Carney and Carney (No.2)
[2019] FCCA 1275
•16 May 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CARNEY & CARNEY (No.2) | [2019] FCCA 1275 |
| Catchwords: FAMILY LAW – Property – property adjustment after 29 year marriage – second marriage for both parties – add backs – treatment of nursing home refundable accommodation deposit – contribution by inherited funds - future needs where one party to the marriage is deceased and the other has a compromised life expectancy. |
| Legislation: Family Law Act 1975, ss.75, 75, 117 Federal Circuit Court Rules 2001, Division 11.2, Rule 15.29A Federal Circuit Court Act 1999 (Cth), s.64 Powers of Attorney Act 2003, s.19: |
| Cases cited: Fisher v Fisher (1986) HCA 61 (28 October 1986) Hall & Hall (2016) 257 CLR 490 Lawrie and Lawrie (1981) FLC 91-102 Menzies v Evans & Anors (1987-1989) 12 Fam LR 519 Miklic & Miklic & Anor [2010] FamCA 741 AJO & GRO (2005) FLC 93-218 Re Parrott v Public Trustee of NSW (1994) FLC 92-473 Smith v Smith HCA 36 (27 June 1986) Stanford v Stanford (2012) FLC 93-518; (2013) 293 ALR 70 Tasmanian Trustees Limited v Gleeson (1990) 14 FamLR 189 Vass & Vass [2015] FamCAFC 51 |
| Applicant: | MS CARNEY BY HER LITIGATION GUARDIAN MR BAKER |
| Respondent: | ESTATE OF THE LATE MR CARNEY BY HIS EXECUTORS MS HOWARD AND MS NORMAN |
| File Number: | NCC 774 of 2018 |
| Judgment of: | Judge Costigan |
| Hearing dates: | 8 & 9 April 2019 |
| Date of Last Submission: | 23 April 2019 |
| Delivered at: | Newcastle |
| Delivered on: | 16 May 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms V Carty |
| Solicitors for the Applicant: | Berryman Partners Lawyers |
| Counsel for the Respondent: | Mr W Tregilgas |
| Solicitors for the Respondent: | Lea Smith Solicitor |
ORDERS
That within, 21 days of the date of these Orders the Respondent shall pay to the Applicant, from the proceeds of sale of the property at Street A, Suburb B NSW, the sum of $415,283.
That except as otherwise provided in these orders each party is declared the sole beneficial owner of all items of property currently within their possession or under their control.
That the matter is adjourned to 28 May 2019 at 9.30 am in relation to the issue of costs.
IT IS NOTED that publication of this judgment under the pseudonym Carney & Carney (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 774 of 2018
| MS CARNEY BY HER LITIGATION GUARDIAN MR BAKER |
Applicant
And
| ESTATE OF THE LATE MR CARNEY BY HIS EXECUTORS MS HOWARD AND MS NORMAN |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Carney (‘the Wife’) and Mr Carney (‘the Husband’) were married … 1989. They separated in September 2017 when the Husband was admitted to the Suburb B Nursing Home.
The Husband is now deceased. He died on … 2018.
On 12 March 2018 the Wife commenced these proceedings for a property settlement pursuant to section 79 of the Family Law Act 1975 (‘the Act’).
On 16 April 2018 orders were made by consent for the appointment of Mr K, as Litigation Guardian for the Husband.
On 25 September 2018 orders were made by consent for the appointment of Mr Baker as Litigation Guardian for the Wife (‘the Applicant’).
On 21 November 2018 orders were made by consent for the appointment of Ms Howard and Ms Norman as Executrices for the late Husband’s estate to be substituted for the deceased as Respondents.
It is unfortunate that this matter is in essence a dispute between the Husband and Wife’s adult children.
Competing Applications
The Applicant sought final orders in accordance with his Case Outline filed 5 April 2019 as follows:
1. That within, 14 days of the date of these Orders the Respondent shall pay to the Applicant, from the proceeds of sale of the property at Street A, Suburb BNSW, the sum of $490,000.
2. That except as otherwise provided in these orders each party is declared the sole beneficial owner of all items of property currently within their possession or under their control.
3. That the Respondent shall pay the Applicant’s costs in these proceedings, and such costs shall be paid on an indemnity basis for the period 1 April 2019 to conclusion of the hearing.
The Respondents seek final orders in accordance with their Minute of Order dated 23 April 2019 as follows:
1. That the Respondent pay to the Applicant the sum of $300,000 to be utilised by the Applicant to house the Applicant and on the Applicant’s demise the amount of $300,000 or such balance as is remaining is paid to the Respondent.
2. That the Applicant’s Application filed 12 April 2018 as subsequently amended be otherwise dismissed.
3. That pursuant to s. 117 of the Family Law Act that the question of costs be reserved.
Background
The Wife is 93 years of age. She is currently a resident at the Town L Retirement Village. She has some significant health issues including Congestive Cardiac Failure, Atrial Fibrillation and Peripheral Vascular Disease.
The Husband was 93 years of age at the time of his death,
The parties were married on … 1989. It was the second marriage for them both. The Husband had been married to his first Wife Ms P until her death in 1980. There were six children from the marriage including the Respondents Ms Howard and Ms Norman.
The Wife had been married to Mr Q until his death in 1984. There were three children from that marriage.
At the commencement of the marriage, the Husband owned and remained the sole registered proprietor of the property situated at Street A, Suburb B (‘former matrimonial home’) and the Wife owned a home in the same street being Street A1, Suburb B.
Between 1989 and 1991 the Husband and Wife lived in the Wife’s property Street A1, Suburb B while the former matrimonial home was renovated.
In or around … 1992 the Wife sold her Street A1, Suburb B property to her son Mr F.
In 1993 the Husband received an inheritance of $49,500 from the estate of his late mother.
In or about 2009 the Wife says that she received a gift of $30,000 from her brother Mr G. On Mr G’s death she received a further sum of $208,081 in … 2013 as a beneficiary under his Will. From those monies she placed $142,500 into a term deposit.
In 2014/2015 the Wife deposes that she paid for the renovation of the bathroom at the former matrimonial home, the costs of which were approximately $8,000 to $10,000.
On 17 July 2015 the Husband signed a Will appointing his daughters Ms Howard and Ms Norman as Joint Executrices and Trustees. The Will provided for the Wife to have a life tenancy in the former matrimonial home, and upon the Wife’s death the former matrimonial home was to be sold and the proceeds of sale to be divided equally between his children. Clause 5 of the Will further provided:
‘At the written request of my Wife my Trustee shall sell the house and buy a retirement residence to which the same provisions of those expressed in the last clause shall apply.’
On 24 August 2015 the Husband signed an Enduring Power of Attorney (EPA) appointing his son, Mr H and his daughters Ms Howard and Ms Norman, jointly and separately to be his Attorneys. The Wife deposes that she was not aware of the contents of the Will or the EPA.
The Wife deposes that in 2016 the Husband gifted two (2) blocks of land that he owned at Town J to his grandson Mr K. There was no evidence before the Court as to the value of those parcels of land – either at the commencement of the marriage or at the time of disposal.
In … 2017 the Husband was admitted to the Suburb B Nursing Home and according to the Wife,
‘he had been suffering from dementia for several years.’[1]
[1] Wife’s affidavit filed 12 March 2018 at [6]
The Respondents deny that the Husband was suffering from dementia. They rely on a letter dated 11 April 2018 from the Husband’s treating orthopaedic surgeon which reads as follows:
‘I had a discussion with his daughter today. I understand there has been some concerns that he had severe dementia prior to his knee replacement surgery. I can say that in the encounters I had with him while discussing his left knee arthritis and options, including surgery, he was very clear minded and strong in his beliefs as to what he wanted to have done. Certainly if I had felt there was any significant cognitive decline I would not have proceeded to knee replacement surgery.’[2]
[2] Exhibit O
The Court also notes that the Husband executed an Enduring Power of Attorney in favour of the Respondents on 24 August 2015 and a Solicitor provided the usual certificate under section 19 of the Powers of Attorney Act 2003 that he had explained the effect of the Power of Attorney and the Husband appeared to understand.
The Wife says that she first became aware that the Husband’s children wished to sell the former matrimonial home when she saw a real estate agent taking photographs at the property. The Respondents deny there were any plans to sell prior to the commencement of these proceedings.
On 8 November 2017 the Wife registered a caveat on the title of the former matrimonial home.
On 12 March 2018 the Wife filed an Initiating Application seeking final orders that the Husband transfer to the Wife 50% of the former matrimonial home or the equivalent proceeds of sale and otherwise the parties be declared the sole beneficial owners of all items in their possession. She also sought her costs of the proceedings.
On 13 April 2018 a Response was filed to that application by the husband’s grandson Mr K, who also sought appointment as the legal personal representative for the Husband. It was necessary that such an appointment occur Mr K deposed because the Husband had been admitted to an aged care facility,
‘was frail and bedridden and unable to administer his affairs’.
The final orders sought by the Husband were simply that the Wife’s application be dismissed on the basis that, though physically separated, the parties were still in a marital relationship. In his supporting affidavit Mr K deposed that for the purposes of Centrelink the Husband was recorded as being partnered and that,
‘..Ms Carney continues to visit Pop on a regular basis and I have heard her say to the nursing staff ‘he is my Husband and I love him.’[3]
[3] Affidavit of Mr K file 13 April 2018 at [8]
On 16 April 2018 the matter came before Registrar Clarke who made orders by consent for the appointment of Mr K as the Litigation Guardian for the Husband having been satisfied as to the matters required by Division 11.2 of the Federal Circuit Court Rules 2001.
Orders were also made by consent for the Wife to have sole use and occupation of the former matrimonial home whilst ever the Husband remained a resident in an aged care facility and for, inter alia:
·A restraint on the Husband and his agents from entering the property, dealing with the property or removing items from the property without the consent of the Wife;
·The Husband to provide his consent for the Wife to lodge a caveat on the title of the former matrimonial home;
·The appointment of a single expert to value the property; and
·A restraint on the Wife from removing the Husband’s chattels from the former matrimonial home.
The Registrar made orders for the parties to attend a conciliation conference to take place on 18 June 2018. These orders also carried the following notation:
‘The Respondent Husband contends that it is not just and equitable to make an order under s.79 in this matter and his consent to the following Interim Orders made on the basis that he makes no concession that the Wife is entitled to alteration of property interests.’
On 4 May 2018 the Wife paid $210,000 to Town L Retirement Village and on 18 May 2018 she commenced living there following admission to Town L Private Hospital for a period of one week.
On 11 May 2018 the Wife was admitted to Town L Private Hospital. She was discharged on 18 May 2018 to reside at the Town L Serviced Apartments. The Wife secured that accommodation by using the inheritance monies that she received from her late brother’s estate.
The Conciliation Conference before Registrar Clarke on 18 June 2018 was vacated on the joint application of the parties in view of the Wife’s recent changed circumstances. However, interim orders were made by consent that provided for:
·Discharge of interim orders 2 to 7 inclusive made by consent on 16 April 2018;
·The Husband to maintain his consent to the registration of the Wife’s caveat over the former matrimonial home until sale;
·Within 14 days the Wife to attend and remove her goods and chattels listed in annexure A to the orders; and
·For the former matrimonial home to be listed for sale and sold by way of auction with a reserve price of $730,000.
On 2 July 2018 the Wife formally vacated the former matrimonial home.
On 22 August 2018 the Wife’s solicitors received a list of nominated agents from the Husband’s Solicitors.
On 24 August 2018 the Wife filed an Amended Initiating Application seeking the appointment of her daughter Ms M as her Litigation Guardian. Ms M, her sister Ms N and brother Mr F had been appointed as Attorneys under the Wife’s Power of Attorney. A medical certificate dated 31 August 2018 from the Wife’s general practitioner Dr O states:
‘..She [the Wife] suffers from Congestive cardia failure and Atrial Fibrillation which causes breathlessness and fluid retention. Her mobility is greatly impaired. She also has Peripheral vascular disease. She visits me at least fortnightly with her medical problems. I have found that she has declined rapidly over the last few months’ possibly due [sic] stress of her recent displacement. Ms Carney is in no physical or emotional state to attend court in person.’[4]
[4] Wife’s affidavit filed 21 September 2018, annexure A
The Amended Initiating Application came before Registrar Clarke on 28 August 2018. The Registrar transferred the matter to the Docket Judge as the Wife’s application for appointment of a Litigation Guardian was opposed by the Respondent.
On 25 September 2018 the matter came before the Court for the first time in a duty list. Orders were made by consent for the appointment of Mr Baker as Litigation Guardian for the Wife and a further Conciliation Conference date allocated. Mr Bates of Counsel appearing on behalf of the Respondent informed the Court that the Respondent would not be pursuing the ‘Stanford argument’ and the dispute was now a ‘contributions issue.’
On 16 October 2018 the Wife by her Litigation Guardian filed an Application in a Case seeking orders for his appointment as Trustee for Sale of the former matrimonial home.
On … 2018 the Husband passed away.
On the joint application of the parties the Conciliation Conference scheduled for 7 November 2018 was vacated by order of Judge Middleton on 6 November 2018.
On 20 November 2018 the matter was listed before the Court for directions and orders were made by consent for the appointment of Ms Howard and Ms Norman as the Respondents in these proceedings noting that the Death Certificate and Will of the Husband were not yet available. The matter was also listed for final hearing on 8 April 2019 with a time estimate of two (2) days.
On 17 January 2019 orders were made for, inter alia, the sale of the former matrimonial home by 15 March 2019 and in default the property was to vest in the Litigation Guardian for the Wife as Trustee for sale on terms.
On 7 February 2019 a Grant of Probate was issued for the Estate of the Late Husband.
On 2 March 2019 the former matrimonial home was sold at auction for $935,000. Settlement was due to take place on 8 May 2019.
On 29 March 2019 trial directions were made in preparation for the hearing.
The final hearing commenced before me on 8 April 2019 and was completed in two days. The Applicant was represented by Ms Carty of Counsel and the Respondents by Mr Tregilgas of Counsel.
At the commencement of the hearing there were a number of preliminary issues, the most significant of which was an application pursuant to Rule 15.29A of the Federal Circuit Court Rules 2001 that the Affidavit of Ms Carney and Updated Financial Statement sworn on 3 April 2019 be admitted into evidence without the wife being subject to cross-examination. The application was opposed by the Respondents.
Section 64 of the Federal Circuit Court Act (1999) (Cth) provides:
(1)Testimony in a proceeding in the Federal Magistrates Court is to be given orally or by affidavit.
(2)However, the Federal Magistrates Court or a Federal Magistrate may:
(a) direct that particular testimony is to be given orally;
or
(b)direct that particular testimony is to be given by affidavit.
(3) Subsections (1) and (2) have effect subject to:
(a) any other provision of this Act; and
(b) the Rules of Court; and
(c) any other law of the Commonwealth.
Cross-examination of person who makes an affidavit
(4) If:
(a) a person makes an affidavit; and
(b)a party to a proceeding in the Federal Magistrates Court adduces, or proposes to adduce, evidence by the affidavit;
a party to the proceeding may request the person to appear as a witness to be cross-examined with respect to the matters in the affidavit.
(5) Subsection (4) has effect subject to the Rules of Court.
(6) If:
(a) a request under subsection (4) is given to a person who has made an affidavit; and
(b)the person does not appear as a witness to be cross-examined with respect to the matters in the affidavit;
the Federal Magistrates Court is to give the matters in the affidavit such weight as the Federal Magistrates Court thinks fit in the circumstances.
Rule 15.29A of the Rules of Court provides:
The Court may:
(a)dispense with the attendance for cross-examination of a person making an affidavit; or
(b)direct that an affidavit be used without the person making the affidavit being cross-examined on the affidavit.
Upon hearing oral testimony from the Wife’s treating general practitioner Dr O and brief submissions from the legal representatives, I exercised my discretion in favour of the Applicant to permit reliance upon the affidavit and Financial Statement and delivered my ‘ex tempore’ reasons.
There was also controversy as to the items that constituted the asset pool. The legal representatives agreed to forward to Chambers a final draft Balance Sheet to be relied upon in their respective client’s case. I then reserved my decision.
On 23 April 2019 I received a Minute of the Final Orders sought by the Respondents.
Evidence
The Applicant relied on the following documents at final hearing:
(a)Amended Initiating Application filed 24 August 2018;
(b)Updated Financial Statement of Ms Carney filed 3 April 2019;
(c)Affidavit of Ms Carney filed 3 April 2019; and
(d)Affidavit of Dr O filed 3 April 2019.
The Applicant also tendered and relied upon the following documents:
(a)Case Outline (Exhibit A);
(b)Copy of Enduring Power of Attorney by Husband in favour of Respondents and Mr H dated 24 August 2015 (Exhibit I);
(c)Letter dated 5 April 2019 from Berryman Partners to the Wife in relation to legal fees (Exhibit K);
(d)Valuation of the former matrimonial home dated 14 June 2018 prepared by Valuers (Exhibit L);
(e)Real Estate Agent C Property Marketing Strategy for the former matrimonial home (Exhibit M);
(f)Paragraph 5 of the affidavit of Ms Howard filed 19 December 2018 (Exhibit N);
(g)Tender Bundle (Documents identified as Exhibits A to AB) comprising 81 pages; and
(h)Balance Sheet prepared by the Applicant dated 9 April 2019.
The Applicant relied on his Summary of Argument set out in paragraph F of his Case Outline as follows:
S79(2)
1. On 25 September 2018 Counsel for the Respondent informed the Court that the Respondent would not be pursuing ‘the Stanford argument’ and that the dispute now ‘devolves to a contribution issue.’
2. Without an order the wife’s need for a capital sum to secure her accommodation in an appropriate high needs age care facility will not be met, and nor will the wife’s need be met in relation to her ongoing weekly maintenance, including medical costs.
s. 79(8) (b) (i) and (ii)
3. At the date of the death of the husband, namely … 2018, property proceedings were pending between the parties, the wife having filed an Initiating Application on 12 March 2018.
4. The wife submits that the Court would have made an order with respect to property if the deceased had not died because the parties were involuntarily separated, as a result of their ages and infirmities, and each party was residing in a separate aged care facility from the other, with neither party having common use, or any use, of the matrimonial home.
5. The major asset of the parties, at the end of their marriage of 30 years, is the proceeds of sale of the matrimonial home at Street A, Suburb B, which was sold by auction on 2 March 2019 for $935,000. Settlement is due, reportedly, on 8 May 2019. The late husband was the sole registered proprietor of the matrimonial home and currently the Executors of the Estate of the Late husband are therefore legal owners of the proceeds of sale of the matrimonial home.
The Respondents relied upon the affidavit of Ms Howard filed 3 April 2019 and tendered the following documents:
(a)Case Outline (Exhibit B);
(b)Part I, Financial Statement of the Wife filed 12 March 2018 (Exhibit C);
(c)Paragraph 12 of Wife’s affidavit filed 12 March 2018 (Exhibit D);
(d)List of work conducted by the Carney Family post 3 July 2018 (Exhibit E);
(e)Settlement Statement as at 8 May 2019 in relation to the sale of the former matrimonial home (Exhibit F);
(f)Email dated 1 April 2019 from Real Estate Agent C to Lea Smith Solicitor in relation to estate agents fees on sale of the former matrimonial home (Exhibit G);
(g)Photographs taken by Ms Howard of the Suburb B Property (marked with ‘X’) (Exhibit J);
(h)Letter dated 11 April 2018 from Dr R to Dr S in relation to the Husband (Exhibit O);
(i)Bundle of accounts for renovation of the former matrimonial home (Exhibit P);
(j)Statement from Husband’s Town L Bank Account number ending … for period 2 July 2018 to 20 August 2018 (Exhibit Q);
(k)Front Page of Contract for Sale in relation to the former matrimonial home (Exhibit R);
(l)Balance Sheet of Husband dated 12 April 2019; and
(m)Minute of Order sought dated 23 April 2019.
Counsel for the Respondents observed that this was an unusual case in that,
‘neither the husband through death nor the wife through ill-health gave evidence’
and that the only witness, save for the Wife’s general practitioner Dr O, was the Husband’s daughter from his first marriage.
Having made an order under r.15.29A of the Federal Circuit Court Rules 2001 and that the Applicant would be able to rely on the contents of the Wife’s affidavit, Counsel for the Respondents further noted that the Rules do not go on to say how the Court accords weight, though conceded it was probably discretionary. He submitted that, in this matter that involves a number of disputed facts, wherever there is inconsistency between the evidence of the Wife and that of the Respondents, the latter evidence should be preferred unless there is independent evidence to corroborate the evidence of the Wife.[5]
[5] Dowling v. Fairfax Media Publications Pty Limited [2009] FCAFC; Tarrant v. Statewide Secured Investments Pty Limited [2012] FCA 582
As previously stated, the only lay witness in the proceedings was one of the Respondents Ms Howard. She is the daughter of the late Mr Carney and one of the Executrices of his Estate. I had the benefit of observing Ms Howard in the witness box. She presented as a confident woman and extremely protective of her late father and his legacy. Her tone, however, was on occasion dismissive and a touch disdainful when speaking about the Wife and her extended family. While I am satisfied that Ms Howard was an honest witness, I approach her evidence with some caution in view of her marked partisanship and where possible, I will look to other objective evidence or a version of events which is more inherently likely.
The Law
In determining an application for alteration of property interests, there is a wide discretion conferred by the operation of s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Section 79(8) deals with applications for alteration of property interest after the death of a party as in this case. Where, before property settlement proceedings are completed a party to the marriage dies, s.79(8)(b) of the Act provides as follows:
(b) if the court is of the opinion:
(i) that it would have made an order with respect to property if the deceased party had not died; and(ii) that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to:
(iii) any of the property of the parties to the marriage or either of them;The onus in respect of an application is on the Applicant.[6]
[6] Tasmanian Trustees Ltd v Gleeson (1990) 14 Fam LR 189)
The High Court in Stanford v Stanford (2012) 247 CLR 108 considered the application of the principles involved in the exercise of discretion pursuant to section 79, in circumstances where a party dies before the property settlement proceedings are completed. At [24] the High Court concluded:
Section 79(8)(b) thus requires a court considering an application for a property settlement order which is continued by or against the legal personal representative of a deceased party to determine first, whether it would have made an order with respect to property if the deceased party had not died and secondly, whether, despite the death, it is still appropriate to make an order. Both of those inquiries require consideration of s 79(2) and its direction that the court not make an order unless “satisfied that, in all the circumstances, it is just and equitable” to do so. It follows that, in cases where s 79(8) applies, a court must consider whether, had the party not died, it would have been just and equitable to make an order and whether, the party having died, it is still just and equitable to make an order.
I must therefore decide if it would have been just and equitable to make an order if the Husband had not died and whether it is still just and equitable to make an order.
If I decide it is just and equitable to make an order, I will need to determine what specific orders to make. To then satisfy what is required by the legislation, I will:
(a)identify the value of the parties’ existing assets and the extent of their liabilities;
(b)assess each party’s contributions to the assets, including any assets no longer owned by them;
(c)assess the relevant factors set out in ss 79(4)(d) to (g) of the Act; and
(d)then make a decision about what orders are just and equitable.
When I assess each party’s contributions, I will look at those contributions holistically and the examination will be in relation to the entire period from the commencement of the parties’ relationship to final hearing.
As to whether it is global or asset by asset approach, given the nature of this matter, I find it appropriate for a global approach to be adopted.
Schedule of assets and liabilities
The following is a schedule of existing assets and liabilities of the parties taking into account my findings.
ASSETS
VALUE
(W)VALUE
(R)1. Sale proceeds of Street A, Suburb B (former matrimonial home) $932,918[7] $908,159.96[8] 2. Funds held by Estate of Late Mr Carney $29,036[9] $22,431[10] 3. Town L Bank Account (W) $47,578 $47,578 4. Commonwealth Bank Account (W) $46,767 $46,767 5. Motor Vehicle (W) $6,200 $6,200 6. Household contents (W) $500 $500 7. Refundable accommodation deposit – Suburb B Nursing Home (W) - $143,000 Total Assets $1,062,999 $1,174,635.96 ADDBACKS 8. Wife’s legal fees[11] (agreed) $61,258 $61,258 9. Unaccounted for monies (W) - $52,374 Total Assets (including Addbacks) $1,124,257 $1,288,267.96 LIABILITIES 10. Legal costs on sale $1,558 - 11. Estate agent’s commission and fees[12] $23,207 - 12. Agreed costs of preparation of FMH for sale $6,605 - Total Liabilities $31,370 - NET TOTAL ASSETS $1,092,887[13] $1,288,268 FINANCIAL RESOURCES 13. Refundable component Nursing Home (W) $143,000 - [7] Net of adjustments on sale for rates ($1,583.22) and water rates ($491.82)
[8] Net of expenses adjustments on sale, agent’s commission and legal costs of sale.
[9] Respondent’s Balance Sheet
[10] Net of agreed costs of preparation of property for sale
[11] Exhibit K
[12] Exhibit G
[13] The applicant’s balance sheet has a total of $1,092,507 but appears to be arithmetic error
It was subsequently agreed between the parties that there is $44,400 remaining in cash in the Husband’s estate. Also agreed were the costs of sale of the former matrimonial home ($23,207), expenses incurred by the paternal family in preparing the property for sale ($6,605) and the Estate costs ($15,364).
It was also agreed that the Wife’s paid legal fees in the sum of $61,258 should be added back to the Balance Sheet. The source of those monies was the Wife’s inheritance from her brother Mr G which she received in … 2013.
Areas of Dispute
Refundable Component of nursing home fees
In Hall & Hall (2016) 257 CLR 490 the High Court stated that:
The reference to "financial resources" in the context of s 75(2)(b) has long been correctly interpreted by the Family Court to refer to "a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency". The requirement that the financial resource be that "of" a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee's discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
Whether a potential source of financial support amounts to a financial resource of a party turns in most cases on a factual inquiry as to whether or not support from that source could reasonably be expected to be forthcoming coming were the party to call on it.
The Respondents say that the refundable accommodation deposit (RAD) in the sum of $143,000 is an asset. They argue that it is money that the Wife has control over and will come back to her on leaving the aged care facility. The Wife says it is monies she has paid from her $210,000 inheritance and should be characterised as a financial resource.
The RAD is akin to an interest-free loan to the aged care facility that is refundable to the Wife or her estate when the Wife leaves, less any amounts agreed to be taken out, such as extra services.
The available medical evidence suggests that it is highly unlikely that the Wife will ever return to independent accommodation. However, she may move to another aged care facility or some other form of supported accommodation and on that happening, the RAD would be repaid to her. I am therefore satisfied that the RAD is an asset rather than a financial resource and that the item should be included in the asset pool.
Monies unaccounted for the wife
The Respondents say that the Wife has disbursed the sum of $52,374 which remains unaccounted for. Counsel for the Respondents referred the Court to the Amended Financial Statement filed by the Wife on 15 June 2018 in which at paragraph 37 she deposed to having combined funds in her Town L Bank and Commonwealth Bank Accounts of $307,027 as well as shares of $43,950, totalling $350,977. In her Updated Financial Statement filed 3 April 2019 the Wife deposes to holding a combined sum in those accounts of $94,345 ($47,578 and $46,767), a difference of $256,632. The sum of $143,000 was used to pay the RAD for the Retirement Village and a further sum of $61,258 was applied to her legal fees. This leaves a sum of $52,374 which has been disbursed and for which no explanation has been provided.
In AJO & GRO (2005) FLC 93-218 the Court identified three types of addbacks commonly encountered where it may be appropriate to add property back into the pool being:
(a)Where the parties have spent money on legal fees;
(b)Where there has been a premature distribution of assets (usually to benefit that party); and
(c)Where a party has either embarked on a course of conduct to reduce or minimise the value of the assets or has acted recklessly, negligently, or wantonly with the assets with the effect of reducing their value.
Whilst there was some doubt about the issue of addbacks following Stanford & Stanford (2012) 247 CLR 108, the Full Court in Vass & Vass [2015] FamCAFC 51 did not consider an error was committed in notionally adding back into the pool sums which have been dissipated by the parties.
This is a sum that has been expended by the Wife over a period of ten months. The Wife did not provide any explanation as to how the $52,374 was disbursed. If used on living expenses then it is a significant sum when taking into account that the Wife was also in receipt of the aged pension. I am satisfied that the expenditure should be added back to the asset pool as a premature distribution of assets.
Adjustment of interests in property and Balance Sheet Findings
Taking into account the above findings, the final property pool of the parties is as follows:
ASSETS VALUE
1. Sale proceeds of Street A, Suburb B $935,000 2. Funds held by Estate of Late Mr Carney $44,400 3. Town L Bank Account (W) $47,578 4. Commonwealth Bank Account (W) $46,767 5. Motor Vehicle (W) $6,200 6. Household contents (W) $500 7. Refundable Accommodation Deposit – Nursing Home (W) $143,000 Total Assets $1,223,445 ADDBACKS 7. Wife’s legal fees[14] $61,258 8. Unaccounted for monies (W) $52,374 Total Assets (including Addbacks) $1,337,077 LIABILITIES 8. Adjustment on sale: City Council – rates $1,583.22 9. Adjustment on sale: Water Corporation – water rates $491.82 10. Legal costs on sale[15] $1,558 11. Estate agent’s commission and fees[16] $23,207 12. Agreed costs of preparation of FMH for sale $6,605 13. Agreed estate costs $15,364 Total Liabilities $48,809.04 NET TOTAL ASSETS $1,288,267 [14] Exhibit K
[15] ReParrott v Public Trustee of NSW (1994) FLC 92-473
[16] Exhibit G
Is it just and equitable to make a property settlement order?
Section 79(2) of the Act states that,
‘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.’
In Stanford[17] at [43], [44] and [49] the High Court (French CJ, Hayne, Kiefel; and Bell JJ) observed:
[17] Op cit
43. By contrast, the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order. It does not permit a court to disregard the rights and interests of the parties in their respective property and to make whatever order may seem to it to be fair and just.
44. When, as in this case, the separation of the parties is not voluntary, the bare fact of separation does not demonstrate that the husband and wife have any reason to alter the property interests that lie behind whatever common use they may have made of assets when they were able to and did live together. Common use of some assets may very well continue, as it did here when the husband made provision for the wife's care and accommodation. Past arrangements that the parties have made about their property interests on the assumption, expressed or implicit, that those arrangements were sufficient and appropriate during the continuance of their marriage are not necessarily falsified. If both parties are competent, it can still be assumed that any necessary or desirable adjustment can be made to their property interests consensually. And if one of the parties has become incompetent it is not to be assumed that the other party lacks the will and ability to make those necessary or desirable adjustments.
………..
49. No basis was identified at first instance, on appeal to the Full Court, or in argument in this Court, for concluding that it was just and equitable to make any order dividing the parties' property between them. It was not shown that the wife's needs during her life were not being or would not be met. The legal personal representatives of the wife supported the Full Court's reasoning but pointed to no additional consideration as bearing upon this question.
The Respondents submit that the Stanford issue still applies in this matter and Counsel referred the Court to paragraph 56 and Annexure E (Probate Document) of the affidavit of Ms Howard. The Respondents say that these proceedings were unnecessary as paragraphs 4 to 8 of the Husband’s Will make provision for the Wife in the event that she is unable to continue living in the former matrimonial home. In those circumstances the property was to be sold and the proceeds of sale would be applied to her accommodation in a retirement residence on the same conditions, that is, the Wife would retain a life interest. On her death the accommodation was to be sold and the proceeds of sale revert to the Estate.
Firstly in relation to s79(8) (b)(i) I am satisfied that the Court would have made an order with respect to the property if the Husband had not died. The parties were involuntarily separated by reason of their age and ill-health and residing in separate age care facilities. At the date of the Husband’s death there was no common use of property by either of them.
Further, the Wife owned assets totalling $274,013 comprised of savings, shares, the motor vehicle, the RAD held by Suburb B Retirement Village and her home contents. In terms of the total assets as seen in the Balance Sheet this represents about 21%. Given that the parties were married for 29 years and given that the Wife made substantial contributions including the proceeds of sale of her unencumbered Suburb B property, I am satisfied that the Court would have required the Wife receive a greater share of the parties’ assets than 21%.
Secondly in relation to section 79(8)(b)(ii) I am satisfied on the balance of probabilities that it is still appropriate that an order be made altering the parties’ property rights. The consequence of the Husband’s death is that the proceeds of sale of the former matrimonial home as he was the sole registered proprietor, automatically passes to his Estate and does not in my view afford the parties’ justice and equity.
These proceedings may not necessarily finalise the financial relationship between the parties. The Wife may have existing rights under the Will that the Respondents as Executrices must honour.[18] However, it was not an issue that was raised in these proceedings.
[18] Smith & Smith (1986) 66 ALR 1
Contributions
At the commencement of the marriage the Wife deposes that she owned the property at Street A1, Suburb B ($110,000), a motor vehicle (nominal value), monies received from the Estate of her late Husband Mr Q ($60,000), furniture and household contents (nominal value).
The Wife says that at the commencement of the marriage the Husband owned the former matrimonial home ($90,000), a motor vehicle (nominal value) and land at Town J ($10,000). She says that her property at Street A1, Suburb B was a four bedroom property whereas the former matrimonial property was only a three bedroom property in need of renovation.
The Wife deposes that the Husband had retired at the age of 59 years. He supported himself from a lump sum superannuation payment of $74,000 that he received in 1984. He did not qualify for an age pension until 1991 when he turned 65. She was already in receipt of a pension.
The Wife deposes that after they married the Husband moved into her property at Street A1, Suburb B and she supported him and paid all the household bills.
In … 1992 the Wife says that she sold Street A1, Suburb B to her son Mr F for $110,000. She deposes that the initial deposit of $60,000 was paid into her bank account and the balance of $50,000 which was secured by way of mortgage over the property, was paid by instalments over the following ten years. The final payment was made on … 2002. She says that the proceeds of sale were used by her and the Husband during the course of their marriage for general household expenses.
The Respondents say Street A1, Suburb B was sold to Mr F in … 2012 and produce a copy of the transfer evidencing that stamp duty was paid on a value of $122,000. They also produce a printout from a website RP Data [19] which they say indicates a sale price of only $50,000. The affidavit evidence of Ms Howard was that the Wife told her on many occasions that she had ‘only got $50,000 for the house.’
[19] Core Logic is a company that provides on-line house price data. There was no evidence adduced as to the source or reliability of their data.
The Wife says that the $60,000 deposit was applied to the purchase of a motor vehicle for $14,373, custom made furniture, carpet, linoleum and curtains for the former matrimonial home which was in the process of being renovated.
In 1993 the Wife says the Husband received an inheritance from his mother of $49,500 which he used to purchase a motor vehicle and the balance was deposited into his bank account for his ‘own use’.
The Wife deposes:
‘Our pensions were deposited to our joint account and we paid household expenses such as land and water rates, utility bills, insurance and food and household supplies.’[20]
[20] Wife’s trial affidavit filed 3 April 2019 at [13]
During the marriage the Wife says she paid for holidays for her and the Husband to various locations including Country T and around Australia.
She deposes to having made significant financial contributions towards the maintenance of the former matrimonial home including payment of half the Council and Water Rates, half of all electricity, home insurance accounts and lawn maintenance (until December 2016).
The Wife also says that she contributed to the renovation costs of the bathroom in 2015 and annexes her bank statements showing cheques drawn in favour of Ms Howard and debits to various home improvement outlets, totalling $8,810. The renovation itself was carried out by Mr U and the Husband. Ms Howard says that she and her husband Mr U paid for the renovation. In cross-examination she was firm that she did not receive any money from the wife towards the costs of the renovation but was reluctantly prepared to concede the possibility that the cheques drawn on the Wife’s account may have been paid into her Husband’s account.
In contrast, Ms Howard says that the parties rarely socialised or holidayed together. They kept their finances separate and the domestic responsibilities were conscientiously shared. She said,
‘Dad would do the dishes and Ms Carney would try [sic] the dishes.’
It is clear that by the time of separation the bulk of the parties’ wealth comes from the former matrimonial home. The Husband owned that property at the date of cohabitation and it was unencumbered. The Wife also owned a property which she sold to her son and the proceeds of sale were used to renovate the Husband’s property and for the parties’ living expenses, as was a part of the Wife’s inheritance that she received towards the end of the marriage.
The Wife deposes that from 2014 the Husband suffered from dementia and that she cared for him until he was admitted to the aged care facility. In support of her assertion she annexes a Discharge Summary from Town L Private Hospital dated … 2014 which indicates that the Husband was suffering from dementia.[21] The Respondents deny that the Husband suffered from dementia and tender a report from his Orthopaedic Surgeon dated 11 April 2018.[22] I accept that the Husband is likely to have suffered a decline in his cognitive and/or physical capacities which necessitated his transition to an age care facility and that the Wife may have been called upon to care and support the Husband. However, the evidence available to the Court does not assist in determining the level or period of enhanced care provided by the Wife. It is often the case that as people age they restrict the area of their activities in order to concentrate their energies and pursuits. The evidence suggests that the parties no longer travelled and only saw family members when they came to visit them. They stayed at home and were somewhat socially isolated and therefore mutually dependent on each other. By 2017 it was clear that the parties’ required assistance with basic tasks such as cleaning, house chores, preparing meals, bathing and grooming and the Husband’s transitioned in an aged care facility because the Wife was unable or unwilling to provide that assistance.
[21] Exhibit N
[22] Exhibit O
Another issue at trial was the work undertaken by the paternal family[23] to prepare the former matrimonial home for sale which the Respondents say was reflected in a significantly improved sale price. In other words the Respondents argue that they have made significant post separation contribution which warrants an adjustment in their favour. The original valuation prepared by Valuers on 14 June 2018[24] valued the former matrimonial home at $730,000. It sold at auction on 2 March 2019 for $935,000. The Applicant submits that there is no evidence before the Court to suggest that the work undertaken by the paternal family has led to an improvement in the property resulting in the increased sale price. He says that there is an argument that the level of expenditure (which included for example the installation of a water system) could be categorised generally as “wastage” when the marketing strategy employed by Real Estate Agent C [25] was to advertise the property as a ‘knockdown development.’
[23] See Exhibits E, J and P
[24] Exhibit L
[25] Exhibit M
The Applicant points out that this work was undertaken by the paternal family without the express authority of the Wife and therefore in contravention of Order 6 of the Consent Orders made on 18 June 2018 which provided:
6. The cost of cleaning the property for sale and lawn mowing shall be shared equally between the parties, subject to the husband providing to the Wife a quote for any service engaged any Wife’s written approach to incur such costs.
The Respondents submit that the Court does not know if a commercial decision was taken by the purchaser to sub-divide the property. They say that the only evidence before the Court as to the reasons for the improved price is the work undertaken by the paternal family from July 2018 to prepare the property for sale. It is a significant post separation contribution by the paternal family in circumstances where the former matrimonial home represents 72% of the gross asset pool.
There is insufficient evidence for the Court to reach any adverse conclusion about waste by the Estate. It appears that, notwithstanding the voluminous receipts and photographs tendered by the Respondents in their case, the parties have sensibly agreed a figure upon of $6,605 which in terms of the sale price achieved does not appear unreasonable.
Nor is it possible to say that the value of the former matrimonial home was increased by the expenditure and work undertaken by the paternal family without an expert appraisal. However, equally possibly that the improved sale price was attributable to market appreciation or shrewd real estate strategies or a combination of both.
In relation to the Wife’s inheritance received in 2013 whilst it cannot be said the Husband made any direct contribution towards the Wife’s acquisition of the inheritance monies from her brother, they were received four years prior to separation at a time when the Husband was continuing to provide both financially and emotionally to the Wife. There appears no dispute that the remaining inheritance monies should be included in the Balance Sheet.
There was limited evidence available to the Court as to the asset held by the Husband at the date of separation. The evidence of Ms Howard was that as a result of the combined assets of the parties’ the Husband was required to pay an additional $186,000 for his accommodation bond at the nursing home.[26] There was no evidence as to whether the bond was paid and if so, from what source. The Wife says that on the Husband moving into the nursing home they closed their joint bank account which held approximately $28,000 and divided the proceeds equally. She says that at the time the Husband entered the nursing home he had assets totalling $52,292 (savings, shares and other assets)[27] which would certainly have been insufficient to meet the costs of the bond.
[26] Affidavit of Ms Howard filed 3 April 2019 at [44]
[27] Affidavit of Ms Carney filed 3 April 2019 at [25]
One final point which was not the subject of extensive evidence but demands some comment is the disposal by the Husband of the two blocks of land at Town J by way of gift to his grandson Mr K. The Wife deposes that the Husband owned the land at the commencement of the marriage and it was valued at approximately $10,000. The Husband gifted the land to his grandson in 2016 sometime after the execution of his Will. Ms Howard made no mention of the gift in her affidavit material which speaks to her view that it was property (like the former matrimonial home) owned exclusively by her father and in respect of which the Wife held no interest or entitlement.
Nevertheless, the Wife’s affidavit material does not suggest that the gift was hidden from her or that she complained about the gift. It would appear that at the very least she acquiesced in the gift being made.
After a long, 29 year marriage where the Wife and Husband brought in assets of similar value at the commencement of the relationship, contributed equally to the household and the household income, and taking into account an inheritance retained by the Wife and (to the extent that I can) the post separation contributions of the paternal family in preparing the former matrimonial for sale and achieving an enhanced price, I assess the contributions of the parties as equal.
Section 75(2) and related factors
The death of a party has a significant impact on the application of section 75(2), and generally results in a more favourable property settlement to the surviving party. The deceased no longer has section 75(2) needs for the future, whilst the other party may continue to have such needs.[28]
[28] Menzies v Evans & Anor (1987-1989) 12 Fam LR 519
In Lawrie and Lawrie (1981) FLC 91-102 the plurality (Asche, Fogarty and Gee JJ) found the extent of the adjustment will be greater where the assets are small and the needs of the surviving party are significant. Fogarty J stated that:
“It is appropriate and, in my view, necessary to consider the relative future needs of the parties in determining what is a just and equitable order under sec. 79. Where there is a significant disparity that would ordinarily be reflected in the orders. This is frequently a result in cases of a more usual type. Further, where in any case it is clearly established that the future financial needs of a party will terminate (or perhaps significantly diminish) upon the happening of a definite future event, it is proper to take that into account. A number of examples of that readily spring to mind. The weight to be given to that will obviously vary from case to case.”
In this matter the Wife is 93 years old. She has multiple health issues that are primarily aged related and set out in the medical report annexed to the affidavit of Dr O filed 3 April 2019 and which reads as follows:
‘Ms Carney DOB … 1925 has several medical conditions. She has been my patient for 30 years. She suffers from Congestive cardiac failure and Atrial Fibrillation which causes breathlessness and fluid retention. Her mobility is greatly impaired. She also has Peripheral Vascular disease. She visits me at least fortnightly with her medical problems. I have found that she has declined rapidly over the last few months possibly due to stress of her recent displacement. Ms Carney is managing at present with the current level of care. In view of her age and her Cardiac condition she may need higher level of care at any time. Ms Carney is in no physical or emotional state to attend court in person. I have examined Ms Carney today She could be at risk of a sudden cardiac event if she is put under the stress of cross examination.
Dr O also gave evidence in the proceedings. She said that she had provided the above medical certificate on 2 April 2019 having seen the Wife the week before. She confirmed that the Wife was in poor health and that she supported the decision that the Wife should be transitioned into an aged care facility.
Despite several attempts by Counsel for the Respondents to wrest an opinion as to the wife’s life expectancy, Dr O was insistent that she was unable to do so saying:
I am a doctor. I am not God. I can’t tell you.
The case law in relation to diminished life expectancy confirms that it is a relevant factor when determining whether there should be an adjustment for s75(2) matters. However, every case will turn on its own facts.
Where evidence is provided, it is relevant to consider not only the lower life expectancy, but the increased costs associated with illnesses.[29]
[29] T & D & Anor [2006] FamCA 1248
In S & P (unreported decision of Fogarty, Lindenmayer and Finn JJ delivered 29 April 1997) a 5% adjustment was made to the Wife on the basis that the Husband had a life expectancy of five years. Of course, in this case, the Wife’s reduced life expectancy has to be considered in the factual context that the Husband has pre-deceased her.
The Wife says that she will require a lump sum of $450,000[30] to enter in to the aged care section of the Suburb B Retirement Village which provides higher level of care than she currently receives in the serviced apartments.[31] The Respondents say that the costings for the accommodation at Suburb B Retirement Village which appear at Annexure S in the Wife’s Tender Bundle, range in price from $300,000 to $450,000. They submit there was no evidence to suggest that the cheaper priced accommodation would not meet the needs of the Wife and in view of the ‘modest’ asset pool the sum of $300,000 proposed by the Respondents by way of loan from the Estate was appropriate. I disagree. The Wife is entitled to the best level of care and comfort that she can reasonably afford and the position adopted by the Respondents is both uncharitable and parsimonious.
[30] Less the RAD of $143,000
[31] Exhibit Y
The Wife receives an aged pension of $365 per week of which 87% is paid directly to Suburb B Retirement Village by way of a daily care fee. The daily care fee is in addition to the lump sum. It covers the Wife’s nursing needs and her meals. It does not cover equipment, clothing, medical expenses or personal needs of the Wife.
The Wife says that she is under the care of specialists and while she has health insurance she still has to fund any fee gap. She sets out at paragraphs 34 and 35 of her trial affidavit her current medication regime and says that the gap between the Pharmaceutical Benefits Scheme and the actual cost of her medication is on average between $25 and $30 per week.[32]
[32] Exhibit T
The Wife has no earning capacity given her age and infirmity. Counsel for the Applicant conceded that the Wife will no longer require a motor vehicle and that some items such as furniture and manchester will not be recurring expenses.
It is not possible to estimate with any particularity the likely cost of the Wife’s extra services which she currently receives as a resident of the nursing home over and above her pension entitlement, or know how many years of life she has before her. The Wife says that she will need $26,000 per annum. The evidence of Ms Howard was that the Husband’s daily living expenses were an additional $28,000 per annum.
The Applicant submits that an adjustment in the range of 6-15% is justified in the circumstances of this case.
Taking into account the above matters that are discussed pursuant to s 79(4)(d)-(g) of the Act, it is my view that the Wife should be entitled to an adjustment of 10 percent.
An Order That Does Justice and Equity - Section 79(2)
A division of the pool, in the manner suggested would be represented as follows:-
(a)The Wife will retain 60% of the overall pool ($1,288,267) comprised as follows:
Description Value ($) Proceeds of sale of FMH 415,283 Town L Bank Account 47,578 Commonwealth Bank Account 46,767 Motor Vehicle (W) 6,200 Household contents 500 Refundable accommodation deposit (RAD) 143,000 Addback – legal fees 61,258 Addback – unaccounted for monies (W) 52,374 Total 772,960
The Respondent will receive 40% of the overall pool comprised as follows:
Description Value Proceeds of sale of FMH 422,097.96 Funds held by Estate of Late Mr Carney 44,400 Less Liabilities 48,809.04 Total 515,307
As can be seen, the Estate would need to pay $415,283 to the Wife and the Wife would retain her bank accounts, motor vehicle, household contents and RAD.
This would mean that the Wife after payment of $307,000 ($450,000 - $143,000) for accommodation in the aged care facility would have savings of approximately $202,628 ($415,283 - $307,000 = $108,283) + $47,578 + $46,767) to meet expenses over and above her daily care fee which is paid from her age pension.
The amount of $415,283 represents approximately 46 per cent of the net proceeds of sale of the former matrimonial home ($901,554) which in my view is a just and equitable outcome.
Costs
The Wife seeks an order for the Respondents to pay her costs on an indemnity basis from 1 April 2019 to the conclusion of the hearing. The Respondents seeks that pursuant to s. 117 of the Act that the question of costs be reserved. I will adjourned the competing costs applications to 28 May 2019 for further argument.
I certify that the preceding one hundred and thirty six (136) paragraphs are a true copy of the reasons for judgment of Judge Costigan
Date: 16 May 2019
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