Bancroft and Bancroft
[2008] FMCAfam 120
•22 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BANCROFT & BANCROFT | [2008] FMCAfam 120 |
| FAMILY LAW – Property – add backs – superannuation split. |
| Family Law Act 1975, ss.79, 75(2) Family Law (Superannuation) Regulations 2001 |
| Omacini & Omacini (2005) FLC 93-218 DJM & LJM (1998) FLC 92-816 Townsend & Townsend (1995) FLC 92-569 Kowaliw & Kowaliw (1981) FLC 91-092 HDM & SJM [2006] FamCA 47 AJO & GRO [2005] FamCA 195 |
| Applicant: | MS BANCROFT |
| Respondent: | MR BANCROFT |
| File Number: | BRC 1928 of 2007 |
| Judgment of: | Connolly FM |
| Hearing date: | 23 November 2007 |
| Date of Last Submission: | 23 November 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 22 February 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Matthews |
| Solicitors for the Applicant: | Biddle Lawyers |
| Counsel for the Respondent: | In Person |
ORDERS
The wife pay to the husband the sum of $33,884 (“the payment”) on or before 21 March 2008 (“the date”);
That contemporaneously with the payment:
(a)The husband do all such acts and things and sign all such documents as may be required to transfer to the wife at the expense of the wife, all of his right, title and interest in the real properties situate at and known as Property M and Property W (“the real properties”)
(b)The wife indemnify the husband against all payments and liability and all apportionable rates, takes and outgoings of or with respect to the real properties of whatsoever nature and kind.
The wife, on or before 21 March 2008, do all such acts and things and sign all such documents as may be required to transfer to the husband at the expense of the husband, all of her right, title and interest in the real property situate at and known as Property N (“the real property”).
The husband indemnify the wife against all payments and liability and all apportionable rates, takes and outgoings of or with respect to the real property of whatsoever nature and kind.
That in the event that the whole of the payment has not been made by the date, then the real property at Property W be forthwith sold altogether out of Court (“the sale”)
and upon completion of the sale, the proceeds of sale be applied:
(a)First to pay all costs, commissions and expenses of (the said trust transfer and) the sale;
(b)Secondly to discharge any other encumbrance affecting the real property;
(c)Thirdly so much of the payment as is then outstanding together with interest thereon at the rate of 10 percent per annum adjusted monthly from the date to the husband;
(d)Fourthly the balance to the wife.
That pending the payment or completion of sale:
(a)The wife have the sole right to occupy the real property and during such right of occupation, the wife pay all rates and taxes and like apportionable outgoings of the real property as they fall due;
(b)The parties hold their respective interest in the real properties upon trust pursuant to these orders; and
(c)Neither party encumber the real property without the consent in writing of the other party.
That the husband forthwith do all necessary acts and things and sign all necessary documents to transfer to the wife at the expense of the wife all his right, title and interest in the Magna Sedan and the Hilux Utility.
That the wife forthwith do all necessary acts and things and sign all necessary documents to transfer to the husband at the expense of the husband all her right, title and interest in the Land Cruiser Wagon.
That the husband be liable for and indemnify the wife against all payment in respect to the joint Mastercard.
That paragraphs 9 and 10 take effect from the operative time.
That whenever a splittable payment becomes payable to the husband from his interest in the Suncorp Superannuation Fund, the wife will be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount of $15,997.00 and there will be a corresponding reduction in the entitlement the husband would have had but for this Order.
That having been accorded procedural fairness in relation to the making of this Order, this Order binds the trustee of the Suncorp Superannuation Fund.
The operative time for this Order is four working days after the service of this Order on the Trustee of the Suncorp Superannuation Fund.
That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)Each party be solely entitled to the exclusion of the other, to all other property (including choses-in-action) in the possession of such party (the furniture, personal possessions, and like chattels in the property to which they are entitled pursuant to these Orders being deemed to be in the possession of that party).
(b)Each party forgo any claims they may have to any superannuation benefits belonging to or earned by the other.
(c)Insurance policies remain the sole property of the owner/beneficiary named therein.
(d)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
(e)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
That there be liberty to apply for a period of 14 days with respect to the form of this Order and any other matter arising from the Order.
All extant applications be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Bancroft & Bancroft is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC1928 of 2007
| MS BANCROFT |
Applicant
And
| MR BANCROFT |
Respondent
REASONS FOR JUDGMENT
The proceedings
This judgment arises from the parties’ competing property applications. The wife instituted these proceedings in the Family Court on
8 December 2005. She initially sought 60 percent of the nett sale proceeds of the parties’ assets. By the time the trial commenced, the wife had increased her claim to 65 percent of the total pool. The husband on the other hand, seeks an equal distribution of these assets.
Documents
The documents relied on by the wife are set out in the Outline of Case document filed by her. The husband’s documents are as follows:
i)The husband’s application, filed 18 June 2007;
ii)The husband’s affidavit, filed 18 June 2007;
iii)The husband’s affidavit, filed 19 March 2007;
iv)The husband’s financial statement, filed 19 March 2007;
v)The husband’s affidavit, filed 23 October 2007;
vi)The husband’s affidavit, filed 8 November 2007.
The history
The husband is 52 years of age. He is currently unemployed and resides at P in far North Queensland. The wife is 52 and she is employed as an assistant nurse and lives in rented premises at
Property C, in South Queensland. She earns $500.00 per week, nett.
The parties married in 1980 and separated on 15 May 2005 (a 25 year marriage). They did not reside together prior to their marriage. They have two children of the marriage: A (born in 1985) who is now 22 and S (born in 1988), now 19. Both children are independent, although S still lives with her mother. When the wife first married, she was a registered nurse and she still retains that qualification in New South Wales. However in Queensland, the qualifications are no longer recognised and she would need to complete a three-year course before being able to practise as a registered nurse. The husband, prior to the marriage, was a motor mechanic and in 1978 he purchased the lease of a caravan park in S Queensland. Following the parties’ marriage, they continued to operate the park until 1981. The husband also worked at night at the M Boat Club and the wife as a registered nurse at the R Hospital.
In February 1981, the husband purchased a block of land at M. In June 1981, the parties relocated to A where they were employed as assistant managers of the S Resort where they remained for the next five years. During that time the husband was promoted to Resort Manager and the wife became the resident nurse as well as continuing her role with the running of the Resort. In 1982, a five acre block was purchased in the name of the husband at A. This property was sold in 1986.
By 1985, a further property was purchased in the husband’s name at Property M, Queensland. This property was rented out and is still in the parties’ possession. In 1995, the husband was appointed General Manager of the L resort on Fiji and the family lived on the island for about 12 months. In 1986 and 1987, the husband was employed in managerial roles in the hospitality industry in Sydney and Canberra. During this time the parties bought a house, sold it and ultimately moved to Darwin in 1987 where the husband was appointed Area Manager for the T Group. During this time, the wife was involved as a full-time parent and homemaker. In 1989, the parties purchased a further investment property at Property N in Queensland. In mid 1989, the husband obtained a further position in Sydney with the S Hotels Group. The family then lived in Sydney until 1991 when the husband was appointed General Manager of the M Travelodge and Area Manager for S Hotels. The wife did not immediately move to Papua New Guinea but lived in the investment property at U on the Gold Coast.
In 1992, the parties purchased a 50 acre property at G and in July 1993 the wife and the two children moved to M to live with the husband as a family again. They remained there until the year 2000. They children initially attended the E School in M. A commenced boarding in 1998 at the S School. In 1995, the husband purchased a R Freehold property on the Gold Coast which he later sold in October 2002 to assist with the purchase of the C Resort at P. In January 2000, S also commenced boarding school at H School on the Gold Coast. However, in April of that year, she was diagnosed as suffering from Primary Pulmonary Hypertension, a life-threatening condition.
The deteriorating health of S was a very stressful situation for the family. The wife moved from G to rented accommodation on the Gold Coast to allow S to attend school as a day pupil and the husband ultimately had to return to Papua New Guinea after taking six months long service leave. However, the company that he had been employed by was sold and he forced to seek other employment. As well as being a very traumatic time because of their daughter’s illness and being forced to live apart, it was also a very financially debilitating period, with the two children attending private schools and the expense of medical treatment for S. In addition, the husband had to fund the rented premises on the Gold Coast for the wife and children.
In October 2001, the husband was appointed Manager of the C Resort at P and he purchased the managerial rights of the Resort on 1 April 2003. The wife continued to live in the rented accommodation at the Gold Coast until 2003 when she moved back to G. In 2003, A commenced studies at University on a half scholarship. Eventually the cattle at G had to be sold because of the drought and in October 2003 the husband opened a restaurant at the Resort but it quickly became a financial liability. In 2004, the husband’s financial situation deteriorated further and by late 2004, or early 2005, the parties had agreed to separate.
In August 2005, following a routine visit from the Office of Fair Trading, it was discovered that the husband had not renewed his Restricted Real Estate Licence dating back to 2003. This had disastrous consequences. He was served with a notice from the Body Corporate to sell the management rights or the Resort letting and caretaking agreements would be withdrawn. As a result, a contract for the sale of the Resort was signed in late 2005 and settlement was effected in March 2006. In addition, the husband is exposed to litigation with respect to the repayment of letting commissions charged by him while he was not the holder of a licence. The G property was also sold and the proceeds distributed equally between the parties.
The law
The determination of an application pursuant to Section 79 of the Family Law Act 1975 involves firstly identifying the property, liabilities and financial resources of the parties; secondly, evaluating the contributions made by the parties at the time of the hearing (as defined in section 79(a)(b) and (c) of the Family Law Act 1975); thirdly, evaluating the matters contained in Section 75(2) of the Family Law Act 1975 as far as they are relevant; and fourthly, in determining what Order should be made under Section 79, the Court must be satisfied that it is just and equitable to do so.
Conclusions and findings
The agreed property, financial resources and superannuation are as follows:
Assets:
i)Property M $390.000.00
ii)Property W $240,000.00
iii)Property N $370,000.00
Nett proceeds of sale, Property G $610,780.20
iv)Landcruiser wagon $14, 500.00
v)Magna sedan $5,000.00
vi)Hilux utility $5,000.00
Liabilities:
i) Joint Mastercard $8,544.00
Nett non-superannuation property $1, 626, 736.20
The superannuation interests comprise the husband’s superannuation with Suncorp (three policies) with a value of $31, 994.00.
What is really in issue in this case is what add backs should be made to the property pool before it is apportioned to the parties. The wife’s counsel initially contended that the following amounts ought to be added back into the pool:
i)The ANZ overdraft $75,000.00
ii)The balance of proceeds of the
C Resort $360,546.59
iii)The value of furniture and stock
of restaurant $60,000.00
iv)The 50,000.00 interim distribution made to the husband
Counsel for the husband very helpfully set out the legal principles with respect to add backs in paragraphs 13 to 16 of the Outline of Case document. I agree and adopt those paragraphs as follows:
i)“The question of what should be treated by the Court as an add back was dealt with by the Full Court of the Family Court in Omacini v Omacini (2005) FLC93-218. In this matter the Full Court said (at paragraph 30):
To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
a) Where the parties have expended money on legal fees. In DJM and LJM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 for reasons set out in Farnell, s.177 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by the parties on costs frequently has the effect of defeating the policy of s.117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought to be to add costs already paid back into the pool. Whilst there may be cases that where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
b) Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was, with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under s.75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling in, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those monies is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by the parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
a) Where one of the parties has embarked on a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
b) Where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in paragraph (a) and (b) above having economic consequences is clearly in my view relevant under s.75(2) (o) to applications for settlement of property instituted under the provisions of s.79.”
ii) This statement of the Full Court set out above was accepted “as an accurate statement of the law” by the Full Court in HDM and SJM [2006] FamCA47 per Kay, Holden and Coleman JJ.
iii) It is not the case that simply because there has been a premature distribution of property that there should be an add back of that distribution. What is required is a critical examination by the trial judge of what has happened with the premature distribution and the reasonableness of the expenditure. In the Full Court decision of AJO and GRO [2005] FamCA 195, their Honours Holden, Warnick and La Poer Trench JJ stated as follows:
“Her Honour seems to be saying that the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation, will result in that expenditure being added back ‘in the usual way’ as a premature distribution of assets with nothing more. If that is what Her Honour is saying, in our view, she is being unduly simplistic. In our opinion, it was a necessary requirement for Her Honour to examine and make some assessment of the reasonableness or otherwise of the expenditure.”
iv) It is submitted therefore that what is required is that each party must provide to the Court sufficient evidence to allow the Court to examine and make some assessment of the reasonableness or otherwise of all of the amounts they have had and expended from the distributions of amount they have retained or received from the property pool at or since their separation.”
With respect to the issue of the overdraft of $75,000 with the ANZ, it became clear (from the husband’s evidence from his cross-examination and from documents produced) that the overdraft was approved but never utilised and as a result, Counsel properly did not press for that as an add back.
Each party received $50,000.00 interim distribution as a result of Judicial Registrar Smith’s Orders. The wife claims that what she received should not be added back because it was used for living expenses and should accordingly be treated as maintenance I accept that submission. The husband’s evidence is that his $50,000 it was used to pay debts. It is also clear from the evidence that he has been unemployed since settlement took place in early 2006 and has had to live in the meantime. Accordingly, I do not propose to add that amount back into the asset pool. Therefore, the balance of $360,546.59 needs to be accounted for.
The husband’s evidence, and it was ultimately accepted by Counsel for the wife, was that $192,000 of that amount (approximately) was used to pay a tax liability. I also accepted the evidence that the amount related to pre-separation earnings and did not include any interest on penalties as a result of negotiations conducted by the husband with the Taxation Department.
The husband’s evidence, which I also accepted, was that there were a number of losses incurred as a result of his failure to renew his restricted real estate licence. The husband was sued by six of the owners for the return of commission. The total claim was for $150,000 and was settled for $60,000 and the payment of legal costs totalled $40,000. There is still the balance of 50 owners who have not made any claim but could potentially do so for six years from the date of payment of the commission.
There was a further financial loss from the failure to renew the licence and that was $40,000 which the husband was forced to pay by way of the calling up of the bank guarantee. Further, the husband was in effect lockout out of the restaurant and as a result lost fixtures, fittings and stock which the wife claims were valued at $60,000 because they were shown at that value on the books. The reality however is that there is no proper or admissible evidence as to this value.
The husband claims that there is approximately $50,000 that he will have to pay on the sale of the Resort by way of Capital Gains Tax. However that is a mere assertion and is not supported by any evidence to that effect.
In my view, the losses effected by the husband’s failure to renew his restricted real estate licence should not be added back. The husband’s failure to renew the licence was explained by him as having occurred during a stressful time in his life - his daughter was seriously unwell, his marriage was under pressure and there were financial pressure as a result of his loss of employment in Papua New Guinea, his daughter’s illness and the renting of premises for his wife and children to reside on the Gold Coast all contributed to this stress. In all of the circumstances, I accept his explanation that he inadvertently overlooked the renewing of the licence. I do not accept that there was any form of wilfulness about his conduct or that he acted recklessly, negligently or wantonly. Nor do I consider that it was so unreasonable that he should bear the sole brunt of the losses. As it is, he may still be sued by some of the owners for the return of commission, although I think that is unlikely.
Accordingly, from the nett proceeds of $360,546.59 from C Resort will need to be deducted: $192,000 for the tax payment, $100,000.00 for the loss from the litigation and $40,000 pursuant to the bank guarantee. This leaves a sum of $30,546.59 (which the husband has not explained) to be added back. The adjusted non superannuation pool is therefore $1,657,282.79 and superannuation of $31, 994.
I am satisfied that the parties have contributed equally over a 25 year marriage. The husband’s contribution has been by way of a major breadwinner whereas the wife has been the party mainly responsible for the role of homemaker and parent. However, it is also significant that the wife has played a part as an income earner and the husband has involved himself in the parental obligations and responsibilities. In my view, there should be no adjustment for contributions as each of the parties have used their best endeavours over a long marriage.
So far as the s.75(2) factors are concerned, I do not accept the submission made on behalf of the wife that there should be an adjustment of ten percent. The parties are both 52. I am satisfied that the wife is unable to practise as a registered nurse and is restricted to earning $500 per week nett of tax. While the husband has been unemployed since March 2006 his history indicates that he has a capacity and entrepreneurial skill to earn considerably more than the wife. Indeed, I anticipate that once the stress of the current situation has subsided, the husband should be able to find some employment in the hospitality industry. Although this may take a little time. Allowing for these facts and the fact that the wife will end up with a greater share of the pool, I am satisfied that five percent is an appropriate adjustment.
55 percent of the non superannuation assets’ total $1,657,282 is $911,505. If the wife receives $305,390.10 – half of the G property; $390,000 - property at Property M; $5,000 – Magna vehicle; $5,000 – Hilux utility, and $240,000 – Property W, this totals $945,390. She would then need to pay the husband $33,885.
There will also need to be a splitting order with respect to superannuation. That should be split on an equal basis given that the parties are likely to have similar needs by the time they are entitled to access the benefits.
In my view, it is just and equitable to make such an order. It provides each party with a home in which to live and also provides the wife with an investment property which she can either realise or hold on to. This provides the wife with greater access to funds, but she will need that given her lesser income-earning capacity. At the same time it places the husband in a position where he can use his business skills and experience to start again.
Accordingly, I order as per the terms set out herein.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Connolly FM
Associate: Averil Manners
Date: 22 February 2008
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