Wotton and Wotton and Anor
[2010] FamCA 194
•15 March 2010
FAMILY COURT OF AUSTRALIA
| WOTTON & WOTTON AND ANOR | [2010] FamCA 194 |
| FAMILY LAW - PROPERTY - Settlement in relation to marriage - Transactions to defeat orders - On the date of separation the husband transferred a substantial sum of money to his half-sister who resides in the United Kingdom - Transactions set aside pursuant to s 106B of the Family Law Act - Section 79 application for property settlement - Superannuation splitting orders - Spousal maintenance - Child support departure order |
| Family Law Act 1975 (Cth) Child Support (Assessment) Act 1989 (Cth) |
| Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs and mgrs appt) [2009] VSCA 238 Balfour v Balfour [1919] 2 KB 571 Biltoft v Biltoft (1995) 19 Fam LR 82 Black & Kellner (1992) 15 Fam LR 343 Brodie v Brodie (2009) 41 Fam LR 18 Chang v Su (2002) 29 Fam LR 406 Cohen v Cohen (1929) 42 CLR 91 Cumpton v Cumpton (2007) 38 Fam LR 377 Essex v Essex [2009] FamCAFC 236 Gyselman & Gyselman (1992) FLC 92-279 Halabi v Artillaga (1994) FLC 92-470 Henderson v Miles [2005] NSWSC 710 Katsilis v Broken Hill Pty Ltd (1977) 18 ALR 181 Magill v Magill (2006) 231 ALR 277 Marriage of Clauson (1995) 18 Fam LR 693 Marriage of Coghlan (2005) 33 Fam LR 414 Marriage of Gould (1993) 17 Fam LR 156 Marriage of Hickey (2003) 30 Fam LR 355 Marriage of Phillips (2002) 29 Fam LR 128 Omacini v Omacini (2005) 33 Fam LR 134 Parrott v Public Trustee of NSW (1993) 17 Fam LR 785 Strahan & Strahan (Interim Property Orders) [2009] FamCAFC Weir & Weir (1992) 16 Fam LR 154 |
| APPLICANT: | Mr Wotton |
| FIRST RESPONDENT: | Ms Wotton |
| SECOND RESPONDENT: | E |
| FILE NUMBER: | SYC | 3621 | of | 2008 |
| DATE DELIVERED: | 15 March 2010 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Justice Austin |
| HEARING DATE: | 10, 11 & 12 February 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Tockar |
| SOLICITOR FOR THE APPLICANT: | Delaney Lawyers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Lloyd SC |
| SOLICITOR FOR THE FIRST RESPONDENT: | Fox & Staniland |
| COUNSEL FOR THE SECOND RESPONDENT | Not Applicable |
| SOLICITOR FOR THE SECOND RESPONDENT | Not Applicable |
Orders
The husband shall pay to the wife spousal maintenance of $16,120 for the period commencing on 15 March 2010 and ending on 14 March 2011.
Order 1 hereof is an order to which s 77A of the Family Law Act applies, and the whole of the amount payable is spousal maintenance.
For the purposes of implementing Order 1 hereof the parties shall forthwith:
a)Properly execute an irrevocable authority addressed to Lloyds TSB Bank plc in the form comprising “Annexure A” to the affidavit of L filed in these proceedings on 11 November 2009,
b)Furnish Lloyds TSB Bank plc with that irrevocable authority,
c)Sign all other documents and do all other things necessary so as to instruct Lloyds TSB Bank plc to distribute the proceeds of account number …59 held at the … branch in the manner directed by the irrevocable authority, and
d)Sign all documents and do all things necessary to instruct the wife’s solicitors to distribute the funds received by them from Lloyds TSB Bank plc pursuant to the irrevocable authority in the following manner:
i)The sum of $16,120 to the wife, in satisfaction of Order 1 hereof, and
ii)The balance in reduction of the debit balance on home loan account number …08, for which the parties are jointly liable to the Commonwealth Bank of Australia, and if that debt is already discharged, to the husband.
Pursuant to s 106B of the Family Law Act, the disposition by the husband to the second respondent, on or about 21 May 2008, of ₤64,000 from account number …95 held by the husband with Halifax is hereby set aside.
Pursuant to s 106B of the Family Law Act, the disposition by the husband to the second respondent, on or about 21 May 2008, of ₤36,000 from account number …91 held by the husband with Halifax is hereby set aside.
The second respondent shall forthwith pay to the wife’s solicitors the sum of GBP₤100,000.
The husband and the wife shall forthwith sign all such documents and do all things necessary so as to instruct the wife’s solicitors to distribute the funds received by them pursuant to Order 6 hereof in the following manner:
a)The sum of AUD$73,680 to the wife, and
b)The balance in reduction of the debit balance on home loan account number …08, for which the parties are jointly liable to the Commonwealth Bank of Australia, and if that debt is already discharged, to the husband.
In default of compliance with Order 6 hereof within 28 days:
a)The wife is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising, and being known as, …, United Kingdom, (“the UK property”), and the husband shall do all such things and sign all such documents as may be necessary to transfer to the wife all his right, title, and interest in the UK property.
b)The wife shall indemnify and keep indemnified the husband against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the UK property.
Pending compliance with Order 6 hereof, without the written permission of the wife, the husband is restrained from:
a) Selling or transferring the UK property, and
b)Further encumbering the UK property, and
c)Allowing the debit balance on the loan owed by the husband to Alliance & Leicester, secured by mortgage over the UK property, from increasing beyond the equivalent of AUD$370,000.
Subject to compliance with Order 6 hereof:
a)The husband is declared the sole owner (as between the parties) of the UK property,
b)The husband shall indemnify and keep indemnified the wife against any and all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the UK property.
Within 28 days of the date of these orders, the husband shall discharge:
a)Home loan account number …08, for which the parties are jointly liable to the Commonwealth Bank of Australia, and mortgage number …87 registered or held over the T property securing that loan, and
b)Any other liability incurred in the names of the husband and wife, or either of them, secured by CBA mortgage number …87:
i)Which may include the husband’s CBA streamline overdraft account number …37, and the husband’s debt on CBA visa card number …487,
ii)But excluding the wife’s debt on CBA mastercard number …005.
Contemporaneously with compliance with Order 11 hereof, the husband is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as T, NSW (“the T property”), and the wife shall do all such things and sign all such documents as may be necessary to transfer to the husband all her right, title, and interest in the T property.
In default of Order 11 hereof, the parties shall do all such acts and things and sign all such documents as may be necessary to list the T property for sale by public auction on the following terms:
a)The solicitors acting for the wife in these proceedings shall be the solicitors acting on the sale for the parties.
b)The property shall be listed by the parties for auction sale within 6 weeks of the date of the husband’s default in compliance with Order 11.
c)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by ballot from the respective choices of the parties.
d)The reserve price shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer.
e)In the event that the T property is not sold by auction, or private negotiation within a further 7 days, then it shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction.
f)The parties are restrained from charging, mortgaging, or otherwise encumbering the property.
g)The husband may occupy the T property pending its sale pursuant to these orders, provided that he meets all expenses incurred in respect of the property as and when those expenses fall due (including loan repayments, Council rates, water rates, and insurances), maintains the realty in a reasonable state of repair, and facilitates inspection of it by prospective purchasers.
Upon completion of the sale of the T property pursuant to Orders 12 and 13 hereof the solicitors acting for the parties on the sale shall disburse the proceeds of sale as follows:
a)Firstly, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property.
b)Secondly, to pay the amount to discharge the debts and encumbrances referred to in Order 11 hereof.
c)Thirdly, to pay to the wife 55.5% of any balance then remaining.
d)Fourthly, to pay the balance then remaining to the husband.
The husband shall indemnify and keep indemnified the wife against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the T property.
The husband is declared the sole legal and beneficial owner (as between the parties) of, and the wife shall execute all such documents as may be necessary to transfer to the husband all legal and equitable title in, the following items of property:
a) VW Golf car, registration number …
b) Halifax account number …91
c) Halifax account number …95
d) Laiki bank account number …83
e) The HSBC banking account held in the name of the husband
f) HBOS/Lloyds shares
The wife is declared the sole legal and beneficial owner (as between the parties) of, and the husband shall execute all such documents as may be necessary to transfer to the wife all legal and equitable title in, the following items of property:
a) Ford Telstar car, registration number …
b) CBA account number …44
On or before 5 April 2010 the husband shall make the items listed and attached at Annexure “A” available for the wife and her nominee to collect from the T property.
To facilitate Order 18 the wife shall nominate three different times and dates to attend the property within seven days from the date of these Orders and the husband within a further seven days shall select and advise the wife of one of those dates/times.
If the husband fails to select a date and time for the wife to collect the said items by 5:00 pm on 29 March 2010 the wife’s third preference of the three she nominated pursuant to Order 19 shall prevail.
The wife and her nominee may then enter the T property, on the date as selected above, to retrieve the items listed in Annexure “A”.
Simultaneously when the wife attends the T property to retrieve the items in Annexure “A” pursuant to these Orders, the husband must make available for the wife to collect all photo albums listed in Annexure “B”, noting that the wife shall be entitled to keep the originals of the albums listed in items 1, 2(a)–(i) inclusive and the husband must make any copies he requires prior to that date.
Within 30 days of the wife’s receipt of the original albums pursuant to Order 22 the wife shall make available for the husband to collect the original albums listed in items 2(j)-(r) inclusive of Annexure “B” for the husband to collect such albums.
It is declared that the trustee of S Superannuation Fund has been accorded procedural fairness in respect of the following superannuation splitting orders, and orders ancillary thereto.
The superannuation splitting orders are binding upon the trustee of S Superannuation Fund.
Pursuant to s 90MT(2) of the Family Law Act, for the purpose of these orders the value of the husband’s superannuation interest in S Fund is determined to be $582,960, being a value with which the parties agree.
Pursuant to s 90MT(4) of the Family Law Act, a base amount of $339,168 is allocated to the wife out of the husband’s superannuation interest in S Fund.
Pursuant to s 90MT(1)(a) of the Family Law Act, whenever a splittable payment becomes payable in respect of the husband’s superannuation interest in S Fund:
a)The wife is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001 using the base amount, and
b)There will be a corresponding reduction in the entitlement of the husband to whom the splittable payment would have been made but for the order.
These orders shall have effect from the operative time, and for that purpose the operative time shall be 4 days from the date of service of these orders upon the trustee of S Fund.
Unless otherwise provided:
a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder, and superannuation interests are deemed to be in the possession of the superannuant.
b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession, and any debts in their respective sole names.
The husband pay for the benefit of the children, in addition to the Child Support Agency child support administrative assessment as varied from time to time, the following:
a)All private health insurance premiums with HBA policy number … at the current level of cover;
b)As and when same fall due one half of all school fees, school books and other stationary costs, school uniforms, sports equipment, excursions, extra-curricular activities undertaken by the children or either of them, including tuition courses agreed in writing prior to their being incurred, such agreement not to be unreasonably withheld;
c)One-half of all the gap expenses regarding health care costs after Medicare and private health insurance rebates for services of registered medical practitioners, hospital, physiotherapy, dental, orthodontic and optometry within 7 days of receiving an invoice or receipt from the wife of such expenses incurred by the children; and
d)Each parent to be responsible for the cost of day care/after school care as utilised by them when the children are in their care.
In the event of any party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s106A of the Family Law Act.
Any and all outstanding applications are dismissed.
Costs are reserved for a period of 28 days from the date of these orders.
ANNEXURE “A”
| ITEM | |
| 1. | K’s Binnowee tea towel 2007 (in cane drawers) |
| 2. | Baby Wotton 1 videos of ultrasounds 19 wks (K) |
| 3. | Baby Wotton 2 videos of ultrasounds 19 wks (B) |
| 4. | Guess How Much I Love You Height Chart |
| 5. | utensils set (in brown box) |
| 6. | Xmas Santa photos of kids |
| 7. | 50% of K’s Portfolio activities/drawings etc from ABC daycare 2005 |
| 8. | K and B’s Blue Medical books. |
| 9. | Educations CDs/DVDs for computer. |
| 10. | K baby photo (Pixie photos, striped top with duck on it) |
| 11. | DVDs/Videos a) The Office complete 1st series – Video b) The Human Body Trilogy videos c) Sydney at War video – copied off TV d) Rabbit Proof Fence DVD – Wife won e) Playschool Out & About Video (passed down to Wife from her sister) f) Copy of K’s 2nd birthday video copied in UK 2005 from “…” TV show, where birthday card to K that the Wife made was shown and birthday hello from children’s entertainer. g) Bob the Builder – Buffalo Bob video h) Toy Story 2 video i) Lady & the Tramp video (passed down from Wife’s sister) j) Stuart Little DVD – No. 2 & 3 series k) Any other children’s DVDs Husband willing to pass on and considers fair as he has retained at least 90% of them. |
| 12. | Audio CDS a) Beatles No. 1 album b) Yellow Submarine c) Paul McCartney Off the Ground d) Unfenced Land e) Queen greatest hits f) Midnight Oil. Diesel and Dust g) Men at Work. Business as Usual. h) Colin Hay – Transcendental Highway i) Hands Up – Rhythm Factory j) Play a song – Silly Songs CD and book k) The Wiggles (original – 1st CD) l) Songs for Aussie Kids m) Great Australian Song book n) I like to Sing – Justine Clark o) Circle songs for Preschoolers p) Sing-a-long Christmas party q) Vivaldi collection r) 18 ABBA hits recently bought by the wife s) Fun songs – Love to sing PLUS any more Husband is willing hand on. |
| 13. | Digital Photos copied on CD/DVDs – Disks 31 & 35 only |
| 15. | Home videos – copies onto DVD with date |
| 16. | Congratulations/Birthday cards/Xmas Cards for kids saved |
| 17. | Weekend Australian newspaper from October 2006 when B born |
| 18. | White wooden baby cradle |
| 19. | 1 wooden playpens (one with floor and yellow thin vinyl mattress) |
| 20. | Cancer Council Beach sunshade shelter (pop up one) – blue and yellow |
| 21. | Camp fire hotplate with fold out legs. (Heavy one) |
| 22. | Children’s Toys: a) Recorder (musical instrument, passed down from wife’s sister) b) Plastic egg and Spoons game (game I bought for Playgroup Xmas day activity) c) Castanets (were Wife’s Grandmothers) d) Spinning Bells and stand (Wife bought at a garage sale) e) Beetle Game (gift from Wife’s mother) f) Junior Scrabble (gift from Wife’s friend) g) Insey Winsey Spider Game in box (passed down from Wife’s friend) h) Green crate of boys little castle and knights set with figurines (passed down from Wife’s sister) i) Plastic Airport set (passed down from Wife’s sister) j) Junior Engineer gear set k) Toy red car and plastic keys – makes sounds and lights and doors open (Wife bought in UK) l) Fisher Price Clock Teacher (Wife bought on sale) |
| 23. | Children’s Dress ups: a) English Bobby helmet b) Fireman’s hat c) Pirate hat d) Grey felt hat (used to be Wife’s father’s) e) Brownie uniform f) Grid iron body armour g) Batman mask h) Cowboy pants and spurs i) Toy cowboy gun |
| 24. | Soft cover Children’s Books: a) Pondus the Penguin b) The Secret Fairy Party c) 1001 Things to Spot in Fairyland d) Box set – Usborne Farmyard Tales e) Time for Bed |
| 25. | Hardcover/Board Children’s books: a) Big Book of Wild Australia b) Peter Rabbit Songs |
| 26. | Adult books: a) My Medical Diary (Wife has started writing it up for herself and kids) b) Aust. Children’s Party c) Baby Love d) The Mighty Toddler e) Fun & Games Activities for 2-6 Year Olds (passed down from …) f) The Number Devil g) Brockhampton Book of Children’s parties h) Save our Sleep i) Kid Wrangling j) The Birds of Australia k) The Complete Parenting Guide l) Toddler Taming |
| 27. | Recipe Books: a) Delia’s Winter Collection or the Delia’s summer collection b) Nigella Lawson’s Forever Summer (Wife won in competition) c) Beat Cookbook |
| 28. | Box of wine bottles. |
ANNEXURE “B”
PHOTO ALBUMS
| PHOTO ALBUM | |
| P1 | Pre-School Days Photo album – photos from 2007 of K and B (or copies of same quality) |
| P2 | Photo Albums – non digital photos: Wife to Retain the following albums but to allow Husband to borrow for copies to be made: a) K’s first year (yellow with her name on Front. I put this album together) b) Silver wedding album c) Jan 2001 – Oct 2001. Mottled pink/red/blue d) Grey Flip album – personal collection of photos e) Rivers Green shoebox that has lots of photos taken and catalogued on Wife’s 35mm camera. f) Blue one stripes matching Pink striped one (Memories photo album) g) Paris 1997 – Xmas 1999. Blue, gold strip edge h) April 1996. London/Ireland/Paris trip (small blue one) i) 2 of the 4 plastic flip albums that had all the Paris 1993 trip photos Husband to retain following albums but to allow Wife to borrow for copies to be made: j) July ’95 Barrier Reef Trip – shells cover k) Pale Blue Baby boy album – nothing in as yet but collection of many baby photos of B already printed, ready to put in it. l) Sabbatical Trip Nov 2001 – July 2002 - 2 albums with Black edges and burgundy colour. m) April ’04 – 30/5/05. Mauve with pink stripes n) May 200 UK – Olympics 2000 – Dec 2000 (blue cover) o) Jan 2000 Lord Howe Is. – May 2000 HK, UK p) Blue Checked box of Kodak Photo CDs q) wedding photos – in plastic ziplock bag – collection of wedding photos by family and friends. r) 2 of the 4 plastic flip albums that had all the Paris 1993 trip photos. |
IT IS NOTED that publication of this judgment under the pseudonym Wotton & Wotton is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: SYC 3621 of 2008
| MR WOTTON |
Applicant
And
| MS WOTTON |
1st Respondent
And
| E |
2nd Respondent
REASONS FOR JUDGMENT
Introduction
The parties in these proceedings remain in dispute about the property adjustment orders that should be made between them as a consequence of the breakdown of their marriage on 21 May 2008.
Proceedings were initially commenced by the husband filing an Application in June 2008 seeking only parenting orders, but the parties’ initial dispute concerning parenting orders for their two young children was resolved shortly afterwards when final orders were made by consent on 17 July 2008.
The property adjustment dispute between the husband and wife came on for hearing before the Court in August 2009, but was then adjourned with a costs order against the husband.
The parties have both subsequently filed Applications in a Case pertaining to that costs order made by the Court in August 2009. The husband’s Application in a Case was filed on 14 September 2009, and the wife’s Application in a Case was filed on 16 October 2009. Those two Applications came before the Court on 12 November 2009, at which time an order was made by Cohen J adjourning each of those Applications for determination at a time after the determination of final property adjustment orders.
The issues for determination were therefore confined to the final property adjustment, spousal maintenance, and child support departure orders that should be made.
During the hearing the husband and wife commendably narrowed the controversy by reaching agreement in relation to their disputes over the manner of distribution of many items of personal property, and the terms of an appropriate child support departure order.
The respondent wife filed an Amended Response on 17 September 2009. One particular aspect in which that document changed the complexion of the litigation was to join a second respondent to the proceedings, and to seek orders setting aside two previous financial transactions that occurred between the applicant husband and the second respondent. The second respondent is the half-sister of the applicant husband and she resides in the United Kingdom.
On 15 January 2010, the applicant husband and respondent wife were each ordered to serve upon the second respondent all documents upon which they sought to rely at the final hearing. The respondent wife complied with that order, serving the documents upon which she wished to rely upon the second respondent in the United Kingdom on 29 January 2010.
The matter came before the Court for final hearing on Wednesday, 10 February 2010. There was no appearance by, or on behalf of, the second respondent. In breach of an order made by the Court on 15 January 2010 requiring her to do so, the second respondent has failed to file and serve a Notice of Address for Service.
The hearing proceeded on the basis that the second respondent would be called as a witness in the applicant husband’s case, but that she would not participate in the proceedings as a party. The second respondent confirmed her intention to approach the litigation in that way when she was called to give evidence as a witness in the husband’s case. Despite the second respondent’s decision to approach the litigation in that manner, there is no issue about her proper joinder to the proceedings by the respondent wife. Nor was it disputed that she will be bound by any orders that concern her.
Position and primary evidence of the applicant husband
The husband has never filed in these proceedings any document proposing property adjustment orders.
The Application initially filed by the husband on 30 June 2008 sought only parenting orders.
Although the respondent wife subsequently filed a Response and Amended Responses proposing property adjustment orders, the husband has not filed any Amended Application setting out the property adjustment orders he seeks.
It was not until the morning of the hearing that the husband proffered to the Court a minute of the property adjustment orders proposed by him.
By reference to the minute of orders belatedly provided by the husband, the property adjustment orders proposed by the husband may be conveniently summarised as follows:
a)The wife transfer to the husband her interest in the T real estate (Order 1.1).
b)The husband re-finance the mortgage secured over the T real estate (Order 1.2).
c)The wife transfer to the husband the Volkswagen Golf motor vehicle (Order 1.3).
d)The husband transfer to the wife the Ford Telstar motor vehicle (Order 1.4).
e)The husband be declared the sole proprietor of the real estate situated in the United Kingdom (Order 2), and the husband indemnify the wife in respect of the mortgage secured over the UK property (Order 3).
f)There be a splitting order in respect of the husband’s superannuation entitlements held with S Fund, with the wife to be allocated 40% thereof (Orders 4-7 inclusive), or alternatively, that there be a flagging order in respect of those same superannuation entitlements in the same proportions.
That still did not represent the husband’s final word on the matter. Following the conclusion of the evidence the husband proffered a different minute of proposed orders. It changed his position in two respects, namely:
a)By seeking a declaration that the husband hold the UK property upon trust for the two children of the marriage, on certain conditions, as an alternative to the husband being declared the sole legal and beneficial owner of the property (Orders 4-6).
b)By proposing that the splitting order relating to the husband’s superannuation entitlements held with S Fund should be split by reference to a base amount of $233,184 in lieu of a percentage (Orders 7-10).
In support of the orders sought by him, the husband read the following documents in evidence:
a)Affidavit of the husband, filed on 12 August 2009;
b)Affidavit of the husband, filed in Court on 10 February 2010;
c)Financial Statement of the husband, filed on 14 August 2009;
d)Affidavit of the second respondent, filed on 12 August 2009;
e)Affidavit of the second respondent, filed in Court on 10 February 2010;
f)Affidavit of Professor N, filed on 12 August 2009.
In breach of Order 1 made by the Court on 15 January 2010, the husband failed to file and serve an updated Financial Statement, although it must be said that his latest affidavit included some updating financial information.
Position and primary evidence of the respondent wife
Although the respondent wife filed an Amended Response on 17 September 2009, the property adjustment orders proposed within that document were not the orders for which she advocated when the hearing commenced.
The respondent wife proffered to the Court a minute of the orders sought by her, which can be conveniently summarised as follows:
a)The wife transfer to the husband her interest in the T real estate (Order 1.1).
b)The husband discharge the mortgage secured over the T property (order 1.2).
c)The husband pay to the wife the sum of $44,000.00 (Order 1.3).
d)The wife transfer to the husband the VW Golf motor vehicle (Order 1.4).
e)The husband transfer to the wife the Ford Telstar motor vehicle (Order 1.5).
f)The husband transfer to the wife numerous items of personal property (Orders 1.6, 22(e) and 23).
g)The Court set aside two financial transactions between the applicant husband and second respondent (Orders 5-7 inclusive).
h)The husband transfer to the wife the real estate in the United Kingdom (Order 8) and assign to the wife all future rental income from that property (Order 10), in return for which the wife shall indemnify the husband against any encumbrance secured over the UK property (Order 9).
i)Splitting order in respect of the husband’s superannuation entitlements held with S Fund, allocating a base amount of $450,000.00 to the wife (Orders 15-19 inclusive).
j)The husband pay to the wife spousal maintenance for a period of one year (Order 20).
k)Child support departure order (Order 21).
l)Supplementary declaratory orders (Orders 22, 24, 25 and 26).
m)Contingent and procedural orders (Orders 2, 3, 4, 11, 12, 13, 14, 23, 27 and 28).
n)Costs (Order 29).
In support of the orders proposed by her, the respondent wife read the following documents in evidence:
a)Affidavit of the wife, filed 30 June 2009;
b)Affidavit of the wife, filed 16 October 2009;
c)Financial Statement of the wife, filed 29 January 2010;
d)Affidavit of the husband’s former wife, Ms L, filed 10 July 2009;
e)Affidavit of Ms L, filed 11 November 2009;
f)Affidavit of the wife’s mother, filed 28 January 2010;
g)Affidavit of the wife’s sister WR, filed 28 January 2010;
h)Affidavit of Service sworn by MS, filed on 9 February 2010.
Background history
The applicant husband was born in 1953. At the time of hearing he was aged 56 years.
The respondent wife was born in 1964. At the time of hearing she was aged 45 years.
The husband and wife met one another in Australia in November 1983 but did not begin a romantic relationship until February 1988 in the United Kingdom. They began cohabiting in Australia in August 1991 and were later married in Australia in 2000.
Two children were born to the marriage. The eldest child was born in April 2003 and the youngest child in October 2006. The children are currently aged six and three years respectively.
The husband moved to Australia from the United Kingdom to take up full-time employment at a New South Wales organisation in August 1991, and it was at that time that the husband and the wife began their cohabitation. Since that time, the husband has retained his employment with the Organisation, although he has been successively promoted over time. His employment throughout the entire duration of the parties’ cohabitation has been continuous.
The husband’s employment has taken him to international destinations with a reasonable degree of frequency for varying periods of time. He was ordinarily accompanied by the wife on those sojourns abroad.
The wife is qualified as a teacher. Her employment has been sporadic, largely because of her abandonment of employment to accompany the husband overseas, and to bear and raise the children.
The parties purchased a residential property at T in 2003, which became the matrimonial home. The family resided there until the time of final separation.
The husband and wife separated on 21 May 2008, although they remained living under the one roof for a short while thereafter.
On the same day as their final separation, the husband made arrangements to transfer the sum of GPB£100,000.00 from two accounts held in his sole name to his half-sister. The husband’s two accounts were held with a banking institution in the United Kingdom, and the husband’s half-sister resided in the United Kingdom. The husband’s half-sister, who was the recipient of those funds, is now the second respondent in these proceedings.
One of the most contentious issues in these proceedings was the veracity of those transactions, and whether the wife was made aware of the transactions by the husband at or about the time of their occurrence.
Within a matter of weeks of the final separation the husband commenced proceedings in this Court seeking parenting orders in respect of the children of the marriage. The husband’s Application was filed on 20 June 2008.
On 17 July 2008, the Court made final parenting orders in respect of the children, with the consent of both the husband and wife. The general effect of those parenting orders was to ensure that the children spent virtually equal time with each parent on a week-about basis.
Only a few days later, on 20 July 2008, the wife vacated the former matrimonial home.
The husband has continued to reside at the former matrimonial home and the wife has remained in alternate rented accommodation.
On 17 July 2008, the Court also made interim orders consensually between the parties. In particular, the husband was ordered to pay to the wife the sum of $10,000.00, the characterisation of which was to be subsequently determined.
On 10 September 2008, the Court made further interim orders consensually between the parties. In particular, the husband was ordered to pay to the wife the further sum of $30,000.00, which funds the husband was entitled to raise by drawing upon the mortgage secured over the property owned by the husband in the United Kingdom.
The proceedings came before the Court for hearing in respect of final property adjustment orders on 17 August 2009. The proceedings were then adjourned on the application of the wife. The asserted basis of the adjournment application, which was accepted as efficacious by the Court, was the husband’s recent disclosure of the transfer by him of £100,000.00 to his half-sister over 12 months before. The wife denied prior knowledge of that transaction and wished time to investigate it. With the reprieve of an adjournment, the wife conducted further inquiries and subsequently filed her Amended Response joining the husband’s half-sister to the proceedings as a second respondent and seeking orders that the subject transactions between the applicant husband and second respondent be set aside.
When the Court granted the wife’s application for adjournment, the husband was also ordered to pay the costs of the wife thrown away.
The matter came back before the Court for final hearing on Wednesday 10 February 2010. The hearing proceeded and was concluded on Friday 12 February 2010. Judgment was reserved.
Matrimonial pool
Establishment of the matrimonial pool is the first step in the recognised four-step process of determining the property adjustment orders that should be made between spouses (see Marriage of Hickey (2003) 30 Fam LR 355 at 370).
During the hearing the parties gradually refined the balance sheet constituting the matrimonial pool. The balance sheet initially relied upon[1] differed from the balance sheet prepared earlier by the parties for the Registrar in accordance with procedural orders, and was superseded by a final balance sheet.[2]
[1] Exhibit B
[2] Exhibit D
There was ultimately no controversy between the parties in respect of the valuations to be ascribed to the assets, liabilities, superannuation entitlements, other financial resources, and add-backs that might constitute the matrimonial pool.
However, the parties remained in dispute about whether many of those items either should or should not be included within the matrimonial pool. I will deal with those contentious items individually.
Funds transferred by the husband to the second respondent – should the transaction be set aside pursuant to s 106B of the Family Law Act?
The parties separated under the same roof on 21 May 2008. There was no dispute about that.
On that very same day, the husband transferred to the second respondent in the United Kingdom the sum of ₤100,000 in two separate transactions from two different accounts held by him at that time with Halifax, an English banking institution.
The first transaction involved a transfer from account number …95 in the sum of ₤64,000, and the second transaction involved a transfer from account number …91 in the sum of ₤36,000.[3]
[3] Husband’s affidavit filed 12 August 2009 par 127, Annex M
The two transactions were challenged by the wife. She sought that the transactions be set aside pursuant to s 106B of the Family Law Act (“the Act”), and that the funds be brought back to account in the matrimonial pool.
These funds comprised part of item 14 on the balance sheet.
The second respondent is the half-sister of the husband. Although the husband asserts that he learned of the second respondent’s existence when he was very young, he concedes that he first met her only 6-7 years ago. That was not disclosed in his affidavit material. The strong familial feelings he has for her,[4] he now admits, having felt only in the years since he has met her. It was the strength of those feelings for her that impelled the husband to come to the second respondent’s financial rescue by “gifting” her ₤100,000.[5]
[4] Husband’s affidavit filed 10 February 2010 par 4
[5] Husband’s affidavit filed 12 August 2009 par 126; Husband’s affidavit filed 10 February 2010 par 4; Second respondent’s affidavit filed 12 August 2009 par 7
The husband and second respondent both contend that the second respondent was experiencing pressing financial need during May 2008, although there is really no independent evidence to corroborate how compelling a need that actually was. The Court is invited to take the husband and the second respondent at their word for that. None of the documents annexed to the second respondent’s two affidavits prove the degree of the second respondent’s financial distress, unless one uncritically accepts her explanation of them.
Despite the asserted financial distress of the second respondent, the husband conceded in cross examination that the second respondent had a proprietary interest in at least two parcels of real property in London. Otherwise he professed ignorance of the second respondent’s financial circumstances, and merely relied upon her representations to him about her need for funds.
According to both the husband and second respondent, it was the husband’s idea to transfer to the second respondent the precise sum of ₤100,000. The husband says that was simply because he had that sum of money readily available to him. The sum apparently bore no correlation to the level of the second respondent’s need. The husband alleges having that sum sitting idly in his Halifax accounts. Those monies had been withdrawn against the loan secured by mortgage over the UK property owned by the husband.[6]
[6] Husband’s affidavit filed 10 February 2010 par 8
The husband gave two reasons for the withdrawal of those funds and placement into the two accounts. Firstly, he said that the monies were drawn down and earmarked for use in payment of legal fees in prospective litigation in the UK against his former wife, Ms L, arising out of a prior litigious settlement reached by them in July 2006, which he regarded as flawed.[7] Secondly, he also said in cross examination that he had the money set aside for use by him and the wife in Australia.
[7] Husband’s affidavit filed 12 August 2009 pars 119-121; Husband’s affidavit filed 10 February 2010 par 4
I reject the suggestion that the husband had the money available for intended use by him and the wife in Australia. Both parties spoke at length in the evidence about how they were living beyond their means in the period leading up to their separation. By then, the occasion for use of those funds by the parties to ameliorate their financial predicament had already arisen, and they were certainly not contemplating further investment opportunities.
The prior litigation between the husband and Ms L in the UK had been settled on 27 July 2006.[8]
[8] Affidavit of Ms L filed 10 July 2009 par 14
The husband did not draw down the funds from the mortgagee until some time after June 2007.[9] Self-evidently, the funds were drawn down at some time before the payments were made to the second respondent on 21 May 2008.
[9] Husband’s affidavit filed 12 August 2009 par 119
The husband tendered an email from his then solicitor informing him about the prospective costs of the fresh litigation. That email was dated 8 November 2007.[10]
[10] Exhibit H1
The documents produced by the husband from Halifax verifying the transactions are not bank statements and do not disclose the dates upon which the funds were deposited into his accounts.[11] Inferentially, the husband probably withdrew the funds against the loan and deposited the monies to his accounts after 8 November 2007 and before 21 May 2008. It is impossible to be more precise on the available evidence.
[11] Husband’s affidavit filed 12 August 2009 Annex M
In cross examination the husband denied fabricating the prospective expenditure of the funds on legal fees in fresh litigation in the UK as a reason for the draw down, even though he conceded that such fresh proceedings were never commenced by him.
The wife admitted that the husband had discussed with her how he perceived that the settlement reached with Ms L in July 2006 was flawed, and his contemplation of instituting further litigation to challenge it. She believed that conversation occurred with him in about August 2006. She counselled him against spending any further time or money pursuing it. In light of the wife’s admission, I am not convinced that the husband did fabricate that excuse for borrowing the further funds, although I am left with lingering suspicion.
In any event, that is not determinative of the issue. Even if the husband did have a legitimate reason for having the money resting idly in his accounts, it is the purpose and/or effect of the transfer of the money out of the accounts that influences the outcome of the relief sought under s 106B of the Act.
There is a live factual dispute between the parties as to whether the husband told the wife of the transfer of funds to the second respondent at or about the time that those transfers were made.
The husband asserts that he told his wife of the second respondent’s financial turmoil, and of his intention to transfer the funds to her, and of the actual transfer at or about the time it occurred.
The wife flatly denies being told any of that. She even denies knowing that the husband had drawn down more monies from the loan secured over the UK property and had that money resting in his UK accounts.
I accept the wife’s evidence about that issue in preference to the evidence of the husband. Apart from her far more convincing demeanour, I am persuaded of the reliability of the wife’s evidence for the following reasons.
Curiously, the husband could not remember what the wife said to him when he allegedly disclosed those things to her. That is all the more surprising given the tension that then existed between them, and how the “gift” of ₤100,000 to a third party would deleteriously affect their ailing financial status. The parties’ marriage was failing at that time. According to the wife, the parties had been having marriage counselling for many months. The husband said in cross examination that at that time they were living beyond their means. I find it unconvincing that the husband can purport in cross examination to have a reasonable memory of his conversations at that time with the second respondent, but not the wife, on the very same topic.
If the parties were then living beyond their means, as the husband admits, logic dictates that the wife would have been stridently opposed to the husband giving away ₤100,000 worth of matrimonial funds contemporaneously with their final separation. It is quite ridiculous for the husband to suggest that he cannot remember the wife’s response and imply her meek acquiescence to the idea.
The wife says the transfer of funds came as a complete surprise to her. She only learned of it when she was finally furnished with copies of the husband’s UK bank statements and was then served with the husband’s affidavit, filed on 12 August 2009, just prior to commencement of the final hearing on 17 August 2009.[12] It was that very disclosure that led her to successfully seek an adjournment of the final hearing and amend her Response to additionally seek relief under s 106B of the Act.[13] There was no other reason to seek an adjournment.[14] It would be absurd to conclude that the wife had sought an adjournment of the hearing in August 2009 on the pretext of non-disclosure by the husband of the subject transactions. The wife’s subsequent investigation of the details of the transactions and her filing of an Amended Response seeking fresh relief in relation to the transactions is hardly conduct by her consistent with a ruse.
[12] Wife’s affidavit filed 16 October 2009 pars 14-18
[13] Wife’s affidavit filed 16 October 2009 pars 20-22
[14] Wife’s affidavit filed 16 October 2009 pars 4-8
Section 106B of the Act provides, relevantly, as follows:
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2) The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4AA) An application may be made to the court for an order under this section by:
(a)a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
There is no doubt that the elements of s 106B are triggered. The relief sought by the wife under s 106B was sought in property adjustment proceedings under the Act, the subject transactions involved a disposition of money by the husband to a third party, and the disposition had the likely effect of defeating the wife’s entitlement to proper property adjustment orders as between she and the husband by significantly diminishing the matrimonial pool available for distribution between them.
Although the wife conducted a case to the effect that the disposition was actually intended by the husband to defeat property adjustment orders, it is really unnecessary to determine whether that was in fact so. Section 106B does not necessarily require proof of such intention for the provision to be engaged. There mere disadvantageous effect of the subject disposition may suffice. As was explained by Nicholson CJ in Halabi v Artillaga (1994) FLC 92-470 at 80,884:
The authorities establish that the intention in question must be one to defeat an anticipated order and not a claim in the proceedings, and that the test as to whether the instrument is likely to have this effect is an objective and not a subjective one (see Whitaker and Whitaker (1980) FLC 90-813 per Nygh J, Pflugradt and Pflugradt (1981) FLC 91-052 per Elliot J, Holley and Holley (1982) FLC 91-257, ANZ Banking Group Ltd v. Harper (supra), Hadjuk and Hadjuk (1993) FLC ¶92-383).
The section therefore lays down two sets of circumstances which will cause it to operate, namely that an instrument has been made with the intention of defeating an anticipated order in the proceeding, or secondly, regardless of the intention with which it has been made it is likely to have the effect of defeating such an order.
Although the husband disavowed any intention to defeat prospective property adjustment orders in executing the transactions, he was ultimately bound to concede in final submissions that the transactions were caught by s 106B irrespective of his intention.
In any event, were it necessary to do so, I would find as a fact on the balance of probabilities that it was the intention of the husband to defeat the wife’s entitlement to proper property adjustment orders. That is because of the contemporaneity of the transactions with the marital separation, the lack of probative force of the evidence pertaining to the financial distress of the second respondent, the lack of correlation between the financial need of the second respondent and the amount transferred to her, and my preference for the wife’s evidence over that of the husband about her being kept ignorant of the transactions for so long. It is immaterial that the husband may have had an ancillary bona fide intention of assisting his half-sister.
Once s 106B is engaged, the Court must then consider whether discretion will be exercised so as to grant relief. The exercise of discretion should not be confused with the initial issue of whether the subject transaction falls within the ambit of the section.
The proper approach is described by Nicholson CJ as follows (see Halabi v Artillaga at 80,885):
…first determine whether the requirements of ss (1) have been satisfied, and if so, to treat the disposition as not having been made for the purpose of arriving at an appropriate order pursuant to s 79, and then having done so, to determine whether, having regard to the rights of the bona fide purchaser or person interested under ss (3), a discretion should be exercised to set the instrument or disposition aside. The exercise of such a discretion may well depend upon whether if this is not done there are sufficient funds available to the party who has made the disposition to satisfy the order without setting the instrument or disposition aside.
Although Nicholson CJ was there discussing the operation of s 85, the preceding legislative formulation of s 106B, the process remains the same under s 106B (see Cumpton v Cumpton (2007) 38 Fam LR 377 at 398).
There are several reasons why I am satisfied that the Court should exercise discretion to set aside the transactions that occurred on 21 May 2008 between the husband and second respondent.
At best, there is parity between the assets and liabilities of the parties. The repatriation of those funds to the matrimonial pool will make a material difference to the spouses’ financial position.
The second respondent has been accorded procedural fairness. She was properly joined to the proceedings and was duly served with the material disclosing the wife’s request for relief, which would impinge upon her (see Marriage of Gould (1993) 17 Fam LR 156 at 187-191). The second respondent has eschewed the opportunity to participate in the proceedings as a party to oppose the relief sought by the wife.
When called as a witness in the husband’s case, the second respondent was cross examined about the subject transactions. She professed not being aware of the matrimonial disharmony in the parties’ household at the time she accepted the monies from the husband. Her evidence implied that she would not, or may not, have accepted the monies had she known of their impending matrimonial separation, of which she learned some time afterwards. Implicitly, even the second respondent was wary of the probity of the transactions with the benefit of hindsight.
The current financial circumstances of the second respondent were not disclosed to the Court. I impute from the evidence that the financial tribulations previously endured by the second respondent have abated. The second respondent admits having later transferred back to the husband funds totalling ₤52,000 in two tranches, although she asserts that the first payment of ₤12,000 actually came from the original ₤100,000 given to her by the husband. She raised the second payment of ₤40,000 by encumbering her own resources. The uncontested evidence is that the second respondent has a proprietary interest in two parcels of real property in London. No argument has been mounted by the husband that the second respondent does not have the means to meet any order requiring restitution of the ₤100,000. Nor did the second respondent give any evidence to that effect.
In the absence of such evidence, the permissible inference is that the evidence available to the second respondent, which she has not adduced and chosen not to explain the failure to adduce, would not have advanced her case. As was said by Barwick CJ in Katsilis v Broken Hill Pty Ltd (1977) 18 ALR 181 at 197:
…it can properly be said that the failure of a party to give or produce evidence which, in the circumstances of the case, that party in its own interest would be expected to give or produce, warrants the conclusion that, if given or produced, the evidence would not support that party’s case. Indeed, in some circumstances it might be inferred that it would support the opponent’s case; but, if so, it must depend very much on the circumstances. But, in any case, the inference would depend upon some element of conscious repression or withholding of the evidence. The warrant for the inference must depend upon the deliberation with which the evidence is withheld and the appreciation or likely appreciation of the party of its significance in the case. In my opinion, these propositions are in accord with the decided cases which I have taken occasion to examine.
Funds returned by the second respondent to the husband – how should these be treated?
These funds were also the subject of item 14 on the balance sheet.
The figure at item 14 on the balance sheet was computed by simply setting off the total sum of ₤52,000 transferred by the second respondent back to the husband against the ₤100,000 initially transferred by the husband to the second respondent. The Court was informed that the difference of ₤48,000 was then arithmetically converted to AUD$84,667.
As was discussed during final submissions, that computation was perhaps erroneous. It depended upon, firstly, the question of whether the initial transactions of ₤100,000 were set aside, and secondly, the characterisation of the ₤52,000 later transferred back by the second respondent.
Since the initial transactions of ₤100,000 will be set aside, for reasons set out above, that sum must be brought back into account as a matrimonial asset.
How the funds totalling ₤52,000, later transferred back to the husband by the second respondent, are treated in this litigation depends entirely upon how those transfers are characterised at law.
The husband adduced evidence through himself and the second respondent concerning those payments. The evidence was inconsistent in several respects.
The husband expressly asserted in his cross examination that the two sums given to him by the second respondent were advanced to him as loans, and that the second respondent was in error if she said to the contrary. However, contradictorily, in his first affidavit the husband said that the first payment made back to him of ₤12,000 was “gifted” back to him by the second respondent,[15] and later said that it was “lent” to him.[16] He did not even mention the second payment of ₤40,000 in his first affidavit, and did not characterise either payment in his second affidavit.[17]
[15] Husband’s affidavit filed 12 August 2009 pars 128-130
[16] Husband’s affidavit filed 12 August 2009 par 164
[17] Husband’s affidavit filed 10 February 2010 par 11
The second respondent had equal difficulty deciding the characterisation of the monies transferred by her back to the husband. In her first affidavit she said, in apparent reference to the two payments back, that she had “lent” the money to the husband for his use on “legal fees”.[18] In her subsequent affidavit she simply said that she “returned” the money to the husband.[19]
[18] Second respondent’s affidavit filed 12 August 2009 par 10
[19] Second respondent’s affidavit filed 10 February 2010 page 1.9
Understandably, the second respondent’s equivocation excited the interest of the wife’s counsel. In cross examination she refused to be drawn on whether she had “loaned” or “returned” the money to the husband, and ultimately deferred to the husband, confessing that the characterisation of the monies transferred by her to him was a matter for the husband to unilaterally decide, and also that it was a matter for the husband as to whether he paid her back. It could hardly be contended that it was unfair for the second respondent to be pressed on such a pivotal issue. It was common ground that she was an experienced notary public practising in the UK.
The second respondent was also confused about the source of the funds she transferred back to the husband. In her latest affidavit the second respondent said, or at least implied, that the two payments had been raised by her by re-mortgaging her house.[20] However, in cross examination she said that the first payment of ₤12,000 was still retained by her as part of the ₤100,000 gift she had earlier received from the husband, and only the second payment of ₤40,000 was borrowed by her.
[20] Second respondent’s affidavit filed 10 February 2010 page 1.9
Leaving aside the inconsistencies in the evidence adduced by the husband, there is some evidence on the issue which is uncontentious.
The husband said that his financial circumstances made it imperative for him to request the second respondent to give him money back. He asked her for ₤12,000 because that was the sum that he had worked out was needed by him to avert his financial problems – not because that was the sum still retained by the second respondent from his original gift to her of ₤100,000.
It was only shortly afterwards that the husband sought a further ₤40,000 from the second respondent. He did not explain how or why it was that he needed another ₤40,000 so shortly after having calculated his need at ₤12,000.
The evidence does not disclose when or how the first payment was made by the second respondent to the husband. The husband does not say,[21] and in her cross examination the second respondent said she could not remember.
[21] Husband’s affidavit filed 10 February 2010 par 11
The husband asked the second respondent to deposit the second payment into an account that he had opened in his own name at the Laiki Bank. The husband had opened the account on 17 October 2008.[22] The husband failed to disclose the existence of that bank account before the aborted hearing in August 2009. It was certainly not disclosed in his Financial Statement filed on 14 August 2009, at which time the account contained a credit balance of $31,399.26.[23]
[22] Exhibit W5
[23] Exhibit W5
The second payment of ₤40,000 was deposited to that account on 1 July 2009. The currency conversion resulted in a deposit of AUD$82,236.[24] There is no deposit into that account corresponding with the earlier payment of ₤12,000. If the deposit on 1 July 2009 represents both payments together, that conflicts with the evidence of the husband and second respondent that the payments were made separately.
[24] Exhibit W5
Any assertion by the husband that he is indebted to the second respondent in respect of the two payments made by her to him entails an assumption that he and the second respondent intended to create a legally enforceable commercial contract (or contracts) between themselves, notwithstanding their familial relationship (see Balfour v Balfour [1919] 2 KB 571; Cohen v Cohen (1929) 42 CLR 91; Henderson v Miles [2005] NSWSC 710 at [24]; Magill v Magill (2006) 231 ALR 277 at 326; Atco Controls Pty Ltd (in liq.) v Newtronics Pty Ltd (recs and mgrs appt) [2009] VSCA 238 at [60]).
Having regard to the uncertain state of the evidence I am not satisfied that either payment of ₤12,000 or ₤40,000 made by the second respondent to the husband is properly characterised as a loan. There is no evidence that the husband and second respondent intended to create between them a legal relationship of creditor and debtor. There is no written loan document in evidence, and neither the husband nor the second respondent adduces evidence from which an oral loan contract can be construed. Any bare opinion expressed in affidavits that the transactions were loans is unsupported by admissible and probative evidence.
Even if the payments were capable of being construed as loans, by reason of the evidence given by the second respondent, I am not satisfied that repayment of them is ever likely to be called upon by her as creditor. In those circumstances, the Court has a discretion to ignore the loans as liabilities in the matrimonial pool (see Biltoft v Biltoft (1995) 19 Fam LR 82 at 94), and I would do so.
For those reasons the payments made by the second respondent to the husband will be excised from the balance sheet as liabilities.
Although there is no document in evidence to corroborate the first payment of ₤12,000 by the second respondent to the husband, the wife has fairly conducted the case on the basis that she accepts that such payment was made, in the absence of her ability to contradict the husband. I will do likewise.
Although not loan advances, the payments by the second respondent were immersed in the husband’s post-separation financial circumstances and he must therefore be accorded credit for having contributed those funds to the assets which otherwise constitute the matrimonial pool. Hence, the ₤52,000 that the husband received from his half-sister will be taken into account at the second stage of the four stage process, which deals with contributions of the parties to matrimonial assets.
Lloyds TSB joint account – an asset?
The funds held jointly by the husband and a third party, Ms L, in the Lloyds TSB account was item 12 on the balance sheet.
The husband and Ms L formerly enjoyed a joint proprietary interest in a residential flat in a London suburb. The flat was leased. The monies held in the Lloyds TSB account result from the circumstances of that lease, but there is some uncertainty as to precisely how.
It was asserted by the husband that the tenant mistakenly overpaid rent, which funds were kept aside in the Lloyds TSB account. That however, by reference to the evidence of Ms L, seems to be only part of the explanation.[25]
[25] Ms L’s affidavit filed 10 July 2009 pars 83-87; affidavit filed 11 Nov 2009 par 4-11
The husband and Ms L have since sold the property. They have each unsuccessfully tried to establish contact with the former tenant. The husband was unable to even remember the name of the former tenant. The husband conceded that no demand had ever been received by them for refund of those monies. Ms L is a qualified lawyer practising in the UK. By reference to the circumstances known to her, she sees no impediment to the distribution of the funds in the account.[26]
[26] Ms L’s affidavit filed 11 November 2009 par 6
In final submissions the husband’s counsel submitted that because the husband disavows any entitlement to the funds comprising the account, a practical solution was for the Court to order disbursement of the funds in the manner sought by the wife and Ms L. Although the husband may consider that to be an attractive pragmatic solution, I reject the submission to the extent that it implicitly invites the Court to proceed unlawfully. The Court only has jurisdiction over that share of the account in which the husband is proven to probably have a legal proprietary interest.
Lloyds TSB, Ms L, and the wife all uniformly regard the funds in the account as being jointly owned by the husband and Ms L. On balance, I accept that joint position to be correct. The husband said his belief about lack of entitlement to the funds was a moral rather than legal judgment on his part. I do not rely upon the husband’s moral judgment. The husband’s share of the funds will therefore be incorporated into the balance sheet as an asset.
Liabilities incurred by the husband post-separation – how treated?
Items 21, 22, and 23 on the balance sheet comprised the following liabilities:
a)The husband’s CBA visa credit card debt,
b)The husband’s CBA streamline overdraft account, and
c)The husband’s Halifax mastercard credit card debt.
As at 2 June 2008, being a time proximate to final separation, the husband’s CBA visa card debt stood at $13,256.30.[27] Presently, the debt stands at $20,227. The debt has increased by more than $7,000 since separation. It is common ground that the husband is responsible for all of that expenditure.
[27] Exhibit GG to the Wife’s affidavit filed 30 June 2009
As at 12 June 2008, also at a time proximate to separation, the husband’s CBA overdraft streamline account had a debit balance of $4,434.28.[28] Presently, the debit balance stands at $79,486. The debt has increased by more than $75,000 since separation. It is common ground that the husband is responsible for all of the expenditure that accounts for the burgeoning debit balance.
[28] Exhibit LLL to the Wife’s affidavit filed 30 June 2009
The husband is presently indebted to Halifax for his mastercard debt of $708. That debt did not exist at separation.
Item 19 on the balance sheet is the home loan balance, which is secured by mortgage over the T property. It has also increased and fallen into arrears since separation. At separation the debit balance was $871,277.57.[29] The debit balance is now $888,388, meaning that the debt has increased by more than $17,000 since separation. It is common ground that the husband has had the benefit of sole and exclusive occupation of that home since the wife vacated the property in July 2008.
[29] Wife’s affidavit filed 30 June 2009 par 80
The husband failed to meet the mortgage repayments for the first few months of 2009,[30] and in more recent times has only been repaying the interest component of loan repayments without diminishing the principal debt. The home loan is currently in arrears by $8,809.51.[31] The husband blames the bank for an administrative error in ceasing to deduct repayments for a period, but the reason for the cessation of repayments is largely immaterial. The husband derived the benefit of cost-free accommodation for that period, and the wife assumes joint responsibility for the enlarged debt under the joint home loan.
[30] Exhibit W3
[31] Exhibit W4
The debts within the control of the husband have increased by some $99,000 in the time elapsed since separation, which is a period of some 21 months. All the while, the husband has continued to earn an income which he estimates at $140,000 per annum (presumably gross),[32] and he has received payments totalling ₤52,000 from the second respondent.
[32] Husband’s affidavit filed 12 August 2009 par 47
Adding together the extended debt, his net (not gross) earnings, and payments received from the second respondent, the husband has had the benefit of expenditure of roughly AUD$370,000 over the 21 months since separation. That calculation does not include the payment of ₤100,000 made by him to the second respondent, which was wholly raised against the security of the UK property.
The husband has failed to adequately explain how that money was spent, particularly in circumstances where the expenditure was not supporting the entire family. He has been living as a single man since separation, with the children living in his household for equal time. His child support payments to the wife have been modest. He currently pays an assessed amount of $1,123 per month in respect of two children.[33]
[33] Husband’s Financial Statement filed 14 August 2009 par 31
It is conceded that the husband has incurred $130,000 on legal fees, and paid a total of $40,000 to the wife pursuant to interim orders made in July and September 2008. That accounts for $170,000. The husband cannot account for the remaining $200,000, other than to glibly assert that it was spent on “living expenses”. I find that implausible. Even if the arithmetic is not meticulously accurate, it is sufficiently approximate to conclude that the husband has spent an enormous amount of money for his own benefit since separation, for which he has not afforded a satisfactory explanation.
The mere fact that a party has expended money realised from assets that existed at the time of separation, without more, does not justify notional add-back of the expended funds as a premature distribution of assets. The Court needs to make some assessment of the reasonableness of the expenditure (see Omacini v Omacini (2005) 33 Fam LR 134 at 146), before deciding whether to notionally add-back the expenditure under one of the recognised categories of add-back (see Omacini at 144-145). The failure of the party responsible for the dissipation or expenditure to afford a fulsome explanation for the dissipation or expenditure is a matter of significance in the determination of the reasonableness of it (see Omacini at 146).
Not all of the husband’s expenditure has been made from or against assets that existed at the time of separation. Some of it has been from the salary he has earned since the time of separation. It is only expenditure of the former kind which is susceptible to add-back.
The quantum of legal fees incurred by the husband in this litigation was more than covered by the expenditure by the husband from his CBA streamline account, his saving made during the period of reprieve from meeting repayments on the CBA mortgage, and the monies he received back from the second respondent.
The money spent by the husband on legal fees is already the subject of an add-back by agreement between the parties. It is item 17 on the balance sheet. It would be double-counting to add back both the legal fees and the amounts by which the liabilities increased after separation, if it is assumed that the legal fees were paid from those sources.
The expenditure made by the husband from his own income earned after separation is a matter for him. That form of expenditure is not a premature distribution of matrimonial funds or assets. Though, the husband’s income has implications for the issue of spousal maintenance considered below.
The wife did not propose the notional add-back to the balance sheet of the unexplained post-separation expenditure of the husband. Rather, she proposed that the liabilities of the husband in the form of his CBA visa card debt, CBA overdraft streamline account debt, and Halifax mastercard debt be notionally excluded from the balance sheet and be borne solely by the husband from his share of the remaining matrimonial assets. The husband did not argue that it would be contrary to legal principle for the Court to adopt the course advocated by the wife, but contended that the Court ought not take that course in this particular case.
That is not the orthodox or preferential way of dealing with funds unreasonably and prematurely distributed (see Essex v Essex [2009] FamCAFC 236 at [31-35], [42]). The usual course would be for the balance sheet to recognise the husband’s debts to the CBA and Halifax as existent liabilities at their full value, but to add back to the balance sheet as notional assets those amounts of negligent, reckless or wanton expenditure by the husband that caused the inflation of those liabilities since separation. That would have the effect of catching only the unexplained increased debt, rather than a greater proportion of the husband’s expenditure from all sources, and would exclude the level of the husband’s debt that existed at separation.
However, for reasons explained, the husband’s individual liabilities should not be the subject of add-back to the matrimonial pool in addition to the add-back of legal fees.
I will deal with the home loan liability separately below.
Extension of the home loan liability by the husband – an add-back?
These funds were item 18 on the balance sheet.
The value of that item was apparently calculated by reference to the mortgage repayments that the husband admittedly failed to make on the T property for several months in early 2009, the absence of which are demonstrated by the CBA home loan bank statement referrable to that period,[34] together with redraws made by the husband on the loan.
[34] Exhibit W3
The wife conceded that if the husband was fixed with sole responsibility for the increase of the home loan, and the liabilities of the husband listed as items 21, 22, and 23 on the balance sheet were also discounted from the balance sheet as liabilities, then it would be double-dipping for the funds at item 18 to be added back to the balance sheet as a notional asset. That concession does not dictate the outcome because I have determined to deal with the liabilities differently from the wife’s proposal.
I remain uncertain as to how item 18 has been computed at $44,269. As already explained, the home loan debt was extended by some $17,000 after separation as a consequence of the sole conduct of the husband. The parties were each aware of the amount by which the loan balance was increased during their cohabitation.
I am not satisfied that the husband should be fixed with sole responsibility for the extent to which the home loan debt increased whilst the parties remained in cohabitation at the T property. The loan balance over the T property at the time of its acquisition in April 2003 was $607,125.66.[35] By the time of separation in May 2008 the debit balance was $871,277.57.[36] The debt had therefore increased by some $264,000 over that period of years. The parties remain in dispute about their respective responsibility for that increased debt.
[35] Wife’s affidavit filed 30 June 2009 pars 43-44; Husband’s affidavit filed 12 August 2009 par 62
[36] Wife’s affidavit filed 30 June 2009 par 80
The wife admits to redraws by her totalling $44,550 during that time.[37] The husband purports to calculate the redraws by both he and the wife, which is suggestive of a greater level of redraws by the wife than she admits, making them about equally responsible.[38] The wife was not cross examined on that particular aspect, which her counsel submitted should be taken as an admission of the accuracy of her evidence, but I do not accept that such a conclusion necessarily follows. The husband was cross examined on his calculations, but I did not regard his explanations as incredible.
[37] Wife’s affidavit filed 30 June 2009 par 150
[38] Husband’s affidavit filed 12 August 2009 pars 63-71
Ultimately, I am not persuaded that either party should bear greater responsibility than the other for the increase in their joint home loan liability during the period that they lived together. It is uncontroversial that the parties each had the ability to redraw on the home loan. It was not asserted that either kept the home loan bank statements secret from the other. I impute that they were each aware of the escalating debt and acquiesced to that circumstance.
Nor am I satisfied that the husband should assume responsibility for the extension of the home loan debt whilst he has had sole and exclusive occupation of the property. I have attributed the extension of that liability towards the quantum of legal fees paid by the husband, which is already an add-back item. Consequently, I decline to add-back to the balance sheet any amount on account of the home loan extension.
Monies paid to the wife by the husband pursuant to interim orders on 17/7/08 and 10/9/08 – add-backs?
These payments comprised item 15 on the balance sheet.
On 17 July 2008 the Court ordered that the husband pay to the wife the sum of $10,000.[39] That order was made consensually, but without admissions, noting that the characterisation of the payment was to be determined on the date to which the wife’s interim spousal maintenance application was adjourned.
[39] Property Order 2.2 made 17 July 2008
The wife’s interim spousal maintenance application came back before the Court on 10 September 2008, at which time the Court ordered that the husband pay to the wife a further sum of $30,000.[40] That order was again made with the consent of both parties. However, the consent orders made on that date determined the wife’s interim spousal maintenance application, and no express order or notation was made by the Court characterising the payments, as had been envisaged at the prior Court event.
[40] Order 1 made 10 September 2008
As has been more recently recognised by the Full Court (see Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166 at [81-96], [208-210]), it is necessary or desirable to identify the source of power for the making of interim orders that compel one party to provide funds to the other during the course of litigation, as the payment may be made in the guise of spousal maintenance, interim or partial property adjustment, or costs orders.
There is no evidence adduced as to the actual source of the initial payment of $10,000 made by the husband to the wife.[41]
[41] Husband’s affidavit filed 12 August 2009 pars 136-139
There is also discrepancy in the evidence about the source of the funds raised by the husband to pay the second payment of $30,000. It was asserted during the hearing by the husband that the funds had been raised against the mortgage secured over the UK property, as the orders envisaged that he would do.[42] However, his original evidence was that that sum was actually received back by him in the form of a payment of ₤12,000 made at his request by the second respondent.[43] In his subsequent affidavit his evidence was different again, wherein he asserted that the ₤12,000 received back from the second respondent was needed to meet his legal fees.[44] That was also the evidence of the second respondent.[45]
[42] Order 3 made 10 September 2008
[43] Husband’s affidavit filed 12 August 2009 pars 128-130
[44] Husband’s affidavit filed 10 February 2010 par 11
[45] Second respondent’s affidavit filed 10 February 2010 page 1.9
As a consequence, on the state of the evidence, it is impossible to know where the husband obtained the funds to meet the two payments required of him by the interim orders. All that can be said with certainty is that he did make the payments to the wife.
I have already assumed that the husband paid the bulk of his legal fees by extending his liabilities, which resulted in those increased liabilities not being added-back to the balance sheet so as to avoid double-counting those liabilities with the legal fees. Were it otherwise, then the liabilities would also be properly liable to add-back. In those circumstances, it follows that the two lump sum payments to the wife were met from the husband’s salary.
Despite the wife receiving a total of $40,000, the parties are agreed that the sum of only $15,500 should be the subject of argument. The residual $24,500 was expended by the wife on meeting her legal fees, which are otherwise taken into account by way of another agreed add-back, which is item 16 on the balance sheet.
The wife contends that the sum of $15,500 ought be regarded as being provided to her in the guise of spousal maintenance, because she was at that time unable to support herself, and the agreement was reached between the parties in satisfaction of her claim for interim spousal maintenance. In that event, she says, the monies should not be added back to the balance sheet as a notional asset because the monies were expended by her on ordinary living expenses.
Although the husband concedes that the Judicial Registrar expressed a preliminary view at the time the consent orders were made that the monies should be characterised as spousal maintenance, he argues that the monies should properly be regarded as a partial property adjustment, in which event the monies would be added back to the balance sheet.
The husband asserts that, although the wife may then have been able to demonstrate a need for spousal maintenance, he had no capacity to pay it. He correctly contends that his capacity to pay is an integral element of any payment being characterised as spousal maintenance. So much is evident from the provisions of s 72 of the Act.
I am satisfied that the wife was unable to support herself adequately in July and September 2008. The husband did not seriously suggest otherwise. The wife was compelled to borrow money from her mother and sister to meet her expenses. There was no suggestion put to the wife that she expended the funds received by her from both the husband and her own family members on anything other than legal fees and ordinary living expenses. The issue, therefore, is whether the husband then had the ability to pay spousal maintenance.
There is no evidence before the Court setting out with any precision the financial circumstances of the husband at the time the interim orders were made in July and September 2008. That must be imputed from the evidence currently available, which was filed by the husband in August 2009. However, I am satisfied on the balance of probabilities that the husband did have the capacity to pay spousal maintenance to the wife in July and September 2008.
Allowing for the injection of those funds, and the differential in the assets introduced by the parties to the relationship at cohabitation, the husband has a slightly inflated entitlement to the matrimonial pool of assets by reference to criteria set out under s 79(4)(a)-(c) of the Act. That entitlement should properly be measured at 52%, which axiomatically means that the wife has an entitlement to 48%. The 4% differential is an appropriate recognition of the husband’s slightly greater contribution on the grounds identified above.
The Court is generally exhorted to assess the parties’ contributions to superannuation entitlements separately (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429). Neither party directly addressed the issue in submissions, but inferentially, they each treated superannuation as another asset. It is appropriate to adopt the Coghlan model in this case because of the lack of net equity in the matrimonial pool of property, exclusive of the transactions of ₤100,000 between the husband and second respondent which are set aside under s 106B of the Act.
All but a very small portion of the parties’ superannuation entitlements were accrued during the parties’ cohabitation and since separation. At cohabitation, the husband had only his interest in the JSS Pension Fund, which was then valued at ₤2,080.[66] It is agreed that the parties’ superannuation entitlements are now collectively valued at $658,145.
[66] Husband’s affidavit filed 12 August 2009 pars 18-22
The differential is the result of the parties’ mutual hard work, both in paid employment and in and around their home. Although the husband’s employment over many years with his current employer accounts for most of the accrued superannuation entitlements, the wife’s support of him in the pursuit of that career and her assumption of primary responsibility for the household and the children, facilitated accrual of those entitlements by him. The parties’ financial and non-financial contributions should be regarded as equivalent, and accordingly it is proper for those entitlements to be divided equally between them, subject to a slight adjustment to recognise the value of the husband’s accumulated entitlements at the time of cohabitation.
Third Stage - Adjustment
The husband argued that there should be no adjustment to the parties’ entitlement by reference to factors found within s 79(4)(d)-(g) of the Act. Conversely, the wife argued for an adjustment in her favour, conceivably as large as 20%.
The husband remains employed. He is aged 56 years and will likely retire in about 9 years time.[67] He conceded in cross examination that his salary, until retirement, is likely to be more than the salary that the wife could earn. That concession in cross examination was not as fulsome as it might have been. There is no doubt that, until his retirement, the husband’s salary will be much more than the wife could ever hope to earn. Presently his annual gross salary is about 10 times greater than hers.
[67] Husband’s affidavit filed 12 August 2009 pars 106-107
The husband has given evidence calling into question the state of his health and his capacity to keep working until retirement age.[68] In the absence of reliable medical evidence casting doubt upon his working capacity I pay the husband’s private ruminations no heed.
[68] Husband’s affidavit filed 12 August 2009 pars 140-149
The husband has also adduced evidence about the continued security of his employment.[69] That evidence could only give rise to a doubt about the security of his tenure. The evidence falls far short of establishing that his employment will probably be terminated early. The husband’s admitted qualifications and experience,[70] and the retention of his employment whilst other employees have already lost their jobs,[71] justifies a conclusion that the husband will probably retain his employment until retirement.
[69] Husband’s affidavit filed 12 August 2009 pars 108-117
[70] Husband’s affidavit filed 12 August 2009 pars 24-32
[71] Husband’s affidavit filed 12 August 2009 pars 109-110,117
The wife holds tertiary qualifications as a teacher. The zenith of her earnings occurred in the 2000/2001 financial year, during which she was earning wages equivalent to about $46,580 gross per annum.[72] The wife then terminated her employment to accompany the husband overseas for an extended period in pursuit of his career. The wife did not thereafter return to paid employment in order to bear and raise the children.[73]
[72] Wife’s affidavit filed 30 June 2009 pars 21-23
[73] Wife’s affidavit filed 30 June 2009 pars 23-25
The wife obtained paid employment nearly a year after separation. She is presently earning some $13,000 gross per annum in casual work which is unrelated to her tertiary qualifications.
The wife adduced evidence about her attempts to find work after separation from the husband.[74] She admitted that she did not pursue some of those opportunities further because they entailed commitments that conflicted with her wish to be available for the children. In April 2009 she attended a TAFE to discuss her participation in a course to update her skills and training,[75] but that option was not pursued because later that same day she attended an interview and was offered the job with her current employer, a shop, which she accepted.
[74] Wife’s affidavit filed 30 June 2009 par 27
[75] Wife’s affidavit filed 30 June 2009 par 27(ii)
The wife regarded her current level of income as commensurate with her income-earning capacity, but the husband did not agree. The wife was cross examined about her ability to secure more regular work as a teacher, making use of her tertiary qualifications and earning a higher income. She conceded that she would only need to complete a few weeks of refresher study to again be eligible for full-time work as a teacher. Because the wife has not worked as a teacher for a protracted period, her teaching skills require refreshment to trigger her eligibility for teaching work.
The wife conceded that she no longer wanted to work as a teacher. Nor did she wish to work full-time, at least while the children are young. She wishes to avail herself of only casual or part-time work to ensure her availability for the children, and her participation in their activities at school and pre-school.
The wife was ultimately impelled to concede that she is able to work more than her current working commitments. She does not bear a greater burden than the husband in the future care and supervision of the children. They will continue to spend equal time in each household.
Given that the wife is aged 45 years, and is 11 years younger than the husband, her working future is much longer. But her earning capacity over that period is markedly less than the husband’s, as he admitted.
The husband has the benefit of his interest in the UK Widows Home Buyers Plan available to him, which fact is agreed between the parties. The nature of his interest in that plan was not explained by the evidence.
The husband presently has vastly superior accumulated superannuation interests, but both parties proposed splitting orders in respect of those interests to re-distribute them more equitably between them. Because of the splitting orders that are made, the existing disparate superannuation interests of the parties are not a basis for any adjustment under s 75(2) of the Act.
An overall adjustment in favour of the wife is warranted but, for reasons which will shortly be explained, the adjustment will be reflected differently in respect of the property and superannuation interests. There will be a cash adjustment in respect of the property, and a percentage adjustment of 7.5% in respect of superannuation interests.
Just and Equitable Orders
The orders providing for division of the personal chattels (being Orders 18-23 inclusive) accord with the consent orders proposed by the parties.[76]
[76] Exhibit C
There is no evidence as to how the distribution of personal chattels will reflect itself in apportionment between the parties of the overall value of $9,935, attributed to those assets. The combined value of those assets can therefore be excised from the pool, reducing its net value to $74,085 (being $84,020 - $9,935).
The wife has an entitlement to 48% of the matrimonial pool based on contributions. Applying that percentage to the adjusted net value of the matrimonial pool results in the wife having to receive property with a net value of $35,560.
Any modest third-stage percentage adjustment of property interests would be inadequate. For example, a 7.5% adjustment (as will apply to the superannuation interests) would afford the wife an extra $5,556 only, leaving a net balance in the pool of $32,969, notionally for the husband.
It is not a just and equitable outcome for the wife to receive such a small sum as a third stage adjustment for factors stipulated within s 79(4)(d)-(g) of the Act, and in particular the wife’s significantly lower earning capacity.
As was pointed out by the Full Court in Marriage of Clauson (1995) 18 Fam LR 693 at 710, when referring to an adjustment warranted by factors under s 75(2) of the Act:
“…it is the real impact in money terms which is ultimately the critical issue.”
That principle has been the subject of frequent endorsement. The overall property adjustment between the parties must be just and equitable, not just the underlying percentage division of the net value of the parties’ assets (see Marriage of Phillips (2002) 29 Fam LR 128 at 140-141). In cases where the net pool is relatively modest it is often preferable to express a third stage adjustment as a lump sum rather than as a percentage (see Parrott v Public Trustee of NSW (1993) 17 Fam LR 785 at 790-791). This is a case in which such a course is justified.
An adjustment of only some $5,000, representing a small percentage of the pool, is an insignificant sum compared with the dimension of the assets and the difference between the parties’ present and future circumstances (see Marriage of Clauson at 709).
The just and equitable outcome in this case would be for the wife to retain the residual sum of $38,525, in lieu of a percentage adjustment, as a third stage adjustment. The wife will therefore take the entire reduced net value of the pool, amounting to $74,085 (being $35,560 + $38,525).
The justness of that outcome can be illustrated by remembering that the husband will actually earn net income of $38,525 within the next few months.
The parties expressly or implicitly agree that the wife should retain or receive the following assets and liabilities:
Assets
Value
Total
CBA acc….44
790
Ford Telstar car
800
W’s paid legal fees
74,598
Sub-total
76,188
Liabilities
CBA mastercard
2,624
ANZ visa card
1,901
Loan from wife’s mother
66,258
Loan from wife’s sister
5,000
Sub-total
75,783
Total
+405
In order for the wife to have her proper entitlement, she needs to receive a further $73,680 (being $74,085 – $405) from the matrimonial pool.
That can be achieved by her receiving that sum from the money that will be repatriated to the pool as a consequence of setting aside the transactions between the husband and second respondent pursuant to s 106B of the Act.
The wife contended for an order that she be declared the sole owner of the property in the UK, subject to her indemnity of the husband in relation to any liabilities attaching to that property. That outcome was fiercely opposed by the husband.
The UK property is encumbered by a mortgage, the value of which exceeds the value of the property. The wife would need to indemnify the husband or re-finance the property with a loan in her own name, which she does not have the financial capacity to do. She admitted as much when cross examined. She admitted that she could not achieve a re-finance unless she was able to interest a commercial partner to assist her, or succeed in having superannuation funds released to her on hardship grounds. Those alternatives are most uncertain.
The husband wishes to retain the property. It was acquired by him with Ms L well before the parties’ cohabitation. The husband later acquired sole proprietorship of the property from Ms L as part of the settlement of litigation between them in 2006.[77] The husband said that he wanted to retain the property for the children to inherit from him.
[77] Affidavit of Ms L filed 10 July 2009 par 14
The wife’s interest in the property arises from her belief that the property represents a good long term investment. The only reason that the loan secured over the property swamps the value of the property is that the husband reached agreement with the tenant on an assured tenancy, which de-valued the property. A copy of the assured tenancy agreement is in evidence.[78] At about the time the husband entered into that tenancy agreement the property was worth ₤335,000.[79] Presently, nearly 4 years later, the property has an agreed value of only $300,000. Its value has therefore nearly halved in 4 years.
[78] Affidavit of Professor N filed 12 August 2009 par 4
[79] Wife’s affidavit filed 30 June 2009 Exhibit WW
The husband agreed that it was his entry into the assured tenancy which caused such a significant de-valuation of the property. He says that he was unaware of that consequence at the time and only subsequently came to learn of the depreciation in property value caused by such tenancies. The assured tenancy grants to the tenant the right of indefinite occupation, with limited scope for the landlord to terminate the lease, and restrictions on rent increases. The benefit to the tenant is obvious. The benefit to the landlord is supposedly the security of uninterrupted receipt of rental income over a long term.
The husband admitted that he did not inform the mortgagee of the assured tenancy entered into over the UK property on 1 June 2006 when he borrowed the extra ₤100,000 against the property in late 2007 or early 2008. Had he done so it is inherently unlikely that the mortgagee would have approved the advance of those funds, because that caused the value of the loan to then exceed the value of the security.
Of course, if the assured tenant decides to terminate the tenancy and vacate the property then the value of the property will presumably immediately escalate dramatically. The owner of the property, presently the husband, will be the beneficiary of any such windfall.
As things stand, the assured tenant, Professor N, has no intention of terminating the lease and vacating the property, in which case the depreciated value of the property will prevail for years to come. I accept his evidence as truthful.
I accept the husband’s submission that he should retain that encumbered asset. However, that result is only just and equitable provided that the wife receives the cash adjustment to which she is entitled as a consequence of the orders made pursuant to s 106B of the Act.
Although I am not persuaded to order that the husband transfer the entirety of his interest in the UK property to the wife as part of the primary property adjustment process, I am satisfied that it is just and equitable for the husband’s retention of that property to be conditional upon implementation of the property adjustment orders.
There are reasons to speculate about the second respondent’s willing compliance with the orders made requiring her repatriation of ₤100,000 to matrimonial assets. She has declined to participate in the proceedings as a party. There is no evidence before the Court identifying her assets which could otherwise be the subject of a charge or default enforcement order. Needless to say, the wife would encounter substantial difficulty and expense in attempting to enforce the orders against the second respondent across the world.
If the husband retains the UK property unconditionally and the second respondent fails to repay the sum of ₤100,000 to the parties then the wife would be severely disadvantaged. The same level of disadvantage would not accrue to the husband. That prospect requires that the orders be framed in such a way that the parties are able to enjoy their assets justly and equitably.
In the event that the second respondent complies with the order to pay back the ₤100,000 in a timely way, the husband will retain proprietorship of the UK property, in accordance with his desire. He will therefore have an incentive to cajole the second respondent’s compliance with the orders.
In the event of non-compliance by the second respondent, proprietorship of the UK property will pass to the wife, in accordance with her desire. The wife will then ostensibly be worse off, even if she is later able to successfully enforce the orders against the second respondent, because she would be taking an asset encumbered by a loan which exceeds the value of the asset. However, in that knowledge, the wife pressed the Court for an order vesting ownership of that property in her, and there is no disadvantage to the husband in him being relieved of an encumbered asset with a negative net value.
Both parties sought that the husband assume sole proprietorship of the T property and re-finance the loan secured over that property so as to remove the wife’s liability to the mortgagee under the mortgage. There was some agitation during the hearing about the husband being compelled to sell the T property, and he indicated his willingness to do so. However, in view of the orders mutually proposed by the parties, the husband will be designated as the sole owner of the T property, subject to him re-financing the loan in his sole name and indemnifying the wife against any liability attaching to that property. If he does not do so then the property will be sold. The husband was content to do so, and that would protect the wife against the prospect of further joint liability for a growing home loan debt.
There is no evidence either way, but there is a possibility that the husband’s indebtedness to the CBA, for the streamline overdraft account and visa card liability recorded in his own name, may also be secured by the CBA mortgage registered over the parties’ T property securing the parties’ joint home loan. That would probably be the case if the CBA mortgage is an “all monies” mortgage. If secured by the mortgage, the re-finance of those liabilities by the husband will also be a condition of his sole ownership of the T property.
The other assets and liabilities will lie where they fall.
The parties both propose superannuation splitting orders in respect of the husband’s entitlements accumulated with S Fund.
The superannuation splitting orders meet with the consent of the trustee of S Fund, who has been accorded procedural fairness as required by Rule 14.06 of the Family Law Rules. That is demonstrated by documents tendered in evidence.[80]
[80] Exhibit F
Section 90MT(2) of the Act obliges the Court to determine the value of the superannuation interest before it is the subject of any splitting order. In the absence of the regulations providing a specific method of valuation (s 90MT(2)(a)), and there is no relevant method in the circumstances of this case, the Court is expressly entitled to determine the value of the interest by such method as the Court considers appropriate (s 90MT(2)(b)). The parties have not placed any independent valuation evidence before the Court with respect to the husband’s superannuation interest in S Fund. However, the parties have agreed that the value should be taken to be $582,960 for the purpose of the splitting exercise. In the circumstances, the Court determines the value of the interest at $582,960 in accordance with the agreed fact, that being an appropriate valuation methodology.
The base amount allocated to the wife in the S Fund interest is $339,168. That figure, added to the wife’s own superannuation interest with NGS, totals $376,625 which amount represents 57.5% of the parties’ overall superannuation interests, exclusive of a small deduction to allow for the entitlements accumulated by the husband in JSS Pension prior to cohabitation.
The percentage apportionment of 57.5% arises from a 50% distribution based on equivalent contributions to the accumulation of superannuation interests, together with a third stage 7.5% adjustment. The husband will retain 42.5%. I am satisfied that distribution of the superannuation interests in those proportions between the husband and wife is just and equitable.
The splitting order has been made by reference to a base amount rather than a percentage because that was the request of the S Fund trustee, and both parties agreed to that manner of division.
Spousal Maintenance
The submission put for the wife in final submissions was that the husband seemed to have the capacity for an extraordinary level of borrowing – the implication being that that of itself demonstrated that the husband had the continuing capacity to pay spousal maintenance to the wife. If I interpreted the argument correctly, I reject it.
The wife’s claim for spousal maintenance must be considered in light of the adjustment of property interests accomplished pursuant to s 79 of the Act (see Brodie v Brodie (2009) 41 Fam LR 18 at 37-38)
As a consequence of the property adjustment orders made the wife will have a modest lump sum paid to her, which will then largely be exhausted in the repayment of her debts to her mother and sister.
The wife will have re-adjusted superannuation entitlements vested in her name, but they will not be available to her as liquid funds for expenditure on living expenses unless she can convince the superannuation trustee that some of those funds should be released to her on hardship grounds.
The wife will continue to earn only meagre wages from her casual work, unless she is able to secure more and/or better paid work. I accept the submission of the husband that the wife does have a higher income-earning capacity than she is currently utilising, but the extent to which the wife can improve her income over the short term is still highly speculative.
There is no evidence that the wife has a range of employment skills that would be attractive to a broad range of employers. Apart from the work in which she is currently engaged, the wife is likely to have to fall back on her teaching qualifications.
Even if the wife did undertake the teaching refresher course earlier discussed, in all probability, that will not result in an immediate return to teaching work, let alone at a level approaching full-time work. No evidence was adduced by the husband to the effect that the wife would enjoy an immediate and marked improvement in her earning capacity through completion of the refresher teaching course. The wife has not undertaken teaching work for many years. She would likely only be able to secure teaching work for the foreseeable future on a casual basis, although the frequency of such casual work could fluctuate.
In the meantime, I am satisfied that the wife is unable to support herself adequately by reason of her partial responsibility for the care and control of the two young children of the marriage, and because of her age and restricted capacity for much better employment. Her reasonable needs exceed both her income and income earning capacity in at least the short term. The wife was not challenged about the accuracy of her financial circumstances, set out within her Financial Statement.[81]
[81] Wife’s Financial Statement filed 29 January 2010 pars 9-34
I am also satisfied that the husband is reasonably able to maintain himself having regard to his existing financial circumstances, and allowing for the effect of the property adjustment orders made. He is in well paid employment, which he admits does not interfere with his ability to care for the children on a week-about basis with the wife. The husband has no other person dependent upon him. His income is otherwise spent on maintaining himself, paying child support at the assessed rate, making mortgage interest repayments on the T home that he occupies, and meeting his other incidental liabilities.
The husband last deposed to his financial circumstances in his Financial Statement filed on 12 August 2009. On the face of that document, his expenses exceed his income.[82] As has already been observed, the husband does not explain an entry in the Financial Statement described as “other expenditure”.[83]
[82] Husband’s Financial Statement filed 12 August 2009 pars 9-34
[83] Husband’s Financial Statement filed 12 August 2009 par 32
If one uncritically accepts the husband’s evidence, he cannot afford to maintain the wife. He does not have the capacity to do so. That would be a complete answer to the wife’s claim for his payment of periodic spousal maintenance to her. It is not however a complete answer to the entitlement of the wife to spousal maintenance on any basis at all.
The husband has a joint legal interest with Ms L in the Lloyds TSB account in the UK, which he admits is worth $20,224. Despite the Court’s finding of his legal interest in that account, he disavows the interest. Indeed, his counsel suggested its payment to the wife to ameliorate her impoverished position. That asset can conveniently be seized upon to meet the wife’s need for maintenance in the short term in lump sum form.
By reference to the wife’s Financial Statement, the deficit between her expenses and income is about $20 per week, allowing for her receipt of Centrelink benefits totalling $290 per week. Those benefits must be discounted because of the provisions of s 75(3) of the Act. The deficit is therefore $310 per week. Capitalised over a period of one year, and ignoring any discount for the capitalisation, the wife’s need is quantified at $16,120.
The amount of $20,224 resting in the Lloyds TSB account represents payments of $310 over a period of approximately 65 weeks.
The wife pressed a spousal maintenance claim for only 52 weeks, but at a level higher than $310 per week. She sought cash of $300 per week, plus payment of private health insurance premiums, which she deposes to costing her $40 per week. Her total claim is therefore for $340 per week over 52 weeks, which represents a lump sum of $17,680.
However, the parties reached agreement upon the husband’s payment of private health insurance premiums within the context of the child support departure order mutually proposed by them.[84] It would be double-counting to also make allowance for that in a spousal maintenance order.
[84] Exhibit E
I am satisfied that spousal maintenance of $310 per week over a twelve month period is reasonable. An order of lump sum spousal maintenance of $16,120 is made in favour of the wife.
Child Support Departure Order
The child support departure order (being Order 31) accords with the consent order proposed by the parties.[85]
[85] Exhibit E
It was mutually submitted by the parties that the departure order could be made by the Court simply in reliance upon their consent, without the need for the Court to be independently satisfied about the propriety of the order. I do not accept that submission.
Child support departure orders are governed by Division 4 of Part 7 of the Child Support (Assessment) Act 1989 (“the Assessment Act”). The Court must be satisfied that the application is properly instituted and that the statutory criteria have been fulfilled, irrespective of the parties’ consent.
I am satisfied that the application for a departure order is properly brought pursuant to s 116(1)(b) of the Assessment Act.
The circumstances in which a departure order may be made are proscribed by s 117 of the Assessment Act, the requirements of which are numerous and conjunctive. The criteria that must be established to permit the making of a departure order are as follows (see Gyselman & Gyselman (1992) FLC 92-279):
a)In the special circumstances of the case (s 117(1)(a)), there are grounds for departure on numerous available bases (s 117(1)(b)(i); s 117(2)), and
b)It would be just and equitable for all concerned (s 117(b)(ii)(A); s 117(4)), and
c)It would be otherwise proper (s 117(b)(ii)(B); s 117(5))
The departure order sought by the parties assumes retention of the administrative assessment, as it varies from time to time, and requires the husband’s payment of additional expenses directly related to the parties’ financial support of the children. In those circumstances, and in light of the parties’ consent, I am satisfied that there are special circumstances justifying the making of the departure order. I am also satisfied that it would be just and equitable and otherwise proper to make such an order.
I certify that the preceding two hundred and seventy nine (279) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin
Associate:
Date: 15 March 2010
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