Cahill and Cottrell
[2013] FCCA 751
•12 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CAHILL & COTTRELL | [2013] FCCA 751 |
| Catchwords: FAMILY LAW – De facto relationship – property. |
| Legislation: Family Law Act 1975, ss.75, 79, 90SF, 90SM |
| Cases cited: Clauson (1995) FLC 92-595 Clives and Clives (2008) FLC 93-385 C v C (2005) FLC 93-220 Ferraro (1993) FLC 92-335 Garrett and Garrett (1984) FLC 91-539 Hayne and Hayne (1977) FLC 90-265 Hickey (2003) FLC 93-143 Kessey and Kessey (1994) FLC 92-495 Lee Steere (1985) FLC 91-626 Lovine & Connor and Anor (2012) FLC 93-515 OSF and OJK (2004) FLC 93-191 Parshen & Parshen (1996) FLC 92-720 Petruski & Balewa [2013] FamCAFC 15 Poulos and Poulos (1984) FLC 91-515 R v Watson; Ex parte Armstrong (1976) 136 CLR 248 Russell v Russell (1999) FLC 92-877 Stanford v Stanford (2012) FLC 93-518; (2013) 293 ALR 70 |
| Applicant: | MS CAHILL |
| Respondent: | MR COTTRELL |
| File Number: | LNC 210 of 2012 |
| Judgment of: | Judge Roberts |
| Hearing date: | 12 June 2013 |
| Date of Last Submission: | 12 June 2013 |
| Delivered at: | Launceston |
| Delivered on: | 12 July 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr K J Waterhouse |
| Solicitors for the Applicant: | P.L. Corby & Co |
| Counsel for the Respondent: | Mr M Foster |
| Solicitors for the Respondent: | Murdoch Clarke |
ORDERS
That within 30 days of the date of this order MS CAHILL (“the applicant”) must transfer to MR COTTRELL (“the respondent”) all her estate and interest in the property situated at Property S in Tasmania (“the Tasmanian property”).
That contemporaneously with the transfer of the Tasmanian property to the respondent referred to in Order No. (1) hereof the respondent must:
(a)provide to the applicant discharges or partial discharges of mortgages so as to release the applicant from any liability under any mortgage registered and secured upon title to the Tasmanian property; and
(b)pay to the applicant the sum of $25,000 (twenty-five thousand dollars).
That the respondent must henceforth indemnify the applicant against any liability for outgoings in respect of the Tasmanian property.
That the applicant and the respondent must do all acts and execute all documents necessary to implement these orders.
That unless specified in these Orders:
(a)each party is solely entitled to the exclusion of the other to all other property in possession of that party as at the date of these Orders;
(b)any claim that either party may have to any superannuation benefit belonging to or earned by the other is extinguished;
(c)all insurance policies become the sole property of the person in whose name the policy stands as owner;
(d)each party will be solely liable for and must indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders; and
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Cahill & Cottrell is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT LAUNCESTON |
LNC 210 of 2012
| MS CAHILL |
Applicant
And
| MR COTTRELL |
Respondent
REASONS FOR JUDGMENT
Applications
The Applicant, MS CAHILL (“Ms Cahill”) is 67 years old and the Respondent, MR COTTRELL (“Mr Cottrell”) is 63 years old.
Ms Cahill filed an Initiating Application on 17 April 2012 seeking orders that she transfer her interest in a property at [S] in Tasmania (“the Tasmanian Property”) to Mr Cottrell and that he pay her the sum of $116,190.
On 10 May 2012 Mr Cottrell filed a Response seeking similar Orders, save that he sought an order that he pay her only $25,000. He also sought a costs order against Ms Cahill.
On the day before the hearing, Ms Cahill filed an Amended Initiating Application. The significant difference between that and her earlier Initiating Application was that the cash adjustment sought by her was reduced from $116,190 to $78,645.
It appeared to be agreed between the parties that Ms Cahill is effectively seeking a 60/40 division in her favour of the net value of the parties’ property pool whereas Mr Cottrell is seeking a 50/50 division.
Ms Cahill relied upon a trial Affidavit filed on the day before the hearing and a Financial Statement filed with her original Application on 17 April 2012. Mr Cottrell relied upon his trial Affidavit and Financial Statement filed 7 June 2013. Both parties were cross-examined and there were no other witnesses.
Credit
Ms Cahill was an unreliable witness. In her Affidavit filed with her Initiating Application on 17 April 2012 she had stated the following:[1]
At the commencement of the relationship I owned two pieces of real estate. Firstly, I owned 110 acres of land just outside Canberra. During the relationship this property was sold for $48,000. Secondly, I owned a property ……in Queensland.
I was able to own the two pieces of real estate referred to in the previous paragraph as a result of my getting a payout from the Federal Government in 1989 when I left the public service. The payout was approximately $180,000. I used $72,000 of it to purchase [the Queensland property].
[1] At paragraphs 5 and 6
Those paragraphs in her first affidavit were quite clearly misleading, because it transpires that:
(a)at the start of the relationship did not own “two pieces of real estate” - she owned a half interest in a property near Canberra and when that was sold in 1998 she received $16,996 for her interest in that particular property; and
(b)she did not receive her “payout” when she left the public service until 1998 (i.e. not in 1989 as initially stated).
Consequently, the reality is that at the start of the parties relationship Ms Cahill had a half interest in a property which realised less than $17,000 approximately seven years after the parties had started living together. That is very different from the impression one gets from the two paragraphs of her first affidavit quoted above, because they suggest that at the “commencement of the relationship” Ms Cahill’s real estate interests had a value that possibly exceeded $100,000.
In my view, it is also significant when she was cross-examined Ms Cahill conceded that she had not sought to correct any such false impression until the day before the hearing (when she filed her trial affidavit).
Throughout her cross examination, Ms Cahill made statements that
Mr Cottrell had not supported her financially and referred to herself as having been “single” on a number of occasions. That clearly conflicts with the evidence provided in her affidavits that she was in a de facto relationship with Mr Cottrell between 1991/1992 and their separation in March 2011.
Her statements that she did not receive financial support from
Mr Cottrell were quite obviously untrue, especially in those years when she earned significantly less income than Mr Cottrell (and I note that in some years she earned so little that she was not required to file any tax returns).
In this regard, it was only after drawn out cross examination of
Ms Cahill (when she was taken methodically through the tax records of herself and Mr Cottrell for the whole of their de facto relationship) that the following become apparent:
(a)from 1991 to 1997 the parties earned similar incomes; and
(b)between 1998 and 2008 she earned a total of less than $160,000 whereas Mr Cottrell earned a total of slightly more than $420,000.
On the other hand, I found that Mr Cottrell gave his evidence in a straightforward manner and was prepared to admit that he could have been mistaken about some of the evidence set out in his affidavit.
In view of the above, where there is any disagreement between the parties about the facts in relation to this matter, I generally prefer the evidence of Mr Cottrell.
Background
Unless a contrary intention is clear from the context, where I refer to facts in these Reasons, they should be regarded as findings of fact, especially where there is a dispute between the parties in relation to those facts.
Although they had known each other since 1987, the parties agree that their de facto relationship began in 1990 or 1991. There are no children of their relationship but two of Ms Cahill’s children from a previous relationship lived with them for the first two years of their de facto relationship.
At the start of their cohabitation Ms Cahill had her half interest in the property near Canberra (held jointly with her former husband) and
Mr Cottrell had savings of approximately $10,000 and a motor vehicle.
In the main, Mr Cottrell’s employment was as an [omitted] and Ms Cahill’s was as a public servant. However, there were periods during the relationship when Ms Cahill was a full time university student.
In 1992 the parties jointly purchased a vacant block of land at [J] in New South Wales.
Ms Cahill ceased being a public servant in 1998 and she received a payout of $35,620 for unused leave and redundancy pay on 7 January 1998.[2] Mr Cottrell concedes that Ms Cahill purchased the Queensland property in October 1998 for approximately $70,000 from her “payout” and that she spent a further $20,000 renovating it.[3] How Ms Cahill managed to spend approximately $90,000 from a payout of $35,620 was not adequately explained. However, Ms Cahill says that she was able to purchase the Queensland property with “superannuation monies” that she had invested.[4]
[2] See annexure “A” to her trial affidavit
[3] See paragraph 28 of his trial affidavit
[4] See paragraph 17 of her trial affidavit
In 2001 the parties purchased the Tasmanian property for $152,000. Mr Cottrell contributed the deposit of $15,000 and the parties borrowed the balance from the Commonwealth Bank. I therefore conclude that Ms Cahill had exhausted her “payout” funds by then.
The parties sold their block at [J] in 2002 and used the proceeds to purchase air conditioners for the Queensland property and reduce the outstanding mortgage balance in relation to the Tasmanian property.
In early 2011 the parties’ de facto relationship came to an end. Ms Cahill now lives in the Queensland property and Mr Cottrell lives in the Tasmanian property. They both wish to retain the properties in which they are living.
Relevant Law
The law with respect to financial matters relating to de facto relationships is found in Part VIIIAB of the Family Law Act 1975 (“the Act”). Subsection 90SM(4) sets out the matters that the court must take into account when considering what orders should be made for the alteration of the property interests of parties. They include:
a)the financial and non-financial contributions made directly or indirectly by or on behalf of each party or by a child of the de facto relationship to the acquisition, conservation or improvement of any property of the parties;
b)the contribution made by a party to the welfare of the family including any contribution made in the capacity of homemaker or parent;
c)the effect of any proposed order upon the earning capacity of either party; and
d)the matters referred to in subsection 90SF(3) “so far as they are relevant”.
Because subsections 90SM(4) and 90SF(3) of the Act mirror subsections 79(4) and 75(2) of the Act, it is clear that the approach that Courts should take to the determination of de facto relationship property settlements is essentially the same as that which would have applied if the parties had been legally married. Consequently, the Court can have regard to relevant cases decided over the years pursuant to Part VIII of the Act, notwithstanding that Part VIIIAB of the Act only became law in 2009.
Prior to the recent High Court case of Stanford v Stanford,[5] the general approach to the determination of a property settlement application appeared to have been well established by authority as a multi-step process.[6] The steps were said to involve:
a)Firstly, an identification and valuation of the property, liabilities and financial resources of the parties;
b)Secondly, an evaluation of the contributions made by the parties as defined in subsections 79(4) or 90SM(4)of the Act;
c)Thirdly, a consideration of any relevant matters under subsection 75(2) of the Act; and
d)Fourthly, before making an order adjusting property interests, being satisfied in all the circumstances that it is just and equitable to do so under subsections 79(2) or 90SM(3).[7]
[5] Stanford v Stanford (2012) FLC 93-518; (2013) 293 ALR 70
[6] See Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and C v C (2005) FLC 93-220
[7] Also see Russell v Russell (1999) FLC 92-877
Since Stanford, there has been much discussion about the implications of that decision on the manner (or the order) in which Courts must consider the relevant provisions of the Act. For example, in a review of the Stanford decision, Melbourne barrister Minal Vohra said:
The High Court turns our well-understood concept of the requirement that the order be just and equitable as the fourth step in sec 79(4) proceedings on its head. This, the High Court reminds us is not what the Act actually states.[8]
[8] Sound Education in Family Law, February 2013
Martin Bartfelt QC of the Victorian Bar said this in a recent paper:
It follows from the application of these principles that the focus of the enquiry commences by determining whether it is just and equitable to make any order. Or put another way, having regard to what the parties each own, whether such ownership is legal or equitable, should the court disrupt that scheme of ownership by interposing an adjustment of property interests.[9]
[9] “Stanford and Stanford - Lots of Questions - Very Few Answers” by Martin Bartfelt QC, 15 March 2013
In Stanford, at paragraph 37, their Honours French CJ, Hayne, Kiefel and Bell JJ said:
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
In paragraph 40, their Honours went on to say:
40. Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”.[10] To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
[10] R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 257
The quotations above from Stanford clearly suggest that being satisfied that it is just and equitable to make an order cannot be the last in a series of four steps. In my view, the assessment must begin with identifying the parties’ legal and equitable interests in the asset pool and deciding whether it is just and equitable to make orders to adjust those interests. Indeed, with the benefit of hindsight, it may have been wise for judicial officers over the years to have heeded the words of former Federal Magistrate Walters[11] when he said that “the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and there is no fourth step in that sense.” [12]
[11] Now Justice Walters of the Family Court of Western Australia
[12] OSF and OJK (2004) FLC 93-191 at paragraph 16
In this matter, the parties are both seeking an order for Ms Cahill to transfer her interest in the Tasmanian property to Mr Cottrell, so they appear to be agreed that it is just and equitable that I make orders to achieve that.
The asset pool
To their credit, the parties were able to agree upon the make-up of the property pool as follows:[13]
[13] See Exhibit “R1”
Ms Cahill’s Queensland property $255,000 Ms Cahill’s car $4,500 Ms Cahill’s re-draw funds $10,000 Ms Cahill’s agreed “add-back” $5,000 Jointly owned Tasmanian property $280,000 Mr Cottrell’s re-draw funds and savings $36,282 Mr Cottrell’s superannuation $38,458 Mr Cottrell’s car $2,000 Sub-total $631,240 Less mortgage balance $46,282 Net total value $584,958
In accordance with the reasoning of the majority in C v C,[14] I consider that it is appropriate to include the value of Mr Cottrell’s superannuation in the same pool as the other assets. This is because his superannuation is of minor value in relation to the total value of the other assets, and that is the manner in which the parties wish his superannuation interest to be treated.
[14] C v C (2005) FLC 93-220
Contributions
It is important to realise that the assessment of contributions is not an exercise of mathematical precision. In Hayne and Hayne,[15] Pawley J said:
In matters such as this one cannot approach the problem with an eye for meticulous detail. It should rather be dealt with broadly so that the end result can be said to be just and equitable.
[15] Hayne and Hayne (1977) FLC 90-265 at p. 76,415
I also refer to Garrett and Garrett,[16] Clives and Clives,[17] Kessey and Kessey,[18] and Poulos and Poulos [19] and note that an evaluation of the weight to be attributed to parties’ different contributions cannot ever be a science involving precise measurement.[20]
[16] Garrett and Garrett (1984) FLC 91-539
[17] Clives and Clives (2008) FLC 93-385 at paragraph 44
[18] Kessey and Kessey (1994) FLC 92-495 at page 81,150
[19] Poulos and Poulos (1984) FLC 91-515 at p. 79,184
[20] Also see Petruski & Balewa [2013] FamCAFC 15 at paragraph 49
Indeed, in Lovine & Connor and Anor, the Full Court said: [21]
41. It follows that the assessment involves matters of estimation and is not, and cannot be, a mathematical exercise. No amount of devotion to mathematics is capable of transforming a discretionary exercise involving many component parts, each mostly unamenable to precise computation, into one of aggregating separately finely calculated components to reach an overall outcome.
[21] Lovine & Connor and Anor (2012) FLC 93-515 per Coleman, Ainslie-Wallace and Kent JJ
As is often the case in such matters, the assessment of the parties’ contributions in this particular matter is further complicated by incomplete documentation. For example, Ms Cahill said in her first affidavit that her payout from the Federal Government in 1989 when she left the public service was approximately $180,000.[22] However, the only documentation that she produced showed a termination payment to her of only $35,620. Further, she did not adequately explain how she could access superannuation fund to purchase a dwelling.[23]
[22] See paragraph 6 above
[23] See paragraph 21 above
Having said that, it is clear that the direct financial contributions of
Ms Cahill to the “acquisition, conservation and improvement” of the Queensland property were significantly greater than those of
Mr Cottrell. On the other hand, Mr Cottrell’s direct financial contributions from his earnings during the relationship exceeded the contributions of Ms Cahill quite significantly.
Ms Cahill’s counsel submitted that, because of the greater contribution to the purchase of the Queensland property from her payout, she should receive 60% of the total value of the property pool. It would appear that he bases that submission on the fact that value of the Queensland property exceeds 40% of the total value of the pool, and he also appears to suggest that Mr Cottrell made no contribution to that Queensland property. [24] In my view, that submission is erroneous for two reasons:
·firstly, it ignores the fact that Ms Cahill was accumulating her interests in the “payout” and her superannuation during a period of 7 or 8 years while the parties were living together; and
·secondly, it ignores completely Mr Cottrell’s significantly greater direct financial contributions from his earnings between 1998 and 2008.[25]
[24] See the last paragraph of the applicant’s Case Outline
[25] See paragraph 13(b) above
While I do not have very detailed information about how the parties spent what they earned, I note that in Parshen & Parshen, their Honours Ellis, Finn and Purdy JJ said the following:
In our view, in the absence of evidence to the contrary, it should be inferred in proceedings pursuant to the provisions of s79 that moneys howsoever received by a party during the course of the parties’ cohabitation, are used by that party for the benefit of the family unit. Such moneys, in those circumstances, thus constitute a financial contribution by the party who received the moneys. [26]
[26] Parshen & Parshen (1996) FLC 92-720 at page 83,665
I am therefore of the view that the parties’ overall contributions during their de facto relationship of approximately 20 years should be given equal weight. In essence, if this matter was to be decided on contributions alone, I would make orders to provide for a 50/50 division of the agreed asset pool. However, I must also give consideration to the other matters referred to in subsection 90SM(4).
The effect of the orders upon earning capacity
The parties agree that the Tasmanian property is to be transferred to
Mr Cottrell, but the parties cannot agree upon how much Mr Cottrell should pay Ms Cahill to achieve that. However, irrespective of what quantum is ordered to be paid, the orders will not have an effect upon the earning capacity of either party.
Subsection 90SF(3)
As mentioned above, Ms Cahill is 67 years old and Mr Cottrell is 63 years old.
Ms Cahill is a pensioner and student. In my view, it is reasonable to assume that, given her age, her employment prospects are not particularly good and she will continue to rely upon the pension as her primary source of income.
Ms Cahill’s income is approximately $363 per week.[27] She does not have any mortgage commitments.
[27] Paragraph 37 of her trial affidavit
Mr Cottrell is employed as an [omitted] and earns approximately $600 per week because he is unable to be employed full-time because of his deteriorating health.[28] He says that his mortgage repayments are $300 per week,[29] and while that might seem high when the agreed mortgage balance is $46,282, one must remember that Mr Cottrell is 63 years of age and that could cause the mortgagee to impose relatively stringent repayment terms.
[28] See Paragraphs 24 and 41 of his trial affidavit, and his Financial Statement filed 7 June 2013
[29] See Part G of his Financial Statement
Consequently, the parties are in very similar positions in terms of net disposable income per week.
In those circumstances, I am of the view that there should not be any adjustment in the parties’ entitlements arising from a consideration of the relevant factors under subsection 90SF(3).
Conclusions
It is clear from what I have said above that the orders that I make should bring about an approximately equal division of the parties’ assets by value.
The agreed asset pool has a total net value of $584,958. Half of that is $292,479.
If Ms Cahill is to retain the Queensland property, her assets will be:
The Queensland property $255,000 Her car $4,500 Her re-draw funds $10,000 Her agreed “add-back” $5,000 Total $274,500
If Mr Cottrell is to retain the Tasmanian property, his assets will be:
The Tasmanian property $280,000 His re-draw funds and savings $36,282 His superannuation $38,458 His car $2,000 Sub-total $356,740 Less mortgage balance $46,282 Net total value $310,458
Mr Cottrell proposes that he should pay Ms Cahill $25,000 in return for a transfer of her interest in the Tasmanian property. That would make her assets worth a total of $299,500, which is 51.2% of the agreed net value of the asset pool.
In view of what I have said above and the fact that Mr Cottrell is prepared to pay Ms Cahill $25,000 in return for a transfer of her interest in the Tasmanian property, I am of the view that it is just and equitable that he do so. I will therefore make orders to give effect to that.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Judge Roberts
Associate:
Date: 12/7/13
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Equity & Trusts
Legal Concepts
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Remedies
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Constructive Trust
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