Whateley and Morton-Whateley and Anor
[2015] FamCA 750
•10 September 2015
FAMILY COURT OF AUSTRALIA
| WHATELEY & MORTON-WHATELEY AND ANOR | [2015] FamCA 750 |
| FAMILY LAW – PROPERTY – just and equitable consideration – where but for the actions of the wife the parties financial position would be considerably worse – where the wife has made the greater contributions – where a debt is liable to a third party – where parties offered little evidence of actual financial position – where the financial position of the parties appears to be one of net debt |
| Family Law Act 1975 (Cth) s 75 s 79 s 106A |
| Stanford v Stanford (2012) 247 CLR 108 Gould & Gould (2007) FLC 93-333 Jamine & Jamine (No 2) [2012] FamCAFC 104 |
| APPLICANT: | Mr Whateley |
| RESPONDENT: | Ms Morton-Whateley |
| INTERVENOR: | Ms Laurel |
| FILE NUMBER: | BRC | 2512 | of | 2011 |
| DATE DELIVERED: | 10 September 2015 |
| PLACE DELIVERED: | Townsville |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 22 August 2013 and 6 July 2015 |
REPRESENTATION
| THE APPLICANT: | In person |
| THE RESPONDENT: | In person |
| THE INTERVENOR: | In person |
Orders
That it be declared that the Applicant Mr Whateley and the Respondent Ms Morton-Whateley are indebted to the Intervenor Ms Laurel in the sum of $196,091.00
That in partial discharge of that liability, the Applicant and Respondent are to do all things necessary to effect the sale of:
(a)2,629,554 D Ltd shares held by B Pty Ltd as trustee of the C Trust; and
(b)A boat, including trailer and 250 HP outboard motor, all presently in the possession of the Respondent;
and pay the entire proceeds (subject to any costs of sale) to the Intervenor.
That otherwise each party be entitled to such assets under their control at the date of these orders, and remain liable for such debts or other liabilities in their sole or joint names.
That each of the parties shall do all acts and sign all necessary documents to give effect to the terms of this order and in the event that any party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any document necessary to effect the terms of these orders, the Registrar of the Family Court of Australia is hereby appointed pursuant to section 106A of the Family Law Act 1975 to execute such documents on behalf of such party.
That otherwise all extant applications stand dismissed and the matter be removed from the list of active pending cases.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Whateley & Morton-Whateley has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2512/2011
| Mr Whateley |
Applicant
And
| Ms Morton-Whateley |
Respondent
And
Ms Laurel
Intervenor
REASONS FOR JUDGMENT
INTRODUCTION
This judgment arises from the trial of proceedings issued by Mr Whateley (“the husband”) seeking the division of the property of the parties consequent upon the breakdown of their marriage. In substance he seeks orders that the parties retain such assets and liabilities as presently remain in their possession or are held in their names, with the balance of the property to be split equally between them. That property only comprises some shares held in a trust to the value of a little over $68,000.00 and a boat and trailer said to be worth between $20,000.00 and $35,000.00. However Ms Morton-Whateley (“the wife”) seeks quite different orders. She says that not only should the shares and boat be transferred to her, but she should also be entitled to the husband’s superannuation last valued some years ago at a little over $28,000.00 and further that the husband should pay her $230,000.00 as well. It might also be the case that the wife seeks a further payment to her in the sum of $450,220.00[1] although that was not advanced by her in her oral submissions.
[1]See wife’s Summary of Argument filed 30 June 2015 paragraph (N) 17.
Precisely how such payments could be made by the husband were not explained by her. That is because the pool of assets available for division, subject to realisation prices, could not possibly support such payments, and indeed on one view, as shall be seen, the parties’ position is one of net debt rather than net assets.
BACKGROUND FACTS
The husband
The husband was born in 1955 and is therefore presently 60 years of age. He has two adult children to a previous marriage, who are now somewhere in the order of 32 and 34 years of age respectively. When he was about 20 years of age he contracted hepatitis C, seemingly from intravenous drug use. He was 38 years of age when he met the wife in September 1993.
The wife
The wife was born in 1957 and hence is presently 57 years of age. I know little of her life prior to the commencement of her relationship with the husband, which I note started when she was 35 years of age.
The relationship
The parties met in September 1993, commenced to cohabit in either February or April 1994, and married in 1997. I will discuss their respective financial contributions at the commencement of the relationship in due course. Likewise I will discuss the details of their financial and non-financial contributions made during the course of the relationship later in these reasons. However in broad terms I should indicate at this stage that although initially both parties were in employment when the relationship started, during the course of the early stages of the relationship they commenced to operate two businesses.
Although not without some controversy, there is broad agreement that in conducting those businesses, the wife attended to administrative, clerical and bookkeeping duties, whereas the husband was more in the nature of the entrepreneur. That said, decisions were made jointly.
The parties also began to invest in shares. They focused particularly upon one particular company, D Ltd.
In 2003 the parties made a decision to relocate from Western Australia. They wound up their business activities and their investments, leaving only the former matrimonial home and one investment property. They then cleared all outstanding debts. It appears relatively uncontroversial that it is likely that the parties had a net worth of about $600,000.00 when they left Western Australia.
Eventually the parties settled on the Gold Coast. They did not engage in employment for the first 12 months, but rather they lived off the proceeds of sale of D Shares. They purchased a home in Suburb E, and in 2005 commenced a another business, which is described as having “modest” success.
By the end of 2006 the parties had commenced to discuss separation, and in anticipation of that, in January 2007 husband purchased a waterfront property at Suburb F. I will discuss the circumstances of that purchase and its later sale in due course.
The relationship concluded on 7 February 2007.
Post-separation
After separation, the wife remained living in the Suburb E property. She continued to make mortgage payments on it until September 2009; ultimately it was sold by the mortgagee exercising power of sale in or about August 2010. Initially the husband lived with friends, but ultimately moved into the Suburb F property in April 2007 until it sold in about March 2009. After then the husband moved into a rental property.
Seemingly via their solicitors, post-separation the parties agreed to the transfer of D shares to each of them. Between 28 August 2007 and 17 August 2009, the wife received 1.5 million D shares. Between 15 January 2007 and 17 August 2009 the husband received 1,098,523 D shares. It does not appear controversial that the wife gradually sold the shares transferred to her in order to meet repayments on various liabilities from time to time, the circumstances of which I shall detail later. On the other hand, the husband appears to have liquidated the shares shortly after they were transferred to him, and used the proceeds for both business and personal expenses.
However the retention of the shares by the wife was ultimately to her disadvantage, and the more rapid sale of them by the husband was to his advantage. Indeed although the wife received 1.5 million shares, she only received $325,462.24 from their sale. Whilst the precise amount received by the husband for his 1,098,523 shares is not able to be discerned, it is likely that it was substantially more than that, and probably in excess of $370,000.00.
However that did not altogether all work in the husband’s favour. By virtue of the fact that his income from the sale of the shares was received over a shorter period than that of the wife’s, he had a much larger tax liability. I will discuss that in greater detail in due course, but it is pertinent to note that it is agreed that the husband’s present liability to the ATO largely sourced from those sales (no doubt together with interest and penalties) is about $300,000.00.
From the proceeds of the sale of his D shares, the husband invested in other shares. However it appears uncontroversial that on any view those investments were disastrous, perhaps because of the intervention of the global financial crisis in about 2008. It appears as though the value of his share portfolio plummeted from some $429,590.00 as at 1 June 2008 to only $54,420.00 by 31 December of that year.
At a point which the evidence does not enable me to determine, the husband re-partnered. Although in her submissions the wife asserts that the partner is likely to benefit to the tune of millions of dollars from the eventual death of her own father, there is no evidence to that effect.
On the other hand, both of the father’s parents passed away in 2012, in consequence of which in about September/October 2013 he received an inheritance which he says was between $383,000.00 and $384,000.00. The wife does not necessarily accept that was the amount received.
Whilst I will discuss the history of this litigation in due course, after the trial had first commenced before me, the husband moved to live with his daughter from the previous marriage in Country G. In his submissions he said he used part of the inheritance to purchase a franchise business which he claims cost $100,000.00 together with between $40,000.00 and $45,000.00 worth of initial stock. There was however no evidence of any of that. Moreover there has been no disclosure of any documents relating to the purchase by way of discovery, and hence the wife is not in any position to make any informed agreement as to whether or not what the husband claims is correct. The husband also says that he used the inheritance to repay debts, including $100,000.00 or thereabouts to his partner who had loaned him monies to cover his living expenses in recent times. By the time of trial, the husband said that he only $22,0000.00 left in his bank account, presumably sourced both from the inheritance and any earnings from his franchise business.
As at the time of the second day of trial in July 2015, the husband was living in Country G, conducting the franchise business. His partner remains living on the Gold Coast. Other than the business, a car, motorbike and cash at bank, the husband has no assets of significance.
Post-separation the wife obtained employment, and continued in that employment at the time of trial. It is permanent part-time employment. After the former matrimonial home at Suburb E was sold by the bank, she moved into rental accommodation where she continues to reside. At some stage her mother came to live with her from Western Australia. Other than a small parcel of shares and some chattels, at the time of trial she also had no assets of significance.
THE TRIAL
The trial commenced before me in August 2013. At that time the husband was represented by counsel. The wife was self-represented. Further, there remained an intervener to the proceedings, being the wife’s mother. She claimed that she was owed monies which she had loaned to the parties during the course of the relationship. Ms Laurel speaks little English, but via an interpreter, indicated that she did not need the entirety of the proceedings interpreted for her. She took no active role in the trial, and neither cross-examined any witness nor was herself subject to any cross-examination. She chose to make no submissions.
Shortly prior to the trial commencing before me in 2013, a Notice of Discontinuance was filed by two other intervenors, who had initially been the husband’s parents, but upon their death became the executors of their respective estates. They said that the parties owed them certain funds that they had allegedly loaned to them, but ultimately that issue fell away and the husband did not ask me to make any findings in relation to that alleged loan.
On the first day of trial, it became apparent that a major issue between the parties was the extent to which they, or entities associated with them, had substantial taxation liabilities. Tax returns had been prepared by the parties’ accountants on instructions from the wife, however the husband refused to sign those returns because he believed that they were unfairly prepared. Particularly they saw the wife with a tax liability of about $45,000.00, but the husband with a tax liability of $211,000.00. The size of those liabilities was sufficient to potentially wholly exceed any assets owned by the parties. Given the court’s obligation to not permit its processes to be used as a fraud on the revenue, on 22 August 2013 the trial adjourned consequent upon my making orders requiring the parties to jointly instruct their accountants to prepare all outstanding tax returns in relation to themselves and relevant associated entities. I also required the parties to provide all such material as may be reasonably required of them by those accountants for that purpose. I then directed that the parties cause the relevant returns to be lodged on or before 20 November 2013 (although that was later extended to 31 December 2013 by order of a Registrar) and obliged the parties to make file and serve an affidavit deposing to having lodged the said returns. In the event that no such affidavit had been filed by either party by 30 November 2013 (later extended to 10 January 2014) I directed the Registrar to provide a copy of the orders and my reasons for them to the Deputy Commissioner of Taxation.
For reasons which are not clear, notwithstanding the fact that neither party filed the contemplated affidavit by 10 January 2014, the papers were not referred. That said, it appears as though at some point in time – whether before or after 31 December 2013 it is not possible to say – the requisite returns were indeed lodged by both parties and assessments issued.
However neither the returns nor the notices of assessment were in evidence before me. In the husband’s Case Outline filed 21 August 2013 at paragraph 5, he estimated that his tax liability would be about $200,000.00, and the liability of the wife about $40,000.00. Then in the husband’s Financial Statement filed 13 November 2014 he provided an estimate of his tax liability in the sum of $300,000.00. The difference between that figure and the estimate from 2013 was not explored in evidence. However in the wife’s Summary of Argument filed 30 June 2015, she appeared to identify that the husband’s liability was indeed approximately $300,000.00 but referred to a letter from the tax office to the husband in support of an argument that the value of the husband’s tax liability should be treated as nil. I shall refer to that letter later in these reasons. That Case Outline also identified a tax liability of the wife of $45,717.25, which the wife told me – although there was no evidence – was no longer a current liability to the ATO as it had been remitted pending the outcome of these proceedings.
That was by no means the only problem relating to the matter when it was listed for the resumption of trial before me. It became apparent that the parties have, at least since they ceased to have legal representation, not undertaken any disclosure of relevant materials to each other. Moreover, the identity and value of some of the chattels have changed since August 2013, although the parties appear not to have advised each other of the change of the identity of the asset, nor given the other party the opportunity to ascertain current values. That was notwithstanding the fact that the matter had been before a Registrar of this court on no less than six occasions since the trial abated in August 2013, and when it was set down on 28 November 2014 for the resumption of the trial.
Patently the trial was not in fact ready to resume, however no party asked for an adjournment. That is scarcely surprising. The parties have now been separated for more than eight years. They need to have this litigation concluded so that they can get on with their lives. It may be seriously doubted, even if the trial had again adjourned, that either of the parties would have had the capacity to in fact properly ready it for hearing. The absence of appropriate valuations, disclosure and documentary evidence inevitably means that the parties have had a third rate trial, which could well result in a degree of rough justice. Whilst that is to be regretted, it is plainly the direct product of not only the lack of legal representation, but also the level of antipathy that one or both of the parties has towards the other. However the fact remains that I am left to do the best I can in dividing the assets of the parties on incomplete and potentially quite inaccurate material.
RELEVANT STATUTORY PROVISIONS AND LEGAL PRINCIPLES
Section 79 of the Family Law Act deals with the division of property of parties to a marriage. It has long been established that the preferred approach to be adopted to determining property disputes under s 79 is a four step one which involves:
·The identification of the property of the parties including their assets, financial resources and liabilities;
·The evaluation of the “contributions” or s 79(4)(a), (b) and (c) issues;
·The evaluation of the matters referred to in s 79(4)(d), (e), (f) and (g) including, by reference to s 79(4)(e) the matters set out in s 75(2); and
·A determination as to whether the result is just and equitable by reference to s 79(2) of the Act.
After the High Court’s decision in Stanford v Stanford[2] it may be taken as commonly accepted that the first step requires the identification of the parties existing legal and equitable interests in property, and thereafter, it is incumbent upon the court at the outset to determine whether or not it is just and equitable to make an order altering the interests of the parties in that property. However as the High Court itself indicated in Stanford, in many cases that step will be uncontroversial: for instance, if there is jointly owned property which is impracticable for the parties to jointly enjoy consequent upon separation, such as the former matrimonial home.
[2](2012) 247 CLR 108.
In Gould & Gould[3] the Full Court reviewed the previous authorities in relation to the approach of a court where there is a finding that a party has knowingly failed to disclose assets in the course of the proceedings. At [27] the court said as follows:
Rather the appropriate approach for his Honour to have adopted in this case would have been to have increased the asset pool to take account of non-disclosure by the husband, and indeed his Honour had already done this to some extent in accepting the schedule of assets prepared by the wife’s counsel…Alternatively, or even in addition, had his Honour been persuaded that on the balance of probabilities there existed assets other than those contained in the asset pool contained in his reasons, his Honour could have made some adjustment in favour of the wife on account of the husband’s non-disclosure pursuant to the provisions of s 75(2)(i) as did Holden CJ in Kannis.[4]
[3](2007) FLC 93-333.
[4]See also Jamine & Jamine(No 2) [2012] FamCAFC 104.
THE LEGAL AND EQUITABLE INTEREST OF THE PARTIES
Agreed assets and liabilities
As at the conclusion of the trial there was some agreement between the parties as to what the actual physical or at least corporeal assets comprised. On the whole, there was no agreement as to their value. By reference to the individual assets I record the parties’ positions as follows:
The Boat including trailer and 250HP outboard
It is agreed that this is presently in the possession of the wife. The husband says that she stole it from him. The wife says the husband initially stole it from her. In her Summary of Argument filed 30 June 2015 the wife attributed a value of $15,000.00 to it. However during the course of argument she told me that her belief was that the value had been agreed when the matter was first before me in August 2013 at $20,000.00. Why she then preferred a figure of $15,000.00 was not explained by her. For his part, the husband asserted the boat would be worth between $30,000.00 and $35,000.00 depending upon its condition. He had not recently seen the boat and wanted to do so. The wife refused to let him see it because she said he was likely to steal it again. Both parties agreed that the boat be required to be sold, but for the purposes of ascertaining the likely value of the parties’ assets to effect a just and equitable division of them, that is of little assistance to me. I will adopt a figure of $20,000.00 for the boat because it appears to have been so agreed and to otherwise determine its value is impossible. As shall be seen, in the final analysis, particularly given the orders I shall make, its value in immaterial.
Husband’s car
In his Financial Statement filed 13 November 2014, the husband did not disclose the ownership of any motor vehicle. In cross-examination the wife pressed him as to that, particularly given that in the past he had identified that he owned a 4WD which the wife claimed was worth $10,000.00. The husband then said that in fact he had sold or traded that vehicle on another which he purchased for $50,000.00. He thought that had occurred in about November 2014. The husband said the car was probably now worth about $32,000.00. No valuation was undertaken. The wife appeared to agree that that is the likely value of it. On what basis she was prepared to perhaps so agree was unclear, but for the purposes of this proceeding I propose to adopt a figure of $32,000.00 for the car.
Husband’s motorbike
It appears as though the husband has a motor cycle in Country G. It was not disclosed in his Financial Statement. It was only first disclosed by him in cross-examination. He thought it cost about $10,000.00. I will attribute a value of $10,000.00 to the motor cycle.
Wife’s car
The wife has a motor vehicle. The parties agreed that its value is $12,000.00.
Shares owned by B Pty Ltd
The parties agreed that B Pty Ltd in its capacity as trustee of the C Trust owns 2,629,554 D shares. As at 30 June 2015 apparently they were trading at three cents a share; the husband asserted that as at the conclusion of the trial they were trading at four cents a share. The parties have agreed that I should access the trading price as at the close of business on the day before I give my judgment. That was $0.026. I therefore attribute a value of $768,368.40 to the shares.
Wife’s shares
The parties agree that the wife holds 104,262.00 D shares. Likewise the parties agreed I should value those as on the same basis as the shares held by B Pty Ltd are to be valued. Their value as at yesterday’s date was $2,710.81.
Husband’s business
The husband conducts a business in Country G. In his Financial Statement of November 2014 he estimated its value to be $90,000.00. This is not agreed by the wife. In cross-examination he disclosed that he had purchased the relevant franchise for $100,000.00 and paid between $40,000.00 and $45,000.00 for initial stock. Why it is now only valued at $90,000.00 was not explained by the husband. No figure for current stock was provided in the husband’s Financial Statement. The parties proposed no means by which I can ascertain the value of the husband’s business. The only evidence of value is the husband’s estimate. I can do nothing more than adopt that figure, noting that if it be only worth $90,000.00, then that reflects a value of between $50,000.00 and $55,000.00 less than the purchase price including stock.
Husband’s cash
In his Financial Statement of November 2014 the husband disclosed cash at bank of $38,557.00. At the conclusion of the trial he said that there was only $22,000.00 left in that account. What had happened the other funds was not disclosed. Given that the November Financial Statement disclosed a weekly income of $500.00 and personal expenditure of $475.00, the reduction in the balance is something of a mystery. However I am left with little option but to accept a figure for cash at bank at $22,000.00. I will do so.
Husband’s superannuation
The husband has a Colonial Mutual Wealth Portfolio superannuation policy. The husband’s evidence is that the latest valuation he has of that was at 30 June 2012 when it was valued at $28,259.44. In his November 2014 Financial Statement he estimated the gross value of that policy to be $25,000.00. Why it had lost value in that time was not explained in the evidence nor explored in cross-examination. The wife asserts that it is probably now worth more. It might be. It might not be. I do not know. The evidence does not enable me to conclude. Doing the best I can I will adopt a figure $28,259.44, accepting that it may not be accurate.
Wife’s superannuation policy
It was apparently agreed that the wife’s superannuation policy as at 30 June 2014 was valued at $62,743.47. Since then the wife would have made contributions to it. It may have earned income and had fees. I do not know. I can do nothing better than adopt the June 2014 value of $62,743.47.
Debt to accountants
The wife asserts (there is no evidence) that there is a debt owing to the parties’ accountants of $1,760.00. It did not appear to be disputed by the husband. I propose to accept a liability of $1,760.00 to the parties’ accountants.
Contentious assets and liabilities
Alleged loan to Mr & Ms H
The wife asserts that during the course of the relationship the parties made a loan to the husband’s daughter and son-in-law. She said that the outstanding balance including principal and interest as at April 2015 was $47,800.00. The husband says that in fact the loan was to his son-in-law’s brother, who subsequently went bankrupt. In August 2013 the husband tendered into evidence emails from the wife to the husband’s son-in-law’s brother claiming repayments. That tends to support the fact that the loan was to him, rather than the husband’s daughter and son-in-law. However even if that is not so, there is a more fundamental problem. On the evidence, the last attempt at pursuing that debt was in about July 2007. There is no evidence that the debt has been subsequently acknowledged, whether by the husband’s daughter and son-in-law, or the son-in-law’s brother. Therefore even if it were not within the son-in-law’s brother’s bankruptcy, it is nonetheless statute barred. I do not propose to attribute any value to this asserted liability. It will be ignored.
Wife’s tax
The wife says that she was assessed for tax in the sum of $45,717.25.
On 19 November 2014, Registrar Brooks extended the time under previous orders for the wife to file a Financial Statement until 27 November 2014. No such Financial Statement is on the court file, and therefore it appears as though it was not filed. The wife asserts that she did so file it, but the husband denies that he ever received a copy of it. The wife tendered into evidence what she asserts was the “working copy” of the Financial Statement as filed by her. It does not disclose any liability for tax. Indeed it discloses no liabilities at all. However in her Summary of Argument dated 30 June 2015 she identifies a negative tax liability of $45,717.25 with the notation “all interests (sic) previously charged have been credited back by ATO on 12/5/15.” The husband did not cross-examine the wife. In submissions the wife told me that the ATO had withdrawn the assessments pending the outcome of these proceedings. I do not know what that means. I do not understand why the ATO would not press for payment of historical tax liabilities. It appears to me that the best I can do is to acknowledge a liability on the part of wife for $47,717.25, but also take into account that there is some largely indefinable chance that it will not be pursued. To not credit it as a liability to the wife may be to do her a substantial disservice.
Husband’s tax liability
I have briefly addressed this earlier in these reasons. The only direct evidence of the tax liability is in the husband’s Financial Statement filed in November 2014 where he estimated a tax liability of $300,000.00. This appears to be accepted by the wife in her Summary of Argument filed in June 2015, but that document goes on to note “however questionable due to letter from ATO dated 10th August 14 stating they are not pursuing the debt.” The letter was tendered into evidence. It contains a reference for the relevant ATO area which commences “Debt hardship”. I infer that the husband claimed that he was suffering hardship in the event that he was obliged to pay the debt. The letter is indeed dated 10 August 2014 and reads relevantly as follows:
Thank you for your application for release from payment of tax which we received on 1st July 2014.
We cannot consider you application because you do not currently live in Australia.
However, after reviewing you case and taking your current circumstances into consideration the Commissioner has decided not to pursue your outstanding debt at this time. If your circumstances change you have a responsibility to inform the Tax Office and pay this debt.
Your debt may be re-raised and action to collect the debt can commence at any time. This may happen if there is future activity on your accounts. Should this happen we would, at that time, review the interest that has accrued on the account.
Any income tax refund or activity statement credit claimed by you in the future may be used to reduce the debt. …
The letter makes no mention of the sum in question. It makes no mention of when the assessment was raised. The husband says that as late as perhaps October 2013 he received an inheritance of between $383,000.00 and $384,000.00. I do not know whether that fact had been disclosed to the ATO in the course of the husband claiming “financial hardship.” I do not know whether that recent inheritance was one of the “current circumstances” taken into account by the ATO in deciding to “not pursue your outstanding debt at this time.”
The debt is considerable. The husband obviously has assets which could be used, at least in part, to satisfy it. There is no reason apparent on the evidence before me as to why that debt would not be recoverable in Country G, at least to the extent that the husband has assets to satisfy it.
Before me, the husband was a little unclear as to what he wanted me to do with the debt. On the one hand he seemed to be saying that it was likely not to be pursued by the ATO: but when pressed as to what value I should give the liability, he said it should be given a value of $300,000.00. In that sense he appeared to want to have his cake and eat it too.
The liability is still extant. It may or may not be pursued by the ATO. However it remains a liability. I propose to take into account a liability on the part of the husband to the ATO for the sum of $300,000.00, but also, in some broad way, try and take into account the fact that there is some chance that it may not ever be pursued by the ATO so long as the husband remains living in Country G, and has no “future activity” on his accounts with the ATO. To do otherwise may do a substantial injustice to the husband given the size of the debt, and the resources of the creditor to pursue it should it be so minded.
Husband’s inheritance
The husband told me (as distinct from gave evidence) that he received an inheritance of between $383,000.00 and $384,000.00 in September/October 2013. There is no other direct evidence of the receipt of that. Apparently no disclosure of any relevant documents was made by the husband to the wife.
In her Case Outline filed 30 June 2015 the wife asserts that the relevant inheritance was declared by the husband on 22 August 2013 to be $560,000.00. I can find no reference in the transcript of the evidence of that date where the husband did so, nor does there appear to be any affidavit filed by him on that date either. Even if it be the case that the husband was then expecting a larger sum, it did not transpire. The figure which the wife contends I ought put down for the inheritance is $450,220.00. From where that is derived is unclear. It is not in the evidence. I note that in the husband’s Outline of Argument filed 21 August 2013 there was at paragraph 4 a concession by the husband that he would receive a distribution from the estate of his late parents in about the sum of $300,000.00, and that it was, at the least, a financial resource.
Doing the best I can I accept the husband’s submission that he received between $383,000.00 and $384,000.00.
His evidence as to what he did with it is unsatisfactory. He said he re-paid some debts and particularly paid $100,000.00 to his partner. He also spent no more than $150,000.00 on purchase of a franchise. He said he spent the rest on living expenses. That would have to be a sum of about $133,000.00. Perhaps he funded the purchase of the new car from it. Perhaps he funded the purchase of the motorbike. However whatever he did with it, the only evidence I have as to its present representation in the assets of the parties is the husband’s business, some cash at bank, and perhaps a car and a motorbike.
Laurel loans
The wife contends that the parties owe her mother two sums. The first is $139,750.00 which it is said was loaned to assist the parties to purchase shares in D. There are then said to be seven further cash loans between 2003 and 2006 totalling the sum of $56,341.00. She is supported in that claim by her mother who intervened in these proceedings. The orders which the intervenor seeks are firstly that the parties discharge the home loan which she took out in order to provide the funds to the parties in the sum of $139,117.14 (the reason for the discrepancy between that and the amount advanced is unexplained by the evidence) and then further a payment to her of a cash sum of $56,341.00.
It seems clear that on or about 8 December 2004 Ms Laurel did indeed give a mortgage over her home to secure a loan of $139,750.00, and that on 29 December 2004 there was deposited into B’s bank account the sum of $138,658.55. I am prepared to accept that that deposit relates to the loan.
At paragraph 13 of her affidavit filed 13 February 2013, Ms Laurel said:
It was always understood that, although the loan was in my name and secured against my home [the husband and wife] would be responsible for making the payments including capital and interest. It was agreed between all of us that I would not be out of pocket at all in relation to the loan.
At paragraph 70 to 81 of her affidavit filed 4 February 2013 the wife sets out her version of events in relation to the loan. She details that the loan was intended to fund a share acquisition which occurred in November 2004.
At paragraph 221 of his affidavit filed 22 January 2013 the husband encapsulated his argument as follows:
I do not concede that the funds that were advanced by [Ms Laurel] were applied to purchase the share allotment above. The shares were paid for by way of money transfer application on 19 November 2004. Ms Laurel’s funds were not deposited to the B Westpac account until 29 December 2004 as set out below. As such, [Ms Laurel’s] funds were not applied to purchase the allotment of 1,287,000.00 shares on 19 November 2004.
That much appears plain from the face of the materials, and indeed is conceded by the wife. However she says that the funds were necessary to alleviate the pressure which the somewhat hurried and perhaps high interest borrowings that were used by the parties to fund the 19 November share purchase caused, by that debt being retired and replaced with Ms Laurel’s money.
In the course of his oral evidence-in-chief, the husband asserted that the monies “were required for certain renovations on the mother’s home which included the kitchen, the bathroom the laundry. There was also a large satellite dish purchased and put in front of her property for several thousands of dollars. In addition to which, Ms Laurel was spending extended periods of time overseas.” How all of that could total anywhere near $140,000.00 was not explained.
Moreover somewhat contradictorily, the husband’s affidavit did not directly assert that the funds were not a loan by Ms Laurel. For instance at paragraph 238 of his affidavit he says:
238. Between 2004 in separation and 2007 the repayments on the loan of [Ms Laurel] were met by [the wife] and I from the B Westpac account.
239. Post-separation [the wife] has met the repayments of [Ms Laurel’s] loan.
At paragraph 240 he went on to say that the loan by the wife from Ms Laurel was “without consultation with me.” I do not accept that evidence, and in this regard I note particularly that Ms Laurel was not challenged by the husband as to that matter. Even if I am wrong as to that, the husband in his affidavit acknowledges that it was indeed a loan, and acknowledges that indeed it was serviced by the parties. The parties plainly have had the benefit of the monies advanced by Ms Laurel and indeed the mother was not challenged that even to trial she continues to service the interest payments on the borrowings secured by Ms Laurel’s home. I am satisfied that the parties do have a liability to Ms Laurel in the sum claimed.
Turning to the other loans, Ms Laurel dealt with these at paragraph 18 of her affidavit filed 13 February 2013. At paragraph 19 and 20 she went on to say that these loans were pursuant to requests made of her by the parties when they “needed the funds to assist with cash flow issues for [B Pty Ltd].” She deposed that there was a verbal agreement that these funds would be repaid to her, without interest, when they were able to do so.
Ms Laurel was not cross-examined at all.
The wife dealt with this issue at paragraphs 82 to 89 of her affidavit filed 4 February 2013. She was not cross-examined on it. Specifically at paragraph 83 she said:
On each occasion of the loans being advanced, [the husband] and I agreed with my mother that we would repay the loans, without interest, when we were able to do so, or when my mother demanded it.
The wife was not cross-examined by the husband.
The husband did not traverse this issue at all in his affidavits, however in his oral evidence the husband said that he did not “have records to prove it one way or another but I won’t dispute it. It’s quite possible.” His answers thereafter tended to suggest that perhaps it was in reimbursement to the wife for payment of accounts on the mother’s behalf. He also said that he had no knowledge of the loans.
It does appear as though the wife has for some time managed Ms Laurel’s finances. However the absence of cross-examination of either the mother or Ms Laurel in relation to this, makes it difficult to reject their unchallenged evidence. I am satisfied that the parties do owe the additional sum of $56,341.01. That makes the total liability of the parties to Ms Laurel $196,091.00.
Undisclosed assets
The wife sought to persuade me that the husband has undisclosed assets. She particularly asserted that the fact that the husband had on occasions been a director or otherwise associated with particular companies should persuade me of that. Directorship is not ownership. In any event the assets of the companies were unspecified. Further, other than the dissipation of the husband’s inheritance nearly two years ago, the source of funds used to purchase any such undisclosed assets is difficult to discern. Moreover, the wife contends that the father has a protracted history of abuse of cocaine or other drugs, which if true, could potentially explain the dissipation of funds.
The absence of proper disclosure by the husband is, of course, concerning, however it appears as though he was likely unaware of his obligations, and the wife had never requested him to do so. Further, the same criticism can be made of the wife.
I am not persuaded that there are any hidden assets of any material value.
Add backs
The wife sought to include in the balance sheet a number of add backs. These were of two species; the first are assets or monies received by the parties’ post-separation; the second are joint debts paid by the wife post-separation.
Turning firstly to funds received, the most significant amounts were received by both parties by way of transfer of D shares to them from B Pty Ltd. I have already discussed the fact that although the wife received more shares than the husband, when she sold them, they realised less money. The husband undertook an unchallenged calculation that in fact, if one were to look at the value of the shares transferred to the wife as at the times that they were transferred, the amount in question is $526,000.00, compared to $352,000.00 for him.
The wife seeks that both sums be added back into the pool. I decline to do so. I am not persuaded that is an appropriate course, not least because thereafter the parties expressly were free to do with those funds as they wished. Both funds should be treated as interim property divisions and the value of that division should be calculated as at the day that the asset was transferred into the parties’ sole names and they became free to deal with it. The parties should not be the guarantor for the prudence or folly of the other thereafter.
Two other receipts of funds by the husband were relied upon by the wife. The first was the net proceeds of sale of the Suburb F property sold post-separation on 14 April 2008. The difficulty with this is at least two-fold. The first is that the wife regards that as pure profit; however she does not take into account that the property was purchased for $719,000.00, and sold for $850,000.00. Therefore if there be any profit, it could only be a gross sum of $131,000.00 from which there should be deductions of, amongst other things, additional costs of acquisition (legal fees and stamp duty) and costs of sale (including real estate agents commission and legal fees). It is simply not correct to say that the gross proceeds of sale less the raw purchase price is the profit.
Moreover, the funds used to purchase the property were uncontroversially said by the husband to be $107,000.00 derived from sale of the parties’ shares, and $612,000.00 by way of borrowings.
I decline to add back into the pool of assets any sum derived from the sale of the Suburb F property.
The next amount which the wife seeks to add back into the asset pool is the receipt of $98,000.00 by the husband on 30 September 2011, being a distribution to him of a third of certain funds when a trust associated with his parents was wound up. By then the parties had been separated for some four years.
At paragraphs 405 and following of the husband’s affidavit filed 22 January 2013 he dealt with this issue. He concedes that he received the $98,000.00 but says that $50,000.00 was applied to his living expenses, $23,000.00 was used to discharge a Mastercard debt, and $25,000.00 devoted to something referred to as “One Life for mentoring.” He was not challenged about any of that.
Precisely why the wife says that this should be added back into the pool of assets is difficult to discern. I reject her claim to do so.
Turning then to the asserted add backs comprising mutual debts discharged by the wife after separation, I should firstly observe that although in her Summary of Argument the wife drew a distinction between a payment to the parties’ accountants and other payments, there is no logical reason for doing so. Moreover, it is pertinent to observe that it does not appear to be in contest that indeed the wife has used funds derived from the partial interim property division to discharge joint debts, and has also devoted some of her earnings post-separation to that as well. Likewise it does not seem to be in contest that the husband did not utilise the monies he obtained from his interim property division for that purpose. Rather he had nothing more to do with the parties’ pre-separation debts.
However it is quite another matter to say that the unilateral discharge of joint liabilities thereby creates some species of add back into the asset pool. Ultimately the task of the court is to divide actual assets based upon contributions.
I decline to add back all or any of the unilateral payments made by the wife post-separation. They necessarily will be taken into account in assessing contributions to extant assets.
The pool
Accordingly the pool of assets and liabilities of the parties is as follows:
ASSETS HUSBAND WIFE JOINT
Boat 20,000.00
Husband’s car 32,000.00
Husband’s motor cycle 10,000.00
Wife’s car 12,000.00
Shares held by B 68,368.40
Shares in wife’s name 2,710.81
Husband’s business 90,000.00
Cash 22,000.00
Superannuation 28,259.44 62,743.27
182,259.44 77,454.08 86,368.40
Total assets = $346,081.92
LIABILITIES:
Debt to accountant 1,760.00
Taxation 300,000.00 47,717.25
Laurel loans 196,091.00
300,000.00 47,717.25 197,851.00
Total liabilities = $545,568.25
Net liability = $199,486.33
IS IT JUST AND EQUITABLE TO ORDER A DIVISION
The parties have been separated for eight years and still have jointly owned assets in the form of a boat and shareholdings owned by a company of which they are both directors. I am satisfied that in those circumstances it is just and equitable to undertake a property division.
FINANCIAL CONTRIBUTIONS
At commencement
There is some controversy between the parties as to what the wife brought into the relationship at its commencement. The wife asserts that she brought in equity in two properties, but the husband contends she only brought in one property. Further, there appears to be some dispute as to the extent of the wife’s liabilities attaching to one or both of those properties.
On the other hand, it is plain that the husband brought little into the relationship.
The wife contends that the disparity of initial contributions was in the ratio of 72 per cent to her and 28 per cent to the husband. Whilst I do not find that the disparity was in those proportions, as the evidence simply does not permit such a mathematical calculation, the reality is that the wife did bring in more than husband, and she is correct to identify that such equity in real property which she brought in thereafter did enable the parties to embark upon their subsequent business ventures.
During the relationship
The parties are agreed that, but for one issue, their contributions during the course of the relationship were equal. The only disagreement is as to the extent that their contributions were unequal during the time that the husband was indisposed during treatment for his hepatitis C. The parties cannot even agree as to the length of time that the husband was indisposed. The husband says that it was only some months; the wife says it was approaching two years. There was no cross-examination on the issue. In any event, there is no means by which one can with any certainty delineate the impact of the husband’s indisposition upon the acquisition, improvement or maintenance of assets. One cannot even really even begin to embark upon an analysis of any financial impact of his indisposition upon the parties’ financial position. However I am satisfied that the husband was indeed indisposed for a not insignificant period of time during the early course of the relationship, and in consequence there is some, but relatively slight, disparity between the parties’ respective contributions during the course of the relationship.
Post-separation
It is not in dispute that the wife has used both the interim property division and her post-separation earnings to discharge joint debts. The value of those debts was in excess of $450,000.00. The husband did not use any funds under his control to service or discharge them.
But for the wife discharging those debts, the liabilities of the parties would have been far greater than they presently are. Simply put, it is likely that there would have been no assets whatsoever left for the parties to argue about.
Post-separation the husband has brought into the pool the trust distribution and the inheritance from his parents. The latter is presently represented by the business and perhaps a car and motor cycle. Those funds were entirely acquired post-separation, and attributable to the husband. The wife did attempt to say – without any real quantification – that the parties had jointly contributed to the husband’s parents’ wealth by involving in some of their investment projects, but there is no sound evidentiary basis for concluding that whatever involvement the parties had with the husband’s parents, it has been translated into the husband’s inheritance.
NON-FINANCIAL CONTRIBUTIONS
The parties did not seek to argue that there was any disparity in relation to their non-financial contributions. I accept that they should be regarded as equal.
HOMEMAKER PARENT CONTRIBUTIONS
The parties’ marriage had no children. No party sought to argue that their homemaker contributions were disparate. I accept that they were equal.
RELEVANT S 75(2) FACTORS
The husband and wife are respectively 60 and 70 years of age. Each have some health issues. For his part, the husband continues to suffer from hepatitis C, and his evidence is that it causes him to become fatigued. Moreover, he says, and it was unchallenged, that the longer a person survives with hepatitis C, the greater there is likely to be scarring to the liver. The impact of that was not particularly explored in the evidence however.
For her part, the wife says that she suffers from post-traumatic stress disorder as a result of childhood experiences, and also suffers from major depression. She says that she also has osteoporosis with attendant high risk of breaking of bones, and increasing deterioration of bone density with age. She claims, apparently without contradiction, that she has five “crushed” vertebrae, and suffers from sleep apnoea. She also says that she has what is commonly known as fatty liver syndrome associated with contracting hepatitis C from the husband during the marriage. It appears as though that hepatitis C was able to be put into remission however. That said, none of these conditions have precluded the wife from obtaining and continuing in employment after separation.
The most recent Financial Statement of the wife is now of some vintage, having been filed on 4 February 2013. It disclosed a pre-tax income of $740.00 per week. She has only the property discussed in this judgment. There is a potential financial resource being her interest as a beneficiary of her mother’s estate, but as she points out, her mother is 90 years of age and may well live for some time. Certainly before me Ms Laurel appeared to be a robust and lively woman. I put little weight on the financial resource of that prospective inheritance. Both parties have capacity for gainful employment. The husband’s most recent Financial Statement suggests that he has an average weekly income of $500.00 pre-tax, but there was no other material to substantiate that, and it does appear as though the arrangement under which he works – seemingly for a company associated with his partner – might allow some flexibility as to how much he derives by way of income, and when it is derived. Certainly there is nothing to suggest that the husband does not presently have an income stream or a capacity for gainful employment.
The husband asserts that he has an obligation to pay for food and some expenditure of his daughter because he does not pay rent. The wife asserts that she has a commitment to maintain her mother who is now living with her.
I can identify no other s 75(2) factor which is relevant in this case, nor can I identify any fact or circumstance which otherwise I should otherwise take into account.
ASSESSMENT
The following matters are germane to determining what is a just and equitable division of property between the parties:
·The wife has had the greater interim property settlement, such that she received shares at the time of transfer worth $526,000.00 and the husband received shares at the time of transfer probably worth $352,000.00;
·However the wife was only in fact able to realise $325,462.24 (accepting she still owns a small parcel) from the sale of those shares, and has used the entirety of that, together with a further $123,603.62 of her earnings derived from employment, to pay back mutual debt;
·The husband has used none of his interim property division to retire joint debt, but has used it primarily on failed investments, or at least investments which no longer appear to be reflected in any assets held by him;
·Post-separation the husband has received the settlement from his parents’ trust fund and an inheritance from his parents to the extent of $482,000.00 in total, however the wife made little, if any, contribution to those assets, and in any event they appear to be presently reflected only in $154,000.00 worth of assets comprising the husband’s business interest, a car and a motorbike together with some cash at bank;
·The wife brought in greater initial financial contributions, made somewhat greater financial contributions during the course of the relationship in consequence of the husband’s hepatitis C treatment, and but for her repayment of joint debt, the parties would have been in a massively worse debt situation than they presently are.
An additional issue relevant to the division of property is that, as explained earlier in these reasons, some of the assets are not the subject of any valuation or agreement as to value, and that in any event, the parties’ net position is one of debt.
I am satisfied that the husband and wife should be declared jointly liable for a debt in favour of Ms Laurel in the sum of $196,091.00 and judgment should be given for her against both of them in that amount. Further, I am satisfied that in partial satisfaction of that debt, the following should occur:
·The husband and wife should be required to do all such things as are necessary to sell the D shares owned by B Pty Ltd as trustee, and to pay the proceeds of sale to Ms Laurel;
·The parties should be required to do all things necessary to sell the boat and trailer, and the proceeds of sale should be paid to Ms Laurel.
Further I am persuaded that each party should retain responsibility for the liabilities presently in their name, which principally comprise their respective tax debts, subject to the vagaries which attend them.
The only assets then left on the table will be the parties’ chattels and the husband’s interest in his business. They will remain at risk of enforcement by Ms Laurel in execution of the debt remaining due to her. However I have no evidence as to the saleability of the husband’s business, and the respective chattels may, at Ms Laurel’s election, be the subject to seizure and sale pursuant to whatever rights may exist upon a registered judgment in Country G.
The reality is that the debt to Ms Laurel will almost wholly subsume any non-superannuation assets which the parties have. I am therefore not persuaded that there should be any further order made in the parties division of such property. Further I am not satisfied that there should be any order requiring the husband to transfer to the wife his interest in his superannuation, and in so concluding I note that the interest in question is relatively small, whereas the wife has approximately three times that amount in her superannuation, and further, that the wife has already received $174,000.00 worth of shares more than the husband pursuant to the interim property division. I do not overlook that fact that she has deployed those to the reduction of debt, and the husband has not.
I am not persuaded that I should order the husband to pay to the wife any additional sum. Firstly, as I have noted, the liability to Ms Laurel will almost wholly consume the parties’ non-superannuation assets. Secondly, in any event, save for his relatively slender bank balance of $22,000.00 as at 7 July 2015, there is no prospect that the husband realistically could meet any such payment. Thirdly, as to the extent that the husband presently has property, it is obviously principally derived from his post-separation inheritance, to which the wife made minimal, if any, contribution. Further, I note that the husband has a tax debt of approximately $300,000.00, the recoverability of which is moot. The wife’s tax debt is only about $47,000.00, again the recoverability of which is moot.
Under my orders, assuming a sale price of the boat of $20,000.00, and that the D shares at sale remain at $0.026, the following will be the final position:
ASSETS HUSBAND WIFE
Cars 32,000.00 12,000.00
Motor cycle 10,000.00
Shares 2,710.81
Business 90,000.00
Cash 22,000.00
Superannuation 28,259.44 62,743.27
$182,259.44 $77,454.08
Liabilities
Tax 300,000.00 47,717.25
Laurel loans (at 50 per cent) 49,482 .00 49,482.00
$349,482.00 $97,199.25
Therefore the husband shall be left with net debts of $147,317.44 and the wife net debt of $19,745.17.
Given the interim property division saw the wife take $174,000.00 more than the husband in value, I am satisfied that the final outcome is a just and equitable one.
A reader of these reasons will note I have avoided percentage attributions to contribution based entitlements, s 75(2) factors, and indeed the ultimate outcome. I accept that is unconventional, but it is deliberate. There are simply too many imponderables to attempt to hide behind percentages as justifying the result. It is, in any event, the final division which must be just and equitable, and subject to my open concession that it is likely to be rough justice, I am nonetheless satisfied that the outcome is a just and equitable one.
CONCLUSION
For those reasons there will be orders as set out at the commencement of these reasons.
I certify that the preceding one hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 10 September 2015.
Associate: T Ranson
Date: 10 September 2013
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