Neutral Citation Number: [2010] IEHC 474
THE HIGH COURT 2009 3 M
IN THE MATTER OF THE JUDICIAL SEPARATION AND FAMILY LAW REFORM ACT 1989 AND
IN THE MATTER OF THE FAMILY LAW ACT 1995 (AS AMENDED)
BETWEEN
E. S.
APPLICANT RESPONDENT
JUDGMENT of Mr. Justice Abbott delivered on the 12th day of July, 2010
1. This is an application for judicial separation of the applicant wife and respondent husband. The husband and the wife were married on the 5th May, 1995. At all times they were and remain domiciled within this jurisdiction and their children are habitually resident here. There are two children of the marriage. Both children are dependent.
Entitlement to an Order for Judicial Separation
2. The evidence of the husband was that the marriage did not come up to his ideal of a romantic marriage and that there was a need for counselling some years ago. However, I am satisfied that because the parties did attend for counselling and thereafter engaged in the purchase of a property with plans to expand it and acquire further property meant that they were working at their marriage, and that whatever dissatisfaction the husband had with it was not communicated to the wife to the extent that he showed her that he was withdrawing his consent to the marriage. In the second half of the year prior to the initiation of the proceedings into early 2009, the husband had a relationship with another woman and at the time of initiation of the proceedings had set up home with her. His evidence was that this was not entirely of his own volition as he had been locked out of his home when his wife discovered the relationship. It is accepted that this relationship was adulterous prior to the initiation of the proceedings. The court has to decide whether to grant a decree of judicial separation on the grounds that there existed no normal marital relationship for one year prior to the commencement of the proceedings, or on the grounds of adultery, which in this instance is not time related or time barred. The settled policy of the courts has been to prefer the former ground as a recorded ground for the decree insofar as there is a preference to avoid acrimony. However, in this case the lack of consent of the husband was not communicated to the wife, except through the occurrence of the affair which began within the period of a year prior to the proceedings. Therefore, I consider that it is not possible to adopt the lack of normal marital relationship as a basis for the decree and, hence the court must rely on adultery as a basis for the decree of judicial separation which is to be made subject to proper provision for spouses and to children. Having reached this conclusion, I find that in the post divorce age it is not appropriate for a court to penalise either party for adultery and in this case it would be unjust on the husband to have any penalising consequences attached to his adulterous relationship.
Consideration of Provision
3. Subparagraphs (a) to (1) of s. 16(2) of the Family Law Act 1995, as amended, (the Act of 1995) set out the criteria to be considered by the Court (subject to the overriding test of justice) in deciding the provision to be made to spouses on a judicial separation. I set out the consideration of the Court in respect of each of these subparagraphs seriatim, as they affect the provision to be made to each of the parties as follows:-
( a ) the income, earning capacity, property and other financial resources which each of the spouses concerned has or is likely to have in the foreseeable future
The wife receives a children’s allowance of €332 per month. She also receives €300 per week for keeping students from which she must take a proportion of household expenses to arrive at a net profit. While the court ordered interim maintenance in the region of €5,000 per month (subject to a difference between the parties as to whether that included mortgage payments in region of €1,300 per month on the family home), the husband only paid €5,500 of this and the wife has since depended on a salvage operation through the sale of paintings, which were initially valued by the husband at €55,000 in his first affidavit, but later claimed to be in the region of €80,000, and which realised at auction at €41,000. The wife also has had to eke out income from contributions from her father and she also enjoys the benefit of a car (albeit provided unevenly) through her husband’s company. While the provision of this car has caused severe friction in the proceedings to date, I value it as a benefit in the region of €500 per month.
The best evidence of the husband’s income is that which he received from the company last year as a sum in the region of €80,000 gross consisting of approximately 50% thereof taxable and the other half payment, repayment of a director’s loan. To arrive at a realistic income available for the husband it is necessary to consider the situation of his company. This company deals in a capital intensive business where banks finance its stock in trade/inventory (ST/I) by the purchase thereof, subject to a contractual arrangement to have a re-purchase after the period of use by the company at a guaranteed level for the banks. The company’s income is derived from the use of this ST/I, nominally owned by the banks, subject to repayment of loan charges to the banks and then the sale (hopefully for a profit) of the ST/I when eventually sold back to the company after its period of use. The difficulty in this case arises by reason of the fact that in 2008 there was a collapse in the market for ST/I. The parties had been living off the surplus capital available from the disposal of a family business at this time, and the company was just about able to survive the enormous shock of the fall in ST/I prices in 2008 by reason of the fact that neither husband nor wife were extracting significant amounts of income from it. However, the husband, to the consternation of the wife, removed €110,000 from the joint account of the couple to finance a director’s loan by him to the company so that the books of the company could be presented to the bank as showing some prospects of solvency. The husband’s evidence was that the drawings of €80,000 used last year as husband’s income were partly funded by the repayment of this director’s loan. The company has had the benefit of a court order directing the husband to maintain proper book keeping and accounts, and to have updated audited figures to the highest standards, and generally this order has been complied with by the husband, who now says that in any event he would have been compelled to this by reason of the exigencies of securing continued bank support for a company which would otherwise fail in the current difficult market conditions.
Mr. R. occupied a financial position in the company to ensure the presence of a person with a financial background and to act as “honest broker” for the court and for the bank. He gave evidence that, while the company had cash reserves of €200,000 at any one time, this reserve was required to provide comfort for the bank for a company which both parties agree is of nil book value. He nevertheless agreed that at any time a cheque of €100,000 could be safely drawn on the accounts of the company. The husband said that the presence of €200,000 cash reserves in the company was not indicative of any real ability of the company to fund cash flow capable of providing an income for the couple as that sum involved the lodgement of funds by customers to obtain the use of ST/I ahead of the purchase of that particular item of ST/I by the company and, therefore, the sums lodged would be diminished upon the purchase of that ST/I through the complicated bank funding arrangements relating thereto.
Having considered the evidence in relation to the cash reserves, I am of the opinion that while such cash reserves indicate that the company is somewhat financially healthy, they are not of themselves sufficient to give the court any confidence that they can support any worthwhile income for the family in the short term without having the company endangered. However, I am satisfied that the company itself can bear the production of sufficient surplus to bear the withdrawal of a sum in the region of €100,000 income for the husband, who is Chief Executive of the company, for the following reasons:-
(a) The husband has given an account of a successful campaign of cost cutting and staff reduction.
(b) Although the cross examination of the husband revealed his corporate and personal credit card spending, indicative of lavish travel and entertainment, to the detriment of his wife, this spending seems to be instrumental in generating very valuable and impressive client business from good defensive companies in the Irish market who are likely to be able to trade through the present challenging market.
(c) The very survival of the company in challenging market conditions has resulted, and is likely to result, in competitors falling away by a process of attrition.
(d) In the figures available for the most recent few months of the date of hearing, management accounts indicate that profit in region of €14,000 was generated indicating that the financial results mirror the start of success reflecting the presence of the foregoing factors and, indeed, the strong business acumen and efforts of the husband and the staff of his company.
(e) The husband has made extra efforts to sell surplus ST/I.
(f) After the stock of 2008 more informed pricing of repurchase of ST/I from banks will gradually reduce stock of 2008.
Apart from the company, the family have a number of apartments, one of which is occupied as a residence by the husband, and an industrial site with retail buildings thereon, all of which are encumbered and hence, none of which have any equity value. The husband has a pension and an insurance policy payable to his estate on his death in the sum of €400,000. The family home is valued at €850,000 subject to a mortgage in the region of €400,000. While each of the parties has a motor car, these are not owned and, hence, have no asset value. The financial reports given in evidence was that, pension apart, the net value of the equity of each of the parties was in the region of €149,000 to €150,000. With the present poor prognosis for the property market and every possibility of interest rises through Central Bank intervention or through difficulties in the money markets, the court cannot be optimistic that the highly geared property of the parties is likely to improve in value in the foreseeable future and certainly should not be a basis for provision in an order. While the company has no present value there is every indication that it will survive and eventually grow in value – but this is not to be a basis of making comparisons between husband’s share with that of the wife.
( b ) the financial needs, obligations and responsibilities which each of the spouses has or is likely to have in the foreseeable future (whether in the case of the remarriage of the spouse or otherwise)
Open offers and proposals have been helpfully made by both parties in the case. Without going into the details thereof, it is suffice to say that the husband is of the opinion that the family home, with five bedrooms and good saleability, is more than the parties can afford, and that its sale will release up to €400,000 in equity which can be used by the wife to purchase a debt free house, thereby avoiding the need for the family to pay up to €1,400 per month in family home mortgage. The wife, on the other hand, is adamant that by reason of what must objectively speaking be the appalling conduct of the husband by failing to pay any substantial maintenance until the hearing of the action and his overbearing and parsimonious attitude towards the family, that she cannot trust him, and needs the family home to be left in her name in secure fashion without the husband having any share of it. While the husband did not behave well during the interlocutory and case management stages of this case and the court took, in general terms, a very robust approach to ensuring his proper behaviour, it must now be realised that he has through tough action kept the company alive and established very good prospects for it. Notwithstanding that the husband has significantly established himself in the esteem of the court through these actions and through the observations of the court of the learning curve experienced by the husband throughout the hearing, the court is nevertheless very strongly of the view that the wife needs to remain in the home for her health and well being and in the interest of the children. The sale and repurchase of a home in a poorer location at lower cost would, in the circumstances of this case, be so disruptive as to introduce an intolerable level of instability and would be subject to continued destabilising litigation, which would be very harmful to the adult parties and children. The court has had an opportunity through active interlocutory and case management intervention from an early stage in these proceedings to express a view that perhaps the family were not able to afford such a relatively expensive house given that it then appeared to the court that they were a family who had been living off their almost inherited capital with little economic prospects for the future. It was with that view in mind that the court then suggested to the wife that she would have to consider either getting employment for herself or using the dwelling house to generate some income. To her credit, she has taken in students to generate an income of €300 a week to respond to that challenge. This move, again, is a factor to be added to the others in coming to the conclusion that the wife needs to remain in the family home and that, of course, necessitates a financial need for the payment of the mortgage of €1,400 per month. Both parents run a household for the two children, with the wife having most of the care of the children in what has emerged as a healthy, positive and satisfactory system of co-parenting, subject to normal debate in relation to exactly what the details might be. As regards the outgoings of the parties, demonstrated by their first affidavit of means, the wife’s were stated to be €6,580 per month and those of the husband’s were €4,380.14. The husband’s outgoings included the mortgage in respect of the family home which was then running at €1,560.41 per week. The wife’s income should now allow for the cost of the mortgage which she has not accounted for in her initial affidavit of means. The items set out in each affidavit of means are all items which are legitimate items of expenditure, but the levels are plainly unsustainable for the family. For the wife, the central requirement will be payment to cover the mortgage on the family home now in the region of €1,400, and €100 per week for maintenance for each of the children. A particular requirement is that the husband would pay for the fees for a new secondary day school for the girl up to €2,000 per annum, which he has undertaken to do during the hearing.
( c ) the standard of living enjoyed by the family concerned before the proceedings were instituted or before the spouses separated, as the case may be
There is no doubt that with their accumulation of capital from the sale of the previous business, the family enjoyed quite a lavish lifestyle with frequent holidays, good cars and all the trappings of a good but prudent middle class life. This type of lifestyle might well have been reflected in the affidavits of means of the two parties, especially that of the wife when they were first filed in the proceedings. Times have changed, however, and the family is lucky enough that the husband, whether by fair means or foul, has saved and turned round the company business so that they can survive the immediate future, albeit at a lower standard of living. I am optimistic that this may improve.
( d ) the age of each of the spouses and the length of time during which the spouses lived together
Both parties are in their mid forties.
( e ) any physical or mental disability of either of the spouses
Both parties are in good health and have neither physical nor mental disability.
( f ) the contributions which each of the spouses has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution made by each of them to the income, earning capacity, property and financial resources of the other spouse and any contribution made by either of them by looking after the home or caring for the family
Both parties, through the rearing of the children and their earnings, which in the case of the wife lasted until the girl was two and a half, and consisted of contributions in the home and support of the husband in relation to his business activities, are such that it is appropriate to consider that the contributions of both parties should be regarded as equal. This reflects the manner in which the parties have had the family’s cash reserves arising from disposal of the previous business lodged in joint names and in the joint registration of practically all of the residential and commercial holdings of the couple. Achieving immediate equality is difficult when the only asset is the family home subject to a mortgage and the wife wishes to have the security of sole ownership of the family home.
( g ) the effect on the earning capacity of each of the spouses of the marital responsibilities assumed by each during the period when they lived together and, in particular, the degree to which the future earning capacity of a spouse is impaired by reason of that spouse having relinquished or foregone the opportunity of remunerative activity in order to look after the home or care for the family
The wife had worked in glamorous retail and relinquished her earning capacity to look after the children as was the plan of the couple in the early years of the marriage.
( h ) any income or benefits to which either of the spouses is entitled by or under statute
Neither of the couple are entitled to any income under a statute.
( i ) the conduct of each of the spouses, if that conduct is such that in the opinion of the court it would in all the circumstances of the case be unjust to disregard it
Although the conduct of the husband necessitated interlocutory and management intervention in this case on an intensive and early basis, the court is of the opinion that that conduct should not be taken into consideration under the criterion in (i). That is not to say that the court should not have regard to the “form” of the husband necessitating the wife to take the view that she requires to have the family home transferred to her sole name so as to give her security in the face of the husband’s poor record of paying maintenance. While it is not proposed by the court in this judgment to agree entirely with the wife in relation to this requirement, the court’s judgment is tempered by her thinking in that regard and certainly has been influenced by a considerable degree in relation to the decision not to order the sale of the family home as the husband would require.
( j ) the accommodation needs of either of the spouses
It should be clear from the foregoing that the wife’s accommodation needs with her children are catered for in the family home as it now exists. The husband has a two bedroom apartment where he resides with his new partner and the children have overnights there with both of them staying in the one room in bunk beds. While I did not broach this subject while speaking to the girl (as it might have been too insensitive to raise it), I nevertheless consider that fairly soon, both children should not spend an overnight in the one bedroom, and that an apartment or house with two separate bedrooms for the children will be required. This will mean that the husband could well benefit with an injection of capital to support borrowing for the disposal of his present flat and for refinancing of more spacious accommodation in the fairly immediate future as in, I suggest, two years. This has influenced me to consider that notwithstanding a strong case being made by the wife that the husband should not retain any equity in the family home, I consider that his retention of a modest equity now equivalent to approximately €150,000 will be useful to facilitate him raising capital to get the vital extra space for himself and his children. In the contingencies which might arise from the sale of a commercial property by the wife’s father and his generosity with some or all of the proceeds thereof, it might be possible for the wife to buy out the husband’s share in the equity within a short time, depending on the success of the sale of the father’s property.
( k ) the value to each of the spouses of any benefit (for example, a benefit under a pension scheme) which by reason of the decree of judicial separation concerned that spouse will forfeit the opportunity or possibility of acquiring
The pension funds of approximately €190,000 will be split 50/50 by pension adjustment order and, the wife will forfeit the opportunity of acquiring any further pension.
( l ) the rights of any person other than the spouses but including a person to whom either spouse is remarried.
The rights of other persons do not arise.
4. I have spoken to the girl having been of the view on the evidence that the boy was too young and not of sufficient maturity to usefully offer his views under the requirement under Brussels II bis for the court to hear the voice of the child. The girl discussed her situation with me at length and demonstrated a great joy to have the opportunity to stay along with her brother with her parents and her brother on a shared basis. She looks forward to going to her new school. She did express a particular preference for having the odd occasion with her father on her own. This was a wish expressed by her father also in relation to arrangements for her confirmation (which were finalised by agreement during the course of the hearing), and I consider that it is appropriate that her wishes in this regard should be met. However, I do not propose to make any order in that regard except that the parents should consider agreeing an alteration to the existing custody/access arrangements by having at least one overnight for each of the children on their own with each parent once every school term. Such arrangements should be told to them as being the result of the court’s response to the views expressed by the girl and, if this is a success, the parties should consider, without obligation to do so, expanding this type of access, bearing in mind that it is important too for the two children to be with each other while being parented by husband and wife.
Provision
1. The husband is to pay the wife €400 per month maintenance for each child, payable by standing order suitably arranged on the 3rd day of each calendar month until further order, such payments to commence on the 3rd day of August, 2010.
2. The husband is to pay the wife the sum of €50,000 per annum payable in monthly instalments by standing order on the 3rd day of each month.
3. The wife is to be liable to pay out of this sum the mortgage on the family home together with VHI and house insurance.
4. A pension adjustment is to be made directing that 50% of the pension be paid to each of the spouses.
5. A financial adjustment order that 50% of the husband’s life insurance policy is to be made payable to the benefit of his wife or wife’s estate in the event of his death, and an order directing the husband to continue to pay the premiums of the said policy and to notify the insurance company of the interest of the wife in the policy pursuant to this judgment.
6. The succession rights of the wife pursuant to the Succession Act 1965, are to be preserved for the period of twelve years from this date.
7. The wife shall retire from any directorship or function in the family company and shall sign all documentation appropriate to achieve that purpose.
8. The holding of the husband and wife in the family home shall remain on a joint basis and the same shall be sold and the proceeds thereof distributed 50/50 between husband and wife upon the boy ceasing full time education or in any event attaining 23 years of age. Subject to the mortgagee co-operating, the wife is to assume the responsibilities of the joint mortgagor in relation to the family home. In the event of the wife being in a position to raise the capital the wife shall have an option to purchase the husband’s equity in the family home for the price of €150,000, and in the event of the husband not cooperating with such purchase, she will have liberty to apply to Court to make a property transfer order of such equity to her on the payment by her of €150,000 to the husband, and an order that the husband shall execute all documentation requisite to ensure such purchase and that in default, the County Registrar for the County of Dublin shall be appointed to sign such documentation. The option to purchase the husband’s equity in the family home shall also be subject to the right of the wife to reduce the price thereof in the event of any default by the husband in the payment of maintenance by crediting the gross amount of such default against the sum which he is obliged to pay under her right of purchase under this order and, in the event of such a credit arising by reason of the default of the husband to pay such maintenance the wife shall have a further right to credit the sum of €50,000, being her share of the funds in joint account of the parties, transferred by the husband to the company to finance his director’s loan to the company.
9. In the event of the mortgagee not co-operating, then the option to purchase shall operate by the wife acquiring a right to apply for a property transfer order on the termination of the term of the mortgage or earlier discharge thereof, or in the event of the sale of the family home and discharge of the balance owing on the mortgage, to the balance remaining after expenses of the proceeds of the sale.
10. Present custody arrangements for the children are to continue subject to the comments made in this judgment regarding the voice of the child.
11. The husband shall, within the period of one year from the date hereof, purchase or rent accommodation so that the children may have their separate rooms for their overnight stays with him, and such obligation shall bind the husband regardless of the occurrence or otherwise of the purchase by the wife of his equity in the family home.
12. In the event of the purchase of the family home by the wife in accordance with this order or otherwise, the wife shall be solely entitled to the family home.
13. Both husband and wife shall be entitled to reside solely in the accommodation now occupied by them to the exclusion of the other.
14. In the event of the wife resuming employment the husband shall not make any claim for reduction of the maintenance for a period of two years thereafter so that the wife may have some incentive to re-train for and return to work.
15. The husband and the wife shall continue to hold jointly or in common, as the case may be, such commercial properties as they now hold, but in the event of the sale of any of these properties the proceeds thereof after discharge of all expenses and mortgage finance shall be distributed 50/50 as between husband and wife.
16. The husband shall indemnify and keep indemnified the wife against all loan finance in relation to the SL Development and the husband shall be solely entitled to the proceeds (if any) thereof upon the realisation of same, and the parties shall have liberty to apply for a property adjustment order to effect such intention in the event of the same being necessary.
17. The husband shall continue to be solely responsible for the administration of all the rental property owned by the parties.
18. Any interlocutory orders made in the case shall be discharged from the date of the order.
19. No order as to costs.
20. The husband is to pay the girl’s secondary school fees forthwith in accordance with arrangements permitted by the school.
21. Liberty to apply in relation to such further ancillary orders as may be appropriate to affect the intentions of this judgment.
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