Waldrop and Barrett
[2011] FMCAfam 352
•21 April 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WALDROP & BARRETT | [2011] FMCAfam 352 |
| FAMILY LAW – Property dispute – short marriage – only asset being matrimonial home – major initial contribution by wife – competing assertions about contribution – unsatisfactory records by both parties – springboard effect of wife’s contributions – balancing section 75(2) factors. |
| Family Law Act 1975, s.75(2) Evidence Act 1995, s.128 |
| Applicant: | MR WALDROP |
| Respondent: | MS BARRETT |
| File Number: | MLC 1589 of 2009 |
| Judgment of: | Burchardt FM |
| Hearing dates: | 15, 16 & 28 February 2011 |
| Date of Last Submission: | 28 February 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 21 April 2011 |
REPRESENTATION
| Counsel for the Applicant: | Ms C. Jenkins |
| Solicitors for the Applicant: | Ken Smith & Associates |
| Counsel for the Respondent: | Mr A. Lovering |
| Solicitors for the Respondent: | G.A. Black & Co |
IT IS NOTED that publication of this judgment under the pseudonym Waldrop & Barrett is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 1589 of 2009
| MR WALDROP |
Applicant
And
| MS BARRETT |
Respondent
REASONS FOR JUDGMENT
Introductory
This is a property dispute in which the evidence provided by the parties, and the circumstances that give rise to that evidence, lead to the result that the Court is faced with significant difficulty in working out what actually happened so as to embark upon the well-established pathway to producing a result that is just and equitable. Although they are now divorced, it is convenient to refer to the parties as husband and wife.
The pool, to which I will return, is small consisting essentially of the equity in the former matrimonial home. The respondent (the former wife) wants the vast bulk of the assets to be retained by her because of her superior (and markedly so) contribution to the family’s finances during the marriage. The applicant (the former husband) seeks a 60/40, or alternatively 50/50 split, with 60 per cent to favour himself.
For the reasons that follow, I think that the wife is, in the main, correct and the orders that the Court will make are substantially closer to her position than that of the husband.
The facts
The husband was born [in] 1966 and the wife [in] 1965. The applicant asserted in his affidavit sworn 6 August 2010 that the parties met in 2002, married in 2003, and separated in 2007. The wife’s responding material does not dispute the first two dates but says that the parties separated in 2006, although they continued to live under the one roof, as is indeed common cause, until the husband vacated the matrimonial home on 19 February 2008.
The parties’ financial circumstances at the commencement of the relationship and what is said to have been done with those assets was the subject of most of the disputation in the case, although not by any means all of it.
The wife’s case
The wife asserts that she contributed $60,000 cash brought from Great Britain to the purchase of the matrimonial home. The $60,000 was said to have been derived from a number of sources to which I shall return.
The wife asserts that the purchase price of the property was reduced by some $20,000 because the house was purchased at an under-value from her parents.
During her oral evidence, the matter not having been foreshadowed in any way in prior copious affidavit material, the wife asserted that she in fact had brought $110,000 into the relationship, the additional $50,000 not having been revealed because nobody had asked her about it.
It was the wife’s case that she worked throughout the relationship, albeit for modest wages, but that the husband provided very little, if anything. It was her case that such moneys as he obtained were expended wholly on his own needs and whims.
It should be noted that the wife has two children by a prior relationship, [X], now 20, and [Y], 17, who were of course some eight or so years younger when the relationship commenced.
The wife maintains that renovations to the property were either effected before the relationship commenced or were, in the vast majority, performed by her family rather than the husband.
She also maintains that she, with the assistance of the father of the children, paid – and indeed is continuing to pay – the bills for the children’s braces which in each instance came to over $6,000.
It should be noted that the husband did not challenge the wife’s assertion that she continued to receive approximately 300 pounds per month in child support throughout the currency of the relationship. I note that in the main, the exchange rate between the Australian dollar and the British pound has been advantageous to the wife throughout the period of the relationship and that 300 pounds per month may have equated to at least double that in dollars for most of the time.
It is common cause that in late 2003, the parties bought a property at [I] in [L] from a business associate, or possibly employer, of the husband called Mr P. The wife maintained that this was only possible because Mr P offered vendor’s terms. She also asserted that contrary to his position, the husband had never been a self-employed [omitted]. She maintained that the husband was at all times an employee of Mr P, at least until the [I] property was bought, and that indeed she had remonstrated with Mr P because it appeared to her that the husband was not in fact paid any wages for the work that he did for Mr P as an employee.
The husband’s case
The husband’s case was that although the wife had put in a certain amount of money at the start of the relationship (he put the figure at $50,000 rather than $60,000), he himself had assets worth $60,000 at the commencement of the relationship which were, in the course of time, committed to it. He said he owned a business called [M], and that the cars and tools and other matters owned by that business were worth $60,000 at the start of the relationship.
He said that the matrimonial home was bought, in effect, with $60,000 from the wife and a $7,000 home owners’ grant that he was able to access. (plus of course a mortgage).
He said that the [I] property was bought by a combination of the proceeds of a sale of a [omitted] car together with cash in his possession, which had made up the deposit, with the remainder being accessed through a loan from the [omitted] Bank.
He said that he had worked throughout the relationship making about $100,000 as a [omitted].
It is common cause that in 2007, his business was wound up and it appears clear that his income thereafter as an employee has been substantially lower than the earlier sums he asserted.
When the [L] property was sold, a net profit of about $89,000 was engendered, of which half was given to the wife and $34,000 approximately to the husband. A further $6,000 was repaid to the wife’s parents for a loan which had been applied by the husband to buy a [vehicle omitted].
It was the husband’s case that he had paid for the children’s braces in the sum of $6,000 and that he had paid $200 a month for school fees for them. He put his expenses and input into the house renovations at a sum in excess of $38,000.
It is common cause, it should be noted, that the husband suffers from epilepsy, and I would interpolate and say that it is clear that his employment prospects as a result in the future are relatively poor.
The exhibited material
Exhibit A1 is a binding financial agreement, signed by the parties on
12 June 2007 which, both parties agree, was not for various technical reasons effective, albeit that both sides were represented by lawyers at the time that it was entered into.
The agreement records that at that date, the wife was the sole proprietor (as she had been registered since 2004) of the matrimonial home worth approximately $270,000 and encumbered by a mortgage of $147,000.
At recital M, it is stated:
“[Mr Waldrop] was the owner of a business known as “[M]” which no longer exists.”
At paragraph 4(iv), it was agreed that if the matrimonial home was sold, that after all payments of sale commission and mortgage and the like, the net proceeds be distributed to the wife:
“a) $50,000; and
b) all her mortgage payments until the date of settlement be paid to the wife, and the residue be equally divided between the wife and the husband.”
On the figures as they then stood, bearing in mind a net equity of about $123,000 and mortgage payments at that time of about $140 a week, it is apparent that the distribution envisaged would have been a division of approximately $35,000 to the husband and $85,000 to the wife.
It was also noted at paragraph 5 that of the $89,000-odd net proceeds from the sale of the [L] property, the wife would receive just shy of $45,000, her parents would receive $6,000 (for a loan to [Mr Waldrop]), some $4,500 would be moneys deducted from adjustments on sale, and the remainder would go to the husband.
From the husband’s tax returns, being exhibit R2, it is apparent that his earnings varied from as low as $2,797 in the tax year ending 2006 to no more than $19,280 for the tax year ending 2005 during the years that the parties were together.
From exhibit R3, it is apparent that from February 2005 until
21 February 2007, the husband was depositing relatively substantial, albeit intermittent, sums of cash into his bank account. By way of illustration, $3,000 was deposited from [omitted] on 25 February 2005.
I am not an accountant, but the total credits for the various periods of each statement vary from as low as about $14,000 between
31 December 2005 and 31 March 2006 to as high as $33,310 between
1 July 2006 and 29 September 2006.
The bank accounts show that on and from 21 February 2007, the applicant was being paid, as an employee, a relatively modest sum of $640 per week.
Exhibit R4, being records from the [omitted] Credit Union in the name of the husband trading as [M], shows an account operating at a relatively low level of credit, consistent with it having been an account largely, but not wholly, used to run the business. It should be noted that the bank records, being exhibit R3, in addition to showing the intermittent deposits to which I have referred, also show a number of expenses which could be either personal (numerous purchases of liquor) or for the household more generally.
Exhibit R5, being the wife’s bank account records from the [omitted] Bank going back to 2001, shows an inward transfer on 8 May 2001 of $12,707 and a further deposit on 25 November 2003 of $15,000. These records show a further deposit of $8,000 on 27 February 2004. By and large, however, these accounts show that these initial sums were generally drawn down over time for what would appear to have been household expenses.
Exhibit R6 is the wife’s [bank omitted] Account records starting on
2 October 2003 in credit of over $12,000. Likewise, these generally show a series of consistent withdrawals over time and a relatively low credit balance. Finally, a document marked for identification is MFI 1, which was not formally tendered but which is before the Court in any event, shows that the wife borrowed $94,100 as an [omitted] Home Loan on 13 August 2007.
The oral evidence – the husband
The husband confirmed that he did not seek a super split or any orders in relation to superannuation. When cross-examined as to his income, he was warned by the Court as to his capacity to incriminate himself and, in due course, I indicated that I would issue him with a certificate pursuant to s.128 of the Evidence Act 1995. Both counsel expressed the view, as I recall it, that this was an appropriate way to proceed but, on consideration, I am by no means sure that I have correctly applied the operation of the legislation. This is the first time I have had to confront this circumstance since the Commonwealth legislation was introduced. It may well be that I have erred. In any event, the husband candidly conceded that he grossly under-declared his income.
The husband gave evidence as to the effects of his epilepsy, which is plainly a debilitating condition for him.
He also gave evidence about the rather confused and confusing way in which cars are imported into this country for modifications to right hand drive and then sale. He said that he tried to get about $4,000 or $5,000 per car, but sometimes he would achieve a loss. He was adamant that he had a single [car omitted] that he sold for $19,500 to operate as the deposit for [I].
The evidence about the deposit was hard to follow. At one stage, the husband appeared to suggest that a total deposit of $56,000 was paid, of which $19,500 was due to the [car omitted] and a further $30,000 in cash. He said he paid the mortgage on the [I] property.
He also said that at the time the business was sold (more accurately described as wound up and the building sold) in 2007, he had about $15,000 in debt to the Taxation Office and $2,000 to American Express.
He said that he is now earning about $38,000 per year, that his memory is poor and he suffers from claustrophobia. When it was pointed out to him that his affidavit filed on 12 August 2010 put the date of separation as being June 2007, he said that this was an error.
In relation to the binding financial agreement, he said that he signed this, in effect, because he loved his wife and was trying to reconcile and did not care what was in it. He said that he had been advised not to sign the binding financial agreement.
He confirmed that he had not asked Mr P to give evidence, nor anyone else. He confirmed that Mr P and the wife had not got on.
He said that he had had a number of employees, including an apprentice called Mr K, that he drank a lot, but so did the wife.
He confirmed that the mortgage on the matrimonial home was $147,000 in June 2007 when the binding financial agreement was signed, but was down to $94,000 on 30 August of that year, and was in the wife’s name alone.
He said that the parties had gone out as a couple until shortly before he moved out in 2008, and that child support had indeed been paid in the sum of 300 pounds per month throughout.
He said that he had paid private school fees in the sum of $10,000 per annum and pointed to the fact that since separation, the wife had been able to pay $22,000 further off the mortgage, which is now down to $75,000. He put his income from his business during the years that he operated it between $80,000 and $100,000.
The wife’s oral evidence
The wife confirmed that the former matrimonial home had been on the market and indeed was the subject of a contract of sale at a sum of $229,000 before her parents withdrew it. Ultimately the purchase price was $212,000 including $4,000 paid to the agent.
She confirmed the division of the sale proceeds of [I], as I have set them out earlier, but she says that the $6,000 repaid to her parents by the husband had been given by them to her and was paid into the mortgage for the house.
As I have earlier indicated, the wife did not accept that the husband had been in business and said that he had not even been paid a wage, notwithstanding that he was an employee. She said there was no deposit on the [I] property but that the property had been bought on vendor’s terms (no one has sought to produce those terms to the Court).
She conceded that the [I] property had been purchased for $20,000 less than its true value because of the relationship between the husband and Mr P.
In respect of the alleged $110,000 brought from England in 2002, the wife said that she had sold her furniture in England for approximately 11,000 pounds, that she had received 9,000 pounds from the sale of a property at [D], and that she had received 10,000 pounds from the sale of her almost brand new car.
She said that that was her children’s money and that she was careful to ensure that the husband’s name was never put on her bank account. She also said she received $60,000 from an insurance payout which was to be held for her children.
She said she was unable to remember what she did with the money, but that she had needed money to live on.
She described herself as thrifty. She said words to the effect, “I don’t spend; I save and save.” She has no credit cards.
She gave an account of the school fees paid for the children, which were never more than $167 per fortnight. One child was at school for a relatively short time and both children attended Catholic private schools which would have engendered relatively low levels of fees.
She confirmed that she was still paying for braces for the children which she said had largely been funded with payments of child support. In addition to the 300 pounds per month paid, she said that her former husband had paid lump sums, although she was unable to say exactly when these were paid or in what sums.
With the exception of a half contribution to shade sails, air conditioning and ducted heating, she said that the husband contributed nothing to renovations.
She further said – and in my view, tellingly – that, “Each of us did not know what the other got. It was not that sort of relationship. I can’t say how much money he got as I don’t know”.
She said that she paid all the groceries and that the husband provided no cash. She said that is why the marriage only lasted three years. She said she did not know how the [I] deposit was paid for.
She said that the kitchen renovation was undertaken in February 2008 by a draw-back on the mortgage.
When questioned as to why the husband had stayed in the house for so long, she said she would not throw him out and wanted to do the right thing. She said that they still spoke and were still friends, but that intimate relationships had finished in 2006. Her daughter had been at private school for two and a half years and her son for only four months.
The evidence of Mr B – the wife’s father
Mr B said that the matrimonial home was only five years old when it was sold to the parties. I accept that evidence.
He also confirmed the loan of $6,000 for the [vehicle omitted] which had been repaid. He also confirmed that he had worked for some time at [M] when the husband was running it. His evidence was to the effect that the husband was dilatory in his work performance and had spent a substantial amount of time just simply sleeping or resting.
Mr B’s evidence was generally corroborative of that of his daughter.
Mr B was a good witness whose evidence I accept.
Findings on the evidence
The above account, while relatively extensive, is self-evidently only a paraphrase of what the parties actually said. It does not cover each and every matter advanced by them by any means. Rather, I have endeavoured to give a meaningful recitation of the major points they made. This has not been easy given the confusing evidence they gave.
I am satisfied, and there is really no serious challenge to this, that the wife brought $60,000 from Britain in 2002, which she had amassed in large part from the sale of the [D] property (her father gave her his share of the sale proceeds which are shown in exhibit A2). The 19,000 pounds she received was worth over $50,000 at the then exchange rate of 2.67.
I am likewise satisfied that the wife brought additional payments arising from the sale of her car and her chattels in England. There is, however, simply no evidence to enable me to find that a further $60,000 net, either from some sort of insurance payment or from other sources, was paid and if so, what happened to it.
In summary, I suspect the wife brought a sum well in excess of $60,000, but not necessarily as much as $110,000. Indeed, the wife’s own evidence seemed to be slightly equivocal as to the exact amount.
Nonetheless, the wife was a woman of clearly tenacious personality. She had a clear memory of at least some aspects of what had occurred. I think what happened was that she brought more than $60,000, but that the excess was, understandably enough, used up in the costs of living. Although she was living with her parents for quite a time after she arrived in Australia, she was not initially able to work because of visa restrictions and it is only common sense that this is where the money went.
I accept that the husband did have a business called [M] in 2003. It is clear that he was living at the premises when he first met the wife. It is telling that for all her numerous criticisms of the husband’s history, she herself asserted that the parties really had no idea how much money each of them had. Indeed, this was a major source of complaint for her.
It simply does not make sense that the husband was an employee
(as the wife asserts) of Mr P and simply did not get paid at all. The evidence of the wife herself is that the husband and Mr P had a good relationship which caused them to purchase the [I] property for a $20,000 under-value. A friend who treats you like this is not a friend who fails to pay if you are doing work for him.
Although the evidence is by no means clear, it seems more probable to me than otherwise that the husband did indeed have a business and that it did indeed have a relatively significant cash turnover. What is not clear, however, is the extent to which the relatively substantial number of credits recorded in his bank account reflect net profit. It seems to me far more probable than otherwise, especially bearing in mind the husband’s own evidence that some cars were sold ultimately at a loss, that the substantial amounts revealed as credits were offset by very substantial operating costs.
Putting the matter, once again as it necessarily must be, in the round, I find that the husband made more money than he was declaring to the Australian Taxation Office, but nothing like as much as a net wage of $80,000 to $100,000 per year.
I further find that much of the money he made was spent on himself, but clearly a certain amount of it was spent on joint household expenses. It is quite impossible to disaggregate the amounts that may have been spent by the husband on himself rather than upon the joint household. Nonetheless, there is one aspect of the evidence that has a certain resonance. The wife, who impressed me as being a thrifty, if not parsimonious, person said words to the effect that it was the husband's failure to provide financial assistance that explained the relative brevity of the marriage of three years. Certainly the marriage was brief and certainly it was largely broken down, if no earlier, by mid-2007. It is more probable here than otherwise that the wife's irritation about lack of funds provided by the husband is indeed founded in fact.
I should make it clear that in the main the wife was a substantially better witness than the husband. While I have noted some matters where her evidence was unsatisfactory, her answers were generally direct (indeed at times combative), responsive and generally consistent with the written evidence. The husband, even making proper allowance for his epilepsy and other difficulties, was generally a poor witness whose answers were often unresponsive and evasive.
The pool
It is common cause between the parties as I understand it that I should treat the parties' vehicles and superannuation as the same or of so little value as to be of no moment, and therefore ignore them. The same goes as I understand it for chattels.
Thus the pool is the matrimonial home presently valued at $372,000 with a mortgage of $75,000, the nett pool thus being $297,000.
Contribution
The wife's case is that she put in $60,000 by way of initial contribution, $20,000 by way of the benefit given on purchase by her parents, and $72,000 post-separation (of which approximately $50,000 came from her share of the sale of the [I] property).
It was also put that there has been an increase of $25,000 in the value of the property as a result of market increase, and this much seems correct.
The husband's case by way of contrast is that he contributed equally to the operating expenses of the relationship, that he paid the mortgage, that he paid for the children's braces and contributed to school fees. It should be noted that the husband said on a number of occasions that the process of trying to remember was difficult and his demeanour was entirely consistent with this and with the difficulties occasioned to him by his epilepsy and the after-effects of a car crash at an earlier time.
It seems clear that the vast bulk of any renovations were effected by the wife and/or her family and that there is no precise value attributed to their effect before the Court in terms of any increase in the value of the property. It is also clear that the wife's contribution was substantially the greater. The purchase price of the property was $212,000 and the wife effectively put up $80,000 of that. The further reduction of some $50,000 following the sale of the [I] property owes at least something to the $20,000 under-value arising from the husband's interrelationship with Mr P.
These are not areas of precision, particularly given the various gaps in the evidence and the unsatisfactory accounts given as to what occurred.
I do accept that of the $34,000 or so that the husband received upon the sale of [I], a substantial amount would have been expended in living expenses for the husband in any event and some of it would have almost certainly contributed to the joint household which did not finally sunder, notwithstanding that separation had already occurred, until February 2008.
In all the circumstances, and emphasising that by and large I prefer the wife's evidence to that of the husband, this is a case which, given its unusual circumstances, should properly give rise to a 25 per cent loading in the wife's favour under the heading of Contribution. As things have emerged, the final pool of just under $300,000 owes at most $50,000 from the sale of [I] to the husband's direct contribution. By way of contrast the purchase of the matrimonial home owed all but $7,000 to the wife's contribution in terms of the $87,000 initially committed in cash (of which $20,000 was the reduction in price from her parents). The springboard effect of this should not be under-estimated. Without it, the parties would have virtually no assets at all.
Section 75(2) factors
In my opinion, these largely balance themselves out. The husband appears to be in relatively secure employment although I accept he will in the future only be able to work for himself. He has a salary that would seem to be around about $40,000 per annum and notwithstanding his poor health, it seems likely to continue. The mother still has one child of under adult age living with her and must have some expenses in this regard. Her employment as a [omitted] is not munificent and likewise, her future employment prospects, while apparently reasonably secure, are not likely to be munificent.
While it is possible that the wife's parents will continue to support her as they have done in the past, there is no evidence before the Court that that would necessarily continue to be the case. Likewise, the wife's remarks to the effect that her children's father would continue to assist must be taken as necessarily hypothetical given that the children are now almost adult even in the case of the younger child.
As I say in my view the s.75(2) factors of the Family Law Act 1975 (“the Act”) in this case do not lead to any further adjustment.
Just and equitable
A division of the net value of the matrimonial home of 75/25 will give the husband a net figure of just under $75,000. That figure is $25,000 more than he was prepared to accept when the binding financial agreement was entered into in 2007. The binding financial agreement cannot in my view be wholly ignored. Whatever technical deficiencies it had, and whatever his reservations may now be said to be, the fact is that the husband executed it thinking it was binding upon him.
In my view, taking the binding financial agreement as an admission against interest as I think it should be, a return of an additional $25,000 to the husband, in circumstances where any contribution by him thereafter until February 2008 was not great, would be excessive.
Weighing up all these relevant factors, it seems to me that the just and equitable resolution of this matter is that the wife should pay to the husband the sum of $65,000, this being the sum of approximately 22 per cent of the pool. In all the circumstances I have described this seems to me to be the appropriate outcome. There will be orders accordingly. Given that sale seems highly likely I will direct the parties, who may well have views as to choice of agent and the like, to bring in draft minutes to reflect this judgment.
I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 21 April 2011
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