W and W
[2007] FMCAfam 459
•6 July 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| W& W | [2007] FMCAfam 459 |
| FAMILY LAW – Property settlement – $5.3 million pool – claim by husband of special contribution due to intellectual property use for computer gambling – capital gains tax claims – wife primary homemaker and parent – relationship of 10 years at least – what division is just and equitable. |
| Family Law Act1975 |
| Brown (2005) FAMCA 389 Chorn & Hopkins (2004) FLC 93-204 Farnell (1996) FLC 92-681 Figgins (1993) FamCA 688 Goble & Taylor (2002) FamCA 613 Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 JEL & DDF [2000] FamCA 1353 McLay (1996) FLC 92-66 Rosati (1998) FLC 92-804 Stay (1997) FLC 92-751 Townsend (1995) FLC 92-569 Whitely (1992) FLC 92-304 Zyk (1995) FLC 92-644 |
| Applicant: | G D W |
| Respondent: | D W |
| File number: | BRM5013/2006 |
| Judgment of: | Baumann FM |
| Hearing dates: | 28 February & 1 March 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 6 July 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Galloway |
| Solicitors for the Applicant: | KL King & Associates |
| Counsel for the Respondent: | Mr Jordan |
| Solicitors for the Respondent: | Collas Moro Ross Solicitors |
ORDERS
Children’s Matters
Except as agreed to between the parties, that, commencing immediately after school on the Friday immediately following the date of this Order, the children, B J W, born 24 July 1998, and J B W, born 15 October 2001, live with the father G D W for a period of one week, that they then live with the mother, D W, for a period of one week and alternate accordingly thereafter.
During the time the children are in the care of one parent the other parent shall be entitled to contact the children by telephone at all reasonable times.
Notwithstanding the foregoing:
(a)Should Mother’s Day fall on a day when the children would otherwise be in the care of the father then the father is to return the children to the care of the mother no later than 5pm on the Saturday immediately prior to Mother’s Day and the children are to thereafter remain in the care of the mother until the commencement of school the following Monday.
(b)Should Father’s Day fall on a day when the children would otherwise be in the care of the mother then the mother is to return the children to the care of the father no later than 5pm on the Saturday immediately prior to Father’s Day and the children are to thereafter remain in the care of the father until the commencement of school the following Monday.
(c)In the event that the children are not in the care of a particular parent on the birthday of one of the children then that parent shall be entitled to have both children on that child’s birthday for a period of three hours, the actual times to be as agreed to between the parties and failing agreement between the hours of 4pm and 7pm.
(d)In the event that the children are not in the care of a parent on that parent’s birthday then the parent should be entitled to have the children for a period of three hours on that date, the times to be as agreed to between the parties and failing agreement between the hours of 4pm and 7pm.
That each parent will keep the other informed regarding any medical emergency, urgency, or treatment administered to either child whilst in the care of that parent.
That each parent will keep the other informed in respect of the residential address of that parent and land line telephone number at all times, and where possible, provide to the other parent 21 days notice of any change to the current arrangement.
That neither parent will take the children more than a 250km radius outside of the Gold Coast region without first notifying the other parent and, in the event of so doing, shall, where possible ensure that they are contactable at all times by the via a mobile or telephone known to the other parent.
That neither parent will remove the child from the Commonwealth of Australia without the permission in writing of the other parent or by Order of this Court, in the event that a party does wish to travel overseas with the child then that party shall, where possible, provide the other party with thirty days notice of that intention and a copy of the relevant itinerary.
That, save for school periods during which handover is to take place at the children’s respective schools, the father will collect the children from the mother’s residence at the commencement of the time during which they will reside with him and the mother will collect the children from the father’s residence during the time when the children will reside with her.
That each parent shall be restrained from inappropriately physically disciplining the children whilst that child is in that parent’s care.
That each parent shall be restrained from denigrating the other parent to the children or within the children’s hearing, or permitting any other person to do so.
Property Matters
(a) That within 28 days of the date of this Order the husband will transfer to the wife all his right title and interest in the property at 15/3645 M B Parade, Main Beach (“DV”).
(b)That the wife thereafter be responsible for any capital gains taxation or other costs whensoever accruing in respect of the aforementioned property.
(c)That the wife shall be responsible for the costs of and incidental to the aforementioned transfer.
That the husband will pay to the wife the following sums in the following manner:
(a)That within 28 days of the date of this order, the father will pay to the mother the sum of One million, one hundred and forty three thousand, and ninety eight dollars and seventy eight cents ($1,143,098.78), being inclusive of the funds currently standing to the credit of the parties in the ANZ Account termed “Karen Louisa King as Trustee for G and D W”.
(b)the further sum that shall equate to 39% of interest earned on the invested monies on and from 15 February 2007 forthwith upon the making of these orders.
(a) Monies owing to the wife under these orders shall be secured by lodged but unregistered Caveat bearing Dealing No. 710706433 over the property at 7 M Court, P W or such further or other Caveat as may be required in the circumstances and that pending payment the husband is hereby restrained from dealing with the property pursuant to s.122(1)(e) Land Title Act which Caveat shall (if requested) be supported by form of Consent signed by the husband as registered proprietor (“the Caveat”).
(b)That in exchange for payment of all monies payable under 12 hereof, the wife shall forthwith deliver to the husband form of withdrawal of the Caveat signed by her and he shall be responsible for the costs of and incidental to lodgement and registration thereof.
(a) That the wife shall retain for her own use and benefit the DeVille unit, her VW Golf motor vehicle and the monies aforementioned referred to.
(b)The husband shall retain for his own use and benefit the Berkley unit, the 1 N Court property, the 7 M Court property, his BMW motor vehicle, his interest in the Phoenix business in Hong Kong, the horse “Wait Small” and the balance of the monies aforementioned referred to after payment to the wife.
(c)That pursuant to Order made 3 November 2006 each party was paid during the course of these proceedings the sum of $100,000.00 as and by way of partial property distribution.
and otherwise and unless specified in these Orders:
(i)each party is to be solely entitled to the exclusion of the other party (including choses in action) in the possession of such party as at the date of these Orders.
(ii)each party shall be solely entitled to the credit of any monies in any bank account in their name.
(iii)each party be solely liable for and indemnify the other against any liability whatsoever and including any liability encumbering any item of property to which that party is entitled pursuant to these Orders which liabilities for the husband shall include:
(1)Any debt owed by the husband to R W.
(2)Any capital gains tax that may become payable in respect of Admiralty Drive.
(3)Any capital gains tax that may become payable in respect of the B unit.
(4)Any capital gains tax that may become payable in respect of the N Court property.
(5)Any capital gains tax that may become payable in respect of M Court property.
(6)Any monies owing under the Viridian line of credit.
(7)Any monies owing on the husband’s mastercard account.
(8)Any legal fees owing by the husband to Robinson & Robinson.
Each party will be responsible for the cost of transfer of any asset into their name including registration and transfer fees and for any tax arising as a result of that transfer.
If:
(a)an order under this Act has directed a person to execute a deed or instrument;
(b)that person has refused or neglected to comply with the direction or, for any other reasons, the court considers it necessary to exercise the powers of the court under this subsection.
That each party bear their own costs of and incidental to these proceedings.
Notation
It is noted that the parties will be responsible for all school expenses, inclusive of extra curricular activities, private medical cover and any other medical expenses whatsoever relating to the aforementioned children.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM5013 of 2006
| G D W |
Applicant
And
| D W |
Respondent
REASONS FOR JUDGMENT
Introduction
In October 2001 the Applicant husband G W and the Respondent wife D W arrived in Australia as a couple with their daughter B (then aged 3) and with their son J being born in Australia only weeks later.
Although there is a dispute as to when the parties began cohabitation in Hong Kong, the husband, an Australian citizen, had moved to reside and work there in 1987 and the parties were married in June 1996. The wife had also moved to Hong Kong some years earlier from her native Philippines. She had commenced working in the hospitality industry.
Shortly before coming to Australia the husband invested approximately $3.3 million in Gold Coast real estate. The property that now exists for division exceeds $5 million.
The parties, who finally separated on 21 May 2006 are unable to agree on the future care arrangements for their children, now aged 8 and 5, or how the property should be equitably divided. These are the issues I am asked to determine.
Parenting issues
After final separation in May 2006, the mother left, not by consent, the then family home and the children remained in the care of the father.
I will say more about the circumstances of that separation shortly, however the father commenced proceedings in June 2006 seeking that the children live with him and that the mother have weekly daytime “contact” (as it was then called). By the mother’s Response filed
3 August 2006 she contested where the children should live and introduced into the dispute issues of property, seeking a number of interim orders, injunctions and the like.
On 18 September 2006 I made an interim order which eventually provided for the children to share their time with the parents on a rotational basis every 2 or 3 days. The order I made was designed to bring some stability and routine to arrangements which had been in dispute (without orders) since separation in May 2006. I did so with the knowledge that the parents had agreed to engage Valma Johnson, a consultant social worker, to prepare an urgent Family Report.
I appointed Ms Johnson as a Court Expert for this purpose.
Interviews for the Family Report took place in late September (resulting in a report dated 3 November 2006) and when the matter was next before me on 3 November 2006 I ordered, with the consent of the parents, for the children to live in a week about arrangement. The mother, at trial, says her consent to this interim arrangement was shaped by her understanding that the matter was to be listed for trial in February 2007. This care arrangement has continued since November 2006.
Competing Proposals
At trial the mother urged that the children live with her and spend time with the father “for 4 days per fortnight” being each alternate weekend from 3:30 p.m. Friday to 6:30 p.m. Sunday and each alternate Thursday overnight.
The father sought the continuation, on a final basis, of a week about arrangement.
Principles
The Court has power to make a “parenting order” (as defined in s.64B of the Act) and such power arises from the objects set out in s.60B and is subject to s.61DA and s.65DAB of the Act.
Any parenting order to be made must satisfy the legislative requirement that it be in the best interest of the child, which is the paramount consideration. As a result of amendments made to the law effective 1 July 2006, I am required broadly to consider the two tiered listed of factors in s.60CC (being primary and additional considerations) and the three tiered approach to determining the quantity of time a child is to spend with each parent pursuant to s.65DAA.
Application of Principles to this Case
When I apply the principles to the facts of this case, and for the reasons which follow I have come to the conclusion that it is in the best interests of the children B and J to continue to spend time with the parents on a week about basis.
In so doing, I recognise that the parents agreed they should share equal parental responsibility for the children. That was, in my view, an appropriate agreement. As will be seen in these reasons, I am then required to consider equal time (s.65DAA(1)) and only if that is not appropriate should I then consider, in the best interests of the children, whether one parent should have predominant time, with the children spending substantial and significant time with the other parent.
Family Report
I do not propose to quote extensively from the Family Report which was in evidence before me. The report identified, and I agree, that each parent has the capacity to care for the children. They are different people, from different cultural origins, who not surprisingly parent differently. In final submission, Mr Jordan for the mother did not contend for a finding that the father lacked the capacity to parent.
Although, at separation, the father acted as he saw it “protectively”, I agree with Ms Johnson that the events of 19 May 2006 “appear to have been situational and, placed in this perspective, it seems unlikely that domestic violence is a significant issue for this family”. Some of the actions of the father were, in my view, a slight over-reaction to what he had been told about the mother’s disciplining of J (in particular).
I formed the same view, as did Ms Johnson, that the mother, who on a fair assessment of the family history had been the primary carer of these children to separation, had experienced some difficulties with Jallen’s toileting but that her past care had not be “seriously wanting”.
Whilst I accept the observations of Ms Johnson at paragraph 121 that “the children’s primary bond has always been with their mother and they have a secure and loving attachment with their father” I do not agree with the balance of that paragraph where Ms Johnson expresses the opinion that “… their care should revert to the way it has always been. That is, they live with the mother most of the time and they have a heavy involvement with their father”.
My position, and the reasons for not following this recommendation, flows from the advantage I had of over viewing the effects of the week about care arrangements in operation since November 2006. Ms Johnson of course saw the parents and children before the order of November 2006 and has not seen them since. In the mother’s trial Affidavit she does not raise any adverse concerns of how the arrangements have worked. The father says they have worked well and the children are in a good routine.
I draw comfort from the examples of improved communication that has occurred (for example dealing with J’s schooling and his medical needs and engaging in counselling with Lynne Clark when B became oppositional to going to the mother’s “yucky house”). There is not evidence before the Court to suggest the children are experiencing separation anxiety or the like from periods away from the mother. To be fair to Ms Johnson, when it was put to her by Mr Galloway, Counsel for the father, that things were going well, Ms Johnson remarked that “if something is not broken, don’t fix it.”
Ms Johnson referred to “other agendas” (particularly property issues) additional to the children’s care being in the minds of the parents when she interviewed them some months earlier. She also acknowledged the “family upheaval” culminating in the events at separation and thereafter, all took their emotional toll on the children and the parents.
In my view, the matter had clearly settled down by the hearing and I formed the view that although Ms Johnson still favoured the mother having predominate care (because of the history of nurturing undertaken by the mother), her objection to a continuation of week about shared care was not strong.
Primary Considerations
Clearly both parents recognise the importance to B and J of having a meaningful relationship with both parents. Notwithstanding the father’s actions immediately upon separation in restricting the mothers time with the children, I hold no long term concerns that the father will not facilitate the week about arrangement. The week about arrangement offers for these children the optimal environment for maintaining and developing their bonds and relationships with the parents individually.
Section 60CC(2)(b) identifies, as a primary consideration, the need to protect the children “from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence”. Although initially the father raised serious concerns about how the mother handled J’s toileting (and her use of methods including smacking, to modify his habits), by trial those concerns were not so significant to persuade the father against a week about regime applying.
Clearly, the parents must be alert to minimising the prospect of the children witnessing conflict between the parents. The recent more cooperative approach, coupled with the generally more settled personalities of the parents and the finalisation of property proceedings, should, I predict, make the likelihood of future parental conflict remote.
Additional Considerations
Views
The children are too young to attach significant weight to any views or feelings expressed by them – however the most powerful evidence in this regard, is that the mother does not say the children have expressed to her any concerns about the current regime.
Relationships
As already observed the children have a good and secure relationship with both parents and the orders I propose to make are likely to preserve and nurture those relationships. The children appear to have a strong sibship as well.
Effect of Change
As I have detailed above, a change from the current (although interim ordered) arrangement to the mother‘s preferred proposal would put at risk, in my view, the stability and cooperation which now exists. In this regard I am prepared to accept the mother’s “consent” to the order in November was of a temporary nature. She has however observed the rigours of the regime (as has the father) and the facilitation of the handovers have not raised issues of concern. Although B has a heart condition and J carries the effects of mild cerebral palsy, I am strongly of the view that the parents’ quite different parental strengths offer a compatible platform for the future to assist the children to cope with life’s events.
Capacity and Attitude to Parenting
By final submissions, neither experienced Counsel (to their credit) urged a finding which the evidence did not support – namely any significant long term parental deficit in parenting in either parent. I do not ignore the mother’s ancestry or the importance of her country of origin. I did not sense the father as dismissive of this history. These children are likely to be enriched by any understanding of their family roots and I am satisfied the mother will appropriately inform and educate the children in this regard.
Finally, I can say I believe the order I propose to make is less likely to lead to the institution of further proceedings – because the parents and children are likely to see the arrangements as fair – and if, as I predict, they continue to work well, then they will offer the optimal regime for these children.
The parties, in their case outlines, did not put in issue any of the specific issues or special day arrangements which should apply. No evidence or submissions were specifically directed to these issues so as to raise a matter requiring my determination. I propose to allow the parents a short period of time to discuss those specific issues and if I am required to determine any narrow matter in dispute, I am happy to do so at 9:30 a.m. on 20 July 2007, when I will pronounce final orders in accordance with these reasons.
Property Proceedings
The preferred or usual approach to determining property proceedings under s.79 of the Act was the subject of a succinct summary by the Full Court in Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143) at [39] where the Court said:-
“39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions for the parties within the meaning of ss79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s79(4)(e), the matters referred to in s75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1085) FLC 92-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDR (2001) FLC 92-075 and Phillips and Phillips (2002) FLC 9.-104.”
Before moving to a consideration of the evidence within this preferred matrix, it is convenient and contextual to make some observations and findings of some factual issues.
Date of Cohabitation
The wife says she met the husband in Hong Kong in 1994 through mutual friends. She was then working as a housemaid and the husband was “then unemployed”. She says they commenced cohabitation “a few months after we met” and “lived in a defacto relationship for a year and a half in a rented unit”.
The husband agrees the parties met in late 1994 but says “we dated, but did not cohabit from late 1994 to May 1996.” The husband says the parties commenced cohabitation in May 1996. Considering neither party had any real assets at that time (although the husband says in early 1994 he had reached an informal agreement with a person named A W), little turns on which date I accept. The husband, for example, does not provide any corroborative evidence of the extent of his assets at May 1996 but gives details of his financial situation at the time of marriage, as he saw it (paragraph 46).
Property Transactions
Although, as I detail below, the extent of the husband’s earnings in reality through the marriage in Hong Kong is not verified, it is not contested that between August 1999 to January 2002, the husband (who controlled all the funds), spent a total of $3,306,000. For reasons which I refer to below, there have been few bank records produced to the Court as to the source of the funds, save as I acknowledge that the husband was the sole financial contributor through the marriage. By this I mean, it is not clear if the sum invested included, for example, the asserted payment of AUD $1 million said to have been paid by A W to the husband “prior to leaving Hong Kong.”
The actual transactions are detailed in summary form in the husband’s affidavit which I reproduce now in these reasons:-
Property
Purchase price
Sale or current value
Capital gain
1 N Crt, P W
585,000
1,050,000
465,000
98 A Dve, P W
1,350,000
4,000,000
(*sold Nov 06)
2,650,000
5/23 N Tce, S P
440,000
725,000
285,000
15/3645 M BPde, M B
385,000
825,000
440,000
Units 84 & 85 A W, P W
546,000 (total)
780,000 (total)
(*sold Nov 03)
234,000
Total:
3,306,000
7,380,000
4,074,000
Additional to the purchase price stated was stamp duty and legal expenses. The home at N Court, P W is occupied by the parents of the husband. The husband says he has told them they “can live there for the rest of your lives” The family did live in the home for 10 months after first arriving in Australia. The A drive property was purchased in October 2000 and initially rented before the family moved into the property in April 2005. Just prior to separation the husband contracted to sell the property for $4 million- a significant capital gain over its initial purchase price. There is no evidence which suggests the property was renovated or substantially improved over that period. Although the wife says she was unaware of the sale, the evidence of the real estate agent D G supports a finding she was aware the purchasers were inspecting the property – so that it was “on the market”. I also accept the evidence of the husband, where it differs from that of the wife that the wife also was aware of the offer made by the ultimate purchasers, and agreed with the husband to use part of the released deposit to purchase a replacement car for the wife. This in fact occurred. Annexure “GDW2” to the husband’s trial affidavit identifies the net proceeds to be $3,777,864.94 and I am satisfied the disbursement of those funds was in accordance with the terms of the order made 3 November 2006. Eventually the major disbursements were:-
Discharge of the Viridian Loan
$500,000
Funds for purchase of 17 Mn Court
$2,000,000
Discharge of the husband’s Mastercard debt
$61,918
Partial property settlement
$200,000
Spouse Maintenance – lump sum
$54,000
$2,815,918
with the balance paid into trust.
Additionally other expenses of a joint nature; stamp duty on the purchase of M Court and other agreed disbursements were paid from the balance such that the pool set out below makes allowance for the balance remaining at trial. I assume full discovery of all payments and a proper accounting after sale in November 2006 of the A drive property had been attended to, such that no allegations against the husband of misuse of funds was made- save for the increase in the Viridian line of credit debt and Mastercard debt post separation. These issues are dealt with below.
The wife does not take issue with the assertion of the Husband that he made the decisions on what property to buy and otherwise managed all financial affairs for the parties. When I deal with the issue of contributions below I will again return to this important aspect of this case.
Viridian Line of Credit
Although the initial purchase of the properties in Australia as set out above was achieved without borrowings, some time after arriving in Australia the husband secured a line of credit styled “Viridian Line of Credit” through the Commonwealth Bank of Australia. This financial accommodation was secured over the title to the A Drive property. It had an end drawdown limit of $500,000. It is not disputed that at separation the account was in debit to the amount of $385,649.66 (see “DGW-7”). Nor is it disputed that between 18 May 2006 to the date of sale of the Admiralty Drive property on 30 October 2006, the loan had risen to its limit of $500,000. The question before the Court is what expenses was the difference of $114,350.34 used to meet.
I accept that the husband had control of the funds. It was, it seems to me, a fairly simple exercise in discovery to be able to explain the use of those funds. His recent bank statements, I assume, would have been available. The wife did not have access to the account.
Post November 2006 the parties had the benefit of both the interim property distribution of $100,000 as well as the spouse maintenance payment of $27,000.
The only evidence offered to the Court by the husband was:-
a)Until the sale of the A Drive property he was “asset-rich but income-poor”. That seems consistent with the evidence and without evidence establishing the husband was generating an income from personal exertion all he had available was rental income from “B” and “D” (until the wife resumed occupation pursuant to my order).
b)The husband provided some funds to the wife after separation. There was an initial payment of $2500 (for the period, the wife says, between 21 June 2006 and 14 July 2006). He deposited a further sum of $500 in the wife’s account on 26 July 2006 to assist the wife paying a rental bond.
c)The husband had an obligation to pay interim spouse maintenance of $1350 per week for the period to 3 November 2006, as a result of (and commencing from) my order made 18 September 2006. The evidence, not fully tested at trial, was the husband fell into arrears in payments and as at 30 October 2006, the wife claimed that the husband had paid $4650 (exclusive of a medical refund of $750) and was in arrears to the extent of $4050 (paragraph 20 of the wife’s Affidavit filed 1 November 2006).
d)The trial Affidavit relied upon by the husband does not explain the use of the funds drawn down after separation.
e)One lone bank statement for this account is in evidence – and that is marked annexure “DGW-9”. It reveals a commencing balance of $384,149.33 DR and then 6 significant withdrawals to 15 June 2006, leaving a balance at that date of $408,751.63 DR. Those withdrawals are shown to be:-
18 May 2006 – Withdrawal
$1500
30 May 2006 – Withdrawal
$1000
1 June 2006 – Interest
$2414
7 June 2006 – Withdrawal
$17584
7 June 2006 – Withdrawal
$1000
15 June 2006 – Withdrawal
$1000
The principles enunciated by the Full Court in Chorn & Hopkins (2004) FLC 93-204 where the Court said at 79,314 that:-
“…it seems to us that the concept of adding monies reasonably disproved 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 (Cerni (1998) FAMCA 143)”.
offer important guidance in this matter. In this case the husband has chosen to provide little evidence as to how he used $114,350 in just over 5 months (in effect about 24 weeks). I could reasonable allow:-
Living expenses for husband of $1000 per week (based on withdrawals from ATM machine)
$24,000
Spouse benefits received by the wife of approximately
$7650
Interest for the months of June, July, August, September and October at the rate of $2500 per month (considering what was paid for May 2006 and the increasing debit balance
$12,500
Total
$44,150
Doing the best I can on the evidence I propose to “add back” $70,000 used by the husband from the Viridian Line of Credit and not accounted for by him.
Using a similar methodology for the husband’s mastercard account which was at a debit balance of $37,041 at separation (being a little generous to the husband on the interpretation of Annexure “DGW-8” given to it by the wife), the amount paid on settlement in November of $61,918 accrues an unexplained increase of $14,877. It is noted that a number of the debits to the account were for entities described as “Iasbet Com Pty Ltd” and “Sportingbet Aust” for amounts as high as $3000. There is no suggestion the wife had access to this credit card. The wife, at the hearing was prepared to concede a debt level at separation of $47,041 and using an interest rate revealed in the Statement of 18.65% for say 5 months, an allowance for interest of $3650 is reasonable. On this basis, and again in the absence of the husband providing any evidence to show how the funds were used, I propose to add back the sum of $11,200.
Capital Gains Tax Liability
Objection was not taken by the wife to the manner in which the rate of capital gains tax notionally payable by the husband was put before the Court – a copy of an unsigned document from Messrs Grant Thornton Accountants dated 21 February 2007. Based on the husband being taxed at the highest personal rate of 46.5% the amounts estimated to be payable are:-
Admiralty Drive
$430,194
Berkley
$61,206
Norseman Court
$89,713
Deville
$82,064
Although it may be arguable that these estimates are the absolute highest (on current valuations) with future personal tax rate changes; income tax bracket creep; and the prospects of reducing tax because of lower additional incomes in that year etc, Mr Jordan did not cavil with those assessments. It is not an issue that as the A Drive property has been sold an allowance for capital gains tax should be made in the pool for $130,194.
As to how in proceedings under s79 the Court should deal with capital gains tax, the Full Court in Rosati (1998) FLC 92-804 stated:-
“It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:-
(1)Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)If none of the circumstances referred to in (2) applies to a particular asset, but the court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the assets, may take that risk into account as a relevant s75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs”.
This authority has continued to be applied by the Full Court in varying degrees.
The facts of this case when applied to the above stated principles compel the following findings:-
a)N Court
– I have no evidence of the age of the husband’s parents and their actual state of health, however the evidence of the husband is that they may live there as long as they so desire.
I propose to bring the notional capital gains tax estimated at $89,713, into account as a relevant s.75(2) factor although because of the uncertainty about the calculation of tax in the future and the likelihood that it may be many years before a sale occurs, the rate should be discounted.
b)B – it seems inevitable that this asset will be sold as it represents the only asset not occupied by the husband, the wife or the husband’s parents and raising funds to enable a payment to the wife is a certainty. In any event the husband, in this case outline seeks that it be sold. Even if the property was by order of this Court transferred to the wife (with the capital gains tax rollover benefits), a future sale by the wife would trigger a capital gains tax event. I propose therefore to make allowance in the pool for $61,206.
c)DV – the wife seeks to retain the unit, now occupied by her and the children, and the husband in his case outline seeks an order the unit be transferred to her. Because of the use of the property for rental income in the past, a liability for capital gains tax could still arise in the future if sold by the wife, however the level of tax payable will also depend on how long the wife occupies the property as her principal place of residence and her tax rate at the time (she may not have enough income to be taxed at the highest marginal rate). It is my view that any allowance for capital gains tax on DV in the wife’s favour as a section 75(2) factor, would need to be significantly discounted and by a greater factor than the husband’s contingent liability from the N property.
Agreement with A W
If the wife’s evidence is an indication, as it must be, she knew very little about the husband’s business arrangements. She described her husband as a Professional Punter.
The husband gives a detailed history describing himself as a Racing Journalist, but was unable to procure Mr W from the Philippines where he now lives to give any evidence in support of his case.
In summary the husband says:
a)Having completed a Bachelor in Education and after working as a Teacher in Australia he moved to Hong Kong to teach in 1987, which continued until 1993 (at which time he had reached the level of Principal).
b)He was extremely interested in the horse racing industry and from 1987 says he began “collating and interpreting data in relation to horse races” in Hong Kong based on a set of criteria he devised and reviewed from time to time.
c)He claims to have spent “no less than fifty or sixty hours per week on the development of this intellectual property”.
d)In 1993 he took up a position as a Racing Journalist. He had previously, for a different newspaper, contributed as a tipster. His profile in the industry and I assume his “system” gained further prominence when he became a co-presenter on a cable television racing program.
e)In early 1994 he met A W who was reputed in Hong Kong racing circles to be making “big money” as a computer punter who had developed software to use on horse racing. He says at this time:-
“I reached an informal agreement with W pursuant to which he would purchase all my intellectual property which I had developed and collated to that date for a percentage share (10% of his overall profits). As he charged a 50% royalty on all dividends received, this in fact equated to a 5% share of the business. I would estimate that the value of what was effectively an annuity was at least $3 million”
The husband was never asked in cross-examination if the amounts he speaks about were Australian dollars or Hong Kong dollars.
f)The husband in his affidavit gives a detailed system of his codes and factors upon which he says the capacity to select winning horses improved. He says W was interested in “the volume of statistics I had accumulated over 7 years. It allowed him to feed it into his programme to determine variables which had shown a positive co-efficient”.
g)The husband estimates he earned “in excess of 4 million dollars pursuant to my agreement with W between 1995 and 2000” and worked 18 hours a day until he left Hong Kong.
h)At paragraph 48 of his trial affidavit the husband says:
“During the period when I first entered into (sic) arrangement with Woods through to when the mother and I left Hong Kong, I would estimate I earned up to AUD$5 million, a substantial part of which comprised payment for the intellectual property which I introduced into the relationship”.
I take this last comment to refer to the payment of $1 million he says he received from Woods prior to leaving Hong Kong, which the husband at paragraph 55 described as “a payout in respect of my interest in his consortium”.
Mr W cannot, as I say, offer any corroborative evidence. The husband says this is partly due to the wife threatening to report Woods to the taxation authorities in Hong Kong. The husband says he was not required to disclose income from his “informal arrangement with W as gambling is not profits taxable in Hong Kong”. The husband did not produce any personal taxation returns or bank statements for the period. Not surprisingly, there are no documents at all evidencing the arrangements with W. The legitimacy of the whole operation may be open to question but one fact remains – the husband left Australia as a teacher in 1987 and returned 14 years later with over $3 million to invest in G C Real Estate. On any test this demonstrates a degree of success.
The wife does not claim any direct contribution to the husband’s earning capacity. She acknowledges she has not been employed since the birth of B.
The lack of certainty of the “informal arrangement” and the absence of any documentation makes it inappropriate to speculate on what, if anything, the husband’s claimed intellectual property was worth at the time of marriage.
The husband claims at paragraph 46 that at the time of marriage, he had “the share in A W’s operation, pursuant to an informal arrangement between us” and that although he no longer owned the intellectual property he estimated his interest in the operation “exceeded AUD $3 million dollars”.
No foundation for this assessment of value is offered, I cannot accept such a bland statement. As a matter of law, I could not attribute a fixed value to this interest even if it did exist on the evidence before me. That does not, of course mean, I ignore the history. I do not and when I come to consider the contributions I give the husband some recognition for it.
Pool
Many of the items constituting the Pool of Assets and liabilities at trial were agreed. What follows in these reasons is the Pool as I have determined it to be and an explanation for a number of inclusions or exclusions, if not already dealt with above.
POOL
Partial property distribution ($100,000 each)
$200,000
Invested proceeds of sale of 98 A Drive with interest to hearing
$845,878
Funds held by husband’s solicitors
$15,000
“B” unit
$725,000
“DV” unit
$825,000
1 N Court property
$1,050,000
7 M Court property
$2,000,000
Motor vehicles – husband’s BMW
$42,300
wife’s VW Golf
$27,650
Proceeds of sale – CCV shares
$29,422
Husband’s interest in “Phoenix B “Hong Kong
$20,000
House
$6,500
ADD BACKS
Unaccounted for withdrawals by husband
- From Viridian Line of Credit – post separation – say
$70,000
- From husband’s Mastercard Account
$11,200
- Legal fees paid to Robinson & Robinson
$5,182
$5,873,132
LIABILITIES
Capital Gains Tax – A Drive property
$430,194
- “B”
$61,206
NETT
$5,381,732
In respect of this pool, I make the following findings:-
a)Mr Galloway for the husband submitted that I should include $127,000 for each party in the Pool of Assets. These funds were disbursed from the proceeds of sale of the A Drive property as earlier indicated. The payments were made with the authority of the consent order of 3 November 2006. Importantly under paragraph 3 of that order, the sum of $100,000.00 each was “to be treated as an advance of property settlement”. The sum of $27,000.00 each for their “maintenance”. I do not propose to include the sum of maintenance as, at the time of payment each party was entitled to be able to use the funds as they thought fit without expecting a notional add back.
b)The sum of $15,000.00 allowed for as remaining in the Trust Account of KL King & Associates (the husband’s solicitors), arises from the sum of $60,000.00 paid after sale of the Admiralty Drive property to meet joint expenses as agreed. As a result, it would not amount to “double dipping” against the interests of the husband to include this sum.
c)The husband did not contend that the proceeds of sale of the Cash Converters International shares sold by him on 13 September 2006 (14,000 shares) and 14 September 2006 (46,000 shares) providing net proceeds totalling $29,422 should not be added back under the principles in Townsend (1995) FLC 92-569. It is clear the shares were acquired during the marriage; available at separation and sold by the husband with him utilising the full proceeds. In the absence of any evidence as to the incidence (if any) of capital gains tax I have decided to bring in the full nett proceeds as a “premature disposition”.
d)There were a number of small alleged assets or interests mentioned in the wife’s material, in particular, however little probative evidence of value was offered to the Court. As a result I am unable to make any real allowance for furniture and chattels. If the wife had desired that the Court include an allowance for furniture it was well open to seek orders for an independent expert to be appointed for that purpose. No such application was made – by either party. The wife’s estimate of the furniture and value at Annexure “DGW-5”, is nothing more than lay opinion. For these reasons I am unable to deal with aspects of furniture other than the furniture will remain with the party who currently has possession.
There was a dispute about jewellery. It was alleged expensive items existed – including a Cartier watch. Whilst I can accept that the lifestyle of the parties in Hong Kong could well have included the purchase of expensive gifts and jewellery, both parties say the other person has possession of the items. The wife says they were at the house when she left at separation. The husband says the wife kept all these items in “her jewellery box” and removed them in June 2006. In the absence of evidence of their current existence and without any probative evidence of current value it would be unfair to the parties to assign any allowance in the pool of assets.
The husband had a small bank account at trial of about $5,000.00. The most likely source of these funds is any balance from the spouse maintenance payment/partial property settlement or post separation earnings. I propose to disregard the account as a result. The husband acknowledges a one sixth interest in a racehorse called “W S”, there is no evidence that the horse has a current value after a unsuccessful racing career to date save fro the husband’s statement against interest at $6600. I therefore include it.
The husband and wife both have some interest in property in the Philippines. The wife owns a small parcel of land – with the parties estimating its value between $790 to $3,500. No probative evidence of value was offered. The husband had made an “investment” in an “off track” betting shop in Angeles City. The husband’s partner in this venture was Mr P B. Mr Bprovided evidence to the Court by an affidavit filed 19 February 2007. He says, as does the husband, that the husband contributed US$20,000 to the venture. The business included a bar facility, however the business was unable to obtain the required licence in the Philippines for the level of betting activity anticipated. Mr B says the business is running at a loss; he has no books for the business; and all attempts to sell it for US$12,000 have been unsuccessful. The husband said, in cross examination, that he would be happy to ignore the Philippines investments of each party. Mr Jordan, in final submissions, says the best evidence of the husband’s interest is Mr B’s claim that he has tried to sell it for US$12,000. Of course that is not evidence of value. Even if the bar could be sold the nett return to the husband after reasonable expenses, for his 50% share would be in the vicinity of $5,000. The unsatisfactory nature of the evidence persuades me to also disregard this asset in the pool.
It is appropriate in accordance with the principles in Farnell (1996) FLC 92-681, to include in the Pool the sum paid by the husband for legal expenses to his first solicitors Robinson & Robinson deducted from the proceeds of sale of the A Drive property. I propose to add back $5,182.
e)The husband claims a joint debt payable to “J and R W”. The husband says the funds were advanced in November 1994 because he “was experiencing some temporary financial difficulties”. The husband produces annexure “GDW9” which shows a deposit on 25 November 2004 to his Cash Management Call Account described as “Term Deposit Withdrawal”. The wife says she knew nothing of this loan.
The husband offered as corroboration the affidavit of R W sworn 26 February 2007. The deponent was not required for cross examination. Ms W says that in July 2005 “I lent G and D W $40,000 on the mutual agreement that the money would be repaid in approximately twelve months time, being July 2006”. To evidence the payment, rather than show documents which reveal the funds coming out of her account, the witness attaches a copy of the husband’s Bank Statement for the Cash Management Call Account revealing a deposit on 8 July 2005 of $40,000. Three issues arise from this contradictory evidence, namely:-
i)The dates simply do not match between when the husband says he was loaned the funds and when Ms R W says she advanced the funds.
ii)R W says she lent the money. She even made a correction to paragraph 3 of her affidavit to strike out reference to “my husband”. The husband in this case claims he borrowed the funds from his brother and sister-in-law. Yet another confusing inconsistency.
iii)Lastly, the husband claims to have been suffering temporary financial difficulties, yet he had access to Viridian Line of Credit, and further, if the deposit was made as Ms W asserts, then at the time of deposit the husband’s account was already in credit in the sum of $24,402.
The husband has not discharged the evidentiary onus to establish, on the balance of probabilities, that he owes the sum of $40,000 to his family as he asserts.
Contributions
It became apparent from a close consideration of the material and the well reasoned submissions received from Counsel that the nature and character of the contributions made by the parties was not seriously in dispute. What was in dispute was the weight that should be applied to those contributions.
At the time of cohabitation or shortly before marriage the wife’s financial position was the same – namely she had no assets of significance and was working as a housemaid on a modest income. She was approximately 26 years old at the time.
The husband was approximately 44 years old at the time of cohabitation/marriage and apart from his claimed interest in the A W’s operation he says he had “substantial amounts of good quality furniture and bank accounts with the Hong Seng Bank with deposits in excess of $100,000AUD”. No documentary corroboration of this assertion was offered to the Court. The husband was not seriously challenged on the assertion in cross examination and, as a result, I am prepared to accept that he had some funds on marriage. On the husband’s case he worked as a racing journalist receiving an income “in excess of HK$50,000 (approximately AUD$12,500) net per month” until shortly after the marriage when he “commenced working with W on a full time basis”.
In the absence of any real particulars of the yearly income derived by the husband during the marriage whilst in Hong Kong from 1996 to 2001 it is impossible to say whether this was maintained at a steady rate, however the mother concedes in some years the husband earnt as much as $1 million and I have formed the view the income was probably building; then reached its peak which was maintained for a couple of years before tapering down, as the husband claims before leaving Hong Kong finally in 2001. I am not satisfied, on the whole of the evidence, that any particular actions of the wife either caused a souring of the husband’s relationship with Mr W or was the catalyst for the termination of his “informal agreement” with Mr W as the husband claims. It was not pressed by Mr Galloway for the husband that the wife should bear some responsibility for the resultant cessation of the husband’s working arrangements with the somewhat mysterious Mr W.
The husband was, almost for the entirety of the relationship, the sole financial contributor. The wife does not seriously challenge this to be the case.
Similarly, although the husband asserts a reasonable involvement with the care of the children even before coming to Australia with the family, I am satisfied the wife was the primary and predominate homemaker and parent. A combination of the ages of the children and the long working hours of the husband makes this conclusion easy to draw. I do accept that when the family moved to Australia the husband had more of an opportunity to contribute to the household and the children however he was still required to return to Hong Kong for frequent business trips for up to 3 weeks duration at a time. The wife was therefore, in my view, prior to separation the major non-financial contributor in the role of homemaker and parent. Clearly, on the history, since separation that role has been more equally shared.
In making these findings about the homemaker contribution I do not ignore the assistance the wife may have received from hired domestic assistance and the support of the husband’s parents after they moved to N Court. Nor do I ignore the unchallenged evidence of the husband that during a short separation between the parties in Hong Kong when Brittney was a baby, the husband provided HK$1 million to the wife which she spent during the period of separation. All I can really usefully draw from that evidence is that the parties had the money at the time and probably enjoyed a lavish lifestyle (at least by Australian standards).
I accept the husband made the financial decisions as to how to invest the funds available in G C real estate and which properties to buy and then sell. The husband does not say any major improvements were performed by him. Really it could be said with little dispute, that he left Hong Kong and decided to invest in “the right place at the right time”. In my view he is not entitled to demand significant weight for his decision to buy when he did in circumstances where the capital gains (and they have been substantial) were driven by the general market conditions rather than anything he specially brought to the endeavours. It would not, for example, be fair to draw a comparison with a property speculator who sold and purchased a number of properties in a rising market. The number of transactions undertaken in the 8 years until trial is only 6 purchases and 2 sales (counting Units 84 and 85 “Atlantis West” as one transaction).
If the father achieved significant nett income from his betting or other pursuits since 2001 then he failed to produce any evidence to found such a finding. He did not, for example, acquire any other real property after the initial purchases save for the M property which was acquired entirely from the proceeds of the sale of the A Drive home. In fact the evidence is to the contrary in that in the period after coming to Australia in 2001 (when most of the properties had all been acquired without borrowings) until the sale of the A Drive property (some 5 years) the parties seemed to rely on the borrowed funds to meet the excess of expenses over income. Having reached a level of $560,000 at November 2006 (for the Viridian loan and Mastercard Debt) this equates to approximately $100,000 pa.
The issue that loomed large in this case, was whether, as the husband’s counsel asserts, the significant income and benefits received from the husband’s involvement from the Woods operations fell within the category of rare cases, commonly called the “special contribution” cases. The wife’s counsel says it does not, although in final submissions he conceded some allowance in the husband’s favour before consideration of s.75(2) factors were proper – in the region of
5 – 7.5%. The submission Mr Jordan made was that the husband, whilst in Hong Kong “earns a good amount of money, inflated somewhat by the fact it’s a tax free environment” and that, as far as the real estate acquisitions on the G C are concerned, the husband “doesn’t make out a case in his material about some special attributes that he’s brought to it”.
Not surprisingly Mr Galloway for the husband took the opposite view drawing an analogy with the income stream enjoyed by the husband from his earlier research and involvement with Mr W as being “absolutely no difference between that and say an author who writes a work whilst a single man, locates a publisher, has the novel brought, and enjoys a royalty stream thereafter, it simply, cannot be that the novelist’s wife says I have made an equal contribution’”.
I do not think the analogy is apposite to this case. Whilst I accept that the husband did collect his unique brand of statistics and data about Hong Kong racing, and that gave him a confidence to either bet or tip (for others as well) more successfully, unlike the Author who has finished the novel, Mr Whitmore had to continue to work 18 hours a day to generate the income he did and maintain the data he had collected.
After referring to the Full Court decision in Figgins (1993) FamCA 688 Mr Galloway urged a finding that the wife received 30% of the pool for a contributions based entitlement.
Before turning to a brief examination of some of the “special contribution” cases, I remind myself that when comparing the overwhelming direct financial contributions by the husband I must be careful not to minimise the weight to be given to the more difficult to calculate (in monetary terms) non-financial contributions of the wife. The Full Courts recent reminder in Brown (2005) FAMCA 389 is timely.
In Whitely (1992) FLC 92-304, Rowlands J made an allowance to the husband “because of his special skill as an artist” observing that “his is an unusual talent which has been instrumental in reaping a rich reward”. That was a long marriage and the trial Judge also weighed in that the wife was “an inspiration” to the husband in his creative activities.
In Ferraro (1993) FLC 92-335, the Full Court (Fogarty, Murray and Baker JJ) delivered one of the seminal property judgments which has weathered the test of time. The husband was involved in substantial commercial property development which resulted in very considerable capital appreciation with profit being reinvested for further development. After a marriage of 27 years and amassing a net pool of $12 million the husband argued he should receive credit for his “business acumen, skill and property development and vision”. At paragraph [241] the Court said:
“Case law has established however that there may be special factors, such as the homemaker having performed her responsibilities without the assistance of her frequently absent husband or the breadwinner having applied outstanding entrepreneurial skill to the building up of a business, which justify the Court considering that contribution to be above the normal range or to be considered as an “extra” or “special contribution”.
and further at [245] and [246] that
“The reported cases said that “business acumen” or “entrepreneurial skill” of the husband was a “special skill” or an “extra contribution”. These were however, cases where the assets were of very significant value. There does not appear to be any reason in principle or logic why those business skills could be treated differently from the high level of skill by a professional or trade person such as a lawyer, surgeon or electrician. Typically in those cases there is a high level of professional training and the picture of long hours of work over many years, the development of higher professional skills and the resultant imposition on the other partner of a substantial burden in relation to the home is common. The fundamental difference is that those cases normally do not produce the very high value of property with which this and comparable cases are concerned, and a common outcome, other aspects being equal, is one approximately equality (although as s75(2)may intrude to a degree in such cases).
Whilst the application of skill may be the same, the difference seems to be that in the one case the application of that skill produces assets which fall within what may be described as the medium range whilst in cases such as that before us, it produces assets in the high range. We should perhaps add, as more recent experiences demonstrates that they can also produce a high range of losses, although it never seems to be suggested in those cases that the losses be shared other than equally.”
The Court found that although the husband’s contribution overall to the property should be assessed as greater then those of the wife, the wife’s entitlement determined at trial at 30% should be increased to 37.5%.
In McLay (1996) FLC 92-66 the trial judge relied heavily on Ferraro when dealing with a marriage of 21 years and net assets of $8 million. The husband was both a property developer and astute financial investor/manager and because of these activities and the resultant benefit to the parties, the trial judge made a contribution based adjustment of 10% to the husband which was not distributed on Appeal.
The Full Court in Stay (1997) FLC 92-751 allowed an appeal where the trial judge had allowed an adjustment to the stockbroker husband in a pool of “only” $3.7 million for the “extra” or “special” contributions of the husband during a long marriage of 27 years. Whilst acknowledging that the husband’s ingenuity and enterprise produced assets in the medium range rather than the high range, the Full Court reduced the trial judge’s assessment for the husband from 65% to 55%.
A significant property pool of $36 million was divided by the trial judge as to 65% to the husband and 35% to the wife where the husband was a mining entrepreneur. The Full Court (Holden, Kay and Guest JJ) in JEL & DDF [2000] FamCA 1353 increased the husband’s contribution based entitlement to 72.5% and made the following observations as to the general principles that arise from the cases [at 52] namely:
“a)There is no presumption of equality of contribution or ‘partnership’.
b)There is a requirement to undertake an evaluation of the respective contributions of the husband and the wife.
c)Although in many cases the direct financial contribution of one party will equal the indirect contribution of the other as homemaker and parent, that is not necessarily so in every case.
d)In qualitatively evaluating the roles performed by marriage partners, there may rise special factors attaching to the performance of the particular role of one of them.
e)The Court will recognise any such special factors as taking the contribution outside the ‘normal range’ in the sense that that phrase was understood by the Full Court in McLay.
f)The determination of an issue of whether or not a ‘special’ or ‘extra’ contribution is made by a party to a marriage is not necessarily dependant upon the size of the asset pool or the ‘financial product’. When considering such an issue, care must be taken to recognise and distinguish a ‘windfall’ gain.
g)Whilst decisions in previous cases where special factors were found to exist may provide some guidance to judges at first instance, they are not prescriptive, except to the extent that they purport to lay down general principles.
h)It is ultimately the exercise of the trial Judges own discretion on the particular facts of the case that will regulate the outcome.
i)In the exercise of that discretion, the trial Judge must be satisfied that the actual orders are just and equitable, and not just the underlying percentage division.”
The Court also observed that in determining whether “special features” apply to the contribution of one or the other of the parties, the Court must take care to distinguish the situation where the acquisition of wealth was by chance or luck, such as a windfall which was defined in Zyk (1995) FLC 92-644 at 82,514 as a “chance or unexpected benefit which people involved neither anticipated nor made any effort towards”.
In Figgins (2002) FamCA 688 the “special contribution” was a substantial inheritance received by the husband just 2 weeks after marriage and some 3 years before separation. The Full Court (Nicholson CJ, Ellis and Buckley JJ) found that the trial judge had erred in finding that the husband’s inheritance was a “special factor” although it was to be given considerable weight in the assessment of contributions. Although I do not regard the facts in Figgins as of great assistance to me in this case, however I do note the observations of Nicholson CJ and Buckley J that “Marriage is and should be regarded as a genuine partnership in which each brings different gifts. The fact that one is productive of money in large quantities is no reason to disadvantage the other”.
Dessau J in Goble & Taylor (2002) FamCA 613 was confronted with a claim for a “special” or “extraordinary” contributions arising during a 24 year marriage where the husband was a song writer and one of the founders of a well-known rock band. The husband was still receiving performance royalties although his income at trial was modest and he conceded that his high income in the later 1970’s had not translated into assets for the parties at trial. Her Honour relevantly observed [at 84] that:-
“I do not find that the husband has made a significant ‘extra’ or ‘special’ contribution. I do not base my conclusion simply on the size of the asset pool or the financial product, nor am I finding ‘fault’ on his part for the failed and costly property ventures. But they are part of the facts peculiar to this case to be considered in the exercise of my discretion. I agree with the final submission of Senior counsel of the wife. I should not ignore the Husband’s special talent “in the mix” of this case, but I should allow only a small amount to his credit in that regard.”
In my view the husband’s contribution does not fall within the “special” category clearly reserved for only a few and rare cases, although it is appropriate to adjust contributions in favour of the husband for
·The accumulation of data he amassed since 1987 which was the platform for the “informal agreement with Mr W”
·The benefits mostly retained and reinvested, he received in the tax free environment of Hong Kong, which I would accept was in the region of $4 million - $5 million dollars.
·His careful selection of the G C as a location for his attentions as a property investor.
All of which swelled the pool of assets available for division.
Mr Jordan says that the husband has, to a large degree been “lucky” and whilst that is partly true the wife benefits also from that luck. An old adage says “luck is when preparation meets opportunity”. In my view the husband deserves some credit for his preparation and for being in the right place to take advantage of the opportunity.
Weighing all the factors set out above and the contributions made by both parties in different ways, I assess the husband’s entitlement on contributions to be in the range of 57.5% to 65%. I propose to adopt, in the exercise of my discretion, a figure of 61% or in effect an adjustment for the husband to have the first 22% of the pool of $5,381,732 or $1,183,981. I regard this as a fair result to both parties.
Section 75(2) Contributions
The 75(2) factors must be assessed within the context of the parties receiving a contribution based division of $3,282,856 (61% for the husband) and $2,098,875 (39% for the wife). Accepting that the wife will retain the D V unit, and even allowing for legal expenses likely to have been incurred by her, the wife will have approximately $1,000 000 to invest as she pleases.
Both parties will, as a result of my parenting orders, bear equally the responsibilities for the care of their 2 young children. I have no concerns that the parties will be both financially capable and demonstrate a sensible attitude to meeting equitably the children’s financial needs including medical expenses and education.
Although the wife says she has had carpal tunnel surgery with her hands and the husband has high blood pressure, the health of the parties is not an issue to be taken into account.
The husband is some 18 years older than the wife. The expectation is that he will be capable of working but for less time; but that he will live for a shorter period and therefore have fewer needs than the wife. This factor would favour an adjustment to the husband, to be weighed against the history of employment which reveals the husband earning a substantial income in Hong Kong and whilst involved with Mr W. The wife would, with the skills she had prior to the birth of the children, be possibly recruited in the hospitality industry but it must be said, that she would be competing with younger employees and she has been out of the industry from some years.
In 2006 the wife enrolled in a TAFE hairdressing course which is due for completion in December 2007. The wife does not say, however it seems, she is hoping to use those skills for employment. In any event her income would be modest from these pursuits.
The husband has the potential and business experience to make his money work for him. For example, after the sale of the M Court property, he raised $450,000 to lend to a friend for a new business venture and was to obtain an interest rate of 12% - all repayable in May 2007.
The husband’s capacity to travel to Hong Kong regularly will evaporate as a result of the week about shared care regime. Although he has teaching skills he regards himself as too old to return to the classroom. He says he doesn’t have the “courage” to become a professional punter and, although he has bets regularly, says he is not a professional gambler. I have no probative evidence of what he has earned over the last few years and particularly when the arrangement with Mr W ceased. I get a sense that even with his current level of betting he neither wins a lot nor loses a lot.
He said, in cross examination that his future means for income depend on “what money I am left with” and presently his intention is to spend more time with the children and to live off savings and investments. If the income in the Viridian Loan is an indication he will continue to draw down on his capital to meet his living expenses. The likelihood , if he continues to retain the M Court home recently purchased and is unable to access the N Court property will be, that he will have little by way of available cash resources to invest, and unlike the wife, will need to borrow against equity to enable him to generate passive investment income.
I also do not ignore, as earlier mentioned, the respective discounted contingent capital gains tax liabilities each party will need to bear.
When I consider all these factors, I would make no further adjustments for the 75(2) factors.
Just & Equitable
As I have explored when considering the s.75(2) factors, a division of 61% to the husband and 39% to the wife will provide each of the parties with their preferred place of residence and after the sale of “B” and distribution of the proceeds in Trust, for the wife at least a substantial capital sum to invest. Because the husband chose to live in a home worth $2 million, he does not have the same levels of available cash reserves to invest.
I will ask the parties to discuss the form of order that is consistent with these orders, so I may be satisfied that the order does justice and equity to the parties.
I note, for completeness, that the wife no longer presses her claim for spousal maintenance.
The matter shall be listed before me at 9:30 a.m. on 20 July 2007 for the pronouncement of orders in accordance with these reasons.
I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
Date:
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