Baker and Baker
[2014] FamCA 356
•4 June 2014
FAMILY COURT OF AUSTRALIA
| BAKER & BAKER | [2014] FamCA 356 |
| FAMILY LAW – PROPERTY – Initial contributions by the husband – Substantial contributions during marriage by the wife and her family – Compensation payment received by husband at the time of separation but expended – Non-financial contributions favour the wife – Overall greater contributions made by wife – Husband unable to work because of a workplace injury – Wife has significant financial resources – Modest adjustment warranted in respect of factors under section 75(2) of the Family Law Act 1975 (Cth) – Wife’s post-separation debts not included in pool – Husband lacks financial ability to have one of the parties’ properties transferred to him – Consideration as to just, equitable and appropriate orders |
| Family Law Act 1975 (Cth) ss 79, 75(2) |
| Bevan & Bevan [2013] FamCAFC 116 Farmer & Bramley[2000] FamCA 1615 Figgins & Figgins [2002] FamCA 688 Harris & Harris (1991) 104 FLR 458 Kessey & Kessey (1994) FLC 92-495 Stanford v Stanford (2012) 247 CLR 108 |
| APPLICANT: | Ms Baker |
| RESPONDENT: | Mr Baker |
| FILE NUMBER: | PAC | 2397 | of | 2011 |
| DATE DELIVERED: | 4 June 2014 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 13 & 14 May 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Obradovic |
| SOLICITOR FOR THE APPLICANT: | Thompson Madden Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Battley |
| SOLICITOR FOR THE RESPONDENT: | Warwick McCarthy & Co |
Orders
That within two (2) months from the date of these Orders, the Applicant wife pay the sum of $602,175 to the Respondent husband.
That, concurrently with Order 1, the Respondent husband do all things and sign all documents necessary to transfer all his right, title and interest in the properties known as and situate at B Street, Town C in the State of New South Wales (Folio Identifier …) and D Street, Town C in the State of New South Wales (Folio Identifier …) (“the properties”) to the Applicant wife.
That, concurrently with Orders 1 and 2:
(a)The Applicant wife do all things and sign all documents necessary to refinance or discharge into her sole name only the mortgage in favour of her father secured over the properties, so as to discharge the Respondent husband from any liability arising under the said mortgage; and
(b)The Respondent husband do all things and sign all documents necessary to discharge any mortgage secured by him over the properties.
That, otherwise, the parties each retain all other items of property, including but not limited to realty, bank accounts, superannuation entitlements, furniture and motor vehicles, currently in their possession and be declared the sole legal and beneficial owner of all such items of property, and be responsible for any debt or liability arising in respect of any such item of property remaining in their possession.
That all outstanding applications be dismissed.
That the parties be granted a liberty to apply on seven (7) days’ notice as to the implementation of these Orders.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Baker & Baker 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 PARRAMATTA |
FILE NUMBER: PAC 2397 of 2011
| Ms Baker |
Applicant
And
| Mr Baker |
Respondent
REASONS FOR JUDGMENT
The proceedings before the Court are proceedings whereby both parties seek property orders under section 79 of the Family Law Act 1975 (Cth) (“the Act”).
The approach to the determination of an application under s 79 of the Act is set out in Stanford v Stanford (2012) 247 CLR 108 and that decision was the subject of detailed consideration by the Full Court in Bevan & Bevan [2013] FamCAFC 116.
The Court should firstly identify the present assets, financial resources and liabilities of the parties.
The Court should then consider whether, having regard to the circumstances before it, it would be unjust and unfair not to make orders for the alteration of the property interests of the parties having regard to the provisions of s 79(2) of the Act.
The Court can then proceed to consider the contributions by each of the parties as contemplated by s 79(4)(a) – (c) of the Act.
Having determined the contribution-based entitlements of the parties the Court can then consider the various factors set out in s 75(2) of the Act and whether any further adjustment to the parties’ contribution-based entitlements is appropriate.
The Court is then required to consider the justice and equity of the proposed orders and whether, in all the circumstances, the orders to be made are appropriate.
The present assets and liabilities of the parties
The parties are in substantial agreement as to the present assets and liabilities of the parties, although not in full agreement as to the appropriate property pool for division. This aspect will be considered later.
The present assets and liabilities are:
Assets:
Joint D Street property $960,000
Joint B Street property $700,000
Husband Falcon car $ 8,000
Husband Town M property $225,000
Wife Holden car $ 5,000
Wife Money at bank $ 17,958
Wife Inheritance $523,000
Wife W Pty Ltd share $ 95,000
Husband Superannuation $ 7,000
Wife Superannuation $ 8,000
Liabilities:
Joint B Street mortgage $316,500
Husband Town M mortgage $271,775
Wife Capital debt to father $100,000
Wife Borrowings from father $148,325
Unjust or unfair not to make orders
The Court should determine whether it is just and equitable to make a property settlement order. If the Court concludes that it would be unjust or unfair, it must leave the present property rights intact.
In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and thus, for example, the common ownership or use of property by husband and wife will no longer be possible, or the express or implicit assumptions that underpinned existing property arrangements, such as the accumulation of assets or financial resources by one for the benefit of both, have been brought to an end with the relationship.
In particular, such a circumstance arises, as in this matter, where both parties seek adjustment orders but are unable to agree as to same.
In this matter over the period of the parties’ relationship, which was over 27 years until physical separation, the parties accumulated joint property and financial resources. The strong inference being that such assets were accumulated for the common purpose of providing for their life into the future and, in all probability, ultimately for their adult children. As a consequence of the commencement of property settlement proceedings, in which both parties seek disparate property adjustment orders, the Court is satisfied that it is just and equitable to make orders as to property adjustment under s 79 of the Act.
Assessment of Contributions
It is of some utility to consider a short history of the parties’ acquisition of their present assets.
The Applicant wife and the Respondent husband commenced to cohabit in about 1979. They married in November 1982 and separated in mid-2010.
The husband remarried in 2013.
There are three children of the parties’ relationship. Those children are now aged 27, 24 and 20 and live independently of the parties. It is acknowledged by the parties that the wife was the primary carer of the three children and the primary homemaker, with the husband assisting, subject to his work commitments, until his back injury and, thereafter, subject to his physical restrictions. It is clear that the wife shouldered the substantial burden in relation to the children and the home.
At the commencement of the parties’ cohabitation they resided rent-free in a home owned by the wife’s parents. They resided in this property until they moved to Town C in April 1983, where they commenced to reside in a two-bedroom flat rent-free that was also owned by the wife’s parents.
At the time of cohabitation the wife owned some furniture, a motor vehicle and savings of about $5,000. She was the holder of a 20 per cent shareholding in her family company, W Pty Ltd, with that share having an agreed value of $95,000. That company owns a rural property on which the wife’s father operates a rural enterprise as a primary producer. The other shareholders are of the company and the wife’s four siblings.
The wife was in full-time employment at this time in a retail position.
At the commencement of cohabitation the husband owned a motor vehicle that was under finance. He had received a personal injuries verdict which, net of costs, paid to him about $111,000.
This compensation verdict provided to the husband and wife a significant start in their married life together. Using the funds from the compensation verdict, the husband and wife purchased real estate properties in Town C at E Street, a house on the corner of F and G Streets. Financial details of these purchases were not in evidence.
Early in their cohabitation the wife’s father had made available to the parties an old house near Town H. The husband and wife renovated the property, so as to make it habitable, and the property was rented out as an investment. The parties were permitted by the wife’s father to retain the rent for their own use over the next 12 years until a fire destroyed the cottage.
By the time the parties moved to Town C in 1983 the wife had accumulated savings from wages of about $50,000. In May 1983 she commenced work in a retail position in Town C. The husband also obtained some employment in Town C.
In 1984/1985 the parties sold the E Street and G Street properties to fund the purchase of a retail business.
In November 1985 the parties purchased a retail business at Town A and they established at that time a partnership known as the J Partnership through which they ran the business entity. Both parties worked long hours in this business, which was open seven days a week, and they resided on site.
In 1987 the parties jointly purchased a rural property at D Street, Town C. At the time of purchase the property was vacant land.
In October 1988 the parties purchased a second rural property at B Street, Town C for $90,000. The two properties were used for mixed farming, grazing and share farming operations.
By mid-1989 the parties’ retail business was not doing well financially and the wife was expecting the parties’ second child. The parties leased out the business in August 1989 and moved to live with the wife’s parents rent-free until about September 1992, at which time a cottage on the D Street property had been substantially completed.
Following the leasing of the business the husband was unemployed for a period of time and then obtained work at a food processing centre. The husband left his employment in about 1996, at which time the parties purchased a transport industry business at a cost of about $37,000 for the husband to run. The business was not successful.
Following the birth of the parties’ second child, the wife obtained some employment in retail in Town C.
The wife, during this period, received the sum of $2,000 by way of inheritance from her grandfather, which was applied to costs of the construction of the cottage.
The parties moved into the cottage at lock-up stage and interiors were completed as time and money permitted. Upon the ultimate sale of the retail business for $40,000, a shed and pergola were constructed on the property.
The wife later obtained part-time employment in factory work and in 1999 obtained casual work four days a week in customer service at a local retail business. That employment continued until 2004. In addition, the wife had several other part-time positions in retail.
In 2000 the husband commenced employment at K Company in a labouring position and worked there for about nine months. He suffered a back injury whilst in that employment and, after making a workers compensation claim, commenced to receive weekly workers compensation payments. The husband had surgical intervention in an endeavour to remedy pain from his injury. Thereafter, he was able to work on occasions casually, but was on and off workers compensation payments until final settlement of his claim at the time of separation. He acknowledges that following his back injury he was unable to undertake significant physical tasks in and around the home and on the parties’ properties. He was assisted by his son and other children. Partnership financials indicate that the rural enterprise was not generating any realistic income, necessitating the parties obtaining paid employment from time to time. Accumulated losses at 30 June 2009 were $144,000.
In 2002 the parties purchased a property at I Street, Town C for $225,000. The property comprised a rural landholding of 788 acres. The purchase was wholly funded by mortgage, using the B Street property as collateral security. It was the party’s intention to run the property as a grazing enterprise. The property ran at a loss and, following the sale of stock and sale of the property in 2009 for $220,000, the parties were left with an outstanding mortgage secured over the B Street property of about $150,000.
In the financial year ended 30 June 2009 the wife received a franked dividend from W Pty Ltd of $57,142. Those funds went into the parties’ finances. At about the same time the husband received a small compensation payout and paid $22,275 into the parties’ then overdrawn partnership account.
In May 2009 the parties drew about $36,000 from the partnership overdraft to purchase a Triton vehicle that was retained by the husband at separation. The husband later, after separation, sold that vehicle for $17,000, paid $7,000 off his credit card then purchased a cheaper car for $6,000 and used the balance for living expenses.
The parties separated in mid-2010 and, at that time, the outstanding mortgage balance remained at about $150,000. The wife had attempted to subdivide the parties’ two rural properties in order to facilitate a part sale to pay down the mortgage debt. Some work was done in relation to the subdivision prior to separation and in June 2010 the wife’s father advanced to the parties the sum of $100,000 to be used to the purposes of the subdivision.
However, following separation, the husband withdrew his consent to the subdivision, although there remains a doubt as to whether the subdivision itself would ever have been approved due to the zoning of the properties at that time. The wife deposited the sum of $100,000 into the parties’ joint partnership account on 23 June 2010 and subsequently transferred that sum to an account that she controlled.
The wife acknowledges that the $100,000 advanced by her father has been used by her for her living expenses and property outgoings since separation.
Shortly before the parties’ final separation the husband received a lump sum personal injury settlement of $325,000. After deduction of legal expenses and his workers compensation repayment, the husband ultimately received the sum of $155,000. However, as a consequence of that settlement including a payment for future loss of income, the husband, since settlement of that claim, is unable to access Centrelink benefits until September 2014.
The husband, using his settlement funds, purchased a property at Town M and funded his living expenses. The property was purchased for $225,000, the husband paying a deposit of $30,000 from his settlement in late 2010, and the balance finally by way of private mortgage borrowing. At present the mortgage debt exceeds the value of the property. The mortgage shortfall is secured by way of mortgage over the husband’s interest in the parties’ two rural properties. He has otherwise been supported by his new wife.
The balance of the husband’s compensation settlement was used to pay licence fees to occupy Town M until settlement of the purchase, pay property outgoings, purchase his daughter a $3,000 car, pay insurances and meet loan payments after settlement of the purchase for about 8 months and living expenses for he and his wife.
Subsequent to separation the parties went into default in relation to their secured mortgage to the Rural Bank. Neither party made mortgage payments, notwithstanding the wife had access to funds from her father. Following mediation, the loan repayment date was extended to May 2012 and, in default of payment, the bank would take possession and sell the parties’ rural properties.
The wife’s father agreed to advance the sum of $240,000 to discharge the Rural Bank indebtedness and he now holds a registered first mortgage over the B Street property with the consent of both parties. The wife’s father’s mortgage carries interest and, as at the date of trial, the outstanding debt was agreed at $316,500. The parties’ mortgage balance increased over time initially as they drew funds to live on and meet property expenses and then by reason of mortgage default with interest accruing at 20 per cent until the debt was refinanced by the wife’s father at a more favourable interest rate that provided some financial relief to the parties and protected the properties from mortgagee sale.
As at 30 June 2013 the parties’ partnership had accumulated losses of $417,000.
Notwithstanding having had the use of the $100,000 previously advanced by her father, the wife has borrowed further funds from her father to fund living expenses and property outgoings in addition to other funds borrowed by her to pay her legal fees. The funds borrowed by the wife from her father to meet her living and property expenses total $125,500, borrowed over the period from 1 June 2012 to 28 October 2013. As at 30 June 2013 there was about $20,000 left from borrowed funds and at hearing about $15,000. No interest is accruing on these funds and the wife’s father has made no demand for payment. Otherwise, the wife borrowed from her father to pay legal fees.
During this period she has had the sole occupation of the parties’ two rural properties to the husband’s exclusion. She has had the benefit of all income accruing (although minimal) and applied funds available to her as she saw fit to fund her personal expenses and property outgoings. She has no expectation that the properties will generate any income into the immediate future.
In 2013 the wife received $523,000 by way of inheritance from her paternal uncle’s estate. Those funds are presently held in an account in her father’s name on trust for the wife. The wife’s father acknowledges that those funds are not held as security for the wife’s borrowings. It is inferred that the funds are accessible to the wife should she request them of her father.
To assist in determining contributions the parties both assert that the pool available for adjustment should differ from the present asset pool set out above. The husband contended that the wife’s inheritance could either be included in the pool with a relevant contribution-based adjustment or omitted and treated as a financial resource. By reason of the inheritance being received post-separation, it will be treated as a financial resource, as will the wife’s interest in W Pty Ltd, as agreed between the parties.
The notional pool for adjustment, including otherwise contentious items, is as follows:
Assets:
Joint D Street property $960,000
Joint B Street property $700,000
Husband Falcon car $ 8,000
Wife Holden car $ 5,000
Husband Compensation funds $
Husband Superannuation $ 7,000
Wife Superannuation $ 8,000
Liabilities:
Joint B Street mortgage $316,500
Wife “Subdivision funds” $100,000
Wife Post-separation borrowings $148,325
Financial Resources
Wife Inheritance $523,000
Wife W Pty Ltd share $ 95,000
The disputed items relate to:
a)The wife’s debts to her father:
Contended by the wife for inclusion in the pool. The reasons for the debts are set out above. Where the wife used the funds to fund her personal and living expenses and property outgoings where she has remained in occupation of the properties post-separation and where she asserts no incapacity for paid work but chose not to do so then it is not appropriate for such debts to be included in the pool for adjustment, with the result that the husband would share part of the wife’s expenses post-separation.
b)The husband’s compensation funds received at about the time of separation:
The husband’s application of those funds has been explained by him. His settlement repaid various workers’ compensation payments made to him post injury and included a component for future loss of income by reason of his Centrelink exclusion for a period. Otherwise, he applied funds to the Town M property and living expenses. The property, regrettably, has negative equity. It is in the circumstances not appropriate to include the settlement, or part of it, in the pool.
The final pool for adjustment is as follows:
Assets:
Joint D Street property $960,000
Joint B Street property $700,000
Husband Falcon car $ 8,000
Wife Holden car $ 5,000
Husband Superannuation $ 7,000
Wife Superannuation $ 8,000
Subtotal $1,688,000
Liabilities:
Joint B Street Mortgage $316,500
Subtotal $1,371,500
Financial Resources
Wife Inheritance $523,000
Wife W Pty Ltd share $ 95,000
$618,000
Assessment of contributions
In Kessey & Kessey (1994) FLC 92-495 at 81,151 the Full Court made clear that ultimately all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party:
... In many – indeed probably in most – property settlement cases the Court has to evaluate and assess contributions to property in the absence of precise valuations of the contributions in question. Indeed, where the contributions to property are indirect or non-financial, precise valuation is impossible, and even where the contributions are direct or financial so that a valuation might be provided, other factors (not capable of precise mathematical statement) may well have eroded the initial value of such contributions. In a case such as the present, it is not necessary to arrive at precise mathematical valuations of the parties’ contributions - all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party.
In Farmer & Bramley[2000] FamCA 1615 Kay J clearly stated two things, namely:
68. … the Court’s task is to evaluate all of the contributions from the time of the commencement of the parties’ relationship until the time of the hearing and to give such weight to such contributions as the Court thinks is appropriate in the circumstance. …
69. … There is nothing in the legislation that requires s 79(4)(a) (b) and (c) contributions to be measured only in terms of ‘what did either party contributed to the assets of which they are presently possessed?’. [emphasis removed]
In Figgins & Figgins [2002] FamCA 688 the plurality of the Full Court, Nicholson CJ and Buckley J, observed:
134 ... Marriage is and should be regarded as a genuine partnership to which each brings different gifts. ...
In assessing contributions the Full Court said in Harris& Harris (1991) FLC 92-254 at 78,705
The task of the court in proceedings under section 79 is not akin to an accounting exercise. To borrow a phrase used by McLelland J in Davey v Lee (1990) DFC 95-084; (1990) 13 Fam LR 688 at 689 in relation to section 20 of the De Facto Relationships Act1984 (NSW) “the Court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind”.
Clearly, contributions favour the husband at cohabitation.
Thereafter, the parties enjoyed significant periods of rent-free accommodation made available by the wife’s family. The parties received rental from a property owned by the wife’s parents for a period of years. The wife received a modest inheritance and a one off dividend from W Pty Ltd in 2009, at which time the husband received a further smaller compensation payment.
Both parties at times had paid employment but there is no evidence as to quantum. After 2000 the husband on his own evidence was substantially incapacitated. The non-financial contributions were thereafter the main province of the wife in terms of the home and properties. It is conceded that the wife undertook the primary parenting and homemaker roles in the household.
It is submitted by the wife that contributions should favour her as to 70 per cent and 30 per cent to the husband. It is contended by the husband that contributions should favour the husband as to 53 per cent to the wife’s 47 per cent. Neither position is tenable. The assessment of contributions is a holistic exercise. The wife’s contributions overall offset and exceed those of the husband. The period after the husband’s injury is significant in this regard as the children were then 14, 10 and 6, notwithstanding the husband’s initial compensation payout facilitated the acquisition of property by the parties. It is noted in this regard that there is no evidence as to the initial purchase price of these properties or the overall source of funds for their purchase.
Overall contributions are assessed at 57.5 per cent to the wife and 42.5 per cent to the husband. This creates a disparity of $205,700 approximately between the parties.
The relevant s 75(2) factors
The wife is 53 and the husband 55. The husband is in poor health with long-term back problems. His ability to work is problematic, at best. The wife asserts that she intermittently suffers from a sore back, which she manages with exercise and avoiding activities that will aggravate the condition. The wife is presently taking anti-depressant medication and has been doing so since early 2010. The wife, however, does not assert any incapacity for paid work.
Neither party has income. The wife has some capacity for paid work if available. She has not sought to obtain work, notwithstanding her asserted parlous financial position. The husband has little capacity for work by reason of his back disability.
The assets and financial resources of the parties are set out above. The wife has significant financial resources available to her in terms of inherited funds and her interest in W Pty Ltd. The wife has an outstanding debt to her father, but her father does not suggest that he will call in the debt presently or at all.
Neither party has the care of a relevant child.
Both parties have very modest superannuation and little prospect of any significant future accumulation.
The husband has re-partnered and his wife has a modest capital.
Neither party submitted that any other factor was relevant for consideration.
The wife contended that there should be no adjustment for s 75(2) factors. The husband contended for a 10 per cent adjustment in his favour that would create a disparity of $274,000 between the parties.
Such an adjustment is not called for. The husband has remarried and has the assistance of his new wife. He has been in and out of casual work for years since his accident. The significant issue is disparity in financial resources between the parties, yet the husband made no contribution to those resources. They are peculiarly the wife’s.
Overall, a modest adjustment is called for.
An adjustment in favour of the husband of 2.5 per cent is called for, creating a disparity of $68,500 between the parties.
Just, Equitable and Appropriate Orders
Overall, the pool should be adjusted 55 per cent to the Wife and 45 per cent to the husband. In that event the husband is entitled to $617,175.
The husband has a car and superannuation totalling $15,000. Thus a payment to him of $602,175 is required of the wife to retain the parties’ rural properties.
The wife has her inherited funds that she may apply to the payment required.
The husband seeks a transfer of the D Street property to him. He would be required, in that event, to pay the wife about $220,000. He has negative equity in his present property and no capacity to borrow.
He may, on receipt of a payment from the wife, discharge his mortgage and have funds at bank.
In the circumstances, he will be required to transfer the rural properties to the wife in consideration of the payment to him. Such orders in all the circumstances are considered just, equitable and appropriate.
Orders will be made accordingly.
I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 4 June 2014.
Legal Associate:
Date: 4 June 2014
Key Legal Topics
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Family Law
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Property Law
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Injunction
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