Wicks and Smythe
[2007] FMCAfam 369
•18 May 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WICKS & SMYTHE | [2007] FMCAfam 369 |
| FAMILY LAW – Property – Initial financial contributions – inequality of financial contribution during the marriage – credit of the parties. FAMILY LAW – Parenting – Christmas Day and holiday time. |
| Family Law Act 1975 (Cth), ss.75(2), 79(4) Evidence Act 1995 (Cth), s 72 |
| Ferrero & Ferrero (1993) FLC 92-335 |
| Applicant: | MS WICKS |
| Respondent: | MR SMYTHE |
| File number: | SYM 6735 of 2006 |
| Judgment of: | Henderson FM |
| Hearing dates: | 14, 15, and 16 May 2007 |
| Date of last submission: | 16 May 2007 |
| Delivered at: | Sydney |
| Delivered on: | 18 May 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Johnson |
| Solicitors for the Applicant: | Gells Lawyers |
| Counsel for the Respondent: | Mr Schonell |
| Solicitors for the Respondent: | Cara Marasco & Company |
ORDERS
Parenting Orders
The child X born (omitted) 2004 spend time with his father as follows:
a.In 2007 and each alternate year thereafter, from 4.00pm Christmas Day to a date calculated as seven (7) clear days thereafter, extending to one half of school holiday periods the year the child commences formal education and ending at 6.00pm on the last day.
b.In even numbered years the father’s time with the child during Christmas holidays and until the child attends formal education to commence at 9.00am seven (7) days prior to the 24 December 2007 and cease 9.00pm on 24 December 2007.
c.Upon the child commencing formal education the father’s time with the child in even numbered years will commence
i.6.00pm on the last day of school to 9.00pm 24 December.
ii.And again for a further period of time in January to total with the time in Order 1(c)(i) as one half of the Christmas school holiday period and ending at 6.00pm on the last day. Such time in January to commence on a day as agreed, failing agreement, to commence Monday, the second week in January.
Otherwise than as provided in these orders, the child to spend each Christmas Eve with the father from 9.00am to 9.00pm Christmas Eve.
Until the child commences formal education the child to spend time with the father for three block periods of seven (7) days in each year as follows:
a.Being in 2007 the last week of July, the last week of October and the first week of December 2007.
b.In 2008, in each of the months March, June and October or as otherwise agreed.
Pursuant to section 65DA(2) of the Family Law Act 1975 the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders are set out in Annexure A and these particulars are included in these orders.
Property Orders
That within three (3) calendar months of todays date the wife pay to the husband the sum of $70,000.00.
Upon payment of the sum set out in order 5 herein to the husband, the court declares the husband has no further interest in the property at Property H.
In the event the wife fails to pay the sum set out in Order 5 herein within the time frame as provided, the wife to within one calendar month thereafter place the property on the market for sale by an agent as agreed between the parties, failing agreement as nominated by the President of the Real Estate Institute of New South Wales by private tender at a price agreed and failing agreement at a price nominated by the President of the Real Estate Institute of NSW.
Upon the sale of the property, the wife to distribue the sale proceeds as follows:-
a.Payment of agents commissions,
b.Payment of legal costs and the usual conveyancing costs.
c.The sum of $70,000.00 to the husband with interest to be calculated on that sum from a date four (4) months after the date of these orders in accordance with the interest rate set out in the Family Law Act 1975.
d.The wife to receive the balance of the proceeds of sale.
Otherwise the parties be entitled to retain in their possession and control all assets including but not limited to motor vehicles, jewelry, superannuation, contents of home and businesses.
The wife to within fourteen (14) days of today’s date close the joint account in the parties’ name.
IT IS NOTED that publication of this judgment under the pseudonym Wicks & Smythe is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 6735 of 2006
| MS WICKS |
Applicant
And
| MR SMYTHE |
Respondent
REASONS FOR JUDGMENT
The matter of Wicks & Smythe was heard by me on 14, 15 and 16 May 2007. Mr Johnson of Counsel appeared for the applicant wife and Mr Schonell of Counsel for the respondent husband. The issues before the Court were orders for property division and limited, although important, issues concerning parenting of the parties' child, X, born (omitted) 2004, on Christmas Day and during holiday periods.
The parties handed up terms of settlement in relation to their son save the limited issues above, and I made those orders on 14 May 2007.
At the conclusion of the hearing the parties agreed that the wife would be restrained from operating or accessing all accounts in the husband's name, be that his credit card or bank accounts. I found she had been given such an authority during the marriage, that authority had not been revoked or removed and she had recently accessed the husband’s bank accounts for the purposes of producing documents for the hearing and during the hearing. The husband sought the joint account at the (omitted) Bank, which had a debit balance of $500, be closed. The wife did not agree with that order due to the debit balance, however I have ordered the account be closed and have made provision for clearing the debit balance.
The Evidence
The evidence of the parties was as follows:
For the wife, I read her affidavit filed 3 May 2007 and a financial statement filed the same day.
The wife tendered the following exhibits:
a)Wife’s Exhibit 1. An orange folder of documents supporting the wife's contention of the injection of some $622,000 into the relationship and the marriage from October 2000 to date.
b)Wife’s Exhibit 2. The wife's file with her prior lawyers Lawmark.
c)Wife’s Exhibit 3. (omitted) Bank cheque account details for one of the wife's businesses, (business omitted).
d)Wife’s Exhibit 4. The wife's streamline account statements from 30 January 2006 to 17 February 2006 and a net bank transfer for creation of a (business omitted), another of the wife’s businesses at a cost of $18,000.
e)Wife’s Exhibit 5. A bundle of domain names reserved by the wife which had been downloaded from the web.
f)Wife’s Exhibit 6. The husband's tax return for the tax years ended June 2001 to June 2005.
g)Wife’s Exhibit 7. An invoice from the husband's business (business omitted) with the words $3,000 cash in husband's handwriting dated 14 November 2001.
h)Wife’s Exhibit 8. A bundle of cheque butts from (business omitted), the wife's business.
For the husband, I read his affidavit and financial statement filed
1 May 2007.
The husband tendered the following exhibits:
a)Husband’s Exhibits 1. The wife’s income tax returns for the tax years ended June 2001 to June 2005 inclusive;
b)Husband’s Exhibit 2. A profit and loss and balance sheet of the wife's business (omitted) for year ended June 2006 produced 15 August 2006;
c)Husband’s Exhibit 3. Annexure B to the wife's affidavit being an email to her then solicitors Lawmark dated 5 November 2004 headed from (omitted) under the name "(business omitted)";
d)Husband’s Exhibit 4. Profit and loss statement of (business omitted) for the period 1 July 2006 to 30 April 2007 produced by the wife on the night of 14 May 2007;
e)Husband’s Exhibit 5. The wife's (omitted) Bank statements showing the balance of the account between 1 January 2006 and 14 August 2006.
Both the husband and wife were examined and cross-examined.
In addition, there was a report prepared by Mr Merrell, Accountant, showing valuations of (business omitted), (business omitted), (business omitted), (business omitted), (business omitted), (business omitted) and (business omitted). The last two businesses are in the husbands name and the first five businesses in the wife’s name. The only entity that had any value was the wife's business of (omitted) which was valued by Mr Merrell at $6,499. This report cost the parties $6600.
The husband has a legal bill of $60,000 and the wife a legal bill of around $50,000. The wife has paid $9,654 in legal fees, the husband has paid nothing. Each of the parties received $20,000 from the sale of their matrimonial home in Property N. That money has been placed in trust in their respective solicitors' account. Thus, the total of legal fees to be paid by the husband and wife is in the vicinity of $116,000 for an asset pool which is I have found is less than $580,000.
Chronology
The husband was born on (omitted) 1955 and is aged 51.
The wife was born on (omitted) 1976 and is aged 38.
In 1999 the wife purchased a property at Property C for $220,000 with a loan of $200,000.
In June 2000 the husband purchased his property at Property Q for $245,000. The husband borrowed $150,000 and paid the balance from his own resources.
In 2000 the wife purchased a Honda (omitted) for $37,000, which was fully encumbered at purchase.
In October 2000 the parties commenced cohabitation.
In September 2001 the wife sells her property at Property C netting around $84,000 and the parties purchase their first matrimonial home at Property E for $605,000 with a mortgage of $483,000. The parties provide the balance of the purchase price.
On (omitted) 2002 the parties were married.
In April 2003 the wife enters into an agreement to purchase a property Property H for $340,000 in her sole name, which is the only remaining item of real estate the parties now own.
In August 2003 the husband sells Property Q for $385,000 and he nets in the vicinity of $238,000 from that sale.
September 2003 the parties sell their property at Property E for $784,500 and purchase a property at Property N for $1 million. The unit and the home were mortgaged to (omitted) with two mortgages of $650,000 and $355,000.
In February 2004, the parties purchase (business omitted) for $50,000 and renovated the premises ready to commence trading in April 2004. No less than $50,000 is paid to renovate the property. The wife asserts in total $230,000 was spent in renovation and in operating the (business omitted) from her funds.
In March 2004 the wife sells her business of (business omitted) for $350,000, less $68,000 capital gains netting $280,000 from the sale
The brightest spot on this chronology is the birth of the parties' son X on (omitted) 2004.
The wife asserts the parties separate under the one roof in November 2004.
The husband asserts the parties separate under the one roof in October 2005.
The parties physically separate on 29 July 2006. The husband says he moved out of the home to the garage.
(business omitted) is sold in August 2005 for $87,000 and all monies are used to pay outstanding debts and accounts
The parties sell their home at Property E on 31 January 2007 for $1,000,085. They receive their $20,000 each. The unit at Property H is debt free and rented. Otherwise all monies received from the sale are expended in payment of outstanding debts.
I will deal with the evidence relevant to the parenting orders first and then deal with the property orders.
Parenting Orders
The husband seeks three periods of block time with his son of seven days each in July/late August, October and December 2007. The husband wishes to take his son to the snow, on a camping trip and to spend time with him at Christmas.
At the end of the hearing the wife conceded the child could spend two periods of five days with his father in 2007.
In 2008 the husband seeks orders that he spends another three periods of block time of seven days with his son in March, June and October and 7 days in January 2009.
When X attends school the husband seeks half the school holidays which order is agreed between the parties.
The area of contention regarding Christmas Day is that the father seeks some time with his son on Christmas Day each year be it the morning or afternoon.
The wife contends that having regard to the husband’s (nationality omitted) heritage that X spend every Christmas Eve with his father and every Christmas day with her. The parties agree X should be with his father every Christmas Eve.
The parties have agreed, as is the intention of Part V11 of the Family Law Act (“the Act”), to have equal shared parental responsibility for their son and this is clearly an order in the child’s best interest.
The Act then obliges me to consider whether there should be an order for the child to spend equal time with his parents, or substantial and significant time. However the parties have agreed on orders which I consider are in the child’s’ best interests that he should primarily live with his mother and spend significant and substantial time with his father.
The orders made provide for X to be with his father Thursday night every week, extending to a Monday morning each alternate week resulting in this little boy spending substantial and significant time with his mother and his father. That certainly is an appropriate order and one which I consider to be in the child’s best interest.
In relation to block time between X and his father, I am unable to accept the mother's position that the child cannot spend seven days away from her. He spent a minimum of four nights and four days away from her in December 2005/2006 when his mother went on a business trip to Melbourne and there was no evidence of any adverse consequences for X by that separation. X was 15 months younger at that time than he is today.
I do not criticise the mother for taking a business trip, rather it demonstrates that the child can spend time away from her and that the mother has confidence in the father’s ability to care for the child
There is no evidence that the child returns upset or unsettled after spending time with his dad nor does the father say X is upset to leave him or when he is with him. X is a very happy, well-adjusted, much loved child who is clearly comfortable in either his mother’s or his father's home. He has an excellent relationship with his parents. He attends day-care and he is progressing well. He is clearly attached to his mother and his father.
The evidence points to a conclusion that it is the mother’s feelings in being separated from her son that is at the forefront of her attitude. In other words the mother's position on this issue is more her need to have the child with her than any real evidence that the child could not cope with being separated from her.
The mother’s position may stem from her excellent parenting, which has resulted in a confident child who is able to be separated from her for lengthy periods, because of the strength of his attachment to his mother and the strength of his attachment to his father. The father clearly has a capacity to care for this child and is, like the mother, a devoted and capable parent. I will make the orders contended for by the father in relation to his block time with his son.
In relation to Christmas Day, I accept the father celebrates Christmas Eve and that presents are opened at that time and I accept that for the mother Christmas Day is a very important day. The mother is of the (religion omitted) faith.
The additional relevant evidence on this issue is as follows. Consent orders were made for the child to spend Christmas Day with his father in 2006. I accept wholeheartedly the father's version of events, which is that the mother rang him in a distressed state at the prospect of not seeing the child on Christmas Day in 2006. During the mother’s evidence in the witness box on this issue she became teary and it is clear the need for her to have X with her on Christmas Day is very strong.
The mother really wanted X home with her. The father, having a capacity to put his son's needs well above his own needs, took the child back to the mother. He did not want his son upset. He knew what was important to the mother and his son. This conduct on his part gives the Court confidence that the father will always put the child's needs before his own in these important issues for the mother.
However, on this issue the mother is very much focused on her own needs. I can understand the mother wanting the child with her each Christmas morning. I do not see that as the real issue. It is rather the break up of Christmas Eve and Christmas Day that is at the nub of the dispute.
There is no reason why the child cannot commence his holiday time with his dad each alternate year from some time on Christmas Day in the afternoon so in each alternate year he sees his dad on Christmas Day, albeit in the afternoon. Otherwise, X will always be with his father to 9.00pm every Christmas Eve.
The orders I make will provide that in odd-numbered years the father's time with X will be from 9.00am to 9.00pm Christmas Eve and his holiday time with X will commence 4.00pm Christmas Day extending to half the school holidays when X commences formal education.
In even-numbered years and until X commences formal school, the father's time with the child will commence seven days before Christmas Day and conclude 9.00pm Christmas Eve. When X commences school the father’s time will commence the day after school breaks up to 9.00pm Christmas eve, and again for a further period in January to equal half the school holiday period.
The result is that the parents will have a block period each year in January to take their son away. The mother has X every Christmas morning and day; the father sees his son each alternate Christmas Day and has him every Christmas Eve. That seems to me to cover the needs of the child and his mother and father’s needs.
Property
As to the property issues, the issues were presented as complicated and complex; yet I did not so find at the hearing. Much was made of each party's credit, their unreliability in giving discovery of documents, preparation of documents, creation of documents, truth in their affidavits, inconsistencies with oral evidence and the like.
The issues presented to me by the wife were this:
a)The contested date of separation was an issue of credit;
b)The disparity in the parties' initial financial contribution;
c)The wastage and poor management by the husband as asserted by the wife in the running of (business omitted);
d)The disparity, in the wife’s favour asserted by her, in the financial contributions by the parties during the marriage by way of their income earning;
e)The disparity in the wife’s favour asserted by her in her parent and homemaker contribution and her greater 75(2) factors;
f)The husband’s credit in general.
The issues presented to me by the husband were this:
a)The equality of the parties' initial capital contribution at the commencement of co-habitation and during the marriage;
b)The date of separation, a credit issue in the husband’s favour;
c)The direct financial contribution by the parties during the marriage by way of income and earnings ;
d)The disparity in the parties indirect contributions to their assets during the marriage in the husband’s favour in that the husband is a (occupation omitted) and he is fairly handy and asserts he carried out a lot of value added work on all their properties;
e)The wife’s credit in general;
f)The equality of the parties' contribution as a parent and homemaker.
The agreed list of assets were as follows:
ASSETS $ The unit at Property H $360,000 Husband's shares $6,381 Husband's motor vehicle $8,000 Husband's Harley Davidson motorcycle $30,000 Contents in the husband's possession $5,000 Husband's super $45,253 Wife's car $20,000 Wife's contents and jewellery $8,000 Wife's super $25,000 TOTAL $507,634
The wife submitted I ought not to include the parties' present savings in their bank account being post-separation resources. I agree with that submission.
The debts were agreed as follows:
LIABILITIES Harley Davidson $2,500 Wife's car $2,916 Debit balance joint account $500 TOTAL $5,916
Mr Schonnel submitted that I should include the following as an add back to the matrimonial pool:
a)Wife's paid legal fees of $9,654;
b)Wife's business of $6,499;
c)$50,000, being the amount of matrimonial money spent by the wife for her own purposes between January 2006 and August 2006.
As to the disputed add back items being wife's business $6,499, the wife's paid legal fees of $9,654 and the add-back cash of $50,000 I say the following.
As to the wife's paid legals: I have no clear evidence, nor can I make a finding as to the source of the wife’s paid legal fees in the past. There was no evidence, save that in January 2006 two months after the husband's asserted date of separation, the wife still had $100,000 in the (omitted) Bank which, for reasons to follow, I have found was a joint matrimonial asset. Within the space of eight months the account had a credit balance of $235. The wife's legal fees may well have come out of this money, it may have come out of income. It is somewhat unclear. In the absence of clear evidence, I am really somewhat guided by the case law and I will add back the wife's paid legals to the assets.
In relation to the value of the wife's business. I have a valuation prepared by Mr Merrell in relation to (omitted). The valuation is based upon the income stream from royalties after the sale of the business in 2004 which royalties cease in June 2008. The wife now disputes it is a value of a business as it is named as present value of revenue stream and it is not a capital item.
What was valued by Mr Merrill was the income stream received by the wife from the sale of her business in 2004 which has continued and will continue up to March 2008, which is a gross value in excess of $8,000 each year for the next two years totalling some $17,000. Mr Merrill's valuation of that business was $6,499.
I reject the wife's submission that I would not take this asset into account in the division of matrimonial property. Either I will adjust the wife’s income for the next two years upwards by $17,000 to take account of the income stream or I will add to the assets the present value of the business as valued by Mr Merrell. The wife cannot have it both ways.
I will include the value of the business in the list of assets and liabilities.
As to the add-back of $50,000: I will assess that issue after my findings on the evidence.
At the outset I must say the case was fraught by the emotional baggage of each of the husband and wife, particularly the wife. It was clear that the wife blamed her husband for the parties' current financial position which is a significantly deteriorated position to that which it was at the commencement of the marriage.
The evidence demonstrated that the parties had intended to live for some time in the Property N property. It was a home they significantly renovated, at both a financial and emotional cost and each of the parties’ considerable energies and talents were expended on making this a most comfortable and well appointed family home. The home had Travertine floors and similar up market finishes. This was to be the family home. Yet today we find the parties only have one item of real estate left being a one-bedroom apartment at Property H which for the wife and husband must be a severe blow.
The economic failure of the parties' marriage has caused significant difficulties for each party in their recounting of the history of their relationship and may be the reason why I have found there has been a certain degree of recreation at times. However, their son X is clearly a much loved and well cared for child.
The significant factual matters which it was submitted to me were in two parts. The first is the injection into the marriage by way of capital by each of the parties from assets owned prior to the marriage; and secondly the disparity in the parties income earnt during the marriage.
Initial contributions of the parties
Dealing with the capital injections first the issues are:
a)The wife's direct financial contribution other than by way of income at the commencement of the marriage and during the marriage, being the sale of her business (omitted) in 2003. This was fledgling company at the commencement of cohabitation and was sold for $350,000 in 2003 netting $280,000 to the parties. $100,000 of the proceeds of sale of that business remained in the wife’s (omitted) bank in January 2006.
b)The sale of the wife's unit prior to the marriage which netted the parties $85,000, and which was fully encumbered at the date of the marriage.
I find the wife’s total capital injection into the parties' marriage separate to income to be $365,000.
The husband's direct financial contribution other than by way of his income during the marriage:
a)His car worth $30,000, which he still has today worth now $8,000;
b)The net proceeds of sale of his unit in 2003 of $238,000;
c)Cash in his bank at marriage of $31,000;
d)His superannuation of $25,000 which he retains today and which has increased to $41,000
I find the husband’s total capital injection into the parties' marriage separate to income to be $324,000.
Thus, there is a difference of $20,000 in the wife's favour in relation to the assets owned at cohabitation. However, both the capital gains in the wife's business and in the husband's unit occurred during the marriage so there is a mixing and melding of contribution by each to the other’s gain in capital assets.
However, on the issue of the capital contribution by each of the parties, I find there is very little to sway me from it being an equal contribution.
As to the parties' income earned during the marriage, the situation is far different. The evidence discloses that the wife earned significantly more income than the husband during the marriage as disclosed in her tax returns in Husband’s Exhibit 1.
Up until X’s birth in 2004 and (business omitted) commenced trading, the wife's superior income was used, as was the husband's lesser income, to support the family. (business omitted) was the economic drain on the parties’ resources. The (business omitted) was a joint venture in which the husband worked full time. The wife disputes the days and hours the husband worked at the (business omitted), however it was intended that the husband would run the (business omitted) and the wife would do the books etc and primarily care for the parties’ young son.
The losses the parties sustained from the (business omitted) in just one year of trading covering two financial years, was $111,000 together with the capital injection for the purchase price of the property. The (business omitted) was opened in April 2004 and sold for $87,000 in May 2005. The sale price did not make up for the significant losses sustained. The wife was not earning her usual large income as she was at home caring for her son. The (business omitted) was unable to support itself, let alone support the parties' lifestyle in the absence of the wife's significant income and the husband’s income which they had had hitherto earned.
The wife says that when there is a matter of contest between she and the husband I ought to prefer her evidence and the husband says the contrary; that is, his evidence is to be preferred. The wife contends the husband failed to run the business properly and she should not be penalised for his ineptitude and she seeks 80 per cent by way of property adjustment in relation to the parties' assets. The husband seeks an equal division of the parties’ assets.
Findings in relation to Credit
The question, therefore, is whose evidence is to be preferred, if either?
Going first to the date of separation. The wife asserted separation was November 2004, the husband says October 2005. Nothing turns on this issue, save the question of credit. However the issue was run hard by the wife and I must address it.
I do not accept the wife's asserted date of separation for the following: There is no objective evidence that the husband was ever informed by the wife or her solicitor prior to June 2006 that the wife regarded the marriage over as at November 2004. I accept the wife met with her solicitor in November 2004. That is clear from Annexure B to her affidavit, and Husband's Exhibit 2, being an email to her lawyer. However, the husband's evidence as to dates and times at which the wife informed him of various events is to be preferred on this issue.
Despite the wife asserting the separation occurred in November 2004, there are at least three public events they attended. The wife only spoke of two events in her oral evidence, the wedding on the (omitted) and X's birthday. It was the husband who described the third event being a holiday at (omitted) after the sale of the (business omitted) in May 2005 some 6 months after the wife’s asserted date of separation.
The parties continued to live in the same house up until June 2006. The wife claimed the husband as a spouse rebate at the end of the year 2005 in her tax returns. The husband contributed $5,000 to the mortgage by direct deposit into the wife’s bank account in late December 2005. The parties were still living, in terms of the world at large, a married life. Thus, I find separation occurred, as the husband asserts, in October 2005, although at the end of the day nothing turns on this finding in my judgment.
The Wife’s contributions during the marriage
Dealing with the wife’s asserted income and direct financial contribution to the marriage. The wife asserted in Wife’s Exhibit 1 and paragraph 19 of her affidavit that she had injected around $623,000 into the marriage by way of income, sale of a business and a home unit. Paragraph 19 said this was injected in 2 years. Wife’s Exhibit 1 is a bundle of receipts and the like for the period from the date of marriage to date.
I have found the total capital injected by the wife to be $365,000 an agreed figure and as set out in Mr Johnson’s written submissions to me on behalf of the wife. However, of that $365,000, $100,000 was still left in the bank in January 2006 from which the wife paid $50,000 in tax, $18,000 for a website and $7,000 for plastic surgery. The wife cannot have a full credit for the $365,000 and there was an element of double counting by the wife in her evidence and in Wife’s Exhibit 1. In addition the assessment of party’s contribution to their matrimonial assets is not a strict accounting exercise no matter how much one party earns over and above the other.
The wife’s taxable income is significant and is evidenced in Husband’s Exhibit 1:
Wife’s Taxable Income $ 2001 $42,629 2002 $118,074 2003 $113,862 2004 $43,000* 2005 $73,000 TOTAL $390,565
*The income for the year 2004 was $193,000 but this must be reduced by $150,000 being capital from the sale of (business omitted) giving the taxable income of $43,000;
The Wife’s total income was $390,565 before tax. I do not have any evidence regarding the wife’s paid tax. However each of the parties’ income as evidenced in their tax returns was pre tax.
The husband’s income for the same period is evidenced in Wife’s Exhibit 6:
Husband’s Taxable Income $ 2001 $2,446 2002 $17,802 2003 $19,868 2004 $19,640 2005 $31,825 TOTAL $91,581
The wife’s taxable income was four times greater than the husband's during the marriage.
I accept the wife's assertion and submission that her income was superior to the husband's during the marriage, around four times, and I accept that each party injected all their income and earnings into their matrimonial expenses.
During cross-examination it became clear that the wife has a habit of registering business names and domain names at random including (business omitted), (business omitted), (business omitted), (business omitted) to (business omitted). The wife's current business, (omitted), is a (business omitted). The wife has a keen interest and capacity in the business world. The wife has been successful in the past. The wife’s business, (omitted), was built up during the marriage from a fledging business in 2000 to a sale in 2003 of $350,000. The wife has a proven business record.
The husband has also been a successful businessman. The husband has run successful (businesses omitted) in the past and his initial capital contribution to the assets of the marriage came from the sale of a successful (business omitted) he managed and owned prior to the parties' relationship.
I do not accept submissions or the assertions by the husband's Counsel that the wife has not been truthful or has not disclosed the extent of her business activity. I make no adverse finding from her failure to disclose her domain names. It is just something that she does and has always done; I can make no finding of an intention to deceive.
I accept the wife’s tax returns truthfully report her income from all sources and I accept the husband's tax returns truthfully report his income from all sources. There is no issue.
For the last couple of years the wife has been putting her considerable energy and talent into raising the parties' child. Each of the parties has had to deal with the devastating effect of separation and divorce. However, the wife's business acumen will not be suppressed for much longer and she said so in evidence and in her affidavit.
I do, however, find that at times the wife embellished her evidence, particularly in her affidavit. I found her oral evidence to have a greater air of reality than some of the matters in her written material. For example, at paragraph 12 of her affidavit, she asserted the business of (omitted) earned an income of $250,000 per annum each year during the marriage and was worth $200,000. That clearly was not true on her income tax returns. That paragraph was unreliable and it was wrong. The wife was either careless in her instructions to her solicitor, failed to check the documents, or if she checked them, did not really care.
At paragraph 19 of her affidavit, the wife said the income and capital she injected of $622,000 was for the last two years. That was clearly wrong; it was for the entirety of the marriage and relationship.
In Paragraph 21, she failed to take off the tax giving a net figure of the sale of her (omitted) business and asserted her capital contribution was $350, 000 when it was $280,000.
The wife contended that her business (omitted) was currently running at a loss. It became clear from Husband’s Exhibit 4 that she has made a profit of $22,000 in eight months; quite an achievement in circumstances of living through a very stressful divorce whilst caring for a young child.
I found the husband's evidence in his affidavit and his oral evidence to be far more consistent. The husband gave the wife credit for her contribution both financially and as a parent and homemaker.
The husband was accurate regarding his income and assets in paragraph 38 to paragraph 40 of his affidavit. He was accurate in relation to the nature of the borrowings and extensions of the parties’ mortgages necessary to enable them to purchase the first property at Property N. At paragraph 71 the husband accurately sets out the purchase price of and funds required to buy Property N and he accurately recorded that he did not know that the property at Property H had been bought in the wife’s sole name.
This may be as a consequence of the parties' personality styles in that I found the husband to be somewhat meticulous and fastidious in his affidavit and his evidence, whereas the wife was still angry and hurt at the loss of her beautiful home and the consequences of the significant economic decline in the family finances when (business omitted) opened its doors. The wife had difficulty making concessions in relation to the husband's financial contribution. The wife glossed over the husband’s capital contribution of $238,000 from the sale of his unit yet seeks full credit for her capital contribution of the sale of her business of $280,000. Each party made a contribution to the other's capital injection; the husband to the wife's (omitted) business and the wife to the husband's unit.
The wife glossed over the husband’s injection of $5,000 into the joint account in December 2005 to assist in paying the mortgage. During the marriage the wife paid the husband as an employee in her business. The husband did not receive any money; the money went straight into the mortgage. The wife would not concede in her oral evidence that this was a contribution by the husband to the mortgage payments. I find this was a contribution by the husband to the family expenses.
(business omitted).
This evidence was painful for the parties. The wife was pregnant at the time the (business omitted) was purchased. The parties had determined to open a (business omitted) to provide income for the family. The husband would run the business day to day; the wife would do the bookkeeping, care for their son and assist when she could. The business did not fare well from the start.
The wife in her written and oral evidence lays the blame for this failure at the husband's feet. The wife asserts the husband opened the (business omitted) at odd and sporadic hours, he spent time jogging on the beach or at the Gym rather than at the (business omitted) and he would not listen to her regarding the operation of the (business omitted).
The wife says she paid $50,000 from the sale of her business to purchase the (business omitted) and this is agreed. The wife asserted in her affidavit evidence that she expended an additional $230,000 for the fit-out and ongoing running costs. It became clear in cross-examination that it was not possible for $230,000 to have been spent as the parties did not have control of that much additional money. I accept that the wife and husband may have injected $130,000 into the (business omitted) from matrimonial funds. The (business omitted) was sold a year later for $87,000.
The wife says that in August 2004 she realised the business was not making money and she asked the husband to sell it. He would not. The wife continually asked the husband to sell the business until it was sold the following year. The husband did not agree this was how events unfolded.
Under cross examination it became apparent the wife had embellished her evidence. The wife was not at the (business omitted) all the time, she was primarily caring for the child and came there occasionally to (work omitted). I found her evidence on this point very difficult to accept. It was the husband who was at the (business omitted) seven days a week.
In contrast, the husband’s evidence on the (business omitted) opening hours and running in general is to be preferred. The husband’s evidence had an air of reality about it and was based in fact rather than anger and blame.
The husband said that when the business first opened he worked 7 days a week and the (business omitted)’s hours were (omitted). In August 2004 the parties agreed to close for (omitted) as there was insufficient trade to warrant the (business omitted) being open.
In October 2004 the parties agreed to close the (business omitted) on Mondays to cut costs in staff wages amongst other things as the (business omitted) was not trading profitably. I accept this evidence entirely and I find this is how the business was run, with joint decisions being made in an effort to turn the profits around, with the husband working at the (business omitted) 6 days a week and the wife assisting where she could. I accept the husband’s evidence the wife did the banking and ran the (business omitted)’s finances.
I do not accept the wife’s submission that the husband was solely responsible for this financial disaster, either in not keeping reasonable opening hours or running the business poorly. It is just one of those sad facts of life that sometimes business ventures succeed and sometimes business ventures fail. This was clearly a joint venture in which the parties made joint decisions and committed themselves to the success of the operation. I do not see there was any wilful neglect or wasting conduct on either party’s behalf.
The wife remained in her home at physical separation in June 2006 and Court proceedings were commenced by the husband to sell the home as the bank was foreclosing due to non-payment of mortgage. The wife initially resisted this application. It was a home that meant much to her. The home was sold in January 2007 and the wife moved with X to live with friends.
Current financial position
As to the wife and husband's current financial position.
The wife has again re-established herself in business and I accept her assertion in paragraph 23 of her affidavit that (business omitted) will become profitable in the future. It will be harder for the wife to re-establish herself now than it has been for her in the past as she has X to care for. However, the husband is willing and able to assist her with X’s care, particularly when she has to travel interstate for business, an activity I accept she needs to do.
The wife gave evidence she has put $61,000 into her business of (business omitted) but the question was, where that money came from. This is again an area of double counting by the wife. Perhaps the wife used part of the $100,000 left over from the sale of (business omitted), perhaps it is income earned by her; I do not know. No doubt this sum is included in Wife’s Exhibit 1. However this is not an accounting exercise and I really do not need to make a specific finding on that issue.
What I do find is that in just under two years the wife has managed to get another fledgling business up and running with at least an operating profit of $21,000 in eight months whilst caring almost full time for a young child and going through a sad and difficult property settlement. When the wife's car lease is paid in three months a further $27,000 per annum will be freed up to be put into her business rather than paying the lease of a vehicle. I see that the wife's financial position will improve because of her own capacity and ability as a business woman.
Much was sought to be made of the wife staying at four and five star hotels on business trips and that this is in some way wastage or being excessive. I make no such criticism of the wife. The market the wife is targeting is (omitted) and she must do so to maintain a glamorous and upmarket lifestyle to attract that business. The wife is entitled to progress her business activities as she deems fit including staying at Hotels she believes are most appropriate.
The wife only has one debt, a MasterCard of $15,000. Otherwise, she is debt free, as is the husband.
I do not accept the husband's assertion that the wife was untruthful regarding money matters in the relationship. There is, as I have said, a significant element of double counting at times, adding up gross figures rather than net figures and at times an embellishment of facts. However, it is clear the wife's income was four times greater than the husband's and it is clear she injected her capital into the marriage as did the husband.
The husband continues in his business of a (occupation omitted) and his liability for child support is $74 a week. Much was made in cross-examination of the husband's receipt of cash during the marriage. It was not asserted in the wife's material and had the husband derived cash one might have thought he would have told the Court about it because of the disparity in the parties' income earning capacity during the marriage. It would have been in his interest to show his income was greater than the tax returns disclosed. The husband denied that he received cash and asserted that all income received by him was in his tax return.
Wife’s Exhibit 7 is a recept dated 14 November 2001 from the husband’s business, (business omitted) in which $3,000 cash is written in the husband's handwriting. The receipt is for $3,425 with $342 for GST. That one document was not sufficient to convince me the husband had received or not disclosed sums of cash during his marriage.
Much was made by the wife's Counsel that when the parties first married they lived at a property owned by the wife’s’ friend Ms M and that rent was paid by the wife. The husband asserted no rent was paid as it was forgone in return for caretaking duties.
I accept what the husband says and I accept what the wife says. The Wife’s Exhibit 8 shows the wife paid rent. I can accept each parties evidence as the husband’s contention on this issue is consistent with his assertion and my finding that during the marriage the wife was the money manager. The wife made sure the bills were paid; money went from account to account to cover expenses, sufficient monies were raised to buy properties. The wife bought a property in her sole name and I accept the husband was unaware the unit was not jointly owned until the proceedings commenced. The wife did internet banking, the husband did not and the wife did all the banking for (business omitted). This evidence is completely consistent with the husband not really knowing or perhaps not being interested in such matters because his wife is so capable and well organised in that regard. I make no finding on respect of either party in relation to credit.
Both the husband and wife were unresponsive at times in answers to the cross-examination but I make no adverse finding against either of them on that issue.
In conclusion on contested matters overall the husband’s evidence is to be preferred.
Add backs
As to the husband’s submission that I should add back $50,000 of the $100,000 in the wife’s account at January 2006, I say the following.
The wife submitted no cash should be added back as she spent the money in that account to pay the mortgage and other family expenses, or it has been included in valuations of business, or included as part of her income. I reject that submission.
The wife said she paid $18,000 to create a website (omitted), part of (business omitted). This payment was not disclosed in the profit and loss statement produced by her during the hearing for (business omitted) and now Husband's Exhibit 4.
In any event, I accept the money was paid and it is a capital injection going to her business post separation from matrimonial funds and for which the husband has obtained no benefit. For that is what the $100,000 in the wife’s account at separation was, matrimonial funds, and not as the wife asserts her money.
Secondly, the $7000 for plastic surgery must come into account. I am not cavilling with the wife having the surgery but again this was paid from matrimonial funds without agreement from the husband and for which he has obtained no benefit. Those add backs total $25,000.
Of the remaining $25,000 left over from the asserted add back of $50,000 I find the wife spent the remaining joint funds on the joint mortgage payments and outgoings of the property. Although the wife was living in the home at the time, so was the child and it was a benefit to the husband in having the mortgage paid.
In conclusion I will add back the sum of $25,000 only to the matrimonial assets and not the sum of $50,000 as sought by the husband.
The husband did not concede the wife was the major breadwinner because he said he had money in the bank. However the husband’s money in the bank in no way matched the wife's income and it is clear on the papers that the wife was the major breadwinner during the marriage.
The wife suffered a serious neurological incident in 2006 and was hospitalised for a period of time and the husband conceded that she was very ill. Much was made by Mr Schonell, on behalf of the husband, that the wife could not give evidence that she had had a stroke. Section 72 of the Evidence Act is to the contrary. One can give evidence concerning your state of health. I accept that the wife was told that she had had a series of mini strokes. The wife was ill, she was gravely ill. Fortunately, she seems to have recovered without any ill-effect but the future is an unknown and this event stills hangs over her head.
I accept each of the husbands and wife's evidence of their non-financial contribution, that is, their effort and energy put into their assets by way of renovation and maintenance and conservation. These parties work hard, they are go-getters.
Much was made of the husband's failure to produce a consistent run of bank documents and he had to concede, and it is true, the bank documents produced by him would not have assisted Mr Merrell to know what his income stream was. However, I was unable to see what I would make of that in that the husband had made a concession in evidence that the wife earned four times his income. I leave that issue as it is.
The father's child support payments are of concern. The father said he did not give the wife the money, $28 per month, when they first separated because he did not know where the money would go. That evidence did the father no good. The mother would spend the money on their child. She is a devoted and conscientious mother, as he is a devoted and conscientious father. The husband pays $72 a week child support. That is what he is assessed to pay and I brook no issue with that payment.
The husband said he believes this is an appropriate amount of money for the age of his son. It is not appropriate. The child attends day care two days a week, which would cost at least $100. Clearly $72 a week is not an appropriate sum, but it is the sum the husband has been assessed to pay.
Although the father is a capable and caring parent, his attitude to child support supports the mother's assertion that there is not likely to be any significant increase in financial support for this child as he grows, particularly in circumstances where the husband's real income could not be tested as he is a self-employed (occupation omitted) and the records he provided did not permit Mr Merrell to really make a proper finding on that issue.
The Law
This is a property application. I am required under the law to take a four-stage approach under s.79; the decision of Ferrero & Ferrero (1993) FLC 92-335.
The first stage is to identify the matrimonial property, its value and nature.
The second stage is to assess the value of the parties' contributions expressed as a percentage of the value of their assets to the acquisition, maintenance, conversation and renovation of their matrimonial property, having regard to the factors under s.79(1)(a), (b) and (c).
a)Section 79 (1) (a) is an assessment of the parties direct financial contribution.
b)Section 79 (1)(b) is an assessment of the indirect contribution and
c)Section 79(1)(c) is an assessment of the value of each parties' contribution as a parent and homemaker during the marriage.
The third stage under s.79(4)(e) is to determine whether, having regard to the factors under s.75(2), I ought vary the assessed percentage entitlement of either party to take into account their future needs
The fourth stage is to look back at the consequences of the proposed orders to determine if they are just and equitable in all the circumstances.
The gross asset pool is $548,670, when I add back the wife's paid legals, the $25,000 cash and value of her business. The debts are $5,916; bringing the net pool to a figure of $553,000 rounded up.
Assessing the contribution based entitlements under Section 79(1) (a) & (b) of the Family Law Act. The husband asserts the initial contribution and capital contribution of he and his wife is equal. The wife asserts her contribution-based entitlements both as to capital and income are 70% in her favour. The wife submitted her capital contribution was greater than the husband’s and that as this was a short marriage, the income of the parties is more relevant than it would have been in a longer marriage.
Under s.79(1)(a) I find the parties' initial contribution by way of capital injection to be equal. In relation to income earned during the marriage, the wife earned four times the husband's income which income was all ploughed back into the matrimonial assets. This is a short marriage and thus the disparity of income does have a greater impact on my assessment of contribution than otherwise it would. I find the wife's income to have been so superior to that of the husband during the marriage that I allow an adjustment of 10 per cent in her favour for that factor.
In relation to indirect contributions, under section 70(1)(b), I find both parties made equal non financial contributions to their assets.
In relation to section 79(1)( c) the parties contribution as parent and homemaker I find both parties' contribution to be equal in that at times each stayed at home and cared for their child or their property or went to work and worked to the best of their capacities during the marriage in this regard.
In relation to s.79 (4)(d), that is, the s.75(2) factors, the wife asserts a further adjustment to her of 10% is warranted. I find as follows.
The wife has a higher income earning capacity than the husband and a much longer period of time to work and accumulate further superannuation and assets.
The wife has had one health scare and this remains a lingering doubt for her future unlike the husband who is fit and healthy.
The wife has the primary care of the child. The husband pays low child support and I find this low level of support will continue into the future.
The asset pool is small; net $543,000 rounded up. Ten percent equates to $54,300 or over 15 years, the length of time X is to be maintained, $3,600 per annum which is a very low support base. In these circumstances, I will adjust 10% for the wife's 75(2) factors, thus bringing the wife's entitlement to the property to 70% and the husband’s 30 %.
Looking at the asset pool, the wife is presently seized of $454,000 less debts of her car and the joint bank account being a net figure of $450,619. The husband is presently seized of $94,634 less the debt of his bike being a net figure of $92,134. Seventy percent of the rounded up net asset pool of $543,000 is $380,100 and thirty percent is $162,900.
For the wife to retain 70% of the assets the wife must pay to the husband a sum of $70, 519 rounded down, $70,000 in order for her to retain the home and prevent its sale. I will give the wife the opportunity to buy the husband out of his entitlement to the unit.
As to the fourth stage, I must assess whether the consequences of the orders are just and equitable in all the circumstances? The husband will receive cash of $70,000. He is virtually debt free. He has his income earning capacity and his current assets of $94,000.
The wife has the full-time care of the child, some lingering health issues and will be somewhat hampered in her hitherto unrestrained business skills by the care of her son. The paid child support is low and is unlikely to increase in the future.
The husband retains his superannuation and his car, which were all matters of capital that I took into account at the commencement of this judgment. Unlike the wife the husband is retaining at the end of the marriage some capital for which he has received credit as having brought into the marriage.
Therefore, in all the circumstances I find these orders are just and equitable and I will so order.
The question of costs is stood over to be determined on another day by agreement.
I certify that the preceding one hundred and sixty five (165) paragraphs are a true copy of the reasons for judgment of Henderson FM
Date: 7 June 2007
0
0
2