BISHOP & BISHOP
[2011] FMCAfam 790
•11 August 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BISHOP & BISHOP | [2011] FMCAfam 790 |
| FAMILY LAW – Property – long marriage – husband contributes share of rural property at outset – late inheritance of wife – statutory provisions. |
| Family Law Act 1975, ss.72, 75 & 79 |
| Bonnici v Bonnici (1992) FLC 92-272 Hunt v Zuryn (2005) FLC 93-266 Gosper v Gosper (1987) FLC 91-818 NHC vRCH (2004) FLC 93-204 C v C (2005) FLC 93-220 |
| Applicant: | MS BISHOP |
| Respondent: | MR BISHOP |
| File Number: | CAC 142 of 2008 |
| Judgment of: | Lindsay FM |
| Hearing date: | 11 November 2010 |
| Date of Last Submission: | 13 December 2010 |
| Delivered at: | Canberra |
| Delivered on: | 11 August 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Brzostowski SC |
| Solicitors for the Applicant: | Walsh & Blair |
| Counsel for the Respondent: | Mr Nash SC |
| Solicitors for the Respondent: | Gordon Garling Moffitt Lawyers |
ORDERS
That in full and final settlement of the claims of each party for settlement of property or alteration of property interests and pursuant to s.79 of the Family Law Act 1975 (as amended):
(a)That the husband do pay to the wife within sixty (60) days the sum of FOUR HUNDRED THOUSAND, FOUR HUNDRED AND SIX DOLLARS AND THIRTY-FIVE CENTS ($400,406.35);
(b)Contemporaneously with such payment the wife do transfer to the husband all of her interest in the real property situate at and known as [E] being Lot [omitted] being the whole of the land comprised and described in [omitted] (hereinafter “the [E] property”);
(c)That the husband indemnify the wife and hold the wife forever indemnified in respect of any monies owing by the parties to any person or institution secured by mortgage over the [E] property;
(d)That the husband indemnify the wife and hold the wife forever indemnified in respect of any monies owing to the Rural Assistance Authority;
(e)That the husband be solely entitled to the exclusion of the wife to the possession, ownership and control of the following assets;
(i)The [E] property;
(ii)All farm machinery, motor vehicles, motor bikes, plant and equipment in his possession;
(iii)All stock on the [E] property or otherwise in his control;
(iv)All shares, debentures and investments in his name or held for his benefit;
(v)Any monies standing to his credit in any banking account;
(vi)Any interest in his name or held for his benefit in a superannuation fund;
(f)That the wife be solely entitled to the exclusion of the husband to the possession, ownership and control of the following assets;
(i) Any monies or other assets held by the [L] Trust;
(ii)All shares, debentures and investments in her name or held for her benefit;
(iii) Any motor vehicles or trailers in her possession;
(iv) Any monies standing to her credit in any banking account;
(v)Any interest in her name or held for her benefit in a superannuation fund;
In the event that either party shall refuse or neglect to comply with the provisions of any of these Orders or as to the implementation of these Orders then:
(a)The Registrar of the Federal Magistrates Court of Australia at Canberra is appointed to execute all deeds, documents and instruments of writing in the name of the defaulting party and to do all acts and things necessary to give effect and validity to these Orders;
(b)The party who is not in default may apply to the Court for the other party to pay any or all reasonably foreseeable damages to the other party caused by his or her default; and
(c)The party who is not in default may apply to the Court for the other party to pay all reasonably incurred solicitor/client costs incurred by the other party for the purpose of enforcing these Orders and proving the said damage.
In the event that the husband fails to comply with paragraph 1(a) hereof, the [E] property be sold and the net proceeds of sale utilised to satisfy the payment to the wife of the sum referred to in paragraph 1(a) hereof.
The parties be at liberty to submit a draft order relating to any further terms or conditions sought by either of them in relation to the circumstances of the default referred to in paragraph (3) hereof.
IT IS NOTED that publication of this judgment under the pseudonym Bishop & Bishop is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAC 142 of 2008
| MS BISHOP |
Applicant
And
| MR BISHOP |
Respondent
REASONS FOR JUDGMENT
This trial involved competing applications for settlement of property.
Those applications had already been resolved by the Judgment of Neville FM made on 18 September 2009.
However, an Appeal and Cross-Appeal against those orders was allowed, by consent, by the Full Court of the Family Court of Australia on 21 July 2010.
The parties separated under the one roof in September 2006 and the wife left the former matrimonial home in October 2007. So this property dispute remains unresolved in the fifth year of separation of the parties.
The affidavit evidence upon which the parties relied upon was relatively brief and the cross-examination of each of them was not extensive. The asset pool and the value of the assets are agreed save for one minor dispute as to a liability and a dispute as to the value of certain land in the possession of the husband at the time the parties married. Though it is of no assistance to the parties now it is appropriate to observe that the level of disputation (and what I infer about the costs associated with that level of disputation) far exceed the scope of the dispute. The asset pool, after a 23 year marriage is at a value of just over $1.2million.
The husband is now aged 55 and the wife will be 54 in September. They married [in] 1983.
There are three children of the marriage, [X] born [in] 1988, [Y] born [in] 1990 and [Z] born [in] 1993.
At trial, [X] was a student at [omitted] University, [Y] was working for the husband on his farm and [Z] was attending boarding school. I do not propose to recite the financial history of the marriage. There is little that is in dispute. Certain detail as to the extent to which the wife assisted on the farm and the periods of the year in which she assisted and the like are in dispute but each of the parties I thought was attempting to give me a truthful account of their own work on the farm and their frank evaluation of the work of their spouse.
Paragraph four of the written submissions filed on behalf of the respondent husband contains this concession:
With the exception of adding the Rural Assistance Authority bore loan as a liability and an amended quantum of the wife’s inheritance fund (discussed below) the table in aide-memoire one of the wife’s submissions represents the wife’s assets and liabilities.
By reference to that aide-memoire and excluding assets that have been acquired post-separation, the property owned by the parties is as follows:
Husband
Wife
Real property known as [E]
$960,000.00
Proceeds of sale of stock and plant post-separation (partial distribution already made)
$25,000.00
$96,500.00
Wife’s trust/inheritance
$207,336.00
Farm machinery in husband’s possession
$19,500.00
Half partnership account (husband)
$135.78
Utility motor vehicle in husband’s possession
$14,000.00
Landcruiser vehicle in wife’s possession (add-back)
$3,500.00
Dog trailer in wife’s possession
$3,000.00
Shares ([A] and [B] husband’s possession)
$12,835.00
Sub-total
$1,031,470.78
$310,336.00
Grand Total
$1,341,806.78
For reasons given hereafter I propose to exclude the wife’s trust/inheritance from the calculation of the asset pool which leaves a total pool with a net value of $1,134,470.78.
Liabilities, excluding liabilities incurred by the parties post-separation, consist of two tax debts, one for the 2008 financial year, one for the husband in the amount of $9,051.00 and one for the wife in the amount of $21,939.00. Those total liabilities of $30,990.00 deducted from the gross value of the assets is $1,103,480.78.
In addition, and for the reasons I set out at [24] – [29] herein I consider that the amount owing by the husband to the Rural Assistance Authority in respect of the bore loan in the amount of $15,790 should be regarded as a joint liability of the parties and taken into account in fixing a total net asset pool.
There is a separate superannuation pool constituted by the parties’ superannuation. The husband’s has an agreed value of $34,507.
The wife’s superannuation, the parties have agreed (see the concession of the husband through his counsel at [9] hereof) at $96,650.
The wife currently lives in [K] in a home that is valued at $450,000 and which was purchased entirely by funds advanced by her aunt. She says those funds are to be repaid to her aunt at the time of the settlement of these proceedings.
The husband has acquired a combine harvester/header worth $166,000 and a motor bike since separation. The debt to the finance company exceeds the value of the header, as does the debt in relation to the purchase of the motor bike.
The husband also owes fees to the bank in respect of an overdraft acquired post-separation, owes monies to farming partners that he acknowledges are his debts and, as noted above, is indebted to the Rural Assistance Authority in the amount of $15,790.00 for work done and materials supplied in relation to a bore on his property.
These are proceedings are pursuant to Part VIII of the Family Law Act 1975 (“the Act”).
Section 79(4) of the Act provides:
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The task of the Court is plain enough. It is to firstly ascertain what it is that constitutes the property of the parties and to determine the value of that property net of liabilities. An assessment must then be made of the financial contributions, both direct and indirect, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of that property and then of the contributions other than financial contributions, again whether direct or indirect, made on behalf of a party to the marriage to the acquisition, conservation or improvement of that property. Further, a Court must assess the contribution made by a party to the marriage to the welfare of the family including the children and specifically have regard to any contribution made as a homemaker or parent. The Court is then to assess the effect of any order is proposes to make on the earning capacity of either of the parties to the marriage.
The Court must then take into account those parts of s.72(5) of the Act that are relevant to the facts of the case. These are the matters that the Act prescribes as matters the Court must have regard to in assessing claims for spousal maintenance. They must also be evaluated in the context of property proceedings.
Section 79(2) of the Act provides:
(2)The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Whether or not this amounts to a discrete fourth step in the Court’s obligation in property proceedings (following upon the ascertainment of the property and its value, the assessment of contributions and the evaluation of s.75(2) of the Act factors) the obligation of the Court is to consider the order it proposes to make after the bringing to account the matters aforesaid and to satisfy itself that the orders it proposes to make are just and equitable. At that stage of the process the need to make a just and equitable order may require an adjustment to the form of the order or to the impact of the order upon the specific circumstances of a party or the parties.
As noted above, the asset pool is essentially agreed. My first task is to deal with the dispute about the bore liability.
The parties moved to live on the farm known as [E] in 1993 although they did not purchase the property (from the husband’s parents) until the following year. They lived at [E] together until separation under the one roof in September 2006, but the wife did not leave physically until October the following year.
The bore was necessary because the area in which the parties lived and farmed at that time was experiencing prolonged drought. The bore was sunk after physical separation of the parties but the application for the loan from the Rural Assistance Authority was filled out in December 2006 (whilst they lived separately under the one roof). The water provided by the bore was used to water the stock. Arrangements which had been made up to that point of paying a neighbour to pump stock water from his farm were becoming unsustainable.
The wife agreed that the farm required the bore to provide the water for stock. She completed the paperwork relating to it by that time (she had been doing the bookkeeping work for the parties for many years).
The wife should not have to contribute to the discharge of a liability that has played no part in the acquisition of assets that benefit the husband alone. There are a miscellany of loans incurred by the husband since separation which fall into that category. But she continues to have an interest in the [E] property. These proceedings substantially arise out of her proper claim to an entitlement to share in that property.
The loan relates to a quasi-fixture on the property and has no value independent of its utility in relation to the conduct of the farming enterprise on the property.True it is that the wife will no longer benefit from the presence of the bore because she is no longer conducting the farming enterprise.
Had the liability in dispute related to an asset which was not so intrinsically part of the farming property enterprise it would be unreasonable to expect the wife to contribute to the payment of the liability. But the loan relates to something which is a necessary incident of the very ownership of the farming property. The loan was incurred in circumstances where the wife recognised the need for the bore to be sunk. She positively assisted in the incurring of the debt for that reason. In all of the circumstances I think that the liability is one which ought to be regarded as joint and I will include it for the purposes of the calculation of the net asset pool.
The next issue to be dealt with in relation to the pool is whether or not to include the inheritance of the wife in the same pool as the other assets or to deal with it in some different manner.
On 5 August 2005 (the year before the separation of the parties) the wife received an inheritance from an aunt in England in the amount of $227,000. A second amount (presumably as part of the same legacy) in the amount of $25,500 was received in November of that year.
The total inheritance therefore was in the amount of $252,500.
The wife established a Trust known as the [L] Trust. The funds in that Trust have never been intermingled with joint funds or funds of the husband.
By the time of the first trial, the value of the Trust had been reduced to $207,336. Partly on account of a reduction in the value of the investments which constituted the Trust and partly because the wife had paid legal fees in the amount of $27,115, a sub-issue arises as to whether that sum should be “added back” or taken into account in some other way.
The husband urges me to regard the funds in the Trust as constituting a discrete pool. That is, he urges a “two asset pool” approach even before we deal with the issue of superannuation. He says this should be done because the husband made no contribution to the inheritance, that it had never been used other than for the wife’s purposes and that it cannot be characterised as a financial contribution whether direct or indirect by either party to the acquisition, conservation or improvement of their assets.
The wife’s counsel urged me to treat the inheritance as being part of the one pool although he acknowledged that it was open to me to regard it as constituting it as a separate pool. If I included it in the one pool he urged me to allocate it as a contribution by the wife the percentage of that pool represented by that asset which on his calculations was $14.38%, i.e. he urged me, whatever else I did in relation to the pool, to begin by allocating 57.1% to the wife and 42.83% to the husband.
I think I am constrained by authority to leave the inheritance received late in the marriage by the wife out of the calculation of the pool. Bonnici v Bonnici (1992) FLC 92-272 was a decision of the Full Court of Australia relied upon by both parties before me. In that case, the husband had received, late in the marriage, from his deceased uncle’s estate and following the death of his mother, assets which ultimately the Full Court determined had a value of approximately $430,000. This was in relation to a net property pool which the Court found was in the amount of approximately $585,000 at trial. The Full Court discussed the question as to whether contributions of this kind should be treated differently from other types of property in which parties have an interest. Having said that –
The answer, we consider, must depend upon the circumstances of individual cases.
the Full Court go on to say at [92-272]:
If, for example, in the present case, there had been no other assets than the husband’s inheritance, but the wife had, as His Honour found, to have carried the main financial burden in the support of a family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and incumbent on a Court to make a property settlement in her favour.
A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
It might be thought, with respect, that those passages do not clarify the question as to whether monies received by inheritance (late in the marriage as was the case in Bonnici (supra)) should be included in the calculation of the asset pool. Whether a property settlement is “appropriate” and can be met from non-inherited funds, does not really answer the question as to whether the inheritance should be included in the calculation of the pool in the first instance.
However, the Full Court go on at [92-272] as follows:
The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it is terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a party.
Counsel for the husband also relied upon a decision of the Full Court in Hunt v Zuryn (2005) FLC 93-266 and especially a passage at [79,728]. But I did not find that decision of particular assistance. The passage to which I was referred relates to a real property in which the wife alleged the husband had a beneficial interest and the husband said was held on trust by he and his sister for the benefit of his parents. It was an asset which was held by the husband at the commencement of the relationship. Against those facts, the Full Court said that the property should not have been included in the pool, but at [79,728] said:
It seems on the available evidence that the more appropriate approach would have been to quarantine the property from the pool of assets divisible by the parties, given the lack of contribution by the wife and the circumstances said to attach to the gift to the husband, namely, an obligation to make provision for his parents should they require it.
To the extent that the Full Court regarded themselves as dealing with a gift, it was a gift made before the marriage commenced and not late in the marriage as is the case here and in Bonnici (supra).
Despite the reservations I expressed about one aspect of the Bonnici (supra) decision, I think on the facts of this case I am bound to exclude the inheritance from the calculation of the asset pool. It was received in the twenty-first year of a twenty-three year marriage and it has been entirely quarantined by the wife (without the objection of the husband) from their dealings since the date of its receipt. The husband’s contributions to the asset should be regarded as nil. Moreover, it is difficult to see how the wife either made any contribution to the asset in a way that would bring it within the scope of the contributions-based elements of the s.79 of the Act exercise.
The wife’s counsel opposed the adding back of the amount she had withdrawn from the [L] Trust for legal fees. He urged me to use the figure that was used at the time of the first trial which was the figure net of legal fees to that point. I do not think that the husband took issue that any increase or decrease in the value of the Trust since the date of the first trial be put to one side. The wife said that in accordance with the principle to be derived from NHC v RCH (2004) FLC 93-204 I should not consider adding back the amount withdrawn to pay for legal fees. I did not understand the husband to disagree with that. He said that the fact the Trust was able to be drawn upon to pay her legal fees was something that was to be taken into account in demonstrating the value of that Trust as a s.75(2) of the Act factor to the wife. In the light of his concession in that regard, and in accordance with the principle that post separation financial activity on the part of a party should be allowed to take its own course, save where it impacts upon the value of an asset up for distribution in the proceedings, as it were, I propose not to add back the amount used by the wife from the [L] Trust to pay her legal fees.
That does not mean that I am ignoring this fund or the uses to which it has been put. I will return to consideration of it as a s.75(2) of the Act factor and in relation to the just and equitable exercise later in these reasons.
The husband contended that a consideration of the contributions-based entitlements of the parties should result in an assessment of 60% of the asset pool being attributable to the husband’s contributions and 40% of the asset pool to the wife’s contributions. Considerable weight was placed on the fact that the husband brought into the relationship 450 acres of the property known as [T]. [T] was a parcel purchased by the husband and his mother in 1979. It comprised about 900 acres. It was purchased for the sum of $190,000, part of which was funded by mortgage. It is accepted that the purchase price equated to a value at that time of $208 per acre.
The husband conducted a farming partnership with his parents on the [T] property. He said at the time of commencement of cohabitation he had livestock valued at about $20,000 but that it is unsurprising that he was unable to produce any formal evidence as to the value of the livestock at that time.
It will be recalled that the parties married [in] 1983.
In December 1984, the husband and his mother entered into a Deed of Partition. The effect of the Deed was that the husband transferred 150 acres of [T] to his mother but accepted a transfer of 300 acres from her. That meant that he ended up with a 600 acre block and his mother with a 300 acre block. His 600 acres was subject to a mortgage in the amount of $82,000 (at least, it was subject to such a mortgage by 1985).
In 1988, the 300 acres in the name of the mother were purchased by the parties in the wife’s name for the amount of $100,000. The land was consequently valued at that time at a value of $296 per acre.
The purchase price was funded by $25,000 received by the wife by way of an inheritance and the parties borrowing a further $75,000 by the bank. I did not understand the husband to seriously challenge the wife having injected the amount of $25,000 from that source at that time and for that purpose.
The husband says that at the time of the acquisition of his mother’s 300 acres, the property was in fact worth $125,000 and not $100,000.
His mother did not give evidence.
A Mr M prepared a valuation of the [T] property as at 1983 and was called as a witness by the husband. He said it was worth $300,000 (that is, the 600 acres that the husband was left with after the Deed was entered into between the parties as referred to above was worth that amount). That values the land at approximately $500 per acre at that time.
Mr M was cross-examined. He conceded that he did not have regard to the sale price of [T] when it was acquired by the husband and his mother in 1979 but he did say that he examined records relating to the sale of other properties in the area of [T] in 1983 and had identified sale of broad acre properties at $607 per acre in 1983 and $500 per acre in March 1984.
Based upon the actual sale prices of [T] (or part thereof) in 1979 and in 1988 the value per acre is $208 and $296 respectively.
It should not be overlooked that the land was subject to a mortgage which by 1985 was in the amount of $82,000 and a further mortgage of $75,000 was taken out by the parties in 1988.
The parties lived in the [T] property until [E] was purchased in 1993.
$300,000 is the maximum amount at which we can value the husband’s contribution of [T] in 1983. On the wife’s case it is valued at approximately $180,000 at that time.
It is very difficult for me to find a value of the property with any kind or precision. The value of the property obviously lies between those two figures or close to one or other of them. It has a value somewhere between the two competing contentions. That is how I propose to deal with the value of this asset at the time of cohabitation. I do not think I am bound to make a more precise finding. We are talking about an asset which was introduced by the husband some 23 years before the parties separated. It was manifestly the most significant asset the parties had when they married and for a considerable part of their relationship. I am not able to find one way or the other as to whether the husband’s mother gave the parties a discount when the property was purchased in 1988. I can only proceed on the assumption that the parcel of land purchased at that time in the wife’s name was worth approximately what the parties paid for it.
There are three distinct phases of the ownership of the [T] property. There is the husband’s initial ownership at the beginning of the marriage of 450 acres, the extension of that to 600 acres in 1984 and then the acquisition of the entirety of the property in 1988.
It is a significant initial contribution. It must be given real rather than nominal significance when evaluating the contributions the husband has made to the relationship. It was the first of two farming properties owned by the parties. I will deal with the circumstances in which [E] was purchased in a moment.
The contribution of the husband of livestock at the commencement of the relationship must be given some weight. It is in the nature of the topic that little by way of corroborative evidence could be made available at this time. I accept that the husband introduced livestock of a value which approximates the value he attributed to it of $20,000 at the commencement of the marriage.
In 1994, the parties purchased the [E] property from the husband’s parents. The 600 acre allotment of [T] (i.e. the property the husband had in his possession by 1984) was sold for $400,000. The purchase price of [E] was $415,000. The parties required notational loan monies from the husband’s parents in the amount of $30,000 to complete the transfer. Approximately $10,000 of that $30,000 had been repaid prior to the separation of the parties. The balance of that amount was forgiven by the husband’s parents in 2003 or 2004 and must be regarded as an indirect financial contribution by him.
In addition it is agreed that the parties at or about the time of the purchase of [E] received farm machinery worth approximately $65,000 from the husband’s parents. Only $15,000 of that value had been repaid by them prior to separation and the forgiving of that further amount of $50,000 (or, as the husband would see it, the fact that his parents have not yet taken any steps to recover the money) must also be regarded as a contribution by him. In accordance with the principles discussed with the great clarity of the Full Court of the Family Court of Australia in Gosper v Gosper (1987) FLC 91-818, those contributions should be regarded as a contribution on behalf of the husband.
It was somewhat half-heartedly suggested by the husband during the presentation of his case that the monies were still in some sense owing, but it is plain that his parents have done nothing to collect the sums of money allegedly due to them and his mother was not called to contradict the evidence given by the wife.
The remaining 300 acres of [T] were sold in 2007 for the sum of $360,000. The monies were used to discharge the mortgage over [E] and to reduce the overdraft of the parties. A further sum of approximately $66,000 was placed in a superannuation account for the wife. The purpose of using those monies in that way was to avoid the payment of capital gains tax.
The parties conducted a sale described as a “Clearing Sale” in respect of certain plant and equipment at [E] and an amount of $121,500 was obtained as a result of that sale. That was provided, as to $96,500 to the wife and $25,000 to the husband, and this partial distribution of the property of the parties is reflected in the schedule of assets set forth in paragraph [10] above.
As the husband’s counsel points out in his written submission, the amount contributed towards the superannuation account of the wife accounts for approximately two thirds of its current value.
In 2008, the parties, for the first time during their occupation of [E], produced a net income. The income represented the profit on the sale of the property. The net primary production income after sales was $143,500 and the parties had a taxable profit of approximately $71,765 added to the income they had otherwise earned during that year. The wife at that time was working as a [omitted]. The additional income meant that she incurred an additional tax debt of $21,939 against the husband’s tax liability for that year in the amount of $9,000.
The wife filed a very detailed affidavit on 22 January 2009 addressing the issues of the work she carried out on the farm, among other issues. The detail she was able to provide and the nature of the answers she gave in cross-examination in relation to this topic persuaded me that she was giving me a generally accurate account of her contributions to the physical work on the farm. Her other contributions to the farm enterprise were in the form of bookkeeping. I accept her evidence that her performance of that work started in 1984 and that it included all of those aspects of the financial work required for the property that were outlined in paragraph 22 of her trial affidavit filed on 25 January 2008. Whilst I accept that the wife made significant contributions to the variety of physical work required in relation to the farm property, I did not understand her to dispute that the great majority of that work was done by the husband.
More difficult to determine was the extent to which the wife exercised responsibility for the care of the three children during the relationship and the extent to which she assumed responsibility for household duties such as shopping, meal preparation, cleaning and garden maintenance. There is no doubt she played a preponderant role in these areas; the question was whether the husband’s role was as minor as she alleges. On balance, I think she tended to understate the husband’s role.
At the commencement of the relationship the wife was employed as a [omitted]. She transferred to [omitted] in 1986 taking maternity leave when [X] was born in 1988 for approximately six months. The child [Y] was born in 1990. The wife worked between 1990 and 1993 casually at [omitted]. Following [Z]’s birth she left [occupation omitted] until 1995 when she resumed work as a [omitted] part-time. In 1996 she returned to casual [occupation omitted] and in 2000 undertook part-time [omitted] at [omitted]. The wife moved to [K] in 2009 where she obtained a permanent position as a [omitted].
The wife’s income as a [omitted], during the period they farmed the [E] property included many years of drought and her income was plainly of vital importance to the parties and family during these periods.
The other direct contribution the wife relies upon is the inheritance she received in 1988 in the amount of $25,000 which was used to assist in buying the remaining parcel of 300 acres in [T] from the husband’s mother. In addition, in 1989, she received accumulated superannuation and long service leave in the amount of approximately $20,000 which I accept was used for family purposes.
Since the separation of the parties it is clear that the wife has accepted sole responsibility for the support of [Z] as noted at [8], [Z] has been attending boarding school and is aged 17. I thought that the wife’s estimate of the amount she spends on his support each year being approximately $20,000 was reasonably accurate. That is a significant contribution to the welfare of the family post-separation. She will continue to make this contribution for any years [Z] attends a tertiary institution.
The wife’s earnings from her [occupation omitted] duties is a matter that complicates the evaluation of the contributions-based entitlements of the parties. It is clear that the husband worked long hours on the farm during the entirety of the relationship. He pursued certain recreational activities such as tennis as the wife was very keen to point out. But she had her own recreational activities and I am not prepared to proceed on the basis that either party did other than work very hard during the course of the relationship. The wife provided significant assistance to the husband on the farm in a number of ways and she was able to supplement the family income for significant periods with income earned off the farm. But I deal with the matter on the basis of finding that the husband himself worked very hard in relation to the farm. I am not prepared, during the course of the assessment of the contributions-based entitlement of the parties to discern that the wife contributed more in relation to labour plus outside income than the husband contributed in labour alone. I do not think the basis exists for me to regard the wife’s contributions in this way as being greater than the husband’s, even given my finding that she shouldered more responsibility than the husband for the care of the children while they were young.
Her contribution in relation to [Z] post-separation falls into a different category and in my view requires specific recognition.
I have indicated (at [14] above) that I am regarding the superannuation assets of the parties as constituting a separate pool. This is consistent with authority (see C v C (2005) FLC 93-220) and is appropriate because neither party will be realising the benefit of that asset for some years yet. It is not available for distribution between the parties with the same degree of flexibility as the non-superannuation assets. It is just and equitable to deal with the superannuation assets separately.
Were it not for the wife’s contributions to the welfare of the family in the form of her financial support of [Z] post-separation, and the capital contributions made by her and referred to at [72] above. I consider that the contributions of the husband in the form of the value of [T] at the time the parties married and the Gosper contributions made by the husband’s parents (see [62] – [63] hereof) would have required some small weighting in the husband’s favour (something of the order of ten percentum i.e. 55/45% in the husband’s favour). But I think that those matters leave me in a position where I should regard their contributions-based entitlements as being equal. In the context of a 23 year marriage it is not appropriate for me to pretend that I am undertaking something analogous to an accounting or auditing exercise. The evaluation of contributions under s.79 of the Act is an exercise involving a broad exercise of discretion. I accept that the evaluation of the contributions-based entitlements is an exercise more amenable to mathematical precision than the final step in the process – the just and equitable requirement – but it is a discretionary exercise nevertheless. It is to be borne in mind that I do not consider that there was sufficient evidence before me to enable me to find that the acquisition of [T] in its final form or the acquisition of [E] were made by the parties upon the basis of the purchase prices being discounted by the husband’s parents.
Significant for me in the decision I have come to as to the contributions-based entitlements of the parties is the view I have taken that both parties worked extremely hard throughout the marriage.
At the end of such a marriage to give additional weighting to an asset introduced at the commencement of the marriage in a way that ultimately discriminates between all of the contributions the parties made over such a long period would be inappropriate.
I turn now to the s.75(2) of the Act considerations.
I proceed on the basis that the wife will continue to support [Z] financially if he undertakes tertiary studies. We do not know whether he will or not. I think on the evidence she was more likely to provide supplemental support for [X] although it is not likely to be significant. [Y] receives an income in respect of the work he performs and is not supported in any material way by the husband.
The husband has had since separation and will continue to have the sole use and occupancy of the [E] property. Such significance as this might have had is diluted by the circumstance that the wife has had the benefit of having a home purchased for her through the beneficence of an aunt. The property at [K] was purchased by a $430,000 interest free mortgage. The money is due to be repaid in 2013. The aunt is aged in her 80s and has no children although the wife is not the only niece or nephew. Neither party called the aunt. It is difficult to know whether the wife will be called upon to repay this sum of money when it falls due or whether she will be required to repay the amount in full. There must be some uncertainty about that. I do not think I need to make a specific finding about that issue. I am considering what significance if any to the husband’s occupancy of [E]. In terms of a s.75(2) of the Act consideration I do not propose to take into account the circumstances of the husband’s occupancy of the farm post-separation. The wife’s present circumstances would make it inequitable to do so.
The wife has a good income as a [omitted] (the evidence established that it was approximately $80,000). The husband’s taxable income from the farm is approximately $60,000 per annum at the present time and he is likely to enhance the profitability of the farm with the operation of the harvester he has leased. I do not think the income earning potential of the parties can be materially distinguished.
Manifestly, the fact that the wife has a superannuation entitlement almost three times as large as the husband must be taken into account but in the context of neither of them being able to access their superannuation for some years to come. I accept the evidence of the wife that the decision the parties made to invest approximately $66,000 from the clearing sale at [E] in 2007 in the wife’s superannuation fund was done to avoid capital gains tax being levied on the sale and obtaining benefit from that rollover relief. Ultimately though, at the s.75(2) stage I am concerned about the existence of the resource rather than the reason she came into possession of it.
The husband asked me to take into account the permanence of the wife’s employment as a [omitted] in contrast with the uncertainty of his employment as a farmer. But the husband has farmed all of his life. Last year he worked as a [omitted] to supplement his income from the farm. The evidence suggested to me that he will persevere with his farming enterprise. He has made a significant investment in acquiring the harvester and he will use that harvester for contract work on other properties. It was not clear on the evidence whether he would use it on his own property. I also take into account that his most recent improvement in income is partly attributable to agistment fees from leasing the [E] property and there is no certainty that that will continue in the future. But I do not think it is possible for me to find that the husband is at risk of not being able to earn a reasonable income from his farming enterprise. His net income is unlikely to be equal to that of the wife however.
Just as obviously I must have regard to the [L] Trust. The use of the funds is something that is wholly in control of the wife and she will only use it for her own purposes. That is a significant financial resource that the wife has that the husband does not.
Whatever the uncertainties about whether she will be asked by her aunt to repay the mortgage on the [K] property she will enjoy occupation of that property on an interest free basis until April 2013.
These are the pertinent s.75(2) considerations.
I consider that I am obliged in the context of an asset pool of approximately $1.134 million to give significant weight to the wife having $200,000 capital of her own and outside of that pool, and also to her greater entitlement within the superannuation pool. Taking all of these matters into account, there should be an adjustment of 10% of the pool in the husband’s favour i.e. an adjustment of 5% from the wife’s contributions-based entitlement of 50% or in other words, a division of the assets 55/45% in the husband’s favour, after an assessment of contribution-based entitlements and a carrying out of the s.75(2) exercise.
The only fair way to deal with the wife’s additional tax burden for the financial year 2007/2008 (see [67]) is to factor into my calculations a payment of one half of the difference between the tax they each paid following the profit on sale of the property. True it is, that the impact on them of this distribution was also affected by their tax position on their other income (or losses) for that year. So be it. I do not consider there is a more equitable way to make the adjustment than to order the husband to pay to the wife (or to factor such a payment into the order in any event) one half of the difference between $9,000 and $22,000 i.e. one half of $14,000 or $7,000.
The calculation that such findings entails is as follows:
Non-superannuation pool
(excluding wife’s inheritance (see [11])$1,134,470.78
Less bore loan
$15,790
$1,118,680.78
45% equals
$503,406.35
Wife has assets of value
-$103,000.00
Net payment due to wife by husband if he wishes to retain [E]
$400,406.35
Add $7,000 tax adjustment (see [89])
$7,000
$407,406.35
The outcome of these orders would be that the husband would have the assets currently in his possession, the ownership of [E] (presumably subject to an additional mortgage of the sum to be paid to the wife) and his other debts and his superannuation entitlement. The wife would have the sum paid by the husband to her, her other assets including the monies in the [L] Trust, her superannuation and her private indebtedness.
Such an outcome is one that I am satisfied is just and equitable.
I did not hear from counsel as to the orders their clients sought in the event of default by the husband in the payment referred to at [90].
We would need to address the contingency that [E] sold in that event for more (or less) than the parties have agreed it is worth, or at least that such a sale resulted in net proceeds greater (or lesser) than the amount. I should give the liberty to present a minute of the orders sought in that event that would give effect to the intention of these orders. That liberty should extend to the orders sought relating to the terms and conditions of such default sale.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of Lindsay FM
Associate:
Date: 11 August 2011
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