Whelan and Whelan
[2017] FCCA 666
•20 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WHELAN & WHELAN | [2017] FCCA 666 |
| Catchwords: FAMILY LAW – Property – where the wife proposes that she receive 98.5% of the pool – relationship/marriage of at least 16 years with two children – where the wife brought in significant sums by way of inheritances, gifts and damages awards and where the husband helped himself to a significant sum at or about the time of separation but where nevertheless the outcome proposed by the wife is not just and equitable. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 79 |
| Cases cited: Aleksovski & Aleksovski (1996) FLC 92-705 |
| Applicant: | MS WHELAN |
| Respondent: | MR WHELAN |
| File Number: | NCC 1365 of 2014 |
| Judgment of: | Judge Terry |
| Hearing dates: | 19, 20 & 21 December 2016 |
| Date of Last Submission: | 21 December 2016 |
| Delivered at: | Newcastle |
| Delivered on: | 20 April 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Duane |
| Solicitors for the Applicant: | Harris Kelly & Associates |
| The Respondent: | In person |
ORDERS
Within 60 days of the date of these orders the husband shall sign all documents and do all acts and things required to transfer to the wife at the expense of the wife the whole of his right title and interest in Property A in the State of New South Wales (“the property”) being the whole of the land contained in Certificate of Title Folio Identifier (omitted).
Contemporaneously with the husband complying with Order (1) the wife shall do all acts and things required to refinance into her sole name the loan account numbers (omitted) and (omitted) secured by the mortgage on the property to the (omitted) Bank.
In the event the wife fails to comply with Order (2) the parties shall within a further 14 days do all acts and things and sign all documents required to cause the property to be sold and for that purpose:
(a)The property shall be listed for sale by an agent agreed between the parties and failing agreement as nominated by the President of the Australian Property Institute (New South Wales Division)(or his/her nominee) following a request to make such a nomination by either party and the cost of same shall be shared equally between the parties.
(b)The method of sale, listing price and sale price shall be as agreed between the parties or failing agreement as determined by the agent.
(c)The parties shall:
(i)Execute all documents requested by the Agent for the sale of the property;
(ii)Execute the Contract of Sale;
(iii)Cooperate in every way with the Agent in relation to the sale of the property;
(iv)Insure the property and keep it insured;
(v)Sell the property under the usual terms and conditions and provide for vacant possession.
Until completion of the sale of the property the wife shall:
(a)Make the following payments as they fall due:
(i)Mortgage payments;
(ii)Council and Water Rate instalments; and
(iii)Household building and contents insurance.
(b)Keep the property in good repair (having regard to its present condition).
Subject to the wife complying with Order (4) she shall have the sole right to occupy the property until the completion of the sale.
Upon the sale of the property the proceeds of sale shall be applied as follows:
(a)To pay the reasonable expenses of the sale including agent’s commission, legal costs and disbursements.
(b)To pay rate adjustments (other than those amounts otherwise payable by the wife pursuant to these Orders).
(c)To pay all monies required to discharge the mortgage(s) to the (omitted) Bank secured on the property.
(d)To pay the balance to the wife.
The wife shall forthwith make the trailer available for collection by the husband and provided that he collects it within 28 days of the date of these orders, the husband is declared the owner of the trailer to the exclusion of the wife. If the husband fails to collect the trailer within 28 days of the date of these orders, the wife is declared the owner of the trailer and the husband shall sign all documents required to transfer ownership of the trailer to the wife at the wife’s expense.
The husband is declared the owner to the exclusion of the wife of the (omitted) Encyclopaedias, the (omitted) watch given to him for his 21st birthday and his father’s war medals and two sets of replicas.
If at any time the wife finds that these items or any of them are in her possession she shall promptly deliver them to the husband.
The wife shall forthwith assign and/or transfer to the husband any interest of the wife in:
(a)The furniture, furnishings and appliances in the possession of the husband at the date of these orders;
(b)Any funds in any Bank, Building Society or Credit Union Account presently recorded or registered in the husband’s name;
(c)Any item of personal property of any nature whatsoever presently in the husband’s possession or recorded or registered in his name which is not otherwise referred to in these Orders.
The husband shall forthwith assign and/or transfer to the wife any interest of the husband in:
(a)The furniture, furnishings and appliances in the possession of the wife at the date of the Orders;
(b)Any funds in any Bank, Building Society or Credit Union Account presently recorded or registered in the wife’s name;
(c)Any item of personal property of any nature whatsoever presently in the wife’s possession or recorded or registered in her name which is not otherwise referred to in these Orders.
Except as provided by these Orders each party shall indemnify the other and forever keep him/her indemnified in relation to any liability registered or recorded in that party’s sole name or encumbering any items of property to which that party is entitled pursuant to these Orders.
If either party refuses or neglects within 14 days of a written request to do so to sign any documents necessary to give effect to these orders, the Registrar of the Newcastle Registry of the Federal Circuit Court of Australia is hereby appointed pursuant to s.106A of the Family Law Act 1975 to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment under the pseudonym Whelan & Whelan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1365 of 2014
| MS WHELAN |
Applicant
And
MR WHELAN
Respondent
REASONS FOR JUDGMENT
Introduction
These are property settlement proceedings arising out of a cohabitation/marriage of at least 16 and possibly 19 years.
At one time there was also a dispute about parenting arrangements for the parties’ two children but that was settled on 28 June 2016. Consent orders were made which provided for the children to live with the wife and spend time with the husband each alternate weekend during school terms and for half of the school holidays.
At one time there was also a dispute between the husband and the wife and the wife’s sister Ms K. Ms K alleged a breach of fiduciary duty by the wife and a consequent unjust enrichment of the husband and the wife arising out of the disappearance of money which Ms K inherited from her father. She sought equitable damages in the amount of $450,000.00 and she was joined as a party to the proceedings.
The damages claim and the property claim were listed for hearing together and Ms K prepared her case for hearing but on the morning of the hearing, the court was informed that Ms K and the wife had reached a private agreement and that Ms K wished to discontinue her application.
That left only the property matter.
It was the wife’s case that she should get nearly everything: the former matrimonial home at Property A, a Landrover Discovery registered in the husband’s name and all of the husband’s superannuation as well as her own motor vehicle, her own superannuation and other minor items in her possession. She proposed that the husband retain only his half interest (worth $10,000.00) in a (omitted) boat.
The husband agreed that the wife should receive Property A and keep her motor vehicle and superannuation and the minor items in her possession but he proposed that in addition to his half interest in the (omitted) boat, he keep the Landrover Discovery and his superannuation.
Neither party made submissions about why their proposal was an appropriate division of property on a percentage basis.
It was the wife’s case was that it was just and equitable that she should get nearly everything because she had made contributions by way of inheritances, gifts and damages awards which vastly exceeded the amount now in the pool and because the husband had helped himself to $200,000.00 at or about the time of separation.
In final submissions the wife’s counsel did not vigorously pursue an order that the wife receive the husband’s superannuation but he said that it was important to the wife that she receive the Landrover Discovery so that she could sell it and use the money to reduce the mortgage over Property A.
The husband said that he should retain the Landrover Discovery so that he could sell it and use the money to buy a cheaper vehicle and retire and that he should retain his superannuation because it was the only investment he had.
The evidence
The wife relied on her amended application, affidavit and financial statement filed on 25 November 2016 and on the affidavit of Mr P filed on 21 December 2016, to which was attached an updated valuation of the Property A property.
The husband did not comply with the trial directions which required him to file an amended response, trial affidavit and updated financial statement by 18 November 2016. However he filed an affidavit and financial statement on 16 December 2016 and appeared at court on 19 December 2016. The wife’s counsel said that he was content for the husband to be allowed to take part in the hearing and rely on his late filed documents.
The husband and wife were cross-examined. Mr P was not required.
The wife’s counsel tendered a bundle of documents confirming that the trustee of the husband’s superannuation funds had been given procedural fairness.[1]
[1] Exhibit F
Background
The husband and wife met and commenced a relationship in Melbourne in 1995. The husband asserted that they also commenced cohabitation at that time. The wife asserted that cohabitation commenced in 1998 although she agreed that the parties commenced living under one roof in 1996.
Neither the husband nor the wife provided any evidence which corroborated their version of events and I am unable to make a finding about the date of commencement of cohabitation. However nothing turns on it; there were no critical acquisitions of property or critical incidents between 1995 and 1998.
The parties married on (omitted) 1999 and separated in early February 2014 and are now divorced. They were married for almost 15 years and lived together for either 16 or 19 years.
The parties have two children, X born on (omitted) 2001 and Y born on (omitted) 2005.
The parties purchased a home in Melbourne in 1999 but the wife’s family live in (omitted) and in 2004 her mother was diagnosed with cancer. As a result just after Y’s birth in 2005, the parties decided to move to (omitted). They sold their home in Melbourne and in 2006 they purchased a home at Property A.
The wife’s sister Ms K has congenital spina bifida and requires a high level of assistance with day to day living. When the parties moved to (omitted), Ms K was living with her mother (also the wife’s mother) and her father Mr A (the wife’s stepfather) and the parties chose the Property A property because they considered that it could be made suitable to accommodate Ms K if her parents were not available to care for her.
The wife’s mother died in 2007. Subsequently, Mr A was diagnosed with cancer and he died on (omitted) 2009 and upon his death, Ms K commenced residing at Property A.
Mr A left a will appointing the wife his executor. He left $50,000.00 to the wife’s brother Mr T and the residue of his estate as to 2/5ths to the wife and 3/5ths to Ms K.
According to the inventory of property attached to the Grant of Probate, the residue was worth $1,014,577.00 which meant that the wife was entitled to $405,830.00 and Ms K to $608,746.20. Something slightly but not materially different was received when the estate was administered.
As money became available, the wife chose to place all the money to which she and Ms K were entitled into accounts in her name. She said that this was done on legal advice to avoid implications for Ms K in terms of being entitled to benefits if a large amount of money was transferred into her name.
In July 2012 the husband, wife and Ms K decided to purchase a property in Property W with a view to doing it up and on-selling it. It was agreed that Ms K would be entitled to 50% of any profit and the husband and wife to the other 50%.
The property was purchased for $372,000.00 and registered in the wife’s name. $350,000.00 of the purchase price came from the wife’s account and $200,000.00 was treated as Ms K’s contribution to the purchase.
The husband and wife borrowed $300,000.00 from the (omitted) Bank at this time and the loan was secured over Property W. They used $110,000.00 to purchase a Landrover Discovery which was registered in the husband’s name. The balance was intended to be used to pay for the renovations to Property W.
At trial the wife was highly critical of the husband for the purchase of the Landrover Discovery and certainly it was a vehicle he wished to own but there was nothing to suggest that the wife objected to the purchase at the time.
Extensive work was carried out on the Property W property and it was sold on 18 November 2013 for $625,000.00. The net proceeds of sale after repayment of the (omitted) Bank loan and selling costs were $311,715.00 ($264,840.00 plus the deposit of $46,875.00) and this money was deposited into a bank account to which both the husband and wife had access.
None of this money now remains.
In February 2014 the husband and wife separated in acrimonious circumstances. The husband moved to rented or share accommodation and the wife and children and Ms K remained at Property A and they continue to live there.
The parties gave starkly different explanations for why they separated.
The wife alleged that prior to separation the husband began to purchase and use synthetic drugs and that his behaviour became strange and at times deranged. She attached to her affidavit copies of emails the husband sent her at or about the time of separation in which he disclosed engaging in obnoxious spying activities and made threats about ensuring that she was left with no money. The wife’s case was that she was an innocent victim of the husband’s behaviour.
The husband alleged that not long prior to separation the wife became attracted to a neighbour called Mr C and began an affair with him. He said that he struggled to cope with this and alleged that the wife sent him mixed messages about the continuation of the marriage which messed with his head, contributed to his spying behaviour and resulted in him behaving irrationally at times.
The wife did not address the allegations about the affair in her affidavit even to deny them and the husband was not cross-examined about drug use although he was cross-examined at length about his spying behaviour and his alleged threat to leave the wife with nothing.
I am left with a sense of unease about whether I was given a complete picture by the wife about the breakdown of the marriage or her part in it and I cannot be satisfied that the husband’s behaviour around the time of separation sprang up from some mental derangement unconnected with issues in the marriage or the choices of the wife. However the husband’s spying behaviour and distribution of a leaflet the day after the consent orders were signed making defamatory and degrading comments about the wife (for which I am satisfied he was responsible) was reprehensible and inexcusable whatever its root cause.
The assets and liabilities
The parties have the following assets:
Description
Ownership
Value
Property A
Joint
$590,000.00
(omitted) BMW
Wife
$16,500.00
(omitted) Landrover Discovery
Husband
$56,650.00
50% share in a (omitted) boat
Husband
$10,000.00
1800 (omitted) Shares
Wife
$8,496.00
739 (omitted) Shares
Wife
$3,680.00
Trailer
Husband
$500.00
Total
$685,826.00
The husband disputed that the trailer, which is registered in his name but is apparently in the possession of the wife, was worth $500.00. He said that it had accessories for camping and was worth much more. The wife said that she was happy for the husband to have it at an agreed value of $500.00.
During cross-examination the husband said that he did not want it and I said that I would have to order its sale. I will return to the issue of what to do with the trailer at the end of the judgment but at present I have included it at a value of $500.00. Neither party has ever had it valued.
It was the wife’s case that the husband helped himself to something slightly in excess of $200,000.00 shortly prior to separation. However her counsel did not suggest that any amount be added back; in his case outline he said that it was a s.75(2)(o) matter.
The liabilities are as follows:
Description
Ownership
Value
Mortgage account (omitted) secured over Property A
Joint
$211,724.00
Mortgage account (omitted) secured over Property A
Wife
$120,405.00
ATO Capital Gains Tax on sale of Property W
Wife
$40,990.00[2]
Total
$373,119.00
[2] Figure taken from the wife’s affidavit
The capital gains tax debt arises out of the sale of Property W. The wife said and I accept that upon separation the husband removed a large amount of paperwork from the Property A property and as a result, she was unable to provide all the necessary information to the ATO to establish the appropriate cost base for the property. She said that the ATO had fixed on a figure of $44,930.00 as being the appropriate Capital Gains Tax and that she was paying it off by instalments.
It is possible that the debt could be varied if the husband produces paperwork although it could be either increased or decreased. I have included it at a fixed amount but I will consider later whether an order should be drafted to deal with a situation where the liability is varied.
The wife has credit card debts totalling almost $17,000.00 but the parties have been separated for almost three years and I do not intend to include those as liabilities in which the husband must share.
The wife also owes about $15,000.00 to (omitted) Bank arising out of a business venture with a friend which she went into after separation and this also is not a relevant liability at this stage of the exercise.
In his financial statement the husband claimed to owe about $12,000.00 to the Taxation Department, $19,000.00 on credit cards, $3,000.00 to State Debt Recovery and other debts totalling $5,500.00 but these are all post separation debts. I do not intend to include them as liabilities in which the wife must automatically share but I will refer to them again when considering s. 75(2) matters.
The parties held the following superannuation:
Description
Ownership
Value
(omitted)
Wife
$173,745.00
(omitted)
Husband
$14,975.00
(omitted)
Husband
$41,387.00
(omitted) Super
Husband
$3,094.00
(omitted) Super
Husband
$7,447.00
(omitted) Super
Husband
$5,899.00
Total
$246,547.00
The wife provided a figure for her superannuation current as at 14 December 2016.
In her case outline document the wife provided old figures for the husband’s superannuation balances, some for as long ago as 2012. Rather than use those figures I have used the figures from the husband’s 2016 financial statement which in all cases but one are higher than the wife’s figures.
The husband did not indicate how current his figures were but there was no cross-examination on this topic and the wife could have obtained information about the husband’s superannuation balances from the funds had she chosen to do so. The best evidence I have for the purpose of working out the pool is therefore the higher figures provided by the husband.
The pool consists of non-superannuation assets of net $312,707.00 and superannuation of $246,547.00, a total of $559,254.00.
The applicable law
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property.
S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford[3] the High Court stressed that when an application for a property settlement was made the court must after identifying the parties’ legal interests in property and then carefully consider whether it was just and equitable to make an order altering parties’ interests in property. It stressed that this question could not be answered simply by considering whether a party had made contributions as set out in s. 79(4) of the Family Law Act 1975.
[3] Stanford & Stanford (2012) FLC 93-495
I am satisfied that it is just and equitable to consider making property settlement orders in this case as it clearly comes within the following situation referred to in Stanford & Stanford:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship and the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
I intend to take the usual steps to resolve the question of what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s79(4)(a), (b) and (c) and to express those contributions as a percentage if I can;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which include the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
The parties’ superannuation makes up a very large part of the pool, it is untainted by anyone making premature withdrawals from it, there is no issue of the wife having made a contribution to it by way of inheritances, gifts or damages awards and the wife seeks a splitting order. As a result of the last issue alone I would feel inclined as a result of the decision in C & C[4] to assess contributions to the superannuation and non-superannuation pool separately, but in light of the combined issues I feel compelled to do so.
[4] C & C (2005) FLC 93-220
The non-superannuation pool
At the commencement of cohabitation the husband was an undischarged bankrupt and had no significant assets.
The wife had a motor vehicle and furniture and household items. She said that she had purchased her motor vehicle for $25,000.00 several years earlier and was not challenged about this but there was no evidence of its value in either 1995 or 1998.
The wife was employed throughout the relationship except for a period around the time of the birth of the children. She worked for (employer omitted) from 1995 to 2000, (employer omitted) from 1999 to early 2006 and (employer omitted) where she is still employed from 2006.
The husband worked for (employer omitted) from 1995 to 2005, (employer omitted) from 2005 to a date in 2006, (employer omitted) from mid-2007 until 2010 and (employer omitted) from 2010 until 2013.
The husband was unemployed for a period of up to 18 months between his job with (employer omitted) ending and his job with (employer omitted) commencing and from 2013 until separation in February 2014.
During the hearing the wife was critical of the husband for his periods of unemployment. The husband alleged that by agreement between the parties he took on the job of stay at home Dad in 2006 when the wife commenced work at (employer omitted) and that in 2013 he was involved in supervising the renovations at Property W.
I cannot find on the wife’s evidence that the husband deliberately stayed out of the workforce because he did not feel like working and there was nothing to suggest that contemporaneously with these periods of unemployment the wife remonstrated with the husband about not making an effort to find work. I am not satisfied that the employment history of the parties means that I should find that contributions favour one or other of them.
The wife alleged that she did the majority of homemaking and parenting although she conceded that the husband was also involved and that he attended to chores outside the house.
The husband did not concede that the wife did more of the homemaker and parenting tasks and there were periods when he was at home and the wife working full time. He also said that he assisted with renovations to Property A from time to time as well as assisting with the renovations to Property W.
I am satisfied that both parties made contributions as homemaker and parent in accordance with their interests, aptitudes and availability and I do not consider that the wife’s contribution as homemaker and parent means that I should find that contributions favour the wife. I also accept that both parties contributed to other non-financial tasks, again in accordance with their aptitudes and availability.
The wife alleged that she received numerous cash sums during the relationship which tipped the assessment of contributions strongly in her favour. She said that she received:
i)A compensation payment of $60,000.00 in 1998 arising out of a motor vehicle accident in 1992.
ii)A gift of $10,000.00 from her mother on 31 July 2006 which was used for renovations at Property A.
iii)An inheritance of $80,000.00 from her grandmother in late 2006 or early 2007.
iv)A gift of $52,000.00 from her mother which was used to pay for a slab and materials for an additional room and for the installation of ramps for easy wheelchair access to make Property A suitable for occupation by Ms K.
v)An inheritance of about $400,000.00 in total from her step-father which she received between April 2010 and February 2011.
vi)A payment of $39,397.95 on 16 July 2013 in settlement of her claim for damages for nervous shock arising out of her sister’s treatment at (omitted) Hospital in 2012.
The only item the husband disputed was iii). He said that it was his belief that the wife did not inherit anything directly from her grandmother’s estate rather the money went to the grandmother’s children.
The wife did not produce any evidence in support of her assertion about this gift but the husband did not produce any evidence to cast doubt on the assertion and on balance I accept the wife’s evidence that she received this amount.
The wife also received $44,031.00 in January 2007 after being made redundant from (employer omitted) but I have not included that in the list above as it was a benefit which accrued during the relationship.
The total of the amounts in paragraph 69 is $641,397.95 and yet the parties now have net assets of only $312,707.00.
In submissions it was suggested by the wife’s counsel that the only reason the parties had $312,707.00 rather than a considerably smaller amount was because they failed to account to the wife’s sister for her contribution to Property W and her share of the profit when Property W was sold. It was wife’s case that this was an additional contribution which should be taken into account on her side of the ledger because Ms K was her sister.
However Ms K discontinued her application and the issue of whether and if so to what extent Ms K had contributed to the parties assets was not the subject of inquiry at the hearing. It would be unsafe for me to conclude that she made any particular contribution to the parties property pool.
Returning to the contributions outlined in paragraph 69, there is an explanation for where some of the money the wife received went.
$30,000.00 of the amount the wife received in 1998 went to purchase the home in Melbourne and the parties made a profit when Melbourne was sold so it may have flowed through into Property A. This money was also used for the parties wedding and living costs.
$132,000.00 was spent on renovations to Property A if the wife’s recollection is accurate (her inheritance from her grandmother and the money her mother provided).
Some of the wife’s inheritance from Mr A was used to purchase the BMW which is in the pool and it may be that something in excess of $150,000.00 was used to purchase Property W although this is an inference on my part; the wife did not make clear in her affidavit how much of their money the parties contributed to Property W.
The wife said that she also used some of her inheritance to reduce the mortgage on Property A.
These things provide some explanation for why the amount in the pool does not match the amount the wife contributed. Money spent on living expenses has of course disappeared, the cost of renovations is usually not reflected in an exact dollar increase in the value of a property and the BMW is a depreciating asset. However neither the husband or the wife were able to completely explain what had happened to all the money.
The wife said that part of the explanation was that the husband had removed in excess of $200,000.00 from the mortgage accounts and the parties joint account in the two months prior to separation.
She alleged that he could in fact be responsible for the disappearance of far more. She alleged that after separation she discovered that the husband had numerous bank accounts and credit cards which she up till then knew nothing about and discovered that he had opened a post office box in (omitted).
The wife said that examination of the bank accounts available to her showed that there were numerous suspicious transactions between the parties’ bank accounts, the trust accounts for the children and Ms K’s accounts. She engaged (omitted) Accountants to prepare a draft report examining some of the transactions but they informed her that they wold need to do an in depth examination which could cost tens of thousands of dollars to have the transactions investigated and that she could not afford to fund such an investigation.
The wife’s counsel conceded during final submissions that it was not possible to demonstrate that the husband was responsible for the disappearance of any more than about $200,000.00, and as will be seen later when I consider this in the context of s.75(2)(o) matters there is a question mark over whether some of that was legitimately used to pay credit card debts and living expenses.
The fact that the husband had additional bank accounts and credit cards and a secret PO Box raises a concern that the husband may have taken additional money but these actions might also simply have been intended to mask what happened to the $200,000.00 and the husband’s gambling activities at or around the time of separation. They do not of themselves establish that the husband was responsible for the disappearance of further money.
It is troubling that so much money has been lost over the years and that neither party can properly account for what happened to it but living costs and lifestyle choices can chew up money in surprising ways and I cannot safely make a finding that the husband is responsible for removing more than the $200,000.00. There is simply no complete explanation for what happened to all of the money the wife brought in.
Post separation matters
The wife has had the care of the children since separation nearly 2 ½ years ago and has received no child support from the husband. He has had little capacity to pay because he has for the most part been either unemployed or working as a self-employed (occupation omitted). The husband has spent time with the children on alternate weekends and during holidays but the wife has had the primary financial care of the children with little assistance from the husband.
Conclusion about contributions
The wife’s counsel did not make a submission about the finding the court should make about contributions on a percentage basis or indeed about whether the court should make such a finding.
I am not compelled by the legislation to make a percentage finding but it is the usual way of proceeding, it provides a transparent path to an outcome and this is not a case where it is impossible or unhelpful to make such a finding.
The wife received gifts, inheritances and damages awards which exceed in total the value of the pool but it does not follow that her contributions should be assessed at 100% and that the husband’s contributions during the 16 to 19 year relationship count for nothing.
The parties have gone backwards financially but in Kowaliw & Kowaliw Baker J said as follows:
Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec 79 (4) and sec 75 (2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.[5]
[5] Kowaliw & Kowaliw (1981) FLC 91-092
There is a waste or dissipation argument in this case but I was asked to deal with it as a s.75 (2) matter. In the meantime I need to assess contributions to the pool which exists.
The wife’s contributions to the pool which exists undoubtedly exceeded the husband’s. She made all the usual contributions during the relationship: she was employed for most if not all of the time, she contributed income to the home and to mortgage repayments, she made a considerable contribution as homemaker and she has financially supported the children since separation. In addition she contributed cash of $641,397.95.
However the husband also made significant contributions during the relationship. He was employed between 1995 and 2013 with one eighteen month period of unemployment which I treat as one of the swings and roundabouts of the marriage. He contributed income to the family and to the acquisition of property. The parties first home in Victoria and their second home in Property A were purchased with joint loans. The husband also made a strong contribution as homemaker and parent during the relationship.
I cannot ignore the husband’s contributions over a 16 to 19 year period because of eyes dazzled by the magnitude of the wife’s cash contributions (to paraphrase Kay J from Aleksovski & Aleksovski[6]). When all of the diverse contributions are weighed and balanced, I consider that contributions should be assessed as 65% by the wife and 35% by the husband. This entitles the wife to $203,259.55 and the husband to $109,447.45.
[6] Aleksovski & Aleksovski (1996) FLC 92-705
There is never any complete explanation for the intuitive leap which leads to a percentage finding on the basis of contributions but a 65/35 finding is broadly consistent with the decision in Pierce & Pierce[7] in which the husband made the overwhelming initial contribution and the finding was 70/30 in his favour after a 10 year relationship.
[7] Pierce & Pierce (1999) FLC92-844
The superannuation
At the commencement of cohabitation the husband was between 32 and 35 years of age and the wife between 24 and 27. They were both employed and it seems likely that they would both have had some superannuation but neither gave any evidence about this.
Currently the wife has superannuation worth $173,745.00 and the husband has superannuation worth $72,802.00.
As at 30 June 2014 the wife had superannuation with three funds, (omitted), (omitted) Super and (omitted) and her entitlements were in total worth $128,820.02.
Presumably the wife has now consolidated these entitlements although she did not directly say so. Her superannuation as at 14 December 2016 was worth $173,745.00, an increase of $44,924.98 over the 30 June 2014 figure. On a rough calculation almost $20,000.00 of this would be due to post-separation contributions to superannuation made by the wife as a result of her continued employment.
The wife’s figures establish that at the date of separation the husband had at least $61,735.00. This is far from exact however because the figures the wife provided were for various dates between 2012 and 2014. The husband’s superannuation appears to have increased by $11,607.00 but there was no evidence that he had contributed to superannuation since separation. He has had limited employment and some of that has been as a self-employed (occupation omitted).
The parties had a long marriage and their financial affairs were intermingled and the usual finding is that each party has made a contribution to the superannuation pool acquired during the marriage. The wife has made a post-separation contribution to superannuation unmatched by the husband however. She has continued to work steadily and has also continued to make a strong parenting and homemaker contribution. I assess contributions to superannuation as being 55% by the wife and 45% by the husband. This would entitle the wife to $135,600.85 of the superannuation and the husband to $110,946.15 which creates a differential of $24,654.70 between the parties entitlement.
S. 79(4) (d) (e) (f) and (g) matters
I am next required to consider the matters in s. 79(4) (d) (e) (f) and (g) of the Family Law Act 1975. I have considered past payment of child support in assessing contributions and future payment of child support is referred to in s. 75(2)(na). The only relevant subsection therefore is (e) which requires the court to have regard to the matters in s. 75(2) of the Act.
S. 75(2) matters
The wife is 45. She is a (occupation omitted) employed by (employer omitted) and earns $87,932.00 per annum.
The wife is working four days a week but she has the care of two children and a caring responsibility for her sister and there was no suggestion that she ought to be working full time.
The wife in partnership with a friend is attempting to market a (omitted) which assists with (omitted) and she and her friend have jointly taken out a loan of about $30,000.00 to fund their business. The business is yet to make a profit and there is no indication of whether it will ever be a success.
The wife is in good health and there is no impediment to her continuing to earn a good income in the future.
Pursuant to consent orders made in June 2016, the wife has the care of X, 15, and Y, 11, save when they are spending time with the husband on alternate weekends and for half of the school holidays.
The husband has paid little if any child support for the last 2 ½ years and given his recent employment history, it is difficult to be optimistic that he will do so in the future. I am satisfied that he has a capacity to earn an income but if he pursues it through such means as working in a (omitted) or being an (occupation omitted), it may be difficult for the wife to obtain child support from him.
The children do not have any special needs which are likely to have an additional adverse financial impact on the wife save that X needs orthodontic treatment which the wife expected would cost her $6,200.00.
The wife has a responsibility for the care of her severely disabled sister, a responsibility the parties agreed to take on when they were together. Ms K receives around the clock care from paid carers. The wife’s role includes intensive liaison with carers and also with hospital staff if Ms K is hospitalised which occurs from time to time. She is also providing her sister with accommodation.
The wife said that her sister paid her $300.00 per week board but she did not provide any information about the financial cost to her of caring for her sister.
Ms K discontinued her application for orders that the husband and wife pay her $450,000.00, an application which if successful would have wiped out the non-superannuation asset pool. Because Ms K did not pursue her claim, it would be unsafe for me to make a finding that the husband and the wife or either of them has any responsibility morally or legally for any loss of capital by Ms K.
There was no evidence that the wife had re-partnered.
On the basis of contributions, the wife is entitled to $203,259.55 of the non-superannuation assets and $135,600.85 superannuation.
The wife wishes to retain Property A which has been modified to provide appropriate accommodation for Ms K but in order to do so, she will need if nothing else to refinance a mortgage debt of $331,679.00.
The wife has been paying the mortgage since separation and it might be that if she is not required to pay the husband any money she could find a way of refinancing the mortgage. She might also be able to do so with Ms K’s assistance but I was not provided with any information during the hearing about how the wife intended to refinance the mortgage. Although her counsel asked that the wife receive the Landrover Discovery so that she could sell it and reduce debt, it was not suggested that this was a make or break issue in terms of the wife retaining Property A.
The wife has debts in addition to those taken into account in calculating the pool. She owes $15,000.00 to (omitted) Bank in connection with the business she is developing and $16,963.00 in credit card and store debt.
I was not provided with any information about the wife’s paid or unpaid legal fees.
The husband is 53. He is unemployed and has been for most the last three years. He said that he injured his shoulder in 2014 which resulted in him having trouble lifting and limited his job prospects, that a (employer omitted) he worked in briefly closed, that his attempt to work for (employer omitted) failed because he did not meet the requirements of the job and that he ceased being an (occupation omitted) in Sydney after three months because he developed cellulitis in his hands and feet.
The husband had a solid working history between 1995 and 2013 broken by one period of unemployment of about 18 months. He may have genuine health issues which are not apparent to me which will impact on his capacity to obtain employment in the future but nothing in the evidence explains why he has had so much difficult gaining or retaining employment in the last three years. His complaints about medical issues were not backed up by any medical evidence.
It is difficult to be optimistic that the husband has a bright working future ahead of him if the past three years are anything to go by but in the absence of any explanation for why he is in this predicament, I cannot assume that the he could not support himself adequately if he chooses to make an effort.
The husband is not paying child support and there is no sign of that changing in the immediate future because there is no sign of him gaining or maintaining reasonably paid employment.
The husband is not supporting anyone else and has not re-partnered.
On the basis of contributions, the husband is entitled to $110,946.15 superannuation and $123,951.45 of non-superannuation assets.
The husband said that he had a number of debts in addition to those taken into account to calculate the pool. He alleged that he owed $4,000.00 to the ATO arising out of his (occupation omitted) and $8,000.0 to the ATO for previous financial years. He alleged that he owed $19,032.00 in credit card debt, $3,000.00 in fines arising out the (occupation omitted) and $5,500 to his brother and for miscellaneous matters.
The husband provided no evidence in support of his claims. I provisionally accept that he has credit card debt but there was no evidence that he actually owed money to the ATO, no evidence that he had a debt of $3,000E for unpaid fines and no evidence that he would need to repay his brother.
The s.75 (2) (o) argument
S.75 (2) (o) requires the court to take into account any fact or circumstance which the justice of the case requires be taken into account and the wife’s counsel submitted that the court should take into account that the husband had helped himself to a significant amount of money around the time of separation all of which had vanished.
It was not in dispute that between 21 February 2014 and 10 March 2014 the husband transferred money from the joint mortgage accounts to a (omitted) Bank account in his name on a number of occasions. The transfers were as follows:
Date
Amount
21 February 2014
$111,111.11
10 March 2014
$40,000.00
10 March 2014
$20,000.00
Total
$171,111.11
On 21 February 2014 the husband transferred $11,111.11 out of this account to reduce/pay the balance of a credit card debt in the wife’s name.
Between 21 February 2014 and 10 March 2014 he paid a number of credit cards debts in his own name being $9,079.45 owing to (omitted) Bank, $9,141.63 owing to (omitted), $2,459.22 owing on a (omitted) store card and $10,667.77 owing to (omitted) Bank.
$25,550.93 was transferred on different dates to another (omitted) Bank account in the husband’s sole name and on 10 March 2014 $100,000.00 was transferred to this account.
On 11 March 2014 the account into which the $171,111.11 had been deposited had a balance of $66.00.
The husband did not accept that the payment of the credit card debts was wasteful spending. He said that one of the cards had been used to pay for some solar panels.
He admitted that he took $100,000.00 but maintained that he needed money to set himself up upon leaving the former matrimonial home. However he provided no detail at trial of how he disposed of such a large sum of money.
During cross-examination by the wife’s counsel the husband admitted that he had little recollection of his actions around the time he took the $171,111.11 save that he remembered that was trying to clear a path forward for himself.
There is a real possibility that the husband’s actions were not simply designed to pay off debts but were designed to deprive the wife of assets. He was hurt and angry between late December 2013 and the date this money was transferred and there was other suspicious behaviour by him around this time including opening a separate post office box, taking out a lease on a separate storage shed and wilfully transferring money into the children’s trust accounts and then transferring it back.
The depth of the husband’s hurt and anger is illustrated by emails he sent around this time threatening to leave the wife with nothing and talking about revenge and also by the fact that he still harboured that hurt and anger two years after the parties separated.
The day after the parties signed the parenting consent orders in July 2016, a flyer which included a photo of the wife and contained defamatory and derogatory comments about her and her lifestyle was placed into the letterboxes of the people who live in the same street as the wife.
The husband denied that he was responsible and alleged that some other neighbour did it but I am satisfied on the balance of probabilities that the husband was responsible. The contents of the flyer resonate with the beliefs about the wife which the husband continued to express at trial and are very personal and it defies belief that a random unnamed neighbour would have created and distributed the flyer.
I must do something about the fact that the husband removed the $171,111.11 but before deciding what to do, it I need to consider an additional argument by the wife’s counsel. He submitted that the husband should also be held responsible for the disappearance of $31,738.00 which was transferred from a joint (omitted) Bank Account to an account (omitted) in his sole name. The details of these withdrawals are as follows:
Date
Amount
5 December 2013
$5,000.00
12 December 2013
$6,738.00
16 December 2013
$10,000.00
3 January 2014
$10,000.00
Total
$31,738.00
$14,000.00 of the money deposited into the (omitted) account was withdrawn in cash at various times between 5 December 2013 and 28 December 2013 and there are transactions totalling $1,049.37 which clearly relate to gambling. There is nothing on the face of it to suggest that expenditure from this account was for family purposes and it was after Property W was sold so none of it can relate to purchases for Property W.
When cross-examined about this issue the husband seemed to have little recollection of what he had been doing or thinking at the time of the December 2013 transactions and could not explain how the money had been used.
However it is often difficult for people to recollect what happened to even quite large sums of money withdrawn from accounts and $21,738.00 was withdrawn prior to the critical incident after Christmas when the husband became convinced that the wife was having an affair and I cannot exclude the possibility that this or at least some of it was legitimately used for family purposes.
I am less inclined to extend the husband the benefit of the doubt about the $10,000.00 which was withdrawn on 3 January 2014.
Conclusion about the s.75 (2) (o) argument
I can understand why the wife’s counsel suggested that the issue of the money the husband removed from the accounts be dealt with as a s.75 (2) matter rather than by way of an add-back because it is difficult to fix on a precise figure which could be used as an add-back.
$42,455.18 of the $171,111.11 was used to pay credit card debts and at least some of that (the $11,111.11 paid off the wife’s credit card and the amount paid off his (omitted) card which he said had been used to pay for solar panels and quite possibly some of the other credit card debt) could have been legitimate expenditure.
The husband did have to leave the former matrimonial home at separation and he was unemployed at the time so some of the $100,000.00 could have been used for legitimate post-separation purposes.
However as was demonstrated in Townsend & Townsend dealing with dissipation of money as a s.75 (2) matter rather than by way of add-back can mean that the wronged party is not properly compensated for the actions of the dissipating party.
There is nothing to prevent the court at the s.75 (2) stage deciding to deal with the money which has been wasted or dissipated as a line item rather than a factor relevant to percentages and although it is difficult to fix on a figure to use as an add back in my view the appropriate course is to add $130,000.00 to the non-superannuation pool and further consider s.75 (2) matters from there.
This gives the husband the benefit of the doubt in respect of some of the money which was dissipated, credit which he does not necessarily deserve because he left a muddy trail by shifting money around between accounts and failing to make full and frank disclosure. However I am not satisfied that I can treat the December 2013 expenditure as illegitimate and the wife issued numerous subpoenas and she could have provided evidence that the credit card expenditure from the $171,111.11 was not legitimate and I cannot resolve the issue of how much of the credit card debt which the husband paid off was appropriate and how much was inappropriate.
I cannot be sure that $130,000.00 represents the totality of the money taken by the husband and spent at will by him and him alone; it may slightly favour him. However if it disfavours him that is his problem because he has failed to be frank with the court and to make full and frank disclosure.
If $130,000.00 is treated as a notional asset then the non-superannuation pool is worth $442,707.00. If a 65/35% split is applied to that then the wife is entitled to $287,759.55 and the husband to $154,947.45.
The wife remains entitled to superannuation of $135,600.85 and the husband to $110,946.15
Conclusion about s. 75(2) matters generally
The wife is 10 years younger than the husband and in my view different s.75 (2) considerations apply to the superannuation and non-superannuation pool.
In respect of the non-superannuation pool, the s.75(2) matters favour the wife. She has the primary care of two children and may not receive much child support in the future.
The wife also has a responsibility to care for her sister. It is not a legal obligation but it is an obligation the parties took on when they were together. It is a relevant consideration and it is impacting on the wife’s income earning capacity at present as she is working only four days a week.
The wife wishes to retain the home and it is important that she be able to do so if possible as it has been modified to suit Ms K’s needs.
Counterbalancing this however is that one of the children is 15 and the wife left the marriage with a good income earning capacity as a result of unbroken employment of 10 years, she may in the future be able to increase her income by working five rather than four days a week and she is ten years younger than the husband.
The wife has incurred credit card debt and taken out a business loan since separation which may impact on her capacity to obtain a loan in respect of the house but this has been the wife’s choice. Finally the wife did not suggest that she would lose the home if she did not receive assets of a certain amount.
In respect of the superannuation pool the s.75(2) matters if anything slightly favour the husband. He is 10 years older than the wife. He has an income earning capacity if he chooses to exercise it but he did not leave the marriage with secure employment and whereas the wife has found her feet post-separation and has gone on to explore a new business venture the husband still seems to be struggling.
How does this play out?
On the basis of contributions the husband is entitled to $154,947.45 of the non-superannuation assets but $130,000.00 of that is a notional asset leaving $24,947.45. If he retains the (omitted) boat and the Landrover Discovery he has $41,702.50 more than his entitlement.
In respect of the superannuation however the husband is entitled to $110,946.15 and would be entitled to splitting order of $38,144.15 from the wife.
I could order as the wife requested that she receive all of the value in the Landrover Discovery and not just $41,702.50 of the cash in it, and I could order that the husband receive a split from the wife’s superannuation fund so that he receives his contribution based entitlement or even more. However this would leave the husband with virtually nothing by way of real assets and at his age his superannuation is cold comfort for him.
The consent parenting orders provide for the husband to spend regular time with the children and it is important that he not be totally financially crushed. I therefore consider that the just and equitable outcome is to leave the husband with the Landrover Discovery as well as his half interest in the boat and to leave the superannuation as it is.
It would be highly regrettable if the wife lost Property A because she could not refinance the mortgage but she is hardworking and resourceful and she did not suggest that this was likely to be the case.
The pool consists of non-superannuation assets of net $442,707.00 including the notional asset and superannuation of $246,547.00, a total of $689,254.00. Of this the wife will retain:
Description
Value
Property A
$590,000.00
(omitted) BMW
$16,500.00
(omitted) Shares 1800
$8,496.00
(omitted) Shares 739
$3,680.00
(omitted) Superannuation
$173,745.00
Less Mortgage account (omitted) secured over Property A
($211,724.00)
Less Mortgage account (omitted) secured over Property A
($120,405.00)
Less ATO Capital Gains Tax on sale of Property W property
($40,990.00)
Total
$419,302.00
The husband will retain:
Description
Value
50% share (omitted) boat and trailer
$10,000.00
Landrover Discovery
$56,650.00
Notional Asset
$130,000.00
Trailer
$500.00
(omitted) Super
$14,975.00
(omitted) Super
$41,387.00
(omitted) Super
$3,094.00
(omitted) Super
$7,447.00
(omitted) Super
$5,899.00
Total
$269,952.00
This outcome results in the wife receiving approximately 61% of the pool overall in circumstances where she brought in considerable amounts by way of inheritances, gifts and damages awards but where 35% of the pool is superannuation acquired largely during the relationship.
The parties were in dispute about the value of the trailer during the hearing and I indicated that I would solve it by ordering its sale, but it was the wife’s case that the husband could keep it and she maintained that it was worth $500.00 which is a trifling amount. I therefore intend to order that the husband keep the trailer which is registered in his name provided that he collects it from the wife within a specified period. If he does not, the trailer will be declared the property of the wife.
It is difficult to know what to do about the Capital Gains Tax Liability. The husband has little incentive to produce paperwork and get the assessment down unless he is entitled to a share of any reduction in the amount and I am loathe to make an order which might require the wife to pay the husband money.
I do not propose to make an order about the Capital Gains Tax. I have taken the current outstanding amount into account. I consider it unlikely that the bill will turn out to be too high and if the wife is able to get it down by some means then she can retain the benefit of this.
The other troubling issue is what to do about proceeds of sale if the house has to be sold because the wife cannot refinance the loans. It will have to be sold in that hopefully unlikely event because otherwise the husband will remain liable for the mortgage indefinitely.
It is a difficult issue but on balance again I consider it appropriate to order that the wife retain the proceeds. She will have to bear the selling costs but she will also benefit from any increase in value of the home, an outcome which seems more likely in the current market than that the selling price will be less than the valuation.
The husband sought an order that some personal items be returned to him: the (omitted) encyclopaedias purchased for him by his father, his father’s war medals and two sets of replicas and a (omitted) watch given to him for his 21st birthday.
The wife’s counsel informed the court during submissions that he had been instructed that the husband had the encyclopaedias and that the wife did not know where the war medals and (omitted) watch were but would hunt for them and provide them to the husband if she found them.
The husband responded that he did not have the encyclopaedias and believed the wife had disposed of them to hurt him.
I cannot effectively do anything about these items in the absence of evidence about who might be telling the truth about them or and their value is sentimental rather than real.
I intend to declare that the husband is the owner of the encyclopaedias, war medals and (omitted) watch and that if the wife locates them she is to promptly provide them to the husband.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding one hundred and eighty two (182) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 20 April 2017
Key Legal Topics
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Property Law
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