WHALEN & WHALEN
[2018] FCCA 3208
•8 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WHALEN & WHALEN | [2018] FCCA 3208 |
| Catchwords: FAMILY LAW – Property – application to set aside orders – alteration of property interest – where there are deficiencies in the drafting of consent orders – where the terms of the consent orders could not be fulfilled – disparity in contributions – child support – two pool approach. |
| Legislation: Family Law Act 1975 (Cth), ss.79A, 79A(c), 79A(d), 79(4), 75(2) |
| Applicant: | MS WHALEN |
| Respondent: | MR WHALEN |
| File Number: | DNC 512 of 2012 |
| Judgment of: | Judge Young |
| Hearing dates: | 28, 29 March 2018 and 10, 13 April 2018 |
| Date of Last Submission: | 13 April 2018 |
| Delivered at: | Darwin |
| Delivered on: | 8 November 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Barry |
| Solicitors for the Applicant: | Darwin Family Law |
| Counsel for the Respondent: | Ms Farmer |
| Solicitors for the Respondent: | Withnalls Lawyers |
ORDERS
The orders made 20 January 2015 are set aside.
Within 30 days the husband is to pay the wife the sum of $261,838 and obtain the discharge of her liability in respect of Bank 1 loan and Bank 1 loan.
Simultaneously, with the payment to the wife of the amount in Order 2, the wife is to transfer her interest in the Property A property to the husband at the husband’s expense.
In the event that the husband is unable to comply with Order 2, the Property B property is to be sold on the following terms:
(a)Ms G of Real Estate Suburb K be appointed the agent for sale;
(b)at a listed price of $310,000; and
(c)on an unconditional Real Estate Institute of the Northern Territory Contract of Sale.
In the event an offer is received of at least 90% of the listed price, the parties shall accept the offer and sign all documents and do all acts necessary to effect the sale and any subsequent transfer.
The parties are to co-operate in every way with the agent for sale of the property, including making keys available, allowing inspections at all reasonable times as requested by the agent for sale and ensuring that the property is clean, neat and in good order at the time of the inspection by any prospective buyer.
In the event the property is not sold within 90 days, it shall be listed for sale by auction within 14 days with the contract to be prepared on an unconditional cash settlement basis and the auction shall proceed on the following terms and conditions:
(a)the auctioneer shall be nominated by Ms G of Real Estate Suburb K;
(b)the auction shall take place within 28 days of listing pursuant to this order;
(c)the reserve price shall be as recommended by the auctioneer;
(d)the husband shall, in the first instance, pay all auction expenses before the auction but shall be reimbursed from the proceeds of sale.
In the event that the property is not sold by auction or by private negotiation at a price recommended by the auctioneer, the party shall do all acts necessary to offer the property at a second auction on the following terms and conditions:
(a)the auctioneer shall be nominated by Ms G of Real Estate Suburb K;
(b)the auction shall take place within 60 days of the first auction;
(c)there shall be no reserve price;
(d)the husband shall, in the first instance, pay all auction expenses before the auction but shall be reimbursed from the proceeds of sale.
On the sale of the Property B property, the net proceeds shall be paid in the following order and priority:
(a)agent’ s commission, auction expenses and conveyancing expenses;
(b)amount required by the Bank 1 to release its security;
(c)the balance to the wife so as to constitute 54% of the net assets of the parties in accordance with the list of assets at paragraph 93 of the reasons for judgment, with the surplus, if any, to be paid to the husband.
In the event the net proceeds of sale of the Property B property are insufficient to satisfy the wife’s entitlement pursuant to Order 9(c), the Property A property is to be sold on the following terms:
(a)Ms G of Real Estate Suburb K be appointed the agent for sale;
(b)at a listed price of $430,000; and
(c)on an unconditional Real Estate Institute of the Northern Territory Contract of Sale.
In the event an offer is received of at least 90% of the listed price, the parties shall accept the offer and sign all documents and do all acts necessary to effect the sale and any subsequent transfer.
The parties are to co-operate in every way with the agent for sale of the property, including making keys available, allowing inspections at all reasonable times as requested by the agent for sale and ensuring that the property is clean, neat and in good order at the time of the inspection by any prospective buyer.
In the event the property is not sold within 90 days, it shall be listed for sale by auction within 14 days with the contract to be prepared on an unconditional cash settlement basis and the auction shall proceed on the following terms and conditions:
(a)the auctioneer shall be nominated by Ms G of Real Estate Suburb K;
(b)the auction shall take place within 28 days of listing pursuant to this order;
(c)the reserve price shall be as recommended by the auctioneer;
(d)the husband shall, in the first instance, pay all auction expenses before the auction but shall be reimbursed from the proceeds of sale.
In the event that the property is not sold by auction or by private negotiation at a price recommended by the auctioneer, the parties shall do all acts necessary to offer the property at a second auction on the following terms and conditions:
(a)the auctioneer shall be nominated by Ms G of Real Estate Suburb K;
(b)the auction shall take place within 60 days of the first auction;
(c)there shall be no reserve price;
(d)the husband shall, in the first instance, pay all auction expenses before the auction but shall be reimbursed 50% of the expense from the proceeds of sale.
On the sale of the Property A property, the net proceeds shall be paid in the following order and priority:
(a)agent’ s commission, auction expenses and conveyancing expenses;
(b)amount required by the Bank 1 to release its security;
(c)the balance to the wife so as to constitute 54% of the net assets of the parties in accordance with the list of assets at paragraph 93 of the reasons for judgment, with the surplus, if any, to be paid to the husband.
The husband is to retain all right, title and interest in the Property C property and, in the event that it is not necessary, they be sold pursuant to these orders, the Property B property and the Property A property.
The husband is to retain all right, title and interest in Business 1, including shares in the company and any bank accounts or other property in the name of the company and is to indemnify the wife in respect of any liabilities associated with the company.
The husband is to retain all other chattels currently in his possession, including his quad bikes, the boat and trailer and household contents at the Property C property.
The husband is to retain all monies in bank accounts in his name and to be responsible for payment of any credit card accounts or other debt in his name and to indemnify the wife against any liability in respect of the same.
The wife is to retain all right, title and interest in Business 1 including shares in the company and any bank accounts or other property in the name of the company, including the Motor Vehicle M, and is to indemnify the husband in respect of any liabilities associated with the company.
The wife is to retain all other chattels currently in her possession.
The wife is to retain all monies in bank accounts in her name and to be responsible for payment of any credit card accounts or other debt in her name and to indemnify the husband against any liability in respect of the same.
For the purpose of the Orders 24 – 29 "the fund" means the Super Fund C member number.
The base amount allocated to the wife out of the interest held by the husband in the Fund is $27,728.00 ("the base amount").
Pursuant to section 90MT(1)(a) of the Family Law Act 1975 where the Trustee of the Fund makes a splittable payment from the interest held by the husband in the fund, the Trustee shall pay to the wife an amount calculated in accordance with Part 6 of the Family Law (Superannuation Regulations 2001, using the base amount and there shall be a corresponding reduction in the entitlement the husband would have had in the Fund but for these Orders.
Order 25 has effect from the operative time.
The operative time for the purpose of these Orders is the fourth business day after the day on which a sealed copy of these Orders is served on the Trustee of the Fund or the date of the valuation report of the member's interest in the Fund.
Having been accorded procedural fairness in relation to the marking of this Order, this Order binds the Trustee of the Fund.
The Trustee of the Fund, the husband and the wife, in accordance with the obligations set out under the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 shall do all acts and things and sign all such documents as may be necessary to calculate the entitlement of and make payment to the in accordance with this Order.
The parties have liberty to apply.
IT IS NOTED that publication of this judgment under the pseudonym Whalen & Whalen is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT DARWIN |
DNC 512 of 2012
| MS WHALEN |
Applicant
And
| MR WHALEN |
Respondent
REASONS FOR JUDGMENT
This is an application to set aside orders for alteration of property interests and to make new orders.
The parties began to live together in 2002, married in 2003 and separated in about February 2009. The relationship lasted about 7 years.
The parties were divorced on 20 March 2013. The parties consented to orders for alteration of property interests on 20 January 2015.
Parties seek to have orders set aside
On 13 February 2017 the wife filed an initiating application seeking enforcement of those orders or, in the alternative, an order setting aside the orders pursuant to section 79A of the Family Law Act (the Act). On 13 April 2017 the husband filed a response. The only property order he sought was for “compliance” with the orders of 20 January 2015.
On 16 October 2017 the wife filed an amended initiating application where she sought, relevantly, the setting aside of the orders and substitution of new orders. The new orders sought were, in summary, for an equal superannuation split and a division of 55% to the wife and 45% to the husband of non-superannuation property. At trial the wife sought orders that the husband pay her the sum of $518,347 and simultaneously discharge two joint debts to the Bank 1 (Bank 1 loan and Bank 1 loan) totalling $770,080. Various properties were to be transferred to the husband or sold to enable the payments to the wife of the specified cash amount.
The husband did not file an amended response. At trial he agreed that the orders of 20 January 2015 should be set aside and sought orders in substitution. The new orders he sought were for the sale or transfer of the real properties to him and a payment by him to the wife of $120,000 and he would obtain the discharge of Bank 1 loan and indemnify her from liability for certain debts including the Bank 1 loan.
The ground or grounds relied on by the parties under section 79A were (b) and/or (c) which provide that a court may vary or set aside and order and, if it considers appropriate, make another order in substitution of the order set aside if it is satisfied that:
(b) in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set aside and make another order in substitution for the order; or
The parties might also have relied on section 79A(1A) which provides that the court may “… with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution the order so set aside”.
Where the parties have both agreed that the orders should be set aside it is strictly unnecessary, in my view, to decide which of paragraphs (b) or (c) is applicable. Nevertheless, some discussion of the reason why the consent orders of 20 January 2015 were not implemented is necessary.
There are three pieces of real property owned by the parties individually or jointly. The husband owns a property at Property B and a property at Property C and the parties jointly own a property at Property A.
In addition the husband owns an Business 1.
The parties also owned Business 2. The principal assets of this company were two franchise shops which were operated by the wife. The company was transferred to the wife pursuant to the consent orders. The wife sold the shops in about 2015 for $200,000 and $220,000 respectively, retaining the net proceeds.
The intended effect of the consent orders, in summary, was that the Property B property was to be sold “as a sales price of $430,000”. The proceeds were to be directed towards repaying Bank 1 loan. If the proceeds of sale from the Property B property were insufficient to discharge Bank 1 loan, then the wife was to pay the balance outstanding from other monies to be transferred to her by the husband.
On the sale of the Property B property, the wife was to transfer her interest in the Property A property to the husband.
According to Order 4 of the consent orders, simultaneously with the transfer of the wife’s interest in the Property A property to the husband, he was to pay her the sum of $650,000 and she was to simultaneously discharge the Bank 1 loan debt and indemnify the husband against any liability for that debt.
Various other transfers were to occur. The wife was to transfer a Motor Vehicle M, a Motor Vehicle N van and a trailer owned by Business 2 to the husband.
The wife was to retain Business 2 and the shops and be responsible for any associated liabilities and retain her superannuation entitlements.
The husband was to retain the Business 1, and be responsible for any associated liabilities and retain his superannuation entitlements.
They were each to be responsible for their own personal credit card debt.
There was a catch all provision that each party was entitled to all other property and chattels in their possession at the time of the orders. Presumably this dealt with the Property C property which was not otherwise mentioned.
There was liberty to apply “in the event of an ability (sic) to comply with Order 4”.
That typographical or voice recognition error was the least of the deficiencies in the drafting of the consent orders. Unfortunately for the parties, the consent orders did not make any provision for what was to happen if the Property B property could not be sold for $430,000 (apparently the agreed valuation). This was important because it transpired that the Darwin property market (regardless of the valuation) was falling or commenced to fall at about the time of the consent orders. The husband, who appeared to be mainly responsible for the sale arrangements, said there were difficulties with buyers’ inspections because of an uncooperative tenant and so on. By the time the property was ready for sale he could not sell the property at that price. He said he did not receive an offer at any price. That evidence was not challenged. The Property B property remains unsold.
Another serious deficiency in the consent orders is that they are silent about how another joint loan was to be repaid. This is Bank 1 loan. At the time of the orders the amount owed was about $486,000. Order 10 of the consent orders merely says that simultaneously with the payment of the amount of $650,000 to the wife she is to “execute all documents required to effect the closure of the following joint accounts …
(a)…
(b) Home Loan Accounts Numbers … [Bank 1 loan and Bank 1 loan].
It was submitted by counsel for the husband that this was intended to refer to the wife’s obligation to pay both liabilities. This was not accepted by the wife but I had difficulty following her counsel’s interpretations of the intent of the consent orders. Regrettably, such is the poor standard of drafting of the consent orders there is room for argument about their meaning which, no doubt, has bedevilled settlement negotiations. However, I accept counsel for the husband’s interpretation is more likely.
If the assumptions about valuation had been correct and the consent orders give effect as described above, the result would have been roughly as follows. The Property B property would have been sold for $430,000 and Bank 1 loan indebtedness of $405,000 would have been paid from the proceeds. After deduction of sales commission and fees, there probably would have been very little surplus or a few thousand dollars at most to go to the wife. The wife was to transfer her interest in Property A to the husband and he was to pay the wife $650,000. From this amount she was to pay the debt of $486,000 for Bank 1 loan, leaving her a cash surplus of $164,000 and ownership of the Business 2.
Description
Wife
Husband
Total
Assets
1
Property A (joint)
$440,000
2
Property C
$950,000
3
Business 2 (with shops)
c.$420,000
4
Business 2
unknown
5
Cash to wife
c.$164,000
Total assets
$584,000
$1,390,000
$1,974,000
Liabilities
6
Husband’s borrowings to pay wife
$650,000
Total Net Assets
$584,000 (44%)
$740,000
(56%)
$1,324,000
Superannuation
7
Husband’s Super (2 funds) at 2013/15 Ex. R6
c.$197,801
8
Wife’s Super Fund D at 30.6.15 Ex. R6
$87,595
Background
The wife is 47 years old and the husband is 53 years old. They began living together in 2002. A daughter, [X], was born to the parties in 2005.
[X] is now 13 years old. Consent orders were made in February 2018 that the parties have shared parental responsibility for [X] and that she live with and spend time with her parents according to her wishes. At the time of trial, [X] was living with her mother and spending little or no time with the father and, unfortunately, appeared to be estranged from him. The wife’s affidavit contained detailed and various criticisms of the husband in relation to [X] and hearsay evidence about what [X] said about the reasons for her estrangement from her father. I ruled this material was mostly inadmissible. The reasons for the estrangement between [X] and her father were not entirely clear but I would expect the prolonged dispute between these parties has taken a toll on all concerned. Whether this estrangement will continue into the future is unknown.
The husband was previously married and has three children from that marriage, each of whom is now an adult. At the commencement of the relationship between the husband and the wife, the husband was resolving the property aspects of that previous marriage. According to his application for consent orders in November 2001, as a result of the orders the husband retained Property C, said to be worth $280,000 and subject to a mortgage of $36,896, and Property B, said to be worth $140,000 and subject to a mortgage of $109,559. In addition, the husband had borrowed $170,000 to pay to his former wife in property settlement. If these values were correct, his real property was thus worth $420,000 but subject to liabilities of $316,455, giving an equity of $103,545.
The husband also had about $161,000 in superannuation.
The wife said she owned a property in Suburb L, Sydney that she purchased for $150,000 in 1993. She asserted this was worth $350,000 in 2001 and was subject to a mortgage of about $130,000. She said she had a car and about $20,000 in superannuation.
Although these assertions of property values are not admissible evidence of value, I consider they are likely to be a rough guide to the value of the properties, principally because the values are generally consistent with later agreed values or the borrowings for which the properties provided security.
In 2003, Business 2 was incorporated to purchase a shop in Suburb M, Darwin. The husband said the purchase price of the Suburb M shop was $380,000 to $400,000. The husband said that in 2006 a second shop was purchased at Shopping Centre. He said he believed this cost about $350,000. He said that both purchases were fully funded from borrowings and loan repayments were paid from business income. He said that initially there were two Bank 2 loans taken out to purchase the shops and the third loan of $50,000 to renovate the Property C property. He said that the security for the borrowings was the wife’s Property L property and the Property C property. He said that in 2009, the wife sold the Property L property and the proceeds of sale were used to pay out the home loan on the Property L property and to pay one of the Bank 2 loans for the shops.
The wife did not say what the purchase price was of either shop. However, she gave evidence that the mortgage on the Property L property was increased to $408,600 in order to consolidate debt and/or for “a business loan or loans”. She did not say when this occurred but the husband’s evidence suggested it may have been 2007. In 2009 the wife sold the Property L property for $457,000. After repayment of the Bank 2 mortgage of $408,600 and rates and conveyancing charges, the amount received by the wife was $24,442. She claimed $14,349 of this was applied towards renovations on the Property C property.
Unfortunately the imprecision of much of the evidence of the parties about the transactions relating to the shops makes it impossible to reconstruct the exact course of events but I consider it was likely, consistent with the husband’s evidence, that the mortgage on the Property L property of $408,600 related substantially if not entirely, to borrowings for one or both of the shops. This was repaid on the sale of the Property L property. It appears that Bank 2 loan is, in substance, the residue of the borrowings for the purchase price of one or both of the shops.
If the husband’s evidence about the purchase price of the Business 2 shops is correct (it was not challenged) the parties spent $730,000 to $750,000 on the two shops. The wife sold them for $200,000 and $220,000 respectively, a total of $420,000, in April 2015, after the consent orders. If so, the loss on the sale was in excess of $300,000 and, if the wife’s evidence about the net proceeds is accepted, considerably more.
In 2007 the parties purchased the Property A property for $440,000. The husband said the purchase was fully funded by a loan of $485,000, including stamp duty and legal expenses (the discrepancy between the purchase price and the borrowing was not explained). He said that additional security for the loan was provided by the Property C property. He said the property has been used as short-term rental accommodation. The Bank 2 loan is secured against that property and the Property B property. The wife said at trial that the Property A property was “positively geared” but the husband has kept all the rents. She said that she incurred a taxation liability for income from the property of $2,000. She said she did not receive any income from the rent.
The husband said that in about 2005 there were extensive renovations at the Property C property, costing about $245,000. He said $113,000 of this money was withdrawn from his Super Fund C (and thus, in substance, a contribution from the husband’s own pre-relationship resources) and $50,000 was used from the borrowings at the time of the purchase of the shop in Suburb M, Darwin. The wife agreed with that. The husband said the balance of the expenditure was funded from an unspecified amount of annual and long service leave entitlements paid upon the termination of his previous employment and his income as an (occupation omitted). Although I cannot make a precise finding, I accept that the husband made additional contributions to the cost of the renovations but these would appear to be largely earnings during the marriage. The wife also said that $8,000 from the sale of her Property L property was applied to the renovations. The husband accepted that. Elsewhere in her affidavit, the wife said that $14,349 from the sale of the Property L property was applied to the Property C renovations. This inconsistency was not explained. I am satisfied that she applied the sum of $8,000 to the renovations.
The wife’s evidence about how she dealt with the proceeds of sale of the properties was unsatisfactory. She said she paid $86,000 to the Australian Taxation Office, $70,000 in wages and superannuation, $30,000 to repay a business credit card debt, $30,000 for legal fees associated with the sale, $35,424 towards Bank 1 loan and $13,000 toward a car loan on “her” Motor Vehicle M (owned by Business 2). These amounts total $264,424 and if that sum is deducted from $420,000 the result is $155,576. The wife said that she “received around $186,000 net”. Her calculation appears to be an error.
The wife said she expended that money on $59,000 in legal fees and the balance on living expenses and holidays.
The wife’s evidence on this subject was not accompanied, as might have been expected, by supporting documentary evidence. In cross-examination, she said she did not give details of the tax liability because she “wasn’t asked”. She gave no more details although the cross-examiner did not put that the figure was incorrect or false but rather that it related to unpaid tax incurred running the business.
It was put to the wife that the $70,000 for “wages and superannuation” was in fact paid to her because she was the only employee. It was suggested that she paid the wages to herself to which she replied “not entirely”. When the cross-examiner said “Almost all I suggest?” the wife’s reply was “Suggest away!”. I consider that this answer was deliberately unhelpful. I am satisfied that the bulk of the $70,000 was paid by the wife to herself although, given the wife’s non-responsive answers in cross-examination, I am unable to say what circumstances the money was paid or when.
In relation to the claimed expenditure of $30,000 paying a business credit card debt, there was no detail about what the credit card debt related to and whether it was genuine business expenditure. Although the claim was not directly challenged in cross-examination, I am not satisfied, given what I find was a lack of frankness by the wife in relation to this subject, that the credit card debt related only to business expenditure. In cross-examination about the claimed expenditure of $30,000 on legal fees “associated with the sale”, the wife said that “part” of the expenditure related to personal legal fees in relation to the current property proceedings. On further enquiry by the cross-examiner, it transpired that only a couple of thousand dollars related to legal fees in relation to the sale of business. She said her affidavit evidence was the result of “a mistake”.
In relation to the $35,424 spent on Bank 1 loan, it appears this was the total of the periodic payments made from about January 2015 to March 2016 when the husband took over responsibility for the payments. The reduction in indebtedness between the time of the consent orders in January 2015 and then appears to be about $12,000.
In relation to the repayment of the car loan, the wife did not say whether the $13,000 was the total of periodic payments or a lump sum payment resulting in a reduction of indebtedness.
Overall, I accept that the liabilities of the Business 2 business at the time of sale included a taxation debt of $86,000 which was paid from the gross proceeds of sale. I am not satisfied that the balance of the expenditure claimed by the wife should be seen as properly reducing the gross proceeds of sale. I am satisfied that the net proceeds of sale were in the region of $330,000. I am unable to make any findings about whether the other expenditure claimed by the wife related to genuine business expenses or, indeed, was actually incurred. Nevertheless, I accept that some other payments such as the reduction in principal of Bank 1 loan and the reduction of the indebtedness (whatever the amount) in respect of the Motor Vehicle M must be seen as part of the wife’s post separation contribution.
A corollary of this finding is that the overall loss to the parties in relation to the Business 2 business was in the region $400,000 or more, being the difference between the total purchase price of $730,000-$750,000 and the net proceeds of sale of around $330,000.
Once it became apparent that the husband would not or could not abide by the terms of the consent orders, the wife made no further payment in respect of the Bank 1 loan. From March 2016, the husband took over repayments of the loan. The balance outstanding at that time was about $388,000. At trial this had been reduced to $347,440.
It appears that the wife used the proceeds of sale from the business for living expenses over an extended period. She did not give any details of her employment history in her trial affidavit. She said “I worked in small business up until last year” when she began working for the (employer omitted) as part-time (occupation omitted). According to her financial statement, she earns $760 a week, equating to a salary of $39,520 a year. It appears that the wife was in a de facto relationship for about three years at some point after separation but no further information was given about that by her.
Other post separation matters relevant to contribution include the rents received by the husband from the Property A and Property B properties. According to his financial statement, the rent received for the Property B property was $380 a week and for the Property A property $769 a week. He also said he received $420 a week from two boarders at the Property C property. This is a total of $1569 a week. His mortgage payments were said to be $816 a week on Bank 1 loan and $692 a week on Bank 1 loan, a total of $1508 a week. He said that he paid, in addition $109 a week for unit levies and rates on the Property B property. In cross-examination, he said that the taxable income from the rent was $9,270 in 2014, $10,174 in 2015, $2, 621 in 2016 and a loss of $4,800 in 2017. It was unclear whether this included the income from the boarders.
The husband also said that he had undertaken renovations on the Property B unit but he gave no evidence of the expenditure involved. He said also that “since 2009” he had undertaken further renovations on the Property C. Again the cost of this work was not specified, although in relation to a concrete slab for the ground floor veranda, he said it involved “approximately $14,000 in labour and $6,000 in concrete”. Whether the husband employed a contractor or did some of the work himself was not clear. No more detail was given.
The husband also said that he had made 14 additional monthly payments on Bank 1 loan between 2009 and 2012 which he said were “not matched” by the wife. He does not say precisely what he meant by “not matched”. Presumably the other payments were made by the wife from her own resources or from the income of the Business 2 business.
The husband’s child support assessment as at 15 January 2018 was $60.25. He agreed in cross-examination that in the 2015 financial year he earned about $12,000, in the 2016 financial year he earned about $19,000 and in 2017 about $41,500. According to the child support assessment of 15 January 2018 his taxable income for the 2017 year was in fact $46,563. The husband agreed that he had only paid about $3,300 in total for child support.
The husband said he received an inheritance from his mother of $178,000 in two payments in 2016 and 2017. The husband said $31,000 of this was spent on a boat and motor, $23,000 on paying credit card debt and $12,724 spent on “the credit card for rental expenses relating to the Property A property”. It is difficult to know whether this last payment relates to income, which the husband received, or capital expenditure on the property. I make no finding about that. The balance of the inheritance appears to have been dissipated.
The parties were in substantial agreement about the items to be included in the balance sheet and dollar values.
Description
Wife
Husband
Total
Assets
1
Property B
$310,000
2
Property A (joint)
$215,000
$215,000
$430,000
3
Property C
$850,000
4
Money at bank Bank 2
$11,030
5
Money at bank Bank 3
$346
6
Business 2
(car worth $58,850 and bank account $4,105)$62,955
7
Business 2
0
8
3 Quad bikes
$3,000
9
boat and trailer
$10,000
10
Household Contents
$3,000
$5,000
Total assets
281,301
1,335,224
1,616,525
Liabilities
11
Bank 1 loan (joint)
$173,720
$173,720
$347,440
12
Bank 1 loan
(joint)$211,320
$211,320
$422,640
113
Bank 2 Visa card
$23,290
14
Bank 1 Mastercard
$44,435
15
Bank 2 Account
$8,316
16
Bank 2Visa Card
$10,483
17
Bank 1 Mastercard
$3,711
18
Bank 4 Mastercard
$15,872
19
Bank 4 Mastercard
$12,206
Total
$452,765
$435,628
$888,393
Net Total Assets
-171,464
$899,596
$728,132
Superannuation
20
Super Fund C
$275,247
21
Super Fund D
$6,924
22
Super Fund D
$109,279
Total
$109,279
$282,171
$391,450
There were disputes about some items. The husband asserted that Business 2 should be valued according to its balance sheet which was said to show a deficiency of assets against liabilities of $71,461. The figure was not challenged. However, the wife did not accept that that was identical to the value of the company. I agree. The value of a business as a going concern is affected by a variety of factors, not simply its balance sheet at a particular date, and the relevant value is the value to the owner. In the absence of valuation evidence I am not prepared to ascribe any particular value to the company. The other item concerned an amount of $8,316 held in a bank account by the husband. He said he had borrowed this amount from his brother and he owed it as a debt. This was not challenged and I accept the husband’s evidence.
I have dealt elsewhere with the issue of the proceeds of sale of the shops and legal costs.
Contributions
The initial contributions of the parties were comparable. The equity of the husband in the Property C and Property B properties was about $103,000. The wife’s equity in the Property L property appears to have been in the region of $220,000. In addition, the husband had superannuation interests of about $161,000 and the wife had superannuation interest of about $20,000.
The parties agreed that the contributions during the relationship were equal. However, a notable aspect of the relationship was the loss-making investment in the shops. Although the wife operated the business, it was owned by a company incorporated by the parties and in which they both held shares. I am satisfied that the business was a joint enterprise of the parties and the loss should be shared equally. In practical terms, this means that the sale of the wife’s Property L property, the proceeds of which were used to pay a debt related to this business and for which both parties were responsible, should not be simply seen as a loss of an asset by the wife. In my view it would be unjust to regard the initial contributions of the husband through the Property C property and the Property B property, and which are still owned by him, as outweighing the wife’s contribution.
Although the initial financial contribution of non-superannuation assets was greater by the wife, the $113,000 withdrawn by the husband from his superannuation fund and applied to renovations on the Property C property significantly balances those contributions. I am satisfied that the financial and non-financial contributions to the non-superannuation assets to the end of the relationship were equal.
In relation to the superannuation interests the evidence of the parties was vague. There was no evidence about the making of lump-sum contributions, if any, or their timing or any evidence about the level of contributions made by each party during the relationship or at any other time. There was no evidence that the parties considered superannuation a joint savings vehicle. Given these factors and the relatively short relationship, I consider that the contributions should largely, but not entirely, reflect the actual balances held by each party. Nevertheless, there were probably superannuation contributions by each of the parties during the relationship and the husband’s fund appears to have had the more rapid growth. There was no evidence of the value of the husband’s superannuation interest at separation in 2009. The Super Fund C was valued on 1 July 2012 was $160,963. There was no evidence about the value of the wife’s superannuation interest other than at the time of trial and her estimate of her modest superannuation at the beginning of the relationship. I find that the wife’s contribution to the combined funds is 35% and the husband’s contribution is 65%.
Post separation contributions
The parties separated in 2009 and a trial was not held until 2018. The balance sheet reflects this fact. The wife sold the shops in 2015, after the consent orders, as she was entitled to do. I do not accept, as was submitted by the husband, that the proceeds of sale should simply be treated as an “add back” to the property pool. The concept of the “add back” is intended to deal with the situation of a party who takes matrimonial property prematurely or otherwise spends or dissipates matrimonial property in a way that makes it unjust to ignore that fact. That is not the case here. Nevertheless, the wife has received a distribution of matrimonial property which it would be unjust to ignore. While I am not satisfied that the entire proceeds of sale of the shops should simply be treated as a “add back”, I think the fairest and most convenient approach is to include in the balance sheet my assessment of the net amount, about $330,000, received by the wife from the sales. This takes account of the taxation liability, makes some allowance for the costs of sale but does not recognise other deductions.
The husband submitted that the wife’s legal costs should also be treated as an “add back”. The parties have been separated for many years and legal costs, on both sides, would appear to have been significantly funded from post separation earnings or, in the case of the wife, gifts from her mother. I am not ignoring the fact that a significant part of the wife’s legal costs were paid from the proceeds of sale of the shops but that is subsumed in the way I have treated the issue.
At different times since separation both parties have been solely responsible for payment of the Bank 1 loan. The wife made the loan repayments from January 2015 until March 2016 spending, according to her, about $35,000. The husband has made the loan repayments since March 2016. According to his financial statement, the loan repayments are $692 a week. If that amount had been paid weekly since March 2016, the payments would have amounted to about $71,000 by the time of trial. It appears the husband has made those payments and, presumably, continues to make them. It should be noted that the husband largely pays the loan repayments from rents received from the various properties, including the jointly owned Property A property.
The husband has also contributed to renovations on the Property C property but the evidence about the precise amount of any expenditure and the degree to which, if any, it has added to the value of the property is unclear. According to the husband, the work is still waiting for building certification. It is unclear whether this affects the value of the home.
The husband received an inheritance of $178,000 in two payments in 2016 and 2017. However, this appears to have been largely spent on a boat and motor, paying credit card debt and otherwise dissipated.
The parties each appear to have accrued significant credit card debt since the separation. I am satisfied this should be largely ignored.
A very significant aspect of post separation contribution concerns the child. An order was made by consent on 26 February 2018 that the parties have shared parental responsibility for the child, that she live with the mother and spend time with the father according to the child’s wishes. However, it is common ground that, unfortunately, the child has chosen not to spend time with the father since mid-2017. Having regard to the nominal amount of child support paid by the husband, the financial cost of caring for the child has largely fallen on the wife. In my view the wife has made the greater post separation contribution due to this factor.
I am satisfied that given the disparity between the contributions by the parties to the non-superannuation assets and the superannuation interest, there ought to be a “two pools” approach. I find that contributions for the purpose of subsection 79(4)(a),(b) and (c) of the Act to the non-superannuation assets are 51% by the wife and 49% by the husband. The principal reason for the disparity is the wife’s greater post separation contribution, both financial and non-financial, to the care of the child and the husband’s relatively slight financial contribution by way of child support assessment. However, I note that the husband pays half of the child’s private school fees in the sum of about $5,000 a year.
Some adjustment is required for the quad bikes, boat and trailer acquired by the husband with his inheritance and the credit card debts, which I am satisfied have been largely incurred by the parties since separation. Further, after nine years of separation, I am not satisfied that ascribing modest and nominal values to each party’s household contents serves any purpose. I am satisfied the easiest and fairest way of dealing with each of these items is to exclude them from the pool.
Section 79(4)(d),(e),(f) and (g) and 75(2) factors
The orders will not have any effect on the earning capacity of either party and no other order under this Act is relevant. Child support is dealt with below.
The wife is 47 years old and the husband is 53 years old. Both parties are generally in good health. There would appear to be no reason why both parties, if they chose, could not continue to work for many years. The wife says she has no skills and has generally been a relatively low income earner. She says she has rarely earned more than $40,000 a year. Although her income tax returns were not in evidence that claim was not challenged. Whether her current part-time employment is the result of a choice by her or otherwise was not explained. The husband is an (occupation omitted). While his income in some recent years has been low: about $12,000 in 2015 and about $19,000 in 2016, that increased to $46,563 in 2017. The husband said that, if he wished, he could earn more. The husband’s relatively low earnings were unexplained. The husband also said that he injured himself when he fell off a ladder last year and broke his wrist or wrists but he expected to make a full recovery.
The most significant section 75(2) factor is that the wife is likely to have the bulk of the responsibility, financial and otherwise, for the care of the child of the parties for at least another 5 years and possibly more if she continues to tertiary study. Having regard to that and the current modest child support assessment, in my view, an appropriate adjustment is a further 3% of the non-superannuation assets, a difference of 6% between the parties or about $73,000 of the net non-superannuation pool.
In my view the pool should be characterised as follows.
Description
Wife
Husband
Total
Assets
1
Property B
$310,000
2
Property A (joint)
$215,000
$215,000
$430,000
3
Property C
$850,000
4
Money at bank Bank 2
$11,030
5
Money at bank Bank 3
$346
6
Business 2
(car worth $58,850 and bank account $4,105)$62,955
7
Business 2
0
8
Net proceeds of sale of Business 2 shops
$330,000
Total assets
$608,301
$1,375,000
$1,983,301
Liabilities
11
Bank 1 loan (joint)
$173,720
$173,720
$347,440
12
Bank 1 loan
(joint)$211,320
$211,320
$422,640
Total
$385,040
$385,040
$770,080
Net Total Assets
$223,261
$989,960
$1,213,221
Superannuation
20
Super Fund C
$275,247
21
Super Fund D
$6,924
22
Super Fund D
$109,279
Total
$109,279
$282,171
$391,450
I am satisfied that an overall division of non-superannuation assets of 54% to the wife and 46% to the husband and alteration of property interests accordingly is just and equitable. In relation to the superannuation interests of the parties, I have found contributions have been 35% to the wife and 65% to the husband. I find, in relation to the superannuation pool, that section 75(2) factors, particularly the husband’s greater age, do not require any further adjustment.
I should address an argument put to me by counsel for the husband. She submitted that 2015 consent orders ought to be set aside but to a limited extent in a way which reflected the structure and purpose of the earlier orders. She submitted that it would be just and equitable to, in effect, carry out the earlier orders by making an order that the husband pay the wife about $262,000. She said this was $650,000 less the amount that was outstanding on the Bank 1 loan in March 2016, about $388,000, and which the wife ought to have paid. In some circumstances it may be just and equitable, as section 79A contemplates, to make relatively small changes in orders or to vary orders so as to give effect to their intention. However, where orders are to be set aside under section 79A and new orders are made under section 79 in substitution for those orders, then it appears to me that the condition for making an order under section 79, that is, that “in all the circumstances, it is just and equitable to make the order” must be satisfied. In this case, after considering the evidence, I have approached afresh the question of what is just and equitable. My conclusion is not based on the earlier orders although, in some ways, the outcome might be thought to be remarkably similar to the husband’s position at trial. That is coincidental.
The orders I propose will have the following effect.
94.
Description
Wife
Husband
Total
Assets
1
Property B
$310,000
2
Property A (joint)
$215,000
$215,000
$430,000
3
Property C
$850,000
4
Money at bank Bank 2
$11,030
5
Money at bank Bank 3
$346
6
Business 2
(car worth $58,850 and bank account $4,105)$62,955
7
Business 2
0
8
Net proceeds of sale of Business 2 shops
$330,000
Total assets
$608,301
$1,375,000
$1,983,301
Liabilities
11
Bank 1 loan (joint)
$173,720
$173,720
$347,440
12
Bank 1 loan
(joint)$211,320
$211,320
$422,640
Total
$385,040
$385,040
$770,080
Net Total Assets
$223,261
$989,960
$1,213,221
Payment to wife
$431,878
$655,139
(54%)
-$431,878
$558,082
(46%)
$1,213,221
Superannuation
20
Super Fund C
$275,247
21
Super Fund D
$6,924
22
Super Fund D
$109,279
Total
$109,279
$282,171
$391,450
Split 35%/65%
$137,007
$254,443
$391,450
As can be seen from the table, a 54%/ 46% split of non-superannuation assets can be achieved in a number of ways. The husband proposes that the Property B property be sold and the Property A property be transferred to him. The existing Bank 1 loan and Bank 1 loan would need to be discharged to remove the wife’s liability and the husband would need to refinance. If the husband refinanced and the wife’s joint liability was discharged this would constitute, in effect, a payment to her of the amount of her share of the joint debt (assuming equality) or $385,040. An amount of $46,838 would still be owed to the wife. If the husband wished to acquire the wife’s interest in the Property A property, he would need to pay her an additional $215,000 for her interest or $261,838 in total.
A superannuation splitting order will be necessary in relation to the superannuation funds.
If the Property B property can be sold so that the wife can be paid $261,838, the Property A property is transferred to the husband and the husband is able to refinance so as to discharge the wife’s liability the wife’s entitlement will be satisfied. However, if the husband is unable to refinance there will need to be a sale of the parties’ assets.
I propose to make orders that the husband pay the wife $261,838 and obtain a discharge of her indebtedness for Bank 1 loans within 30 days. She will need to simultaneously transfer her interest in the Property A property to the husband. If the husband is unable to pay the wife and obtain a discharge of her indebtedness the properties will be sold, beginning with the Property B property and then the Property A property. It should not be necessary to sell the Property C property but I will give the parties liberty to apply generally.
In addition, there will need to be a splitting order in respect of the husband’s superannuation in favour of the wife of a base amount of $27,728 at the date of these orders.
I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for judgment of Judge Young
Date: 8 November 2018
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Procedural Fairness
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Res Judicata
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Constructive Trust
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Appeal
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