Bisset and Rounds
[2018] FCCA 459
•28 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BISSET & ROUNDS | [2018] FCCA 459 |
| Catchwords: FAMILY LAW – De facto relationship – division of property – treatment of property – disclosure to Centrelink. |
| Legislation: Family Law Act 1975, s.90SF(3)(r) |
| Cases cited: Stanford & Stanford (2012) 247 CLR 108 Watson & Ling (2013) 49 Fam LR 303 In the marriage of Townsend (1994) 18 Fam LR 505 |
| Applicant: | MR BISSET |
| Respondent: | MS ROUNDS |
| File Number: | ADC 3924 of 2014 |
| Judgment of: | Judge Cole |
| Hearing dates: | 1, 2 & 3 March 2017, 5 June 2017, 8 August 2017 & 24 October 2017 |
| Date of Last Submission: | 24 October 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 28 February 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Bowler |
| Solicitors for the Applicant: | Marciano Lawyers |
| Counsel for the Respondent: | Mr B McQuade |
| Solicitors for the Respondent: | Howe Jenkin |
ORDERS
That the respondent within forty-five (45) days:
(a)Pay to the applicant the sum of ONE HUNDRED AND FIFTY-SIX THOUSAND, SIX HUNDRED AND FORTY-SEVEN DOLLARS AND TWENTY-NINE CENTS ($156,647.29); and
(b)Discharge the mortgage secured against the property situate at Property A in the State of South Australia currently registered in the joint names of the parties.
That the applicant in exchange for the funds referred to in paragraph 1 of this Order provide the applicant with a registrable Transfer of his interest in the property situated at Property A in the State of South Australia.
That any interest the applicant may otherwise have in the following:
(a)the property at Property B in the State of South Australia;
(b)the respondent’s share of the proceeds of sale of Property C in the State of South Australia ($50,000);
(c)Vehicle A in the respondent’s possession;
(d)the Bank A bank account in the respondent’s name; and
(e)the Superannuation A policy
vest in the respondent absolutely.
That the respondent indemnify the applicant and keep him indemnified in respect of all outgoings and liabilities attached to the above assets including but not limited to the properties at Property A and Property B.
That any interest the respondent may have in the following:
(a)the property at Property C and Property D;
(b)the property at Property E;
(c)the property at Property F;
(d)proceeds of sale of Property C;
(e)Business A;
(f)Plant and equipment of Business A;
(g)proceeds of sale of the boat sold by the applicant;
(h)Tractor A;
(i)Boat A;
(j)(omitted) motorbike;
(k)Boat B;
(l)Vehicle B;
(m)Tractor B;
(n)Vehicle C;
(o)Superannuation B; and
(p)Superannuation A;
vest in the applicant absolutely.
That the applicant indemnify the respondent and keep her indemnified in respect of all liabilities and outgoings attached to the property as set out in paragraph 5 of this Order including but not limited to the Bank A mortgage for Property C and D and the Bank A business loan overdraft together with the capital gains tax due and owing on the sale of the property at Property C.
That the respondent pay to the applicant one half of the valuation fees within forty-five (45) days of the date of this Order.
That all applications are otherwise dismissed.
That there be liberty to the parties to apply as to consequential orders.
IT IS NOTED that publication of this judgment under the pseudonym Bisset & Rounds is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 3924 of 2014
| MR BISSET |
Applicant
And
| MS ROUNDS |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Bisset and Ms Rounds were in a de facto relationship of some 14 years. They cannot agree on how the property is to be divided between them.
The matter came before me for a three day trial commencing 1 March 2017. The proceedings did not conclude and further time was allocated on 28 April 2017 at 2:15pm, which was then administratively adjourned to 5 June 2017 at 10:00am. Further appearances were required on 8 August 2017 with the matter finally concluding on 24 October 2017.
Orders sought
The applicant in his case outline seeks orders as set out in his trial affidavit namely that:
a)Each party bear their own costs in relation to any and all Contravention Applications and Applications in a Case;
b)The respondent’s property at Property B be brought to account in consideration of the net pool of assets;
c)The net pool of assets and liabilities be divided as follows:
i)the respondent discharge the mortgage on Property A;
ii)contemporaneously with the discharge of the mortgage the applicant transfer his interest in the property to the respondent;
iii)the respondent pay all outgoings, rates, taxes and any other associated levies or expenses in respect of the property;
iv)the respondent pay the applicant the sum of $150,000;
v)the respondent pay one half of the costs of the valuations undertaken for the real estate and his business;
vi)any interest the applicant may have in the sum of $50,000 received from the proceeds of the sale of Property C, vest in the applicant;
vii)the respondent transfer her interest in the property at Property E to the applicant;
viii)each party otherwise be responsible for any other liability in their sole name;
ix)the applicant retain all of the assets in his sole name or possession;
x)the respondent retain all of the assets in her sole name or possession; and
xi)the respondent pay the costs incidental to the proceedings.
The respondent in return seeks orders by way of property settlement that:
a)the applicant transfer to the respondent, unencumbered all his right, title, estate and interest in the property known as Property A;
b)the applicant pay to the respondent the sum of $100,000; and
c)the parties otherwise retain all property including superannuation entitlements held in their possession, power or control.
The evidence
The applicant relies on:
a)his Initiating Application filed on 29 October 2014;
b)his Trial Affidavit filed on 27 February 2017; and
c)his updated Financial Statement filed on 27 February 2017.
The applicant gave evidence and was cross-examined. I will comment on his evidence in due course.
The respondent relies on:
a)her Response filed on 13 March 2015;
b)her Trial Affidavit filed on 20 February 2017;
c)her updated Financial Statement filed on 20 February 2017;
d)the affidavit of Mr A filed on 28 February 2017 (the valuer in respect of Property C and D); and
e)there is also a vague reference to discovered documents and public documents which I found unhelpful.
The respondent gave evidence and was cross-examined. Mr A was initially unavailable to give evidence as he was on annual leave. A request was made for him to give telephone evidence which was rejected. It is not clear why his affidavit was filed so late or why the prospect of him giving evidence was not canvassed earlier in time.
Mr A was subsequently called by consent and was cross-examined.
The respondent was subsequently required to file and serve an affidavit of her mother who then gave evidence and was cross-examined.
The mother was in receipt of a Centrelink benefit and there are grave concerns that on one view her actions may have been seen as an attempt to remove assets from the scrutiny of Centrelink and there may have been some infringement of the disclosure required of Centrelink recipients. I will refer to that later in these Reasons.
The parties
This matter had been listed for hearing for some time. Surprisingly, both parties appeared to be recollecting events of the relationship for the first time once they got into the witness box. The fact that they have been engaged in litigation for over two years did not seem to count as they struggled to remember what appeared to me to be simple and critical dates.
Furthermore, I am uncertain as to what part of the Financial Statement they did not understand or read when they swore the document was true and correct. Critical statements contained within the affidavit sworn by them on their Financial Statements appear to have been ignored or acknowledged merely in passing; statements such as:
a)“I am aware that by law I have an obligation to make a full and frank disclosure of my financial circumstances to the Court and each other party” and
b)“the information in the Financial Statement and any attachments to it which are within my personal knowledge are true” and
c)“I have no income, property or financial resources other than as set out in this document”.
I will refer to this further when considering the evidence of each party. Neither should have walked away from the Court thinking they had provided evidence in a careful or succinct way.
Furthermore, a cursory glance at the chronology of this matter would have easily identified a number of critical documents that should have been disclosed to corroborate the parties’ evidence and yet each counsel had cause to call for documents that should have been provided previously.
The applicant quite rightly relies on a distribution of $500,000 received from his father’s estate and yet a call was made for documents corroborating the distribution of funds from that estate.
The respondent relies on amongst other things the fact that she is holding Property B on trust for her mother and yet a call had to be made for amongst other things a copy of her tax returns showing how the property was treated in 2014 and 2015 and all statements in respect of the Bank A account into which her mother purportedly (and I will refer to this evidence later) deposited in excess of $80,000 into in the sole name of her daughter.
As a consequence of the failure to provide what I thought was fundamental information by both parties, and the late inclusion of the valuer in respect of whether or not the Property C and D was valued at its highest and best use, the trial required further time to be allocated.
The applicant
Noting the comments in respect of the parties’ evidence above, the applicant conceded that he had failed to disclose an amount of cash received from the business that he had held at home, which had subsequently been used to purchase a $25,000 Boat B and trailer. The money it appears was made up of a cash payment of $20,200 being as he put it “cash from savings”, a $3,800 bank cheque and a $1,000 electronic funds transfer.
His reasons why it was not disclosed were unsatisfactory. He insisted he had nothing to hide because he considered that the respondent knew he had the boat. This completely ignored the oath he swore that the Financial Statement filed by him was true and correct.
He also took the position that the motor vehicle that he had purchased and failed to disclose was known by the respondent. This again ignored the information that he had provided to the Court.
In addition he referred to the $6,000 that he had received from the sale of a previous boat which he advised help finance the purchase of Boat B
He was clear that he never had to rely on the respondent’s income and I think there is some credence to that.
He was also clear about the costs of subdividing Property C and D. Whilst making it clear that he was a (occupation omitted) and did not have that expertise, he was aware that if he put an additional connection for the water, it would require payment of approximately $15,000 to the South Australia Water Authority by way of the scheduled fee. I am not directed to any corroborating evidence to support this.
There was some further discussion regarding whether he was able to undertake further work to reduce costs on the property which he conceded, however I have difficulty ignoring the fact that whilst he was working on this property it would be a lost opportunity to receive an income from the usual sources. I therefore consider the cost would need to be brought to account as if the matter was done at arm’s length.
The respondent
Having sat in Court whilst the applicant had explained (somewhat badly) the corrections to his affidavit, it was surprising when confronted with moments of the respondent’s evidence where it appeared that a Financial Statement and her affidavit constituted nothing further than a broad frame of reference and were open to correction by her at will.
Her explanation in respect of the bank account in her name, into which her mother had deposited $80,000, was extraordinary. Further deposits were made to the account of over $16,000 in total and when asked where they came from, she was adamant that she had no idea. Her best answer when pressed was that she presumed they had come from her mother.
She denied that the arrangement was some attempt to defraud Centrelink. I have difficulty with that answer as I have with the rest of her evidence on this issue.
She also stated that she did not have any further statements for the account as they were sent immediately on to her mother as a matter of course. Furthermore, she stated that her mother had the card that had access to the account.
Her mother is not in any way mentioned on the account. Her explanation as to why you would allow someone to deposit funds into an account in your name and make transactions at will on the account did not resolve the issue and was unacceptable.
Whilst a reason was proffered for the starting of the account (which I have difficulty with), I am at a loss as to why it should continue particularly on the basis that the respondent supposedly had no access to that information.
In respect of the commencement of cohabitation the respondent gave the impression that she was thinking it through for the first time. I do not accept that.
Her evidence as to why she needed to buy the property in her name for her mother again puzzled me. When asked about the trust arrangement with her mother, her response was that is what the lawyer called it and put it in the affidavit. There was no information as to how or why this was set up and that left me with a concern that if all of the information was to be supplied it would not reflect well on the respondent or her mother.
Her answers in respect of the statement of financial position provided to the bank where she was unable to advise:
a)why she was noted as receiving rent of $4,866 gross per month or $10,392 per annum, or
b)why she declared a gross income of $4,160 per month or $49,992 per annum
provide further concern that she blatantly misled the bank when seeking the loan for the property.
The respondent’s mother, on the respondent’s evidence had been running a business for some time. She had also sold and purchased houses prior to the “Property B arrangement” being entered into. In the course of running the businesses, she had employed her daughter. It is difficult to accept that she was a woman of little or no substance who had to rely on her daughter who was engaged in part-time employment to secure accommodation.
The respondent’s answers in respect of this issue and in respect of why that account was not shown or the trust arrangement was not shown on her Financial Statement were completely unacceptable.
Jean Stuckey
The case was originally presented on the basis that Ms B, the respondent’s mother, was not being called.
Following a number of concerns being raised about the nature of the financial transactions entered into between the respondent and her mother, leave was given for Ms B to file and serve an affidavit.
In that affidavit her evidence is that she was unable to purchase a home in her sole name as the lending institutions would not take on someone such as her due to her age and income.
She then goes on to say how she and the respondent agreed for the home to be purchased in the respondent’s name and she would contribute toward the mortgage repayments and payment of utilities on the home.
The option of purchasing the home in the joint names of Ms B and her daughter was not canvassed in her evidence nor were any other options, such as the daughter agreeing to be a guarantor for her mother.
She also states that it was necessary to open a bank account from which mortgage repayments could be drawn. It was therefore necessary for the account to be opened in the respondent’s name.
She confirmed she deposited a sum of $80,000 into her daughter’s account. It is not clear why that amount of money needed to be transferred to the account. She also notes she transferred further funds between July and August 2014 in the amount of $16,000.
On 19 August 2016 funds were withdrawn from the account for the deposit for the house. She then says without any basis for it that of the remainder $30,000 is set aside for her son [X] who suffers from schizophrenia.
She does not address in her affidavit:
a)Why she did not advise Centrelink that she held a beneficial or equitable interest in the property;
b)Why she did not advise Centrelink that she had dispersed $80,010 on 9 July 2014 to an account in her daughter’s name;
c)Why she declares the $230 per week payments as rental;
d)Why she did not disclose the $200,000 she received from the sale of her post office business;
e)Why the Centrelink document records show that she does not own a home, has no life interest, shares her accommodation, apparently shares that accommodation with the owner of the home (which is not supported by the evidence before me) and pays board or lodging of $200 per week as at 2014; and
f)Why the position that she appears to have presented to Centrelink, to the bank, and to the Australian Taxation Office is completely at odds with the position that she and her daughter presented to this Court.
I have difficulty with the assertion that the property registered in the respondent’s name is held on trust for her mother.
I have concerns that the respondent and her mother have colluded in arranging Ms B’s finances in such a manner as to provide her with the best possible Centrelink benefit.
If those concerns are correct, then the issue of referring Ms Rounds and her mother to Centrelink is something that must be considered. Should that occur, there is a significant prospect that a significant liability may be incurred and consideration would need to be given to adjourning the trial to determine that amount and how and if it should impact on the division of the assets.
Whilst I have problems with the applicant’s evidence and his failure to disclose, I also have serious problems with the evidence of the respondent and her mother. I do not accept that on their case they have made full disclosure to Centrelink. I have difficulty with their explanation for placing the house in the respondent’s name, obtaining a mortgage in the respondent’s name, paying rent into the account in the respondent’s name and claiming what appears to be rent assistance.
I have also noted the submission that there does not appear to have been any disclosure by Ms B of the $200,000 she received from the sale of her post office business. She says she disclosed this verbally to Centrelink. There is nothing on the documentation produced to corroborate that evidence. I do not accept her answer on this issue.
The alternative is to consider the option that the parties have adopted a course of action that is consistent with the respondent having the ownership of the property having been gifted a significant sum by her mother. In return, the mother has been able to occupy the property for a nominal rent together with payment of the regular outgoings. I will refer to this when considering the assets.
Common ground
Counsel for the parties at the conclusion of these proceedings provided a draft joint chronology which was accepted as an exhibit and marked Exhibit “F”.
On the basis of the agreed chronology and the evidence put before me, I consider it is either agreed or there is no dispute that:
a)Mr Bisset was born 1964 and will be aged 54 this year.
b)Ms Rounds was born 1964 and will also be aged 54 this year.
c)There are no children of the relationship.
d)Mr Bisset is a self-employed (occupation omitted).
e)Ms Rounds is a (occupation omitted) working for (employer omitted). At the time of the trial she worked part-time on the weekend, however she was confident of achieving a five month contract to work longer hours during the week.
f)In or about 1990 the applicant purchased Property G.
g)On 12 January 1995 the applicant and his parents (Mr R Bisset and Ms M Bisett), as joint tenants, purchased Property A for $108,000.
h)On 25 February 1998 the respondent and her mother purchased a house and land situated at Property H subject to mortgage to Bank B.
i)On 1 May 1998 the applicant purchased Property C and D from his parents for consideration expressed to be $65,000.
j)In 1998 the applicant built two units on the Property C and D property.
k)On 19 February 1999 a mortgage was obtained from Bank C to secure $180,000 and was registered over the Property C and D.
l)In or about June 2000 the respondent asserts the parties commenced cohabiting.
m)On (omitted) 2001, the property at Property H is sold for $220,000.
n)In mid-2001 the applicant asserts the parties commenced cohabitation.
o)In or about 2001 (although there is some suggestion it may have been as late as 2003, and the certificate in respect of the business name has not been produced), the applicant’s Business A is established.
p)In October 2001 the death of Ms M Bisett is noted on the title of Property A and the applicant’s father transfers his interest therein to the applicant for no consideration with the value of the applicant’s father’s share (50%) being assessed for stamp duty purposes of $75,500.
q)On 13 December 2001 mortgages to Mortgagee A were registered over the Property A and Property C and D.
r)On 16 June 2003 the applicant sells the property at Property G for $220,000.
s)In or about 2000 the parties demolish the dwelling on Property A and erected a new home there at a cost of about $270,000, the majority of which is borrowed on the mortgage from Mortgagee A.
t)On 28 March 2006 the mortgage over the Property C to Mortgagee A is discharged.
u)In April 2008 the applicant purchased a vacant block of land at Property F for a sum of approximately $74,000 to $80,000.
v)On 25 September 2009 the applicant purchased a house and land situated at Property C for the sum of $320,000 of which sum was borrowed in its entirety from Bank A on the security of memorandum of mortgage. The property is thereafter let to tenants.
w)In or about 2011 the applicant received an inheritance from his late father’s estate in the sum of $500,000.
x)On 6 May 2011 the parties in their capacity as trustees purchased a property situated at and known as Property E for the sum of $325,000 of which funds were provided from the applicant’s inheritance.
y)In 2011 the respondent’s uncle died leaving the respondent a one third interest in his estate (of about $120,000 - received in 2017).
z)On 1 May 2014 the parties separated under the same roof.
aa)On 25 May 2014 the respondent lodges a caveat on Property E.
bb)In August 2014 the respondent purchases property situated at Property B on behalf of her mother and partner. The respondent’s mother contributes the entirety of the deposit in the sum of $50,000 and the remainder of the purchase price is borrowed by the respondent and security of a memorandum of mortgage to the Bank A bank.
cc)On 8 July 2015 an order was made for the Property C property to be sold whereby the sum of $50,000 is to be paid to the respondent from the net proceeds of sale and the balance is paid to the applicant ($14,338).
dd)In August 2015 the applicant vacated Property A and takes up residence at Property C.
ee)On (omitted) 2016, Property C is sold for the sum of $410,000. As at the date of settlement there was a balance outstanding of the mortgage of $337,000 such that the net proceeds of sale amount to $64,338. The respondent received $50,000 and the applicant received $14,338 of the net proceeds of sale.
ff)On 21 April 2017 the respondent is paid the sum of $118,137.92 from her uncle’s estate.
As stated the information above is set out on the basis of the agreed chronology provided by the parties and the evidence that I have identified as common ground.
The respondent’s mother and her partner currently reside in Property B and pay rent of $200 to $230 per week to the respondent’s Bank A bank account.
Both parties submit it is just and equitable for the Court to consider an alteration of the property interests of the parties.
Subject to the above there is agreement the parties were in a de facto relationship from 2000/2001 to 1 May 2014.
The parties have identified the assets and liabilities as follows.
Assets
| Property | Ownership | Applicant’s value | Respondent’s value |
| Property C and D | App | $670,000 | $870,000 |
| Property B | Res | $250,000 | Should not be included |
| Property E | Joint | $325,000 | Agreed |
| Property F | App | $80,000 | Agreed |
| Property A | App | $725,000 | Agreed |
| Proceeds of sale Property C | App Res | $50,000 $14,335 | $50,000 $14,338 |
| Business A | App | $6,385 | Agreed |
| Plant and equipment of the Business A | App | $36,100 | Agreed |
| (omitted) motor vehicle | Res | $7,000 | Agreed |
| (omitted) boat sold by applicant in January 2016 | App | $6,000 | $7,000 |
| Tractor A | App | $2,000 | Agreed |
| Boat A | App | $2,500 | Agreed |
| (omitted) motor bike | App | $1,800 | Agreed |
| Boat B | App | $20,000 | Agreed |
| Vehicle B | App | $11,000 | Agreed |
| Tractor B | App | $4,000 | Agreed |
| Vehicle C | App | $1,000 | Agreed |
| Bank A Bank Account | App | $27,000 | Agreed |
| TOTAL | $2,239,120 | $2,190,123 |
Superannuation
| Ownership | Applicant’s Value | Respondent’s value | |
| Superannuation A as at 27.02.2017 | App | $2,361 | $2,500 |
| Superannuation B as at 10.1.2017 | Res | $21,630 | Agreed |
| Superannuation A as at 11.01.2017 | Res | $4,733 | Agreed |
| Total | $28,724 | $28,863 | |
| Total Assets plus Superannuation | $2,267,844 | $2,218,986 |
Liabilities
| Ownership | Applicant’s Value | Respondent’s value | |
| Bank A Mortgage in respect of the former matrimonial home | $76,394 | $76,000 | |
| Bank A Mortgage in respect to Property C and D | $227,461 | $227,000 | |
| Bank A business loan overdraft | App | $24,859 | $25,000 |
| Capital Gains Tax on Property C | App | $10,834 | $11,000 |
| Mortgage in respect of Property B | Res | $188,596 | Should not be included |
| Unpaid valuations | App | $11,220 | Agreed |
| Cost of subdivision | App | - | $20,000 |
| Total | $539,364 | $370,220 | |
| TOTAL POOL | $1,728,480 | $1,848,766 |
Add-backs
| Ownership | Applicant’s Value | Respondent’s value |
| Amount Paid by the applicant in mortgage repayments and rates and taxes in respect to the former matrimonial home from the date he vacated the home in August 2015 to present (7 months x $467.40) | $3,271 | |
| Council rates Property A ($460 + $2,140) | $2,600 | |
| Water rates Property A ($3,950 + $1,215) | $5,165 | |
| Emergency Services Levy – Property A | $460 | |
| Total | $11,496 |
Financial Resources
| Financial Resources | Ownership | Applicant’s Value | Respondent’s value |
| Respondent’s inheritance from her late Uncle Mr G estate- one third share thereof | Res | $133,315 |
Areas in dispute
The parties cannot agree on:
a)The value of Property C and D;
b)Whether Property B should be included when considering the assets. The applicant says it should have been registered in the respondent’s name, the respondent maintains that it is held for her mother;
c)The value of the aluminium boat in the applicant’s possession;
d)The amount owing on the Account being an overdraft with the Bank A;
e)Whether the amounts paid by the applicant in mortgage payments, rates and taxes since he vacated the home in August 2015 to the present day being mortgage payments of $3,271, council rates of $2,140, and water rates of $1,215, should be added back.
Just and equitable
Whilst the parties agree that it is just and equitable that a division of assets accumulated during the relationship be considered by the Court, I have separately addressed that issue having regard to the assets and liabilities set out above, the history of the relationship, and the guidance provided by the authorities such as Stanford & Stanford (2012) 247 CLR 108 and Watson & Ling (2013) 49 Fam LR 303.
Taking all of that into consideration I do consider it just and equitable that the Court consider an appropriate division of the assets.
Value of Property C and D
This property was valued by Mr A of (omitted Property Valuers).
In his report of 6 June 2016, annexed to his affidavit of 28 February 2017, Mr A valued the property at $620,000. In that report, he noted the property incorporated two dwellings on one title and that the market for comparative sales was very thin. He went on to state that:
…we have adopted an approach that analyses the property with reference to the potential sale of two dwellings after the issue of separate titles. This approach involves establishing the possibility that the dwellings can be issued with separate titles, then analysing the cost to do so, and establishing a gross realization after those costs but also allowing for a profit and risk factor.[1]
The profit and risk deduction in this case would be relatively low as the process of separating and selling the properties would not be difficult. There is also the possibility that if the property were put to market it could attract a buyer that would have use for the property “as is” to accommodate an extended family or retain the property as is for investment purposes.[2]
The sales listed in this report are of comparable dwellings and support a gross realization sale price of the separated dwellings in the order of $800,000.[3]
[1] See Valuation Report of Mr A dated 6 June 2016, 6.
[2] Ibid.
[3] Ibid.
Mr A later noted:
Our conclusion after allowing for the cost to separate and issue new titles, selling expenses, stamp duty, holding costs, contingencies and a developers margin is that the current Value of the property is determined to be within a range of $600,000 to $640,000. We have concluded market value for matrimonial settlement purposes to be $620,000. However this is an unusual property type for which market evidence is limited. Ultimately the true test of value is to test value on the open market.[4]
[4] Ibid, 8
The solicitors for the respondent queried this by letter dated 31 January 2017. A further query was made on 15 February 2017 drawing Mr A’s attention to the sale of a similar property for $445,000.
In his response dated 16 February 2017 Mr A noted that:
…in the absence of comparable sales of properties directly comparable (i.e. two dwellings on one title) we must give consideration to the hypothetical subdivision approach. This incorporates the following variables and approximate costs in determining the value of the property. There are significant costs that will be due at some point when the properties are separately titled. The most significant cost is GST which has to be paid if and when a new supply is created by creating separate titles. It may be relevant to seek accounting advice as to whether this is in fact a requirement.[5]
[5] See affidavit of Mr A filed on 28 February 2017, annexure D.
He went on to state:
In particular in our assessment influencing costs and variables are as follows:
1)approximate cost of subdivision
GST $77,727
Agents Fees/Costs $12,000
Developers Margin $37,289
Titles and Legal Costs $20,000
Holding Costs $16,000
Stamp Duty on Purchase $24,600
2)Time Frame of 5 months
3)An allowance of $20,000 has been made in our calculations for the associated legal and application cost of issuing of separate titles[6]
[6] Ibid.
Property C and D noted by the solicitors for the respondent subsequently sold for $451,000. By letter dated 21 February 2017 the solicitors advised Mr A of the sale and queried what allowance would be made for appropriate costs should the subdivision be effected by the applicant?
Mr A in his response of 28 February 2017 confirmed that the legal and title issue costs remained at approximately $20,000. He noted that he could not confirm that these would be the only costs as GST may be imposed. He had also noted in his letter dated 16 February 2017 that:
It may also be relevant that if either one of the parties who currently own the property takes ownership then some of these costs particularly stamp duty and holding costs are deferred, reduced or irrelevant.[7]
[7] Ibid.
In view of the recent sale of Property I he revised his estimate of the gross realisation of the property being $435,000 per dwelling. This resulted in an adjustment within the hypothetical development model of market value to $670,000.[8]
[8] See affidavit of Mr A filed on 28 February 2017, annexure G.
The respondent’s counsel submits that the applicant’s evidence about whether he would in fact subdivide was noncommittal. He adds that he did not deny that he would subdivide at some point. Subdivision he submits is economically the most beneficial and best use for the property. He submits that if for a moderate cost of $20,000 he is able to increase the value of Property C and D by $180,000 then that is likely what he would do.
There is no allowance in that submission for GST. Nor is there any allowance for capital gains tax, should that be applied.
Mr A in giving evidence before this Court confirmed that the gross realisation price of the units sold on the market would be a combined total of $870,000. He also confirmed that from that a cost of approximately $20,000 would need to be deducted to cover items such as the water connection.
He went on to say when asked to confirm that the gross realisation price of $870,000 less the $20,000 would mean the gross realisation of $850,000 that:
Yes, but you should be careful there because when we are talking about back to the market value of the property as sits, there’s that cost but there’s other costs associated with it, from market valuation point of view. So you are deducting - in this instance you got agent’s fees and the like, including a return to development-return to the developer, profit and risk factor. So we bring it right back to a value of what as is on one title of $670,000.[9]
[9] Transcript dated 5 June 2017, 20.3.
Mr A was not asked to confirm that GST would not apply. The prospect of the applicant having to pay it remains. Furthermore, the issue of capital gains tax was not addressed. I am therefore unable to exclude the prospect of the applicant having to pay capital gains tax.
The applicant submits that his evidence was unequivocal and that he had no intention of subdividing the property. He intended to continue to live in the unit which is currently occupied and to rent the adjoining unit to supplement his income.
There can be no doubt that this property having two units on it has some potential. The respondent urges me to allow for the value of that property at what Mr A refers to as the gross realisation price. The respondent does not however properly address the issues of the cost of the subdivision and more importantly, the tax if any that may be paid by the applicant.
I do not consider that the evidence supports a conclusion that the value of the property should be brought to account at $870,000.
I also do not consider the evidence supports a conclusion that the property can be brought to account at a value in excess of $670,000.
At the same time, the potential for the property to realise more for the applicant, should certain steps be undertaken, cannot be ignored and is a matter that must be referred to under s.90SF(3)(r) of the Family Law Act 1975 (“the Act”).
Property B
There is no dispute that:
a)This property was purchased in the name of the respondent.
b)The property was purchased with the assistance of $50,000 received from her mother. (The respondent’s mother having deposited a sum of $80,000 into the account). Additional funds were contributed to the account between 24 July 2014 and 11 August 2014 of approximately $16,000.
c)The respondent is the person who applied for and is responsible for the mortgage secured against the property. At trial it was agreed that the amount outstanding on the mortgage was $188,596.
d)As at 22 August 2014, the minimum monthly repayment was $1,074.37. The contribution to rent by the respondent’s mother does not cover the entire repayment. That “rent” appears to have subsequently increased to $230 per week. The remainder is paid by the respondent.
e)The Financial Statement completed by the respondent for Bank A notes that the respondent has $185,000 in “other assets”.
f)The Centrelink records for the respondent’s mother of 24 March 2015 show that Ms B is receiving an age pension and rent assistance. The rent assistance is in respect of Property B and shows a rent commitment of $200 per week.
g)The information also discloses that Ms B holds an amount of less than $3,000 in various Bank B savings accounts. There is no reference to any funds held on her behalf by her daughter in an Bank A account.
h)There is no evidence to support a conclusion that Ms B has declared to Centrelink that she is the beneficial owner of Property B.
i)There is no evidence to support a conclusion that Ms B has declared to Centrelink that she is the beneficial owner of the funds held by her daughter in the Bank A bank account.
j)The respondent’s mother has been contributing $200-$230 per week plus payment of outgoings in respect of her occupation of the property.
k)The respondent has declared the property on her tax returns.
l)The respondent has used the property to obtain a negative gearing advantage in respect of her income.
I do not accept the submission that at all times it was anticipated by the respondent and her mother that the respondent would hold the legal interest in the property on trust for her mother.
The respondent in the course of cross-examination clearly stated that the concept that the property was held on trust by her for her mother was “a term which my lawyer suggested”. Any concept in the respondent’s mind that the property was held on trust appears to be something that was formulated in the course of these proceedings.
There has been a course of conduct undertaken by the respondent and her mother in respect of her interactions with amongst other things, Bank A bank, the Australian Taxation Office and Centrelink, that is consistent with the view that the respondent is in fact the owner of Property B and the Bank A bank account.
If I am wrong on this, then there are grave concerns that the respondent and her mother have colluded in providing wrong information to the Bank A bank, the Australian Taxation Office and Centrelink.
Bank A accounts/access advantage cheque account and Bank A Saver account
The respondent asserts that the monies held in these accounts are not hers but are her mother’s.
Ms B claimed that $30,000 of the funds that she had transferred to the respondent were to be preserved for her son who has severe mental health issues. Having concluded that that property is held by the respondent, I consider that the respondent has no legal obligation to pass those funds to her brother. Nor do I consider it appropriate to bring to account any moral obligation in these circumstances.
Ms B asked the Court to note that it is she who has use of the account on her own, paying money from time to time to other family members and to the respondent.
No viable reason is given as to why the account remains in the respondent’s name. No viable reason is given as to why the account is not disclosed to Centrelink.
The parties have chosen to allow it to remain in the name of the respondent. The respondent has chosen to allow her mother to operate the account at will.
The respondent has drawn down a sum at trial of approximately $16,000 to assist her with legal expenses.
It would appear that when required the respondent has access to the account as if it were her own. Otherwise she has chosen to allow her mother to utilise funds from time to time.
In the circumstances I consider it remains open to me to conclude that the account is owned by the respondent however the respondent has chosen to allow her mother to access those funds as and when required.
As stated above, I do not consider there is any enforceable obligation or moral obligation that should otherwise be brought to account on the respondent to set aside funds for her brother.
Proceeds of sale of boat
The applicant sold a boat in January 2016. The applicant says he received proceeds of sale of $6,000. The respondent says he received proceeds of sale of $7,000.
I am not directed to any particular evidence in the closing submissions of either counsel. The evidence would appear to comprise the applicant’s assertion that the boat was sold for $6,000 and the respondent’s assertion that the boat was sold for $7,000.
In view of the fact that I have difficulty with the evidence of each party in respect of their financial transactions, I would bring the proceeds of sale to account at the sum of $6,500.
Add backs
The applicant claims to have added back into the pool the following:
a)The amount paid by him in respect of the mortgage repayments on rates and taxes in respect to the former matrimonial home from the date he vacated the property to the commencement of trial in the sum of $3,271 being seven months at $467.40 per month;
b)Council rates for Property A being $460 plus $2,140 amounting to a total of $2,600;
c)The water rates for Property A being $3,950 plus $1,215 making a total of $5,165;
d)The Emergency Services Levy at Property A being $460;
This amounts to a total of $8,225 that he says should be added back.
I am not directed to any authority in respect of this submission.
The amount is claimed as an add-back. The concept of adding back notional property tends to arise where there has been a premature distribution of the assets.[10] It has also been considered in matters where the parties have expended money on legal fees or as discussed in Kowaliw & Kowaliw (1981) FLC 91-092 where one of the parties has embarked on a course of conduct designed to reduce or minimise the effective value or worth of the assets or where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which is to reduce or minimise their value.
[10] In the marriage of Townsend (1994) 18 Fam LR 505.
I am not convinced that this is a matter which sits within the confines of the principles applying to the concept of adding back notional property.
I am not assisted by the submissions of counsel. I acknowledge that there is no dispute that the applicant has paid these amounts and I consider this appropriately be brought to account under s.90SF(3)(r) of the Act.
I therefore reject the claim for the amount of $8,225 to be added back to the pool of assets.
The pool
I would therefore for the Reasons set out above find the asset pool available for distribution between the parties to be as follows.
Assets
| Property C and D | $670,000 |
| Property B | $250,000 |
| Property E | $325,000 |
| Property F | $80,000 |
| Property A | $725,000 |
| Proceeds of sale Property C | $50,000 $14,338+ |
| Business A | $6,385 |
| Plant and equipment of Business A | $36,100 |
| Vehicle A | $7,000 |
| Sale proceeds of boat sold by applicant in January 2016 | $6,500 |
| Tractor A | $2,000 |
| Boat A | $2,500 |
| (omitted) motor bike | $1,800 |
| Boate B | $20,000 |
| Vehicle B | $11,000 |
| Tractor B | $4,000 |
| Vehicle C | $1,000 |
| Bank A Bank Account | $27,000 |
| TOTAL | $2,239,623 |
Superannuation
| Superannuation A as at 27.02.2017 | $2,361 |
| Superannuation B as at 10.1.2017 | $21,630 |
| Superannuation A as at 11.01.2017 | $4,733 |
| Total | $28,724 |
| Total Assets Plus Superannuation | $2,268,347 |
Liabilities
| Bank A Mortgage in respect of the former matrimonial home | $76,394 |
| Bank A Mortgage in respect to Property C and D | $227,461 |
| Bank A business loan overdraft | $24,859 |
| Capital Gains Tax on Property C | $10,834 |
| Mortgage in respect of Property B | $188,596 |
| Unpaid valuations | $11,220 |
| TOTAL | $539,364 |
| TOTAL POOL plus superannuation | $1,728,983 |
Contributions
There is agreement that the applicant owned a number of properties at the commencement of cohabitation. It is acknowledged that he owned:
a)A 50% interest in the property at Property A (which the applicant values at $75,500);
b)Property C and D which the applicant values at $315,000;
c)Property G which the applicant values at about $200,000 (this property was subsequently sold on 16 June 2003 for $220,000 which forms the basis for its estimated value of $200,000).
On 25 October 2001 the applicant’s father transferred his interest in the property at Property A to the applicant paying stamp duty on the half interest which was valued at $75,500 for the purposes of the transaction.
There is no dispute that the respondent had an interest in Property H. This property was sold on or around the time of the parties commencing cohabitation.
The respondent’s submission is that she had net proceeds of sale of $50,000 of which $27,000 was applied to the purchase of the motor vehicle for the applicant with the remainder of the funds being applied towards household expenditure during the period of the commencement of the applicant’s business.
Whilst it is acknowledged that the respondent’s home at Property H was sold and the respondent received part of the net proceeds, this contribution is not acknowledged. Furthermore it is noted that there is no corroborative evidence to support the claim that a contribution was made as set out by the respondent.
There is no dispute that the respondent’s children [X] and [Y] who were four and three years of age resided with the parties during the period of the relationship. It is agreed that no child support was received for them.
It is also noted the applicant received an inheritance from his father’s estate of approximately $500,000 in or about 2010. Funds from the estate were used to purchase Property E. There is no dispute some of the remaining funds were used to spend on a swimming pool at Property A installing a solar panel system at Property A, and otherwise general living expenses.
There is no dispute that Property B was funded with the assistance of a $50,000 deposit, and an additional contribution toward stamp duty by the respondent’s mother. There is no suggestion the applicant has made any contribution to that asset.
In addition, there is no dispute that the respondent has made no contribution to the accounts into which the respondent’s mother has deposited funds.
I accept that the parties generally worked as a partnership during the period of the relationship. The applicant was originally employed as a (occupation omitted) prior to starting his own business. The respondent did assist him during this process.
There are allegations that the applicant needed to provide funds to meet gambling and drug debts incurred by the respondent. I am unable on the evidence before me to form that conclusion.
Each party has brought into the relationship some assets of note. There can be no doubt however that the assets introduced by the applicant, and the subsequent introduction of the inheritance from his father’s estate, are of greater significance.
The applicant seeks an adjustment of 15% for the initial contributions and a further 10% for the contributions over the period of the relationship including the inheritance received from his late father. This would equate to a division of the assets such that the applicant receives 75% and the respondent receives 25%.
The respondent submits that the inheritance may be seen as a windfall befalling each of the parties.[11] I do not accept this submission. The respondent does however concede that there should be some weighting in favour of the applicant with an allowance of 55% to the applicant and 45% to the respondent on the basis of contributions.
[11] In the marriage of Figgins (2002) 29 Fam LR 544.
The applicant’s father over the course of the relationship and prior to the relationship gifted a number of assets to the applicant. There is nothing in the evidence that would support a conclusion that it was a gift to both parties. It is a contribution that came about because of the applicant’s relationship with his father. It is a contribution that should be credited to his side of the ledger when weighing up the parties’ respective contributions.
The introduction of Property C and D, Property A, the proceeds of sale of Property C, and Property E into the asset pool cannot be ignored.
I therefore accept that an allowance must be made in respect of this and will adjust the division of the assets such that on the basis of contributions the applicant would receive 73% of the respondent to receive 27%.
Financial resources and needs
Each party will be aged 54 this year. The applicant continues to work in his business as (occupation omitted). The respondent is engaged in work for (employer omitted) and as at the date of trial was expecting to be eligible for more hours.
The respondent annexed a report from her general practitioner who wrote that:
In 2010 and 2012 Ms Rounds was the victim of two robberies whilst working for her mother in (employer omitted). At this time she was starting to have difficulties in a relationship with her eldest daughter with frequent arguments and conflict. I referred Ms Rounds in 2012 to Dr I for a psychiatric assessment. Ms Rounds’ dominating symptoms at the time were cycling moods, ruminations, feelings of frustration and irritability. Dr I assessed Ms Rounds as suffering from long term dysthymia or chronic low mood. He changed her antidepressant to Duloxetine. She had also begun Sodium Valproate, an antiepileptic which is used as a mood stabiliser. Ms Rounds responded well and has remained on these medications. She has also been referred to psychologist Dr S for ongoing supportive psychotherapy.
From my most recent consultation with Ms Rounds I am able to report that the situation for her has vastly improved. Ms Rounds is the sole occupant of the house at Property A as her defacto has now moved out. Her youngest daughter is now more settled and has moved back home to live with her mother. Ms Rounds reports being happier and still touches base with her psychologist.
I believe Ms Rounds’ prognosis of depression to be good provided she can minimise stress in her life.[12]
[12] See respondent’s trial affidavit filed on 20 February 2017, annexure J.
The applicant appears to be in reasonable health and the respondent based on the above appears to have no impediment to engaging in full time employment.
The income, property and financial resources of each of the parties have been addressed in these Reasons. It must be acknowledged however that the respondent is in receipt of casual employment and does not have the same skill set as that of the applicant.
Neither party has the care or control of a child under the age of 18.
Neither party draws my attention to the commitments that may be necessary to enable each party to support themselves or any other person who they have a duty to maintain.
The respondent in respect of Property B has entered into an arrangement with her mother which in effect means that the mother and her partner contribute to almost all of the costs of the property.
The respondent submits that regard should be had to the applicant’s failure to disclose his purchase or his possession of Vehicle B, his purchase or possession of his boat, and the cash retained by him. These issues have some substance.
At the same time they are to a significant extent offset by the arrangements that the respondent entered into with her mother and my concerns about the disclosure or lack thereof to Centrelink amongst other things.
In addition, there must be brought to account the fact that the applicant continued to pay the mortgage on Property A together with the rates and taxes.
Furthermore, the potential for the applicant to make a profit from the subsequent sale of Property C and D must also be brought to account. In the applicant’s words, Property C and D represents part of his superannuation fund.
The respondent submits that while she has a financial resource in the form of her inheritance received from a late uncle (which the parties have agreed not to include in the asset pool) she draws the Court’s attention to the need to pay or the fact that she has paid from that the following:
a)credit card liability of $15,942;
b)solicitor’s fees of $42,423;
c)counsel’s fees of $19,921; and
d)the loan from her mother of $16,700.
Her submission is that she is left with the balance of $23,151.92. In view of the fact that the loan from her mother came from the same account that I considered to be the property of the respondent, I consider that amount on that submission should be adjusted to read $39,851.92.
I am urged to provide a further adjustment to the respondent of 10%. The applicant concedes there should be a minor adjustment in view of the parties’ respective earning capacities. I accept there should be an adjustment and consider that should be 10%.
Review
There is no dispute that the respondent will retain Property B, the Bank A account, the (omitted) motor vehicle, and her superannuation benefit and Superannuation A entitlement.
She also seeks to retain the property situated at Property A.
37% of the net value of the assets and financial resources ($1,728,983) amounts to $639,723,71.
The respondent is retaining the following:
| Property B | $250,000 |
| Property A | $725,000 |
| Proceeds of sale Property C | $50,000 |
| (omitted) motor vehicle | $7,000 |
| Bank A Bank Account | $27,000 |
| Superannuation A as at 27.02.2017 | $2,361 |
| Total | $1,061,361 |
| Liabilities | |
| Bank A Mortgage in respect of the former matrimonial home | $76,394 |
| Mortgage in respect of Property B | $188,596 |
| TOTAL | $264,990 |
| Net Total | $796,371 |
The respondent would therefore be required to pay the applicant an amount of $156,647.29 to achieve a 37% distribution of the pool.
The applicant would retain the following:
| Property C and D | $670,000 |
| Property E | $325,000 |
| Property F | $80,000 |
| Proceeds of sale Property C | $14,338 |
| Business A | $6,385 |
| Plant and equipment of Business A | $36,100 |
| Sale proceeds of boat sold by applicant in January 2016 | $6,500 |
| Tractor A | $2,000 |
| Boat A | $2,500 |
| (omitted) motor bike | $1,800 |
| Boat B | $20,000 |
| Vehicle B | $11,000 |
| Tractor B | $4,000 |
| Vehicle C | $1,000 |
| Superannuation B as at 10.1.2017 | $21,630 |
| Superannuation A as at 11.01.2017 | $4,733 |
| TOTAL | $1,206,986 |
| Liabilities | |
| Bank A Mortgage in respect to Property C and D | $227,461 |
| Bank A business loan overdraft | $24,859 |
| Capital Gains Tax on Property C | $10,834 |
| Unpaid valuations | $11,220 |
| Subtotal | $274,374 |
| TOTAL | $932,612 |
The applicant is entitled to 63% of $1,728,983 which is $1,089,259.29. the net value of the assets held by the applicant is $932,612. The respondent would be required to pay the applicant $156,647.29 in order to make up that amount.
In the circumstances and for the Reasons set out above, I consider the proposed division to be just and equitable.
The respondent has access to the remainder of the Bank A account and the funds from her uncle’s inheritance. She also has the equity in the property at Property A.
The respondent will need to make arrangements to borrow the funds and I will give her 45 days to put that in place.
I will give the parties liberty to apply as to consequential orders.
I therefore make the orders as set out at the commencement of these Reasons.
I certify that the preceding one hundred and forty-seven (147) paragraphs are a true copy of the reasons for judgment of Judge Cole
Date: 28 February 2018
Key Legal Topics
Areas of Law
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Equity & Trusts
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Property Law
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Family Law
Legal Concepts
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Remedies
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Constructive Trust
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Costs
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Injunction
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