BACKFORD & BANKS
[2014] FamCA 501
•14 July 2014
FAMILY COURT OF AUSTRALIA
| BACKFORD & BANKS | [2014] FamCA 501 |
| FAMILY LAW – PROPERTY SETTLEMENT – De facto relationship – Modest asset pool – Where there is a huge disparity between the parties’ respective interests in property and superannuation – Disparate initial contributions – Joint financial commitment – Wife primary homemaker and carer – Global approach – Superannuation interests treated notionally as property – Not a just and equitable result for the parties’ to retain their existing legal and equitable interests – Applicant entitled to 20 per cent of the assets and superannuation interests – Respondent entitled to 80 per cent FAMILY LAW – PROPERTY SETTLEMENT – Jurisdiction – Relationship broke down after 1 March 2009 – Court has jurisdiction |
| Family Law Act 1975 (Cth) ss 4AA, 44, 90SF, 90SM, 106A |
| Bevan & Bevan [2013] FamCAFC 116 Docters van Leeuwen & Docters van Leeuwen (1990) FLC 92-148 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Jarrott & Jarrott [2012] FamCAFC 29 Magill v Magill (2006) 226 CLR 551 Mallett v Mallett (1984) 156 CLR 605 Marriage of Bell & Bell (1993) FLC 92-347 Marriage of Coghlan (2005) 33 Fam LR 414 Ogilvie v Adams [1981] VR 1041 ON v ON [2005] FamCA 1110 Pierce v Pierce (1999) FLC 92-844 Robb v Robb (1995) FLC 92-555; (1994) 18 Fam LR 489 Smith & Smith (1991) FLC 92-261; (1991) 15 Fam LR 206 Stanfordv Stanford (2012) FLC 93-518 Teal v Teal [2010] FamCAFC 120 Van der Linden & Kordell [2010] FamCAFC 157 Young v Queensland Trustees Ltd (1956) 99 CLR 560 |
| APPLICANT: | Mr Backford |
| RESPONDENT: | Ms Banks |
| FILE NUMBER: | NCC | 1506 | of | 2012 |
| DATE DELIVERED: | 14 July 2014 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 30 June, 1 & 2 July 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr C Othen |
| SOLICITOR FOR THE APPLICANT: | Catherine Henry Partners |
| COUNSEL FOR THE RESPONDENT: | Mr I Duane |
| SOLICITOR FOR THE RESPONDENT: | Katie Smith Solicitor |
Orders
The respondent shall pay to the applicant the sum of $178,997 within 8 weeks of the date of these orders.
Subject to compliance with Order 1 hereof, and in consideration of that payment, the respondent is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier … and Part Portion … Volume … Folio …, being the property more commonly known as … I Street, Town A, NSW (“the property”).
In default of compliance with Order 1 hereof, the parties shall do all such acts and things and sign all such documents as may be necessary to list the property for sale by public auction on the following terms.
For the purposes of implementation of Order 3 hereof:
(a)The solicitors acting for the respondent shall be the solicitors acting on the sale of the property;
(b)The property shall be listed for auction sale within 6 weeks of the date of these orders;
(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 the property is not sold by auction, or private negotiation within a further 7 days, then the property 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; and
(f)The respondent is restrained from charging, mortgaging, or otherwise encumbering the property, other than for the sole purpose of raising funds to enable compliance with Order 1 hereof.
Upon completion of the sale of the property pursuant to Orders 3 and 4 hereof, the solicitors acting 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 to the solicitors acting for the applicant, 23.1 per cent of the balance then remaining; and
(c)Thirdly, to pay the balance then remaining to the solicitors acting for the respondent.
The applicant is declared the sole legal and beneficial owner (as between the parties) of his shareholding in Backford Pty Ltd.
The respondent is declared the sole legal and beneficial owner (as between the parties) of her shareholding in C Pty Ltd.
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, investment accounts are deemed in the possession of the named investor, and superannuation entitlements are deemed in the possession of the superannuant; and
(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, including any individual liability for capital gains tax arising out of the sale of the property pursuant to Orders 3 and 4 hereof.
In the event of either 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 s 106A of the Family Law Act.
Costs are reserved for 28 days.
Any and all outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Backford & Banks has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 1506 of 2012
| Mr Backford |
Applicant
And
| Ms Banks |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties were formerly de facto partners. These proceedings concerned the alteration of their property interests pursuant to Part VIIIAB of the Family Law Act (“the Act”).
Their dispute over the existence of jurisdiction to hear and determine the proceedings was belatedly conceded by the respondent.
The factual dispute over the duration of their relationship was quite easily determined on the evidence.
Although the dispute over their contributions and ultimate entitlements remained shrill, the argument concerned only a relatively modest collection of assets and resources, which would have been much better preserved by their compromise of the dispute at a much earlier stage of the proceedings. Instead, they chose to contest a hearing at significantly greater cost.
Neither party was completely vindicated by the evidence so they will probably rue their decision not to negotiate a settlement.
Jurisdiction
The parties agreed they were formerly in a de facto relationship but, until the first day of the final hearing, they disagreed about whether the Court was seized of jurisdiction to entertain the applicant’s application for property settlement arising out of the break down in their relationship.
Relevantly, the provisions of Part VIIIAB of the Act only apply to de facto relationships that break down on or after 1 March 2009.
The applicant contended his de facto relationship with the respondent did not break down until 1 February 2012,[1] which would mean the Court was vested with jurisdiction.
[1] Applicant’s affidavit, paras 10, 80, 93
The respondent, however, deposed their relationship broke down when they separated in June or July 2006,[2] which if true would deprive the Court of jurisdiction.
[2] Respondent’s affidavit, paras 3, 103-104, 115
When the final hearing commenced, the respondent’s counsel admitted the Court had jurisdiction to determine the controversy. The concession was obviously made on express instructions, even though repugnant to the respondent’s evidence in chief.
No admission was made on the respondent’s behalf about precisely when she alleged the parties’ relationship actually did break down, but her concession necessarily comprised two separate admissions:
(a)First, the relationship broke down no earlier than 1 March 2009, for otherwise the Court did not have jurisdiction to hear and determine their dispute; and
(b)Second, the relationship broke down no earlier than 8 June 2010, because the proceedings were commenced by the applicant on 8 June 2012 and, there being no application for leave to extend time (s 44(6)) and no assertion the proceedings were out of time, the application for property settlement would otherwise have been incompetent because of the limitation period of two years (s 44(5)).
Short history
Although cognisant that the existence of a de facto relationship is a fluid concept (s 4AA), the parties agreed their de facto relationship commenced when they began living together, but they disputed when that occurred. The applicant contended they began cohabitation in March 2001,[3] but the respondent asserted their cohabitation did not begin until June 2002.[4]
[3] Applicant’s affidavit, para 7
[4] Respondent’s affidavit, para 3
The parties’ cohabitation began when the applicant and his child moved into the respondent’s home at Town B, before which the applicant and his daughter rented a home at Town D. Independent records proved the applicant still used his Telstra telephone connection at the Town D premises up until May 2002,[5] so I accept he and his child probably moved to live with the respondent at her home in or about June 2002 and therefore find their de facto relationship commenced at that time.
[5] Exhibit R1
The applicant’s child was then eight years of age.[6] The father had sole parental responsibility for her, and she lived with the father, pursuant to orders made by the Children’s Court of NSW in June 1999. That child remained part of the parties’ household until she voluntarily vacated their home to live with her boyfriend in 2010.[7] She returned to stay at the respondent’s home several nights each week between early 2011 and February 2012.[8]
[6] Applicant’s affidavit, para 8
[7] Applicant’s affidavit, para 71; Respondent’s affidavit, para 88
[8] Applicant’s affidavit, paras 74-78, 80-81; Exhibit A1, paras 26-29
Two children were born to the parties’ relationship in June 2003 and July 2004. They continued to live with the respondent after the parties finally separated.
When the parties began cohabitation, the applicant was self-employed in the construction industry and the respondent was self-employed making and installing home furnishings. They maintained vocations of that sort throughout the relationship.
The respondent introduced much more valuable assets to the relationship than the applicant. Her assets included parcels of real property situated at Town B, Town E, Town F, and Town G, of which only the Town G property was unencumbered.
The parties initially lived in the Town B property, while the Town E and Town F properties were rented. The Town G property was used for their recreation.
The applicant laboured upon all of the properties, though the parties disputed the extent of the applicant’s improvements and renovations.
The Town B, Town E and Town F properties were sold by the respondent within a year or so of the parties’ commencement of cohabitation. The net proceeds of sale were aggregated by the respondent and used to purchase another property at Town H in her sole name in 2003, which the parties then used as their new residence. The residue funds for the purchase were borrowed by the respondent and secured by mortgage over the property.
The applicant also laboured upon the maintenance and improvement of the Town H property, which was later sold by the respondent for handsome profit in 2006.
The respondent used the net proceeds of sale, together with a loan secured by mortgage, to buy another property in her sole name at Town J in 2006. The parties then used that property as their residence.
Despite the parties’ factual dispute about when they finally separated, the respondent retained sole ownership of both the Town J and Town G properties at separation. The applicant also laboured upon the maintenance and improvement of those two properties.
I find on the evidence that the parties’ separated and their relationship broke down on 1 February 2012, as the applicant asserted, for the following reasons:
(a)The respondent’s admission about the existence of jurisdiction and the lack of need for the applicant to seek leave to bring his application out of time means their relationship subsisted until at least June 2010.
(b)In June 2011 the respondent used her available line of credit to buy a truck for the applicant.[9] She would not likely have done so voluntarily if they were then separated and she did not adduce evidence in chief that she was forced to do so against her free will.
(c)The respondent complained in her affidavit about the applicant’s expenditure on alcohol, which she regarded as excessive, right up until 30 January 2012 – not just until July 2006 when she deposed they separated. After July 2006, according to the respondent’s schedule, the applicant made many purchases at venues in the immediate vicinity of the home at Town J, not Town G, suggesting their cohabitation at Town J continued until February 2012.[10]
(d)Up until February 2012, the respondent spent mostly every weekend with the applicant and the children at the Town G property, during which time the parties shared a bed and engaged in sexual relations.[11]
(e)The respondent was the sole legal proprietor of the Town G property, but did not demand the applicant’s payment of rent or tithe for his occupation of the property. She paid all costs and expenses associated with the property.[12]
(f)The respondent felt compelled to remove her livestock from the Town G property as from February 2012, because she ceased her practice of attending the property each weekend at that point in time.[13]
(g)The respondent did not seek the applicant’s payment of any child support in respect of their two children until 2013.[14]
[9] Respondent’s affidavit, para 74
[10] Respondent’s affidavit, para 72
[11] Respondent’s affidavit, paras 105-106
[12] Respondent’s affidavit, para 112
[13] Respondent’s affidavit, para 124
[14] Respondent’s affidavit, para 115
From the time of separation in February 2012, the applicant lived at the Town G property and the respondent lived at the Town J property.
These proceedings were commenced by the applicant in June 2012 before the Federal Magistrates Court (as the Federal Circuit Court then was). He sought both parenting and property settlement orders. The proceedings were later transferred to this Court.
The respondent sold the Town J property at a loss in December 2012. The respondent used the proceeds of sale to discharge debts of the parties and then distributed the remainder to herself and the applicant, though not equally.
The parties reached agreement about parenting orders in respect of their two children in April 2013. Since then the dispute has been confined to the alteration of their interests in property.
In October 2013, the respondent paid $100,000 to the applicant in return for possession of the Town G property. The respondent still retains and lives at that property with the parties’ two children.
The evidence
The applicant relied upon:
(a)His affidavit filed on 16 June 2014;
(b)His financial statement filed on 13 June 2014;
(c)The redacted past affidavit of his adult daughter, Ms Backford, tendered as an exhibit,[15] which evidence was uncontroversial; and
(d)The affidavit of his mother, Ms K, filed on 9 August 2012.
[15] Exhibit A1
The respondent relied upon:
(a)Her affidavit filed on 13 June 2014;
(b)Her financial statement filed on 13 June 2014; and
(c)The affidavit of her mother, Ms L, filed on 13 June 2014.
Both parties successfully objected to portions of the affidavits upon which the other relied.
Applicable legal principles
Orders under the Act altering the property interests of parties may only be made if the Court is first satisfied it is just and equitable to make such orders. It is necessary to begin that inquiry by identifying the existing legal and equitable property interests of the parties. It must not be assumed the parties’ rights to or interests in property are or should be different from those that then exist, or that a party has the right to have the parties’ property divided by reference to the statutory considerations (see Stanfordv Stanford (2012) FLC 93-518).
Although the High Court was dealing in Stanford with an application between spouses for property settlement pursuant to Part VIII of the Act, the principles apply equally to applications between de facto partners pursuant to Part VIIIAB of the Act.
It is permissible for the factors prescribed by s 90SM(4) (the counterpart to s 79(4)) to inform the inquiry under s 90SM(3) (the counterpart to s 79(2)) of the Act about the justness and equity of making property settlement orders (see Bevan & Bevan [2013] FamCAFC 116 at [83]-[89], [163], [169], [171]-[172]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 90SM(4) of the Act. The court must necessarily identify and assess the parties’ contributions within the meaning of ss 90SM(4)(a)-(c) and then take account of the relevant matters referred to in ss 90SM(4)(d)-(g) and 90SF(3) of the Act.
Existing property interests
At the close of the evidence the parties tendered a joint balance sheet,[16] which is used as the template to determine the parties’ existing legal and equitable interests in property and their superannuation interests.
[16] Exhibit A
The applicant’s current interests comprise:
No.
Asset
Value
2
Toyota car
15,000
4
Household contents
10,000
6
Shareholding (Backford P/L)
16,000
7
Tools, gym equipment, diving gear
160
Sub-total
41,160
Liabilities
11
Visa
4,000
Sub-total
37,160
Superannuation
14
CBUS
17,133
Total
$54,293
The respondent’s current interests comprise:
No.
Assets
Value
1
Town G property
775,000
3
Household contents
10,000
5
Horses, livestock, farm equipment
20,000
8
Shareholding (C P/L)
35,000
Sub-total
840,000
Liabilities
12
Visa
4,843
Sub-total
835,157
Superannuation
13
AXA
277,000
Total
$1,112,157
There is a huge disparity between the parties’ respective interests in property and superannuation, which disparity is even greater than it was when the parties began their cohabitation in June 2002.
Given their combined efforts, both financially and otherwise, to advance the interests of the family, comprising themselves and their two children, over a period of cohabitation which approximated 10 years, it would not be a just and equitable result for the parties to retain their existing legal and equitable interests. A just result requires alteration of their interests.
Such a finding is uncontroversial, since both parties contended for an alteration of their interests by property settlement. They only differed about the proper proportions of their respective final interests.
For the purpose of these proceedings, the parties’ superannuation interests are treated notionally as property and their contributions to property and superannuation are assessed globally, even though that is not the preferred approach (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429). The superannuation interests comprise about one-quarter of the parties’ wealth and, since neither party sought a superannuation splitting order, the adjustment of interests between them will need to be achieved by reference to their property rather than their superannuation.
Contributions
The evidence relevant to the considerations prescribed by s 90SM(4)(a)-(c) of the Act was as follows.
Applicant’s contributions at commencement of cohabitation
The assets taken by the applicant into the relationship comprised a car, a motor cycle, household contents, tools of trade and a small amount of superannuation.[17] There was no admissible evidence about the value of those assets or the superannuation interest.
[17] Applicant’s affidavit, para 19
The respondent alleged, though the applicant denied, the applicant’s motorcycle and car were both sold for only $2,000 each within a few months of the commencement of their cohabitation.[18]
[18] Exhibits R23, R24; Respondent’s affidavit, para 29(a)
It is unnecessary to determine those factual disputes because, irrespective, the applicant’s initial contributions were dwarfed by the respondent’s.
Respondent’s contributions at commencement of cohabitation
The assets and resources taken into the relationship by the respondent comprised:
(a)The four parcels of real estate at Town B, Town E, Town F, and Town G.[19]
(b)Her sole shareholding in the corporation C Pty Ltd.[20]
(c)An assortment of shares, a car, household contents, savings, an investment account, and her superannuation interest.[21]
[19] Applicant’s affidavit, para 22; Respondent’s affidavit, para 11
[20] Respondent’s affidavit, para 12
[21] Respondent’s affidavit, para 13
As already mentioned, the properties at Town B, Town E, and Town F were all sold within about a year of the parties’ commencement of cohabitation. The proceeds of sale were collectively used to acquire and to diminish the encumbrance over the property contemporaneously acquired by the respondent at Town H. When that series of transactions was complete, the net equity in the Town H property stood at around $496,000. That figure is computed by deducting the balance due under its encumbrance as at April 2003 ($49,065.74)[22] from the purchase price of the property paid in January 2003 ($545,000).[23]
[22] Exhibit R10
[23] Respondent’s affidavit, para 18
The respondent had two liabilities at the time of commencement of cohabitation, both of which were secured over one or more of her real properties. One was a line of credit[24] and the other was an investment home loan.[25] Those liabilities are already factored into the preceding computation of the net equity in real property introduced by the respondent to the relationship. They should not be double-counted.
[24] Exhibits R2, R21; Respondent’s affidavit, para 16
[25] Exhibit R3
The Town G property was always unencumbered, but there is no evidence as to its value in June 2002. It was purchased for $95,000 nearly five years before in December 1997.[26]
[26] Respondent’s affidavit, para 20
The value of the respondent’s shareholding in C Pty Ltd in June 2002 is not the subject of direct evidence, but some inferences are available. Between May and July 2002 the credit balance in the corporation’s bank account fluctuated between $38,000 and $14,000.[27] The corporation had a managed investment worth about $5,000,[28] plant and equipment with an aggregate written down value of around $10,000,[29] and shares in public companies.[30] The value of the shares held in public companies was not disclosed, but the parties agreed the corporation sold shares worth $53,000 by the end of the financial year ended 30 June 2004. Although the corporation’s net value was declared at $230,790 in its balance sheet for the financial year ended 30 June 2002, that value comprised a debt of $178,173 owed to it by the respondent, which loan was recorded in her loan account.[31] So even if the respondent’s shareholding interest in the corporation was worth about $230,000, she had a countervailing personal liability to it of nearly $180,000. If there was no prospect of her repaying the loan to the corporation, then her corporate shareholding was correspondingly reduced in value.
[27] Exhibit R20
[28] Exhibit R18
[29] Exhibit R26
[30] Exhibit R26
[31] Exhibit R26
Aside from the assets held by the corporation, the respondent had a managed investment worth slightly less than $5,000[32] and shares in public companies which the parties agreed were then worth about $4,700. The values of her car and chattels are unknown. The balance of her bank account is unknown. Her superannuation interest was then worth about $142,262.[33]
[32] Exhibit R17
[33] Exhibit R19
Inferentially, the total net value of the assets and superannuation taken into the relationship by the respondent approximated $800,000.
Contributions during cohabitation
The parties agreed the applicant carried out work upon the respondent’s real properties that amounted to maintenance, renovation, and improvement. However, there was a factual dispute about the extent of the work done on the properties by the applicant. He contended the work was quite substantial,[34] whereas the respondent contended it was confined to minor repair work.[35]
[34] Applicant’s affidavit, para 24, 33, 40, 50-54, 56-60
[35] Respondent’s affidavit, paras 35
The evidence of the parties on that issue was impossible to reconcile. In all probability, it was not as substantial as the applicant asserted, nor as trifling as the respondent asserted. The applicant’s evidence on the issue was certainly more particularised and tended to be more convincing than the respondent’s evidence. Additionally, the applicant was partially corroborated by his adult daughter and she was not required for cross-examination,[36] so her evidence can safely be accepted as correct. I therefore accept the work the applicant did was relatively significant. The respondent at least accepted the applicant made a “good contribution generally” to the Town G property. The applicant’s work on all of the properties certainly involved considerable time and entailed considerable effort, even if the respondent does not believe it materially improved the value of her properties.
[36] Exhibit A1, paras 4, 5, 9, 14, 16
The respondent alleged she bought a car and a motorcycle for the applicant, collectively worth more than $20,000, as consideration for the work he did for her on the properties,[37] but I reject the imputation they contracted with one another commercially over the work. The applicant denied any such commercial arrangement between them and the respondent’s evidence in cross-examination was not probative of it in the context of their domestic relationship (see Magill v Magill (2006) 226 CLR 551 at 614; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 106).
[37] Respondent’s affidavit, paras 37-38; Exhibit R12
The work done on the respondent’s properties was not done exclusively by the applicant. The respondent engaged contractors to carry out some of the work, such as the installation of a kitchen at the Town H property[38] and the installation of a pool at the Town J property.[39]
[38] Respondent’s affidavit, para 52
[39] Respondent’s affidavit, para 110
Both parties had banking lines of credit upon which they each drew to meet the cost of capital purchases and regular expenses. The respondent deposed in chief[40] and conceded in cross-examination they each treated their line of credit “like a bank account”, into which they deposited and withdrew money as and when required.
[40] Respondent’s affidavit, paras 44-52, 58, 61, 64, 66, 71, 73, 74
Even though the parties did not have any joint bank accounts,[41] the respondent willingly guaranteed the applicant’s line of credit on several occasions[42] and was aware the debit balances on their respective lines of credit were progressively escalating.[43] The respondent admitted in cross-examination she went through the applicant’s bank account statements with him and knew what he did with his money.
[41] Respondent’s affidavit, para 108
[42] Respondent’s affidavit, paras 60, 62, 66
[43] Respondent’s affidavit, paras 44, 58, 64, 67, 71
The applicant adhered to his evidence that the respondent “took control” of their finances,[44] which was effectively admitted by the respondent in cross-examination. She said “Yes, he relied on me for financial matters” and conceded she was the financial manager of the household. The factual dispute about whether she also had both the applicant’s permission and the ability to unilaterally operate his accounts remained unresolved, because she did not concede that allegation.[45] Nevertheless, it was plain enough the parties both used their separate accounts to financially sustain the family and the respondent superintended the financial affairs of the household. It was a combined effort.
[44] Applicant’s affidavit, para 22(a)
[45] Applicant’s affidavit, paras 22(a), 62
Throughout their relationship, both parties worked to derive income. The parties both contributed the whole of their income and expended it for the benefit of the family.
The respondent complained about the applicant’s expenditure on alcohol being excessive and wasteful, but I reject any suggestion such expenditure should reflect deleteriously upon the applicant. The respondent lived with the applicant until February 2012 and she adduced no evidence of her objection to his expenditure on alcohol over the duration of their relationship, even though she was prepared to confront him over other complaints.[46] Such expenditure by the applicant enjoyed either her consent or acquiescence. Save in one respect, there is no utility complaining about it retrospectively.
[46] Respondent’s affidavit, para 114
The applicant was convicted in 2006 for an offence of driving a vehicle with the low range prescribed concentration of alcohol in his body. While driving in that condition he was involved in a collision. He was sued for the damage he caused, amounting to approximately $8,000, for which he was not indemnified by insurance because of his offence. The parties’ assets were therefore diminished by that amount because of the applicant’s foolishness.
The gradual erosion of the wealth accumulated by the parties in the first few years of their relationship seems to be attributable to two principal causes – first, the loss incurred on the sale of the Town J property in December 2012, and second, their expenditure exceeding their income and other capital gains. They bought cars, motor cycles and other equipment, and the respondent spent a large amount on the installation of a pool at the Town J property, which expenditure did not improve the value of the property.
The Town J property was eventually sold for around $110,000 less than the amount for which it was purchased six years before.[47] All the while, the respondent’s debt under her line of credit increased from $53,586 to $291,106,[48] and the applicant’s debt under his line of credit increased from nil to $107,352.[49]
[47] Respondent’s affidavit, paras 57, 75
[48] Respondent’s affidavit, paras 57, 77
[49] Respondent’s affidavit, paras 60-61, 77
The parties jointly experienced the capital loss on the Town J property in 2012 just as they did the capital gain on the Town H property in 2006. They each acquiesced to the other’s expenditure of funds from their lines of credit. I accept the applicant’s submission that the parties’ losses, misfortune and profligacy should not be visited principally upon him.
The applicant did not dispute that the respondent was the primary homemaker and carer for the children. Her work for C Pty Ltd was conveniently done mostly at home.[50] The applicant departed the house for work early each morning, and for one period of several months he was away from the house for several days each week,[51] but he socialised with the children in the afternoons, evenings, and on weekends.[52] I accept the applicant performed domestic chores outside his work hours,[53] as he was corroborated by his adult daughter and her evidence was unchallenged.[54]
[50] Respondent’s affidavit, para 80
[51] Applicant’s affidavit, para 74
[52] Applicant’s affidavit, paras 42-45, 49, 63-68
[53] Applicant’s affidavit, para 69
[54] Exhibit A1, paras 10, 11
Post-separation contributions
The applicant moved from the Town J property to live at the Town G property following separation in February 2012. Up until the applicant vacated the Town G property in October 2013, the respondent paid the rates and insurances on the property and the applicant paid his own utility costs.[55] The applicant therefore had rent-free accommodation for over 18 months.
[55] Respondent’s affidavit, para 112
The respondent has had primary responsibility for the care and supervision of the children since separation.
The respondent’s superannuation interest increased in value after separation, without any direct or indirect contribution by the applicant. In March 2012 the superannuation interest was worth $213,627,[56] whereas it is now worth $277,000.[57] However, as the applicant submitted, there was no evidence as to whether the increase was due to additional financial contributions by the respondent, mere capital growth, or a combination of the two.
[56] Exhibit R25
[57] Exhibit A (item 13)
Other factors
The evidence relevant to the factors prescribed by ss 90SM(4)(d)-(g) and 90SF(3) of the Act was as follows.
The parties separated in February 2012, after which the parties’ two children remained living with the respondent. For reasons which did not need to be explored in this part of the proceedings within the ambit of Part VIIIAB of the Act, the children’s interaction with the applicant tapered off. Even though parenting orders were made with the parties’ consent in April 2013 providing for the children to spend time with the applicant, they have not done so. The parties accepted that situation was unlikely to change in the foreseeable future. The burden of their supervision and maintenance will therefore continue to fall principally upon the respondent. Currently the applicant only pays to her child support of $54 per week.[58]
[58] Applicant’s financial statement, para 31; Respondent’s financial statement, para 13
The respondent is 51 years of age. She intends to remain in the employment of the company she owns and controls, making home furnishings. Her gross weekly income is $914 per week.[59] She is good at her job and there was no suggestion her income will diminish.
[59] Respondent’s financial statement, para 9
The applicant is younger than the respondent. He is 42 years of age. He too intends to remain in the employment of the company he owns and controls, working in the construction industry. He is a licensed tradesman, but undertakes other forms of construction work as well. He deposed to weekly income of $551,[60] but confirmed in cross-examination he did not personally calculate that figure and was entirely reliant upon his partner, accountant, and solicitor to interpret his financial circumstances.
[60] Applicant’s financial statement, para 11
The applicant derives his income through Backford Pty Ltd, which corporation’s financial statements for the financial years ended 30 June 2012, 2013, and 2014 were tendered in evidence.[61]
[61] Exhibit R16
In the 2012 financial year, the company received gross income of $123,792, from which it paid director’s salary of $18,100 to the applicant and spent $32,304 on a vehicle presumably driven by him.
In the 2013 financial year, the company received gross income of only $44,662, which the applicant explained was due to him not working so much because of his disappointment over the schism that developed between him and the two children. In any event, no director’s salary was paid, but the company paid motor vehicle expenses of $9,440. Such records evoke curiosity about how the applicant lived without income, but the curiosity waned when the applicant said in cross-examination “I am a [construction worker] – not everything goes through the books anyway”, from which I impute not all income is declared by the company for assessment of taxation.
For the part of the 2014 financial year up to 31 March 2014, the company received gross income of $148,460, suggesting the company is on track to receive gross income approaching $200,000 for the whole financial year. The records do not disclose the payment to the applicant of any wages, salary or dividends, but the applicant must have received some financial benefit from the company, for otherwise neither he nor his advisers could have estimated his currently weekly income at $551.
The inference is obviously available that the applicant and his advisers do not decide upon the value of the emoluments the company should declare it paid to the applicant until after the financial year ends. Such an approach dovetails perfectly with the suggestion put to the applicant in cross-examination that there is “flexibility” in the amounts he periodically withdraws from the company’s financial reserves.
The applicant’s declared weekly income of $551 equates to annual gross income of only $28,652. If the company derives income of around $200,000 for the 2014 financial year, the applicant will probably receive considerably more than only $28,652 for the whole financial year. It is not unreasonable to infer he has the capacity and flexibility to withdraw wages comparable to those drawn by the respondent from her company.
The parties have both received the benefit of interim distributions of funds following the sale of the Town J property by the respondent in December 2012. The respondent received a net amount approximating $697,000 from the sale of that property.[62] Of that amount she paid $35,000 to the applicant and retained about $210,000 herself. The rest was used to discharge her line of credit ($291,000), the applicant’s line of credit ($107,000), a truck loan ($49,000), and other debts of the respondent. Nearly a year later, the respondent paid another $100,000 to the applicant.[63]
[62] Respondent’s affidavit, paras 75-76
[63] Respondent’s affidavit, paras 76-78, 111
I accept the upshot of those distributions was that the applicant received funds of $135,000[64] and the respondent received funds approximating $141,500.[65] I reject the respondent’s contention that she only received the benefit of funds totalling $80,000.[66]
[64] Respondent’s affidavit, paras 76(d), 78(a)
[65] Respondent’s affidavit, paras 78(b)-78(j)
[66] Exhibit A (item 9)
The respondent acknowledged such funds should not be notionally added back to the parties’ existing legal property interests, as the parties’ joint balance sheet was liable to suggest.[67] Rather, I understood her to contend the premature payment of those amounts to the parties should be taken into account under ss 90SM(4)(e) and 90SF(3)(r) of the Act, with which approach the applicant concurred, or at least did not dispute. Such an approach is consistent with authority (see Bevan & Bevan [2013] FamCAFC 116 at [78]-[79], [160]).
[67] Exhibit A (items 9-10)
The respondent asserted one of the debts she paid from the money distributed to her was an amount of $30,000 due to her mother.[68] I accept she paid those funds to her mother, but do not accept they were paid in the form of a loan repayment. Nor were they paid in respect of any liability that arose in the course of the parties’ relationship. Despite the inconsistent evidence in chief adduced by both the respondent and her mother,[69] they both admitted in cross-examination the funds were advanced to the respondent by her mother well before her relationship with the applicant began – even as far back as 1982. If the advances ever were characterised as loans at all, they were certainly statute-barred and therefore unrecoverable (see Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; Ogilvie v Adams [1981] VR 1041 at 1043, 1045), so the respondent’s payment of $30,000 to her mother in or about December 2012 was entirely voluntary.
[68] Respondent affidavit, para 78(d)
[69] Respondent’s affidavit, para 59; Affidavit of Ms L, para 31
The respondent abandoned any contention she was entitled to any adjustment for her care and supervision of the applicant’s child (see Robb v Robb (1995) FLC 92-555 at 81,542, 81,546, 81,547).
Just and equitable orders
The applicant contended for his entitlement to between 35 and 40 per cent of the parties’ total wealth, and settled on a median figure of 38 per cent. The combined net value of the parties’ assets and superannuation interests is $1,166,450 (= 54,293 + 1,112,157), so 38 per cent equates to $443,251.
The respondent instead proposed the applicant’s entitlement to 15 per cent of the parties combined assets, together with an additional sum of $35,000 calculated by reference to the escalation in value of the respondent’s superannuation interest during cohabitation, albeit paid from asset reserves. The combined net value of the parties’ assets is $872,317 (= 37,160 + 835,157), of which 15 per cent equates to $130,848. By addition of the extra $35,000, the effect of the respondent’s proposal was for the applicant to retain net assets worth $165,848. That figure comprises 14.22 per cent of the overall assets and superannuation interests.
The parties’ proposals were therefore some 24 per cent, or $277,403, apart.
The respondent expressly conceded in final submissions it was impossible to undertake any “pernickety or mathematical” exercise, which I accept to be correct. The task of moving from a qualitative to quantitative assessment of the parties’ contributions and needs is a difficult one, but that is the nature of the exercise of discretion (see Mallett v Mallett (1984) 156 CLR 605 at 625; Teal v Teal [2010] FamCAFC 120 at [36]; Van der Linden & Kordell [2010] FamCAFC 157 at [90]).
The synthesis of the following factors warrants the applicant’s entitlement to 20 per cent and the respondent’s entitlement to 80 per cent of the assets and superannuation interests:
(a)The enormous differential in the parties’ initial contributions at the commencement of their cohabitation some 12 years ago, which is a factor of considerable importance (see Pierce v Pierce (1999) FLC 92-844 at [23]-[30], [40]).
(b)The change in the parties’ respective financial positions since their cohabitation commenced some 12 years ago, including the financial benefit each of them individually received after December 2012 from the net proceeds of sale of the respondent’s Town J property.
(c)The considerable work done by the applicant on each of the respondent’s properties, for which he was not directly remunerated.
(d)The parties’ joint financial commitment to the advancement of their family unit throughout the 10 years of their relationship, subject to the loss of assets worth about $8,000 caused by the applicant’s recklessness while moderately intoxicated in 2006.
(e)The respondent’s provision of rent-free accommodation to the applicant for about 18 months after their separation.
(f)The respondent’s role as primary homemaker and carer for the children, both in the past and into the future. The children are currently aged on 11 and 10 years.
(g)The limited financial assistance presently provided by the applicant to the respondent by way of child support, which situation will likely continue into the future.
(h)The parties’ comparable earning capacities, though the applicant’s earning capacity will probably extend for longer than the respondent’s because of his younger age.
(i)The respondent’s much larger superannuation interest, part of which was accumulated post-separation without direct or indirect contribution by the applicant.
A proportional share of 20 per cent in the parties’ combined net assets and superannuation interests equates to $233,290.
Presently, the applicant has sole legal proprietorship of assets and a superannuation interest with an aggregate net value of $54,293.
In order for the applicant to receive his correct entitlement, the respondent must pay to him the sum of $178,997 (= 233,290 – 54,293).
The only asset the respondent can viably use to raise those funds is her property at Town G. She is free to borrow funds against the security of that property to raise the amount necessary for payment to the applicant. The surplus of her income over expenses, as declared in her financial statement,[70] may well allow her to meet the repayments on any commercial loan of around $180,000 she raises against the collateral of her home. The orders allow the respondent a reasonable period of time within which to arrange finance.
[70] Respondent’s financial statement, paras 9, 16, 33, 60
If the respondent cannot, or does not desire to, borrow money to fulfil the applicant’s entitlement then the Town G property will need to be sold and the proceeds of sale distributed in such a way as to achieve the same result. The orders include a default mechanism to that effect.
Although the value of the Town G property was agreed at $775,000, the property may yield more or less on sale. Expressed as a percentage of the agreed value of $775,000, the payment of $178,997 due to the applicant represents 23.1 per cent. Consequently, the orders provide for payment to the applicant of 23.1 per cent of the net proceeds of sale if the sale of the property becomes necessary. That approach accords with authority (see Docters van Leeuwen & Docters van Leeuwen (1990) FLC 92-148 at 78,024; Smith & Smith (1991) FLC 92-261 at 78,759; Marriage of Bell & Bell (1993) FLC 92-347 at 79,683; ON v ON [2005] FamCA 1110 at [48]; Jarrott & Jarrott [2012] FamCAFC 29 at [21]).
Otherwise, the parties will retain the assets in their respective possession and their own superannuation interests.
Such an outcome is just and equitable.
Costs are reserved for 28 days because both parties sought costs in the last applications they each filed – being the Amended Initiating Application filed on 26 May 2014 and the Amended Response filed on 23 June 2014. The parties also previously informed the Court they had complied with their obligations by serving upon one another Offers of Settlement.[71]
[71] Order 3 made on 6 December 2013; Notation B made on 12 February 2014
I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 14 July 2014.
Associate:
Date: 14 July 2014
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