Monday 24 February 2014

Disclosure of property owned: a “big money” case example

A couple of months ago I wrote a post about disclosure in family law matters. In that post I pointed out that Chapter 13 of the Family Law Rules and Part 14 of the Federal Circuit Court Rules set out obligations that both parties are under to be open and honest about their assets, liabilities and their financial circumstances.
 
A recent case from the Family Court, Elgin & Elgin, highlights just how far the Courts can look into the financial circumstances of a party – both in terms of forensic accounting analysis of disclosed assets and making inferences due to lack of disclosure.
 
Mr and Mrs Elgin were married in 1960. They started their married life with very little. Shortly after their wedding Mr Elgin started to manufacture and install a product known in this litigation as EF Products, which was innovative at the time and the business flourished. Towards the end of the 1970s, the family moved to the Gold Coast. The EF Products business had grown into a national business and in the early 1990’s it was sold off. Around that time, and using the capital acquired from the sale of the EF Products business, the Elgin’s undertook their first property development on the Gold Coast. It was successful and various development projects took place thereafter with a great deal of apparent financial success. The Elgin’s also raised three, now adult, children.

In 2009 Mr and Mrs Elgin separated. Mr Elgin, then 70, had started a relationship with a 26 year-old married mother of two in 2008 and in 2011 Mr Elgin married his new partner and they had a child.

Around the time of separation Mr Elgin told Mrs Elgin that they would divide their assets evenly between the two of them. However, Mr Elgin later changed his mind – telling the Court that the property should be divided as to 70 per cent to him and 30 per cent to Mrs Elgin. Mr Elgin submitted that this was a just and equitable division reflecting the disparity in each party’s contributions over the years. Mrs Elgin sought that the property be divided as to 52.5 per cent to her and as to 48.5 per cent to Mr Elgin. Mrs Elgin submitted that this would reflect an equality of contribution throughout the years with a slight weighting in her favour to take account of an inheritance of $1.3 million which she contributed in 2003.

The Court decided to divide the property evenly between the parties.

The principle issue before the Court was exactly what property was there to divide.
 
The parties agreed as to the identity and value of much of their assets, including:
  • Apartment D, E Street, Gold Coast, Qld with a value of $2,000,000;
  • Apartment CD, C Street, Melbourne, Vic with a value of $1,450,000;
  • Apartment A, C Street, Melbourne, Vic with a value of $1,950,000;
  • DE Street, Suburb FG, Qld with a net value of $346,282; and
  • Mrs Elgin’s interest in her self-managed superannuation fund with a value of $1,091,831.

However, they disagreed about a number of matters, including:
  •  The value to be attributed to the personal savings of Mrs Elgin – the Court concluded $170,994;
  • The value to be attributed to the Wife’s interest in the company, H Pty Limited – the Court concluded $609,679;
  • The value to be attributed to the Husband’s superannuation interest – the Court concluded $454,958;
  • Whether or not a motor car owned by the Husband and two motor cars owned by the Wife should be considered – the Court concluded $40,500;
  • Whether or not the value of the J Elgin Family Trust should be included – the Court concluded the assets of $153,000 should not be included as Mr Elgin did not have control of the Trust;
  • Whether or not the value of various trusts and companies was to be included – the Court concluded the net value was $36,472,146.

The final two steps involved Mr Elgin, in particular, disclosing extensive material – including information in relation to current land developments – to a joint expert in order for valuations to be prepared. 

But that was not the only impact of the disclosure rule in this matter. The Court also had to decide whether property not disclosed by Mr Elgin, and in the name of Mr Elgin’s new wife, should be considered, in particular:
  • Whether or not two Gold Coast unit properties registered in the name of the Husband’s new wife (“the GH Street units”), purchased in October 2009 and May 2010 respectively, should be considered and if so their value; and
  • The value to be attributed to another Gold Coast unit property purchased in the name of the Husband’s new wife (“the B Apartment”).

The Court noted that Mr Elgin had not responded to a request for disclosure about the first two Gold Coast properties. At the commencement of the Court hearing Mr Elgin deposed that his new wife had not paid any money for either of the properties. During cross-examination Mr Elgin agreed that he effectively gave his new wife those properties. Mr Elgin later changed his mind about that point and stated that his new wife had received money from relatives in Europe. Mr Elgin also failed to disclose the sale of another property in his new wife’s name and what happened to those sale proceeds. Mr Elgin also failed to disclose the income that he knew his new wife was receiving from two apartments in her name.

The Court decided that failure to disclose was not an innocent oversight and that the information was deliberately left out of Mr Elgin’s Financial Statement. The Court also noted that the Husband had not sought to produce evidence from his new wife and drew an inference in the circumstances that the evidence of the new wife would not have helped Mr Elgin’s case.  The Court concluded, based on Mr Elgin’s conduct and attitude to disclosure demonstrated throughout the proceedings, that his denials of providing the money for the purchase of the properties was false and that he did in fact provide the money and therefore the properties were property in these proceedings. The Court concluded the values were $425,000 and $365,000 respectively.

In relation to the third property the Court concluded that due to the failure of Mr Elgin to fully and frankly disclose the details of this purchase in a timely manner, the Court did not have any expert opinion evidence as to the property’s value. Mr Elgin said it was worth $895,632.76 but did not provide justification for this figure. The Court agreed with Mrs Elgin and concluded the value was the purchase price of $1.1 million.

Mr Elgin’s lack of disclosure also impacted on his case in relation to furniture. Mr Elgin had claimed that Mrs Elgin had retained $100,000 worth of furniture. He had not disclosed that he had any furniture himself. The Court decided not to include $100,000 worth of furniture as property of Mrs Elgin as Mr Elgin had not made it clear that he intended to contend that Mrs Elgin had $100,000 worth of furniture and he had none himself.
 
Despite Mr Elgin’s lack of disclosure $1,890,000 was added to the asset pool and when it came time to divide the asset pool between the parties Mrs Elgin was allowed to keep all of the furniture in her possession without it being noted as part of her share of the net asset pool.

Monday 3 February 2014

Australian Institute of Family Studies report on same-sex parented families in Australia


A report commissioned by the Australian Institute of Family Studies, Same-sex parented families in Australia, has found that children raised in same-sex parented families do as well emotionally, socially and educationally as their peers from heterosexual couple families.

The report looked into research that has been undertaken in Australia, the US and Europe relating to: children's family relationships; their psychological adjustment; their experiences with peers, particularly with regard to teasing or bullying; and how well they fare educationally.

According to the report:

-        About 11% of Australian gay men and 33% of lesbians have children. Children may have been conceived in the context of previous heterosexual relationships, or raised from birth by a co-parenting gay or lesbian couple or single parent.

-        Overall, research to date considerably challenges the point of view that same-sex parented families are harmful to children.

o       Children in same-sex parented families generally report harmonious relationships with their parents, whether or not they were born to heterosexual couple parents who subsequently divorced, or in the context of a planned same-sex family*;

o       On measures of general health and family cohesion children aged 5 to 17 years with same-sex parents had significantly better scores when compared to Australian children from all other backgrounds and family contexts. For all other health measures there were no statistically significant differences**;

o       The National Longitudinal Lesbian Families Study in the US followed the psychological adjustment of young people approaching adulthood who were raised in lesbian-parented families and found psychological adjustment throughout early childhood was found to be similar to normative samples of American children raised in all kinds of heterosexual families.***;

o       Despite fears about being teased, harassed or bullied, and some negative experiences of bullying, teasing or harassment, it appears children raised in lesbian-parented families do not seem unduly vulnerable to experiencing bullying, although the US evidence is mixed. Comparable measures are higher in European countries than the US, indicating that the prevailing socio-cultural climate of support for same-sex relationships may have some bearing on child wellbeing****;

o       With regard to academic performance, the evidence is that same-sex parented children perform as well as or better than their peers raised in heterosexual couple families*****.

The report concluded that other factors – such as a lack of institutional support for same-sex relationships and the prevailing socio-cultural climate of support for same-sex relationships – have a greater impact on the emotional, social and educational life of children of same-sex relationships than their parents relationship itself does.

Interestingly, from a family law perspective, the report noted that what was important for all family types were family processes such as parenting stress, conflict, and relationship dissatisfaction. And that this can have an impact on children of all relationship types.


* Brewaeys et al. 1997; Bozett, 1987; Golombok, Spencer, & Rutter, 1983; Harris & Turner, 1986; Kirkpatrick, Smith, & Roy, 1981; Wainright et al. 2004

** Crouch, Waters, McNair, Power, & Davis, 2012, Crouch, 2013 - Australian Study of Child Health in Same-Sex Families (ACHESS) based at the University of Melbourne

*** Gartrell et al., 1999, 2000, 2005, 2006

**** Crouch et al. (2012)

***** Wainwright et al. (2004); Gartrell and Bos (2010)