 limit;
· he received interest payments on the credit card with the $20,000 limit but he does not recall how much;
· on 28 February 2005 he received a further $18,000 being interest invested on the $50,000 and he says that on the same date he agreed to re-invest the original $50,000;
· he recalls signing a further Loan Agreement but cannot locate that document;
· he was under the impression that the company had complied with the Agreements and that they were paying a very good dividend in the form of interest and so he decided to sell the L Street property and invest the proceeds;
· the husband sold his house at L Street for $207,000 and on 4 October 2005 he invested $200,000 for a 12 month period with the same company;
· on 28 February 2006 he received a further cash sum of $18,000 being interest on his $50,000 and he used those monies (as he did with all of the interest paid), for day to day expenses and did not bank the money;
· he then re-invested the $50,000 and recalls signing a further Loan Agreement;
· In October 2006 the husband received dividends of $72,000 from the $200,000 invested in October 2005. On that date he told the company he wanted to re-invest the $200,000 for another 12 months and he signed a further Agreement but he cannot find that agreement as at the date he signed the statement;
· G Finance Pty Ltd disappeared in 2006, not long after the husband received the last payment of $18,000 in February 2006. The husband had been trying to contact the company but their phone numbers had been disconnected;
· the husband approached his friend Mr KV who told him that he did not have anything to do with the company and that the husband would need to speak to the General Manager of the company, Ms BN. Mr KV gave the husband an address for her on the Gold Coast. The husband spoke to Ms BN and was told by her that she was not responsible for the company, that she was just an employee and that if he had questions he needed to speak to Mr S. Ms BN gave him an address for Mr S but the husband could not locate anybody at that address;
· the husband again contacted his friend Mr KV and was told that he (KV) and his children had lost money in a similar way. The husband says that his friend passed away in 2009;
· the husband says that, through another friend, he instructed solicitors to pursue the lost funds. He understands that a firm of Lawyers took instructions on his behalf and he says that he paid $10,000 in May or June 2007 for the services of those lawyers. The husband says that he has yet to learn of any outcome of those instructions and that was in 2007. The husband told the police in March 2010 in the Statement that G Finance Pty Ltd owed him a total of $375,000.
Conclusion
In Kowaliw and Kowaliw (1981) FLC 91-092, Baker J said:
“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.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.”
In my view the husband has acted negligently, if not recklessly, with the proceeds of sale of the L Street property. The investment opportunity presented to the husband by his friend was at best, highly speculative. The interest rate offered falls into the “too good to be true” category. And so it proved.
On the other hand I am satisfied that, in the husband’s mind, those proceeds were not matrimonial property. I am satisfied, nevertheless, that the L Street and N Street properties and therefore, the proceeds of their sale, were matrimonial property. Matrimonial funds went to purchase them and the parties’ contributions continued long after 2001. The husband borrowed about $10,000 less than the purchase price when he bought those properties. The only available inference is that matrimonial assets went to make up the difference and to meet the purchase costs. Further, there is no doubt that the wife contributed to the marriage after 2001. She maintained paid employment and during 2003-2004, for example, she was the only parent on hand for most of the time, at the W property, where the boys were largely living and where V was still at school.
Should I add back $200,000? Not all of the $200,000 was lost. Although nothing is left of the $200,000 plus, proceeds of the L Street property, it is the husband’s evidence that he received dividends (interest) in the sum of $72,000 on the investment prior to G Finance Pty Limited going under. The husband says that she spent those moneys on living expenses and the travel and medical costs associated with his cancer treatment in Belarus. The authorities cited in Omacini would have moneys applied to living expenses and other necessary expenses exempt from being added back, in the normal course.
Unlike the proceeds of the W property sale, there is no evidence that the husband was on notice of the wife’s claims in relation to those proceeds. The husband was not asked to give an undertaking not to disburse the moneys nor was he threatened with injunction proceedings. I appreciate that it is likely there was no such notice because of a failure of the husband to notify the wife, but there it is.
The facts I have recited could justify an add-back in the hands of the husband. On the other hand it is not suggested that the husband retains the missing funds. There is evidence that lends support to the husband’s contentions about an ill-fated investment. There are documents evidencing at least some advances to G Finance Pty Limited at or about the relevant time. It is unfair that the wife suffer for the husband’s foolish investment. However, that was the way the parties conducted their financial affairs, with the husband managing things. On balance the better course is not to add back $200,000 representing the proceeds of sale of the L Street property.
Sale proceeds of W property
The wife claims that the net proceeds of sale of the property at W, QLD in the sum of $142,488.00 should be added to the list of assets as a notional asset in the hands of the husband. The husband claims that he applied those moneys to various expenses, including the expense of travel to Belarus, of medical treatment he received there and expenses associated with the parties’ sons, including buying motor vehicles for them.
The W property was bought in November 2003. It was bought in the names of the parties and of their son, M. They obtained a loan from the Commonwealth Bank to complete the purchase. It is the wife’s evidence that the husband insisted that the family live in the property for 12 months after purchase. The husband denies that. I accept the wife on this issue. The issue was not raised during her cross-examination and the husband is not a credit worthy witness. The wife and V moved into the property and within 2 months, the husband brought M up to join them. The husband continued to live in the F property but he visited on at least two occasions, staying for a period while he undertook some work at the property. In October 2004 the husband assisted the wife and V to move back to Sydney. M stayed longer, returning to Sydney in the following year.
On 29 May 2008 the wife’s solicitors wrote[9] to the husband. The letter included the following:
“…
Sale of [W property]
In the meantime, we are instructed that you have placed the property located at [W], Queensland on the market for sale by private treaty. We have notified the real estate agent that the property is subject to a family law property settlement and therefore the sale proceeds will need to be held in trust pending the parties reaching agreement in relation to the division of matrimonial property or the outcome of legal proceedings.
Would you kindly confirm in writing that you will not sell or otherwise deal with the subject property or any other matrimonial asset without out client’s prior written consent. In the event that we do not have confirmation in writing from you and your real estate agent and/or your solicitor in relation to this undertaking, particularly in regard to the [W] property, within seven (7) days from the date hereof, we have no alternative but to commence proceedings and apply for injunctive relief without further notice to you.
[9] Exhibit 5.
On 13 June 2008 the wife’s solicitors wrote[10] to the husband and the letter included the following:
“We refer to our letter of 29 may 2008 and have not received a reply to date. Would you kindly confirm in writing that you will not deal with the sale proceeds of the property at [W] without our client’s prior written consent.
We look forward to hearing from you or your legal representative by the close of business on 18 June 2008.
[10] Exhibit 5.
On 17 June 2008, B Real Estate wrote[11] to the wife’s solicitors in the following terms:
“[VERNOV] FAMILY LAW MATTERS – PROPERTY SETTLEMENT: [W PROPERTY]
We confirm receipt of your letter dated 13th June 2008. We undertake not to distribute or otherwise deal with the sales proceeds of the subject property without your client’s prior approval.
We will also keep you abreast of the progress in relation to the sale and provide you with the contact details of the conveyancing solicitor for the subject property.
[11] Exhibit 6.
On 17 October 2008 settlement occurred of the sale of the W property. The records[12] of the Conveyancing Firm reveal that on settlement, the husband instructed that firm to pay the net proceeds of the sale to an account with the Commonwealth Bank in the name of V Vernov. Annexure H to the wife’s affidavit reveals that at 2.15pm on 17 October 2008 $142,488.00 was deposited into V’s account.
[12] Exhibit 8.
It appears that C Real Estate and not B Real Estate had carriage of the sale. That is to say, either the husband changed real estate agents or he had listed the property with more than one agency.
It is not suggested that the husband gave prior notice to the wife’s solicitors of the settlement.
On 7 November 2008 an email[13] was sent by the husband to the wife’s solicitors in the following terms (formal parts omitted):
“I refer to your letters dated 29 May 2008, 13 June 2008, 22 July 2008, 5 November 2008.
As I have already stated, in order to process your request I need the following information:
1. The exact period of time your client, [the wife] lived in Queensland in 2003 – 2004.
2. The reason she moved to live in Queensland in 2003.
Could you please forward your reply to my email address shown above as soon as possible?
Due to the fact that I am about to travel to Belorussia (medical treatment) I wish all correspondence regarding the matter to (sic) sent to my email address only.
Furthermore, my son [M] said to me that on 5 November 2008 you contacted him and talked to him in a rude manner (forcing him to persuade me to resolve the matter peacefully). I consider such conduct to be totally inappropriate. Therefore, I specifically request (sic) to stop telephoning me or my children. All information are (sic) to be in writing.
Should you have any quires (sic) regarding the matter, please contact me at any time convenient for you (email only).
[13] Exhibit 5.
Thus there is no doubt that the husband received, among others, the letters of 29 May 2008 and 13 June 2008.
The husband was asked in cross-examination how the proceeds of sale came to be paid into V’s bank account. He responded that “that was my mistake”. He was asked how he made that error and responded to the effect: “because on a piece of paper there was written the names and numbers of accounts for myself and for my son and they (presumably the conveyancer) copied down the wrong account number.”
The husband said that he always carries his sons’ accounts details. It was put to the husband that given the instructions revealed in the conveyancer’s file, to pay the proceeds into V’s account, this was a deliberate effort to hide money from his wife, and not a mistake. The husband answered, perhaps not unresponsively, to the effect that he considered this money to be his.
The evidence as to how the funds came to leave V’s account is also confusing. The husband was asked: “did you go to the bank with [V] to get the money out?” and he responded: “yes”. As is referred to above, V was asked about the same event and said that he (V) went to the bank alone. He was told that his father had given different evidence and he said that his (V’s) evidence was correct.
The husband swore a Financial Statement on 26 March 2009. At Part M he was required to set out the details of property he had disposed of in the period 12 months prior to separation and since. The husband did not complete that part. At question 57 in Part L the husband revealed a Financial Resource in the following terms:
“Money left from selling of the [W] property $80,000”
The husband was asked in cross-examination where that money was held at that time and he would not answer the question. The impression I gained is that despite the clear meaning of the words used by the husband in answering question 57, the husband somehow meant to say that the money was all spent at that time. That might be only be an impression. That begs the question of why he completed that part of the form, in that way.
The wife was on the title of the property and contributed to it, if only by having her name on the mortgage.[14] At all relevant times the husband was on notice that the wife wanted to make a claim on the proceeds of sale and required that they not be disbursed without notice to her. In the sense referred to in In the Marriage of Townsend, the husband alone had the benefit of those funds. I will add back $142,488 into the list of assets as an asset in the hands of the husband.
[14] Calverley v Green (1984) 155 CLR 242.
I note that the husband owns three motor vehicles. I am not sure how the husband’s motor vehicle and contents came to be agreed at $4,500, but there it is. At least one of the vehicles may be used by V and or M.
I find that the assets are:
Assets
Value
Former matrimonial home at F
$290,000
P property, QLD
$350,000
Husband’s motor vehicle and contents
$4,500
Wife’s redundancy payment
$8,444.05
Wife’s Superannuation
$23,874
Add Back interim distribution to husband
$142,488
Total
$819,306.05
Liabilities:
The relevant liabilities are:
Liabilities
Amount
Mortgage to the Commonwealth bank of Australia secured on the P property[15]
$242,098.85
Wife’s Commonwealth Bank Visa card
$15,000
Total
$257,098.85
[15] Balance as at 30 June 2010 per exhibit 13.
Net assets
The net assets (including superannuation) have a value of $562,207.20 ($819,306.05 - $257,098.85).
Financial Resources
The parties disclose no financial resources.
Global or Asset by Asset
As to whether the Court should apply the considerations in section 79(4) to the assets globally or asset by asset, the authorities have it that the former approach is preferred, in appropriate circumstances either approach is permissible and sometimes the asset by asset approach is best. See In the Marriage of Lenehan (1987) 11 Fam LR 615; In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712; In the Marriage of Zyk (1995) 19 Fam LR 797.
An exception to the preference for a global approach has been identified in In the Marriage of Coghlan (2004) 33 Fam LR 414. However, in that decision the majority of the Full Court allowed that superannuation may be included in the list of property drawn up as “the first step” in the determination of proceedings under s 79, (the global approach) whether or not a splitting order is sought in those proceedings. The Full Court suggests that that:
“… approach could be adopted where the parties agree that it should be adopted, or where the court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the court to conclude that this would be an appropriate approach.”
Here the case was argued globally on behalf of the wife. The husband’s case was argued asset by asset[16] but he did not seek to single out the wife’s superannuation interest. There is a modest pool of assets and as is often the case, the direct contributions to each asset were made largely by only one of the parties. Thus the wife directly contributed to her superannuation and to her redundancy. The husband directly contributed to the real estate. In my view the most appropriate course is to deal with the assets globally for the purposes of section 79(4).
[16] See the first paragraph under the heading Contributions on page 4 of the husband’s affidavit sworn and filed 5 July 2010.
Contributions
The obligations placed on the Court by s 79 call for an assessment of the respective contributions of the husband and wife. The manner of assessing contributions has been the subject of previous decisions. The contributions of a parent and homemaker are to be assessed, not in any merely token way, but in terms of their true worth to the building up of the assets[17]. There are said to be risks in taking an overly technical approach to the assessment of the respective contributions of the parties in that the Court can become involved in questions of the quality of contributions which go far beyond the real world expectations of parties[18].
Contributions
[17] Mallett v Mallett (1984) 9 Fam LR 449; In the Marriage of Ferraro (1992) 16 Fam LR 1.
[18] In the Marriage of Shewring (1987) l2 Fam LR 139.
Section 79(4)(a) Contributions
Financial contributions, both direct and indirect were made by each of the husband and wife. The parties had no substantial assets at the commencement of their relationship.
Each of the parties had paid employment during the marriage. The wife worked as a Teachers in Belarus and in various housekeeping roles in Australia. The wife says that the husband worked as a truck driver in Belarus. The husband says that he started working as a labourer/plasterer upon his arrival in Australia. As at the date of the hearing he is self-employed through an entity called Vernov[19], engaged in the construction industry.[20] I gather that he has been so employed for a number of years. The wife took maternity leave for the birth of the children. The husband made some reference to periods he had out of paid employment. Otherwise, there is no evidence from which I can identify the periods during which either of the parties did not have paid employment. I do not know how much they earned while in paid employment.
[19] Registered business name – Annexure A to husband’s affidavit sworn 27 March 2009.
[20] Paragraph 11 of the husband’s Financial Statement.
The wife contributed to the purchase of the W property. It was bought in November 2003 in the names of the parties and of their son, M. M has repudiated any interest in the property. The parties and M obtained a loan from the Commonwealth Bank to complete the purchase. In Jacks and Jacks [2007] FamCA 185 Kay J heard an appeal from a Federal Magistrate and was critical of the assessment of contributions at first instance wherein both the initial payment and the mortgage instalment payments were counted as contributions. His Honour said:
42.I refer by way of analogy to the proper approach in determining the equities of the parties in a joint venture to that described by the High Court in Calverley v Green (1984) 155 CLR 242 where the majority of the court, Gibbs CJ, Mason, Brennan and Deane JJ said the extent of a beneficial interest of a party must be determined at the date of purchase, and the fact the mortgage debt was repaid by one is not relevant. It is erroneous to regard the payment of a mortgage debt as payment of the purchase price.
43.One half of the moneys that were jointly borrowed and applied towards the purchase price were held to have been provided by the respondent in that case. It was a case in which there was a purchase price of $27,000, $9000 came from one party and the other $18,000 was jointly borrowed. On a proper analysis, it was not held that the person who put the $9000 had put all the money in and therefore should get all the money out; but, on a proper analysis, it was held the person who put in the $9000 had also put in a further $9000 by way of borrowings and therefore should get two‑thirds of the value of the property.
Section 79(4)(b) contributions
This provision deals with direct and indirect non-financial contributions other than those made in the form of parent and homemaker contributions. There is scant evidence about such contributions. I gather for example, that work was undertaken by the husband at the W property. Neither of the parties gives evidence about the nature or extent of that work.
Section 79(4)(c) contributions
This provision deals with contributions to the family including contributions in the form of homemaker contributions and contributions to children of the marriage.
The wife says that she was the homemaker and cooked and cleaned and looked after the children throughout the marriage. The wife was not cross-examined about that evidence and I accept it. The conduct of the parties suggests that they thought that the wife had the main parenting role. For example there was a year from 1985 when the parties were separated and M lived with the wife, not with the husband. Similarly in the period 2003-2004 the wife and the boys lived in Queensland and apart from two visits, the husband lived in F.
As far as I can find, the entirety of the husband’s evidence in chief on this issue is as follows:
“Since 2005 (my youngest son was 15 years of age at that time) I have been rising our youngest son. My ex-wife has never provided me or our youngest son with any financial support or any other assistance.
My oldest son (he is 25 years of age) has been living along (sic) since 2005. I also provide him with constant financial support.”
I take it that the second sentence of the first paragraph is intended to relate to the period after 2005.
Conclusion on Contribution
The contention on behalf of the wife, subject to the add-backs she seeks, is that the contributions made by her and the husband were equal. The husband does not specifically address the balance of contributions. He argues for an equal division of the proceeds of sale of the F property. His affidavits are silent as to non financial contributions and only address parent and homemaker contributions made after 2005. That seems to reflect the husband’s view that the critical contributions, if not the only relevant contributions, are direct financial contributions made to the acquisition of real property.
Doing the best I can with scant and summary evidence:
The parties’ cohabitation spanned 18 years and contributions have been made since. The parties made their way to Australia, brought up their sons to majority and they acquired assets. They both had paid employment. It is likely that the husband spent more time in paid employment than the wife. Her employment was interrupted with maternity leave and it is likely that her hours were made to fit around the needs of the family. It is likely that the husband earned more than the wife. I am sure that non financial contributions were made but there is no meaningful evidence about them. The wife was the main homemaker and the primary care giver to the children.
Neither party is critical of the efforts made by the other during the marriage. Subject to the arguments about events after 2004, there is no suggestion that either of the parties diverted matrimonial assets. On the basis of the evidence as it stands, I find that the contributions were equal.
The other matters in Section 79
Once contributions have been assessed, the other factors in section 79(4) need to be considered. They are:
Section 79(4) (d)
Pursuant to s 79(4)(d) I am required to take into account the effect of any proposed orders on the earning capacities of the husband and wife. There is no relevant effect.
Section 79(4)(e) - Section 75(2) Factors
The relevant matters in Section 75(2) would seem to be paragraphs (a), (b), (j), (m) and (o).
(a) the age and state of health of each of the parties;
First, as to the age and state of health of each of the wife and husband. They are 48 and 55 years of age, respectively. There is little independent evidence about their health.
The wife contends that she has poor health arising out of a workplace injury suffered in 2007. The wife was in receipt of workers compensation payments from about January 2008. At first she continued to work full-time but on light duties. As the pain (from her lower right back injury radiating to her right leg) continued she reduced her work days from five to four and then to three days a week. She stopped working in December 2008. In February 2009 she underwent surgery. She underwent a microdiscectomy and rhizolysis at the L5/S1 levels[21]. After the operation the wife continued to experience pain. From November 20008 to December 2009 she received periradicular injections in her lower back. The wife takes medication for her back which costs about $25 per week and uses a TENS machine for daily nerve stimulation. She has an appointment to see a lawyer about making a claim. The wife has an appointment with a surgeon in July 2011 but may attend on the surgeon earlier if her condition worsens significantly.
[21] Annexure K to the wife’s affidavit sworn 17 December 2009.
The husband contends that was diagnosed in Australia with thyroid cancer. Exhibit 16 is a copy of a pathology report from Dr O. The report followed a thyroid ultrasound performed on 18 May 2006. The report notes three solid nodules on the left lobe of the thyroid and a marked increase in vascular flow. The report writer says that the findings are consistent with a multinodular goitre. I was not taken to any reference in the report consistent with a diagnosis of cancer. It may be that the husband had cancer but there is no medical evidence to that effect.
The husband says that since 2006 he travelled to Belarus for treatment that did not involve an operation. The husband says that he suffered stress, anxiety and fear due to the cancer.
The husband contends that these proceedings added to his stress and anxiety. He said that he felt unwell during the hearing and said that he thought symptoms of his cancer may have come back.
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
As at the date of the hearing the wife had no income. The wife is not in receipt of Centrelink benefits. It may be that that relates to a potential compensation claim. On the Friday prior to the hearing the wife had been paid $8,444.05 by way of redundancy payment.
A reading of the wife’s Financial Statement[22] would suggest that she lives alone. However, in her cross-examination the wife said that she lived in rented premises until March 2010 and since then has lived, free of charge, in a room in the premises of church friends. There is no evidence about the value of the support provided to the wife by her friends.
[22] Part E, question 17.
Although the arithmetic in the wife’s Financial Statement somehow adds $20 to the total, the wife’s expenses are as follows:
Expense
Amount
Life Insurance – Comminsure
$2.31
Visa payments – St George Bank
$50.00
Other expenses.
$306.00
Food
$100.00
House supplies
$24.00
Electricity
$25.00
Telephone
$12.00
Clothing and shoes
$20.00
Medical dental and optical
$10.00
Holidays
$10.00
Chemist pharmaceuticals
$30.00
Books and magazines
$3.00
Gifts
$10.00
Hairdressing, toiletries
$12.00
Expenditure for children
$50.00
Sub-total
$306.00
Total
$358.31
Of those expenses, only $50 is paid for the benefit of the children. The wife says that she has receipts (she did not say what for) and that she pays for meals with them.
Evidence about the wife’s assets and liabilities is set out earlier in these reasons.
As to the wife’s earning capacity: she says that she suffered a workplace injury in 2007. She deposes to working five days a week after the injury, then four and most recently three days a week. She last engaged in paid employment in December 2008. On or about 31 August 2010, the wife’s employer advised[23] her that she was being made redundant. The endorsement on her redundancy schedule[24] includes a provision for salary in the form of workers compensation payments. The wife said she had an appointment to see a solicitor on the Tuesday following the hearing. I gather that the appointment was in relation to a potential claim for damages or compensation for a workplace injury. She was to see her solicitor before she went “for surgery”.
[23] Annexure A to the wife’s affidavit sworn 10 September 2010.
[24] Exhibit 9.
The husband’s financial circumstances are reported in his Financial Statement sworn 26 March 2009. It may be that they are out of date. The husband’s income is declared at $1,000 per week in salary, $320 per week in rent and $1,000 per week in income from the business Vernov. In the Financial Statement the husband totals those amounts to $1,320 per week. I take it then, that the husband takes one lot of $1,000 per week in income from his work in the business. In his Financial Statement the husband said that he lives with V who he says, earns $280 per week. V was cross-examined and said that his occupation was as a Casual Worker. V said that his brother also lives with him and his father. There is no evidence that V or M contribute to the expenses of the husband’s household. The husband asserts that the boys do not benefit from his expenditure. It is highly unlikely that those propositions are true. If they live with him, the boys must benefit from the expenses paid by the husband.
Although the arithmetic in the his Financial Statement somehow brings the total to $1,250, the husband puts his expenditure as follows:
Expense
Amount
Income tax
$200.00
Mortgage payments to the Commonwealth Bank
$460.00
House insurance on the P QLD property – Commonwealth Bank
$10.00
House insurance on the F property – Commonwealth Bank
$10.50
Motor vehicle insurance – 1997 Ford Falcon motor vehicle – Commonwealth Bank
$7.00
Motor vehicle insurance – 1996 Ford Falcon motor vehicle – Commonwealth Bank
$12.00
Motor vehicle insurance – Ford Econovan motor vehicle – Commonwealth Bank
$7.00
Motor vehicle registration – 1997 Ford Falcon; 1996 Ford Falcon & Ford Econovan
$45.00
Total of all other expenditure - estimated
$500.00
Total
$1251.50
There is no evidence as to the husband’s earning capacity, save to say that he continues in his trade.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The parties’ sons are over 18 years.
(d) commitments of each of the parties that are necessary to enable the party to support:
himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
I have set out the evidence in relation to the expenses of the husband and the wife.
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia,
and the rate of any such pension, allowance or benefit being paid to either party;
Neither party receives an income tested benefit. The wife has a modest superannuation interest.
(g) where the parties have separated or the marriage has been dissolved, a standard of living that in all the circumstances is reasonable;
There is no evidence in relation to the standard of living of the husband and wife during the marriage. They engaged in some overseas travel.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
There is no probative evidence of either the husband or wife planning further study or intending to set up in a new business.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
In the orders they seek the parties propose that the secured creditor be paid out or that the debt be refinanced.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
The wife undertook the main homemaker and parenting role. The husband has been able to establish a successful business.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
There is no evidence about this issue.
(l) the need to protect a party who wishes to continue that party's role as a parent;
This is not a relevant consideration.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The wife lives rent-free with church friends. The husband lives with M and V. There is no evidence that they make any financial contribution to the household expenses.
(n) the terms of any order made or proposed to be made under section 79 in relation to the property of the parties;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
There is no child support assessment.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
Since May / June 2008 the husband has had the use of the main assets of the marriage, while for a period at least, the wife was required to pay rent.
The husband invested $200,000 of matrimonial funds and lost all but $72,000 of that sum.
(p) the terms of any financial agreement that is binding on the parties.
No binding agreement was made between the husband and wife.
Section 79(4)(f)
There are no relevant orders made under the Family Law Act 1975.
Section 79(4)(g)
As I have set out above, there is no child support assessment.
Conclusion
It is submitted for the wife that there should be a 10% adjustment in her favour. However, the orders she seeks, based on the add-backs sought, represent 47% of the revised pool of assets. The wife has not been successful with both add-back arguments. I take it then that she presses for an adjustment.
As I have referred to above, the husband does not argue his case on the basis of percentage contributions and adjustments. I take it that he would oppose an adjustment. The matters that are relevant are:
·The husband is 55 years of age and the wife is 48. They have each been involved in employment that requires physical activity and that alone would affect the duration of their working lives;
·The husband says that he has had compromised health but there is no current medical evidence in his case. The wife has had back surgery, receives ongoing medical treatment, and may face further surgery. She has not had paid employment since November 2008 and it is likely that results from a workplace injury;
·The husband continues in paid employment and the wife does not. This issue is complicated by the fact that the wife anticipates making a claim for compensation for the loss of her earning capacity. There is no evidence about the prospects of such a claim but her circumstances have already been accepted as warranting periodic workers compensation payments; and
·The parties each had accommodation in matrimonial properties, at least until the wife left the F property in May or June 2008. Since that time the husband had the use of matrimonial assets. He made no effort to account to the wife for his application of those assets and lost a considerable sum of money. On the other hand the husband has housed the (now adult) children and has met outgoings associated with the F and P properties.
There should be an adjustment in favour of the wife. Her current financial circumstances are not good but she intends to make a claim. In the meantime I assume that she will need to rely on Centrelink benefits. Neither of the parties is in robust financial circumstances. Even in the context of this case, involving as it does a modest pool of assets, I will make an adjustment of only 2.5% in favour of the wife. Here it represents about $13,844 and will create a differential between the parties of twice that sum.
Just and Equitable
The net assets (including superannuation) have a value of $562,207.20 ($819,306.05 - $257,098.85).
In order to faciliate a division 52.5% to her and 47.5% to the husband, the net assets would be divided as to $295,158.78 to the wife and $267,048.42 to the husband. Of the assets and liabilities the wife has:
Assets
Value
Wife’s redundancy payment
$8,444.05
Wife’s Superannuation
$23,874
Wife’s Commonwealth Bank Visa card
-$15,000
Total
$17,318.05
In order to bring the wife to 52.5% she would receive a further $277,840.73.
Of the assets the husband has the benefit of :
Assets
Value
Husband’s motor vehicle and contents
$4,500
Add Back interim distribution to husband
$142,488
Total
$146,988.00
In order to bring him to 47.5%, the husband should receive a further $120,060.42.
The final distributions to the parties must come from the value of the two properties.
Assets
Value
Former matrimonial home at F
$290,000
P property QLD
$350,000
Mortgage to the Commonwealth bank of Australia secured on the P property[25]
-$242,098.85
Total
$397,901.15
[25] Balance as at 30 June 2010 per exhibit 13.
For reasons that I do not understand each of the parties wants to retain the P property. Unlike the F property, the P property is heavily encumbered. There is no evidence as to why either of the parties should retain the Queensland property. For example, neither of them lives in the property. Assuming that the sale of F property realises a net $290,000,[26] the distribution I have identified would mean that if the wife is to retain the P property she would need to borrow about $72,160. She would receive $277,840.73 from the F property proceeds and would need to pay out the P property mortgage at $242,098.85 and $107,901.15 to the husband (which, with about $12,160 from the F property proceeds would bring the husband to $120,060.42).
[26] In other words that it sells for a figure which represents the costs of sale in addition to the agreed value.
On the other hand, if the husband was to retain the property he would need to borrow about $229,939.58. He would have $12,160 from the F property sale and would need to refinance a mortgage of $242,098.85.
Even on the optimistic assumption I have made about the F property sale, on the basis of their disclosures about assets and financial resources, it seems unlikely that either of the parties could refinance the P property.
As the refinancing task for the wife is more modest than that which faces the husband and because she is not currently in paid employment and therefore in a worse financial position, I will give her the first opportunity to buy the husband out.
As to the form of the orders, neither party wants the F property. Therefore I will not make the orders sought by the wife in relation to that property. The husband occupies the property and it is important that he have an interest in maximising the sale value. I will order that the F property be sold and that the husband receive his settlement from the proceeds. In order that the parties share in the profit or loss resulting from any difference between the agreed value and the net proceeds of sale I will order that the husband receive 120,060.42 / 290,000ths of those net proceeds. I will round that proportion to 41.4%. The balance of the proceeds will go to the wife. Then the wife will have 6 weeks to refinance the P property. If she cannot do that then it will be sold and the wife will receive the first $107,901.15 from the net proceeds and any balance will be divided in the proportions 52.5% to the wife and 47.5% to the husband.
The orders sought by the parties necessarily involve their son, M. He was named as second respondent in the proceedings at one point. His affidavit sworn 27 April 2009 includes:
6.I am aware that my parents are involved in Court proceedings in relation to the division of matrimonial property and do not wish to be involved in those proceedings.
7.I have no entitlements or claim in relation to the [P] property. The property belongs to my parents. They are the beneficial owners.
M is on notice about the proceedings and is aware that orders are sought in relation to the P property. I will give M, as well as the parties, the opportunity to bring the matter back before me in relation to the formulation of the orders.
Conclusion under Section 79
I am left with considerable misgivings in determining this case. Insofar as the husband is concerned his case was poorly made and presented. He chose not to have legal representation and, taking part through an interpreter, was under a considerable disadvantage. For her part the wife was not directly involved in much of the family financial arrangements and therefore was at a disadvantage in identifying the relevant financial history. There is a modest pool of assets and the husband took a preliminary distribution of much of the matrimonial fund. Some of that preliminary distribution is deemed part of his property settlement, largely because he steadfastly ignored his wife’s interests and claims. Doing the best I can the orders I propose will effect a just and equitable settlement of their property.
I certify that the preceding one husband and seventy five (175) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ian Loughnan.
Associate:
Date: 1 October 2010
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Remedies
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Costs
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Jurisdiction
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Procedural Fairness
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