Choate and Baker
[2008] FMCAfam 945
•4 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CHOATE & BAKER | [2008] FMCAfam 945 |
| FAMILY LAW – Alteration of property interests – add-backs – assessment of contribution – inheritance – assessment of future needs – implementation of orders having regard to high proportion of superannuation assets. |
| Family Law Act 1975, ss.75(2), 79 |
| Gosper v Gosper (1987) FLC 91-818 Milankov (2002) FLC 93-095 Norbis v Norbis (1986) 161 CLR 513 Townsend (1995) FLC 92-569 |
| Applicant: | MS CHOATE |
| Respondent: | MR BAKER |
| File number: | SYC 7540 of 2007 |
| Judgment of: | Altobelli FM |
| Hearing date: | 12 June 2008 |
| Date of last submission: | 12 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 4 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Foster |
| Solicitors for the Applicant: | Peter Blackwell and Associates |
| Counsel for the Respondent: | Mr Kearney |
| Solicitors for the Respondent: | Matthews Dooley & Gibson |
ORDERS
That within 56 days the Husband transfer to the Wife all his right title and interest in the former matrimonial home situate at and known as Property W being the whole of the land comprised in Certificate of Title [1] by providing to the other party a duly stamped and executed Transfer.
That conditional upon and simultaneously with the transfer in accordance with Order 1 herein the Wife refinance the mortgage over the former matrimonial home into her name solely.
That should the Wife fail to comply with Orders 1 and/or 2 herein then each party has leave to relist this matter before Federal Magistrate Altobelli on 14 days notice to make orders for implementing orders 1 and 2.
That the Husband be declared the sole owner in law and equity of the property located at Property J.
That within fourteen (14) days of the date of these Orders the Husband sign all documents and give all necessary directions to Richardson Legal to pay to the Wife the funds held in trust on behalf of the parties.
That within fourteen (14) days of the date of these Orders the Wife make available for collection by the Husband all tools belonging to the Husband and/or his father at the former matrimonial home.
That in the event that the Husband within five (5) years of the date of these orders receives any cash or allocation of shares as a result of the demutualisation of MBF then forthwith upon the Husband being able to do so the Husband shall either (and at his sole election):
(7.1) do all things necessary to effect a distribution of such cash such that after deduction of any amounts payable by the Husband as a result of the receipt of such cash, including any taxation payable by the Husband, the Husband shall pay to the Wife an amount equal to one half of the net funds received by the Husband; or
(7.2)do all things necessary to effect a sale of such shares and, after deduction of any costs of sale including any taxation payable by the Husband as a result of such sale, pay to the Wife an amount equal to one half of the net funds received by the Husband; or,
(7.3)pay to the Wife an amount equal to one half of the value of such shares, such value to be determined by the closing sale price of the shares on the Australian Stock Exchange seven (7) days after the first listing of such shares for unrestricted trading;
AND in the event that the Wife receives within five (5) years of the date of these orders any cash or allocation of shares as a result of the demutualisation of MBF then forthwith upon the Wife being able to do so the Wife shall either (and at her sole election):
(7.4)do all things necessary to effect a distribution of such cash such that after deduction of any amounts payable by the Wife as a result of the receipt of such cash, including any taxation payable by the Wife, the Wife shall pay to the Husband an amount equal to one half of the net funds received by the Wife; or
(7.5)do all things necessary to effect a sale of such shares and, after deduction of any costs of sale including any taxation payable by the Wife as a result of such sale, pay to the Husband an amount equal to one half of the net funds received by the Wife; or,
(7.6)pay to the Husband an amount equal to one half of the value of such shares, such value to be determined by the closing sale price of the shares on the Australian Stock Exchange seven (7) days after the first listing of such shares for unrestricted trading.
That each party be declared the sole owner in law and equity of all items of personalty, chattels and financial resources in their name, possession or control not otherwise dealt with in these Orders including but not limited to bank accounts, any choses in action and superannuation benefits.
That in the event that either party refuses or neglects to execute any deed or instrument the Registrar or Deputy Registrar of the Sydney Registry of the Family Court of Australia be and is hereby appointed pursuant to Section 106A of the Family Law Act 1975 to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation of the deed or instrument upon being satisfied by Affidavit of such neglect or refusal. A party shall be deemed to be in default if that party refuses or neglects to sign any document within seven (7) days of being requested to execute that document, such request being made in writing.
Pursuant to section 90MT(2) the Court determines that the values of the interest of Mr Baker in the State Authority Superannuation Scheme is $291,727.00.
That a base amount of $116,143.00 is allocated as required by Section 90MT(4) of the Family Law Act 1975 to Ms Choate out of Mr Baker’s interest in the State Authority Superannuation Scheme.
That in accordance with section 90MT(1)(a) of the Family Law Act 1975:-
(a)Ms Choate is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulation 2001; and
(b)Mr Baker’s entitlement to payments out of their interest in the State Authorities Superannuation Scheme and State Authority Non-Contributory Scheme and the entitlement of such other person to whom a splittable payment may be payable is correspondingly reduced by force of this order.
That the Trustee of the SAS Trustee Corporation Pooled Fund (“the Trustee”) shall do all such acts and things and sign all documents as may be necessary to:-
(a)calculate in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlement created for Ms Choate by Orders 12 to 14 inclusive herein; and
(b)pay the entitlement whenever the Trustee makes a splittable payment out of Mr Baker’s interest in the State Authorities Superannuation Scheme.
That these Orders have effect from the operative time and the operative time for these Orders is four (4) business days after a sealed copy of these Orders is served upon the Trustee.
That this Order binds the Trustee of the State Authorities Superannuation Scheme.
That within the (fourteen) 14 days from the date of the making of these Orders the husband transfer to the wife all his right, title and interest in the jointly owned Toyota Spacia motor vehicle registration number [V].
That the husband pay all monies due and owing on the parties joint
St George Bank Mastercard and that the husband indemnify and keep indemnified the wife in respect thereof.
IT IS NOTED that publication of this judgment under the pseudonym Choate & Baker is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 7540 of 2007
| MS CHOATE |
Applicant
And
| MR BAKER |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for alteration of property interests under s.79 of the Family Law Act, commonly known as a property settlement.
The applicant is the wife, Ms Choate. She was born in 1961 and is currently 46 years old. She lives in the former matrimonial home at Property W, on the New South Wales Central Coast. The respondent husband is Mr Baker. He is 52 years old and lives at [K] on the New South Wales Central Coast. I will refer to them respectively as wife and husband. They commenced living together in 1982, married in 1984, and finally separated on 21 December 2004, after living together for about 22 years. They have three children, [X], 23 years old, [Y], 14 years old, and [Z], 12 years old. [Y] currently lives with his father, and [Z] with her mother. There are parenting orders relating to the children made at the Local Court at Gosford and in the Family Court of Australia in Sydney, but the details of these orders are not relevant in the present context. It seems as if, at the present time, [Y] is not spending much time with his mother, and [Z] is not spending much time with her father. The husband [works within the Transport Industry], and the wife is currently engaged in home duties and in further studies.
Background
There are many facts that are uncontentious. When the wife and husband commenced cohabitation in 1981 they were both employed by New South Wales [omitted]. She had some savings as well as some superannuation and furniture. He had some superannuation and furniture, as well as some debts. The financial situation of the parties at cohabitation is such that, having regard to the period of time that has elapsed, neither party asserted that they were in a stronger financial position and therefore had made a greater financial contribution, at the commencement of the relationship.
The husband had two children from a former marriage who, at the time of cohabitation with the wife, were aged two and three. For many years during their marriage the husband's children spent Christmas and other school holidays with their father, and the wife was involved in caring for them. During the course of cohabitation, including their marriage, the wife and the husband also looked after the husband's father who suffered poor health.
The husband and wife married in 1984 and the next year they purchased the former matrimonial home at Property W for $62,000 using, primarily, a loan from the St George Bank, but also assisted by way of a financial gift from the wife's parents, as well as some joint savings. Having regard to the passage of time, nothing turns on how, precisely, the former matrimonial home was financed on acquisition.
In 1992 the husband received an inheritance from the estate of his late uncle, in the form of a property at Property J which is still owned by him. One of the issues between the parties in this case is how I should assess the contribution made by the husband as a result of this inheritance. The wife asserted that the inheritance was, at least in part, attributable to her inputs. The husband denies this. I deal with this issue below, but it is important to note that the Property J property has an agreed value of $65,000 out of the property pool of about $800,000, so its impact in my final assessment is not going to be a significant one.
During the course of the marriage the parties purchased land at [C] and an investment property at Property N. Both of these properties have been sold and nothing turns on how these properties were financed in terms of their acquisition. Some of the sale proceeds are held in trust for the parties.
Both parties concede that their respective contributions from commencement of cohabitation to date of separation should be equal, with the exception of a claim for greater contribution arising out of the inheritance received by the husband of the Property J property. This was a sensible and entirely appropriate concession for the husband and the wife to make. As a result of the Property J inheritance, however, the husband seeks a 10 percent adjustment in his favour for non-superannuation assets.
The parties separated on 21 December 2004 when the husband left the former matrimonial home. A number of issues are raised by each party about issues that arose thereafter. The wife withdrew some of her superannuation entitlements and spent it for various purposes. The husband disposed of some shares, and likewise used the money for various purposes. Each party asserts that the money spent by the other should be added back to the pool of assets and taken into account in the property settlement. Furthermore, the wife asserts that she was almost exclusively responsible for the care of their son [Y] between separation and August 2007, as well as also caring for their daughter [Z]. [Y] has special needs. Accordingly, the wife seeks an adjustment in her favour for post-separation contribution assessed at 2.5 per cent.
There is a further issue between the parties about whether an adjustment should be made in favour of the wife pursuant to s.75(2) of the Family Law Act. The wife seeks 12.5 percent. The husband believes that no adjustment is necessary on the facts of this case.
Finally, there is an issue between the parties about how, precisely, orders ought to be implemented, particularly having regard to the significant value of the husband's superannuation entitlements, compared to the rest of the asset pool.
At the commencement of the hearing I was presented with an agreed joint balance sheet that I reproduce below:
| NON-SUPERANNUATION ASSETS | Wife | Husband | ||
| 1 | Property W (J) | 390,000 | 390,000 | A |
| 2 | Property J (H) | 65,000 | 65,000 | A |
| 3 | IAG shares – 431 @ $3.95[1] (H) | 1,702 | 1,702 | A |
| 4 | Property W furniture and contents (W) | 1,000 | 1,000 | A |
| 5 | Tools (H) | 200 | 200 | A |
| 6 | Proceeds of sale of Property N | 56,022 | 56,022 | A |
| 7 | 1994 Toyota Spacia (W) | 2,375 | 2,375 | A |
| 8 | 2004 Suzuki motorcycle (H) | 9,000 | 9,000 | A |
| 9 | MBF Limited entitlements (H) | 7,350 | 0 | D |
| 10 | Household contents (H) | 2,000 | 2,000 | A |
| 11 | Box trailer (H) | 50 | 50 | A |
| 12 | Encompass CU (W) | 11 | 11 | A |
| 13 | Greater Building Society account (W) | 30 | 30 | A |
| 14 | Greater Building Society Christmas Club (W) | 140 | 140 | A |
| 15 | St George Retire and Access account (W) | 20 | 20 | A |
| 16 | Encompass CU (H) | 60 | 60 | A |
| 17 | Add-back: Proceeds of sale of Aevum shares (H) | 44,000 | 0 | D |
| 18 | Add-back: Funds drawn by Wife from her superannuation | 9,300 | 20,000 | D |
| 21 | Gross assets | 588,260 | 547,610 |
[1] Close price on 11 June 2008 [Source: ASX website].
| LIABILITIES | ||||
| Wife | Husband | |||
| 22 | Mortgage – Property W property (J) | 70,000 | 70,000 | A |
| 23 | St George Bank MasterCard (J) | 2,560 | 2,560 | A |
| 25 | Encompass CU loan (H) | 0 | 20,700 | D |
| 30 | Gross liabilities | 72,560 | 93,260 |
| NET ASSETS | |||
| Wife | Husband | ||
| 21 | Assets | 588,260 | 547,610 |
| 30 | LESS Liabilities | (72,560) | (93,260) |
| 31 | Net assets | 515,700 | 454,350 |
| SUPERANNUATION ASSETS | ||||
| Wife | Husband | |||
| 32 | State Super Personal Retirement Plan (W) | 464 | 464 | A |
| 33 | SASS (H) | 291,727 | 291,727 | A |
| 34 | State Authorities Non Contributory Super (H) | 27,845 | 27,845 | A |
| 35 | AXA (H) | 23,123 | 23,123 | A |
| 36 | Total Superannuation | 343,159 | 343,159 | A |
| 37 | Net assets and superannuation | 858,859 | 797,509 |
Overall, the wife's application is that contribution up until separation should be equal, that she should receive a post-separation contribution adjustment in her favour of 2.5 per cent, and then a further adjustment in her favour of 12.5 per cent under s.75(2). Based on the orders sought by her, and according to her counsel she would receive 53.6 per cent of the pool of tangible property, and the balance would be made up by way of a super split in her favour in the sum of $93,793.
Overall, on the husband's case, he asserts that contribution should be assessed in his favour as to 60:40, primarily based on the inheritance of the Property J property. He asserts that there are no s.75(2) factors that operate in favour of the wife. The orders that he seeks provides for the wife to pay him $95,000 in return for a transfer by him to her of the former matrimonial home and that there be a superannuation split in the wife's favour of $161,115.
Finally, I record the fact that the husband and wife agreed during the course of the hearing that if, as a result of the demutualisation of the health fund known as MBF, either of them received cash or shares, then such cash or shares would be evenly divided between them. The only issue I need to decide is whether the order in this regard extends to demutualisation happening within two years (as asserted by the husband) or indefinitely (as asserted by the wife). The wife was also cross-examined about the existence of a personal injuries compensation payment. I am satisfied that the evidence went nowhere in this regard.
Issues
Accordingly, having regard to the background set out above, the issues that I need to decide are as follows:
(1)Should there be added back to the joint balance sheet, as notional property, the superannuation withdrawn by the wife, and the shares disposed of by the husband, at or shortly after separation?
(2)An issue raised by the wife is whether the husband's Suzuki motorcycle, together with its corresponding credit union liability in the name of the husband, should be included in the asset pool. She also asserts that the husband should be solely responsible for the Mastercard debt.
(3)How should contribution be assessed during the course of the marriage, up until separation, having regard to the inheritance received by the husband of the Property J property? Moreover, should there be an assessment of further contribution in favour of the wife for the period post-separation arising out of the matters that she raises?
(4)Should there be an adjustment in the wife's favour arising under s.75(2) of the Act, and if so, how should that be assessed?
(5)How should an order for alteration for property interests between the parties, having regard to the above, be implemented, in a just and equitable manner?
(6)For what period of time should the demutualisation order for the MBF shares apply?
The Applicable Law
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution made by the husband in bringing property into the marriage. In this regard, I need to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
26. We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
Possible Add-backs of Superannuation and Shares
The law relating to add-backs is contained in a series of Full Court judgments, including Milankov (2002) FLC 93-095, Townsend (1995) FLC 92-569, AJO v GRO (2005) FLC 93-218. In general terms, these cases identify that it is appropriate to notionally consider assets which have been in the possession of one or other of the parties at some time after separation, but which have been used for that party's own use. The category of cases in respect of which there might be a notional add-back is not closed. It certainly includes cases where parties have expended money on legal fees (not an issue on the facts of this case), or where it is alleged that assets have been dissipated as a result of waste (not an issue in this case) or where there has been a premature distribution of matrimonial assets. It is the latter category that might apply on the facts of this case. It may well be that the Full Court's decision in Townsend contains the clearest statement of the principle at page 81,654 of the report. In short, if there has been a premature distribution of a proportion of the matrimonial assets, as a result of the actions of one spouse distributing to himself or herself an asset to which the other had a legitimate interest, then it is appropriate to bring the said asset back into the pool of assets on a notional basis, and then make a distribution accordingly. However, that principle does not apply to moneys that were used for the reasonable day-to-day expenses of the parties. In short, it is necessary to closely consider the evidence relating to the wife's withdrawal of her superannuation entitlement, and the husband's sale of the shares in question.
The wife gave evidence that in 2005 she withdrew $10,000 from her state superannuation, paid $3,000 tax on that, and used $7,000 for living expenses. Moreover, the wife's evidence is that in 2007 she withdrew a further $10,000 from her state superannuation, paid $2,100 tax on it, and used $7,900 in legal fees.
It should be noted that the wife concedes that $9,300 ought to be added back into the joint balance sheet, but the husband asserts it should be $20,000. At most, however, the add-back would be no greater than $14,900, because of the impact of taxation. In other words, if there is to be an add-back it must be of the net amount, not the gross amount, where the difference is taxation that would have been payable in any event. The issue then is whether $5,600 (i.e. $14,900 minus $9,300) ought to be added back. Insofar as the wife has conceded that legal fees of $7,900 should be added back, I agree that this is appropriate.
The issue for present purposes is whether her use of $5,600 for living expenses was reasonable under the circumstances. She was not seriously challenged about her evidence in this regard, in cross-examination. Whether that was deliberate, or inadvertent, I believe it was the correct decision to make. Her evidence is that she used the money for living expenses in 2005. When one has regard to the wife's affidavit filed 20 May 2008 it is clear that in 2005 she was solely responsible for the children of the marriage, including [Y] who suffers from verbal dyspraxia and anxiety. Her unchallenged evidence about the special needs of [Y] alone is extensively set out in her affidavit. She also was responsible for servicing the mortgage on the former matrimonial home, and suffered ill-health. Whilst I do not consider it necessary to go into this evidence in detail, I have no hesitation in accepting the wife's evidence that it was used for living expenses and that it was reasonable under the circumstances to do so. Accordingly, I decline to add back more than the $9,300 which the wife conceded should be added back.
The evidence about the disposal by the husband of the shares is set out in his affidavit filed 22 May 2008 at paragraph 54. By way of background, he explains that after separation he was paying child support, as well as servicing a credit union loan, as a result of which he found it difficult to meet his living expenses. He sold shares in Aevuf, which were in his sole name, for $47,449. At paragraph 54 he itemises how these funds were spent. The question I need to decide is whether the sale proceeds were spent on living expenses, and whether it was reasonable to do so. It should be noted that the wife only seeks an add-back in the sum of $44,000, which represents the net sale proceeds of the shares allowing for tax. That is, of course, an appropriate concession to make.
There are a number of issues that arise in relation to the items that the husband claims he spent the share sale proceeds on at paragraph 4 of his affidavit. The first issue is the almost complete absence of corroborating documentation to establish that the funds were in fact used for the purpose he states. Indeed, in cross-examination he conceded that he had been asked to produce documents to establish the expenditure at paragraph 54 of his affidavit, but no documents were produced.
The second issue also arises from the husband's cross-examination about this issue. It seems as if shortly after separation he commenced cohabitation with his current partner, Ms H, in jointly rented accommodation. Thus, there was a strong inference that at least some of the expenses referred to in paragraph 54 were shared by his partner. Also, it was apparent that he continued to work full-time during this period and he agreed that there were a number of expenses, including rental, that could easily have been paid out of his income. He agreed that he was not paying the mortgage on the former matrimonial home. He agreed that between January 2005 and April 2005 he spent $40,000 and he agrees that in January alone he withdrew $16,000 over a period of two weeks, in cash, sometimes in multiple withdrawals of $1,000 on the same day. Indeed, the evidence indicates that most of this money was withdrawn in cash and the husband asserted that he put the money under his bed and spent it over time. He denied that he would go to clubs to gamble this money, but agreed that as a result of his actions he was putting this money beyond the reach of the wife. I must say that whilst I found the husband generally to be a witness of truth, his evidence on this particular issue was somewhat unconvincing. In any event, he bore the onus of proof to establish that the expenses referred to in paragraph 54 of his affidavit were in fact expended, did relate to living expenses, and it was reasonable under the circumstances. He has failed to do so and, accordingly, I find that the sum of $44,000 should in fact be added back to the joint balance sheet.
Suzuki Motorcycle, a Credit Union Loan and Mastercard Debt
The parties have included in the joint balance sheet a 2004 Suzuki motorcycle owned by the husband, at an agreed value of $9,000. Also included is a liability by the husband to the Encompass Credit Union in the sum of $20,700. Whilst the quantum is agreed, the wife submits that both the Suzuki motorcycle and the credit union loan that relates to it ought not to be included in the matrimonial pool.
In his affidavit filed 22 May 2008 the husband deposes that in early 2004, the year of separation, he took out a personal loan with Encompass Credit Union for $6,000 to purchase a Suzuki motorcycle, a queen-sized bed and a computer. Later that year he borrowed an additional $5,000, traded in the first motorcycle for a new motorcycle, and purchased a large-screen television, three tyres for the family car, and paid for the registration of the family car. His evidence is that when he moved out of the home he took the motorcycle only, but none of the other items that were purchased with the credit union loan.
The husband was carefully cross-examined about this issue, by counsel for the wife. He agreed that when he upgraded his motorcycle in 2004, shortly before separation, the trade-in from the first bike was not used to reduce the credit union loan, it was put into the purchase of the second bicycle. He also agreed that the additional amount borrowed was $14,000, not $5,000. Moreover, he agreed that in July 2007 he borrowed a further amount to purchase a new motorcycle so that his current liability to the Encompass Credit Union in fact reflects a post-separation acquisition by him.
The documents tendered at the hearing indicate that as at the end of December 2004 the amount owing to the credit union was $17,596. The documents also indicate that in June 2004, when the husband borrowed a further $14,000, the balance of the loan at that time was $4,900 approximately. This took the total loan to just below $19,000. The purchase price of the second motorcycle was $12,000, so that certainly does not allow much scope for the husband to have spent money on other items, as he asserts at paragraph 41 of his affidavit. The same could be said for the purchase of the first motorcycle in 2004 which, the husband agreed in cross-examination, was purchased for $5,000. Accordingly, if any part of the husband's credit union loan was used for items other than associated with the purchase of the motorcycles, it was a minimal amount.
Under the circumstances I accept the submission made on behalf of the wife that neither the husband's motorcycle, nor the Encompass Credit Union loan should be included in the joint balance sheet. The transactions in question almost exclusively benefited the husband, and not the wife and/or the family, except in the general and indirect sense that it enabled him to go to work during the last year of cohabitation. It is clear that there were further borrowings from the Encompass Credit Union after separation. The husband has not produced evidence that satisfies me, on the balance of probabilities, that in fact any part of the credit union loan was used for items other than the motorcycles. Accordingly, neither the liability, nor the asset in question, should come onto the joint balance sheet. The husband should be entitled to the sole benefit of his motorcycle, and the sole responsibility for the credit union debt. As for the joint Mastercard debt, I am satisfied that at separation the balance was about $4,000 and that the wife alone has serviced this since then, on her limited income, and brought the balance down to its current level of $2,560. It is now appropriate that the husband take care of this liability.
Findings about asset pool
Having regard to the findings I have made above, the asset pool is as follows:
| NON-SUPERANNUATION ASSETS | Value ($) | |
| 1 | Property W (J) | 390,000 |
| 2 | Property J (H) | 65,000 |
| 3 | IAG shares – 431 @ $3.95[2] (H) | 1,702 |
| 4 | Property W furniture and contents (W) | 1,000 |
| 5 | Tools (H) | 200 |
| 6 | Proceeds of sale of Property N | 56,022 |
| 7 | 1994 Toyota Spacia (W) | 2,375 |
| 8 | Household contents (H) | 2,000 |
| 9 | Box trailer (H) | 50 |
| 10 | Encompass CU (W) | 11 |
| 11 | Greater Building Society account (W) | 30 |
| 12 | Greater Building Society Christmas Club (W) | 140 |
| 13 | St George Retire and Access account (W) | 20 |
| 14 | Encompass CU (H) | 60 |
| 15 | Add-back: Proceeds of sale of Aevum shares (H) | 44,000 |
| 16 | Add-back: Funds drawn by Wife from her superannuation | 9,300 |
| 17 | Gross assets | 571,910 |
[2] Close price on 11 June 2008 [Source: ASX website].
| LIABILITIES | Value ($) | |
| 18 | Mortgage – Property W property (J) | 70,000 |
| 19 | St George Bank MasterCard (H) | 2,560 |
| 20 | Encompass CU loan (H) | 0 |
| 21 | Gross liabilities | 72,560 |
| NET ASSETS | Value ($) | |
| 17 | Assets | 571,910 |
| 21 | LESS Liabilities | 72,560 |
| 23 | Net assets | 499,350 |
| SUPERANNUATION ASSETS | ||
| 32 | State Super Personal Retirement Plan (W) | 464 |
| 33 | SASS (H) | 291,727 |
| 34 | State Authorities Non Contributory Super (H) | 27,845 |
| 35 | AXA (H) | 23,123 |
| 36 | Total Superannuation | 343,159 |
| 37 | Net combined non-superannuation assets and superannuation | 842,509 |
Contribution
As indicated above, there are two issues here. The first issue relates to how the inheritance of the Property J property by the husband has an impact on his contribution to the marriage. The second issue relates to the post-separation period. The property at Property J has an agreed current value of $65,000, and is in the husband's sole name. He inherited this in 1992 when his late uncle died. The wife's evidence about her input into the receipt by the husband of this inheritance is set out at paragraph 26 of her affidavit filed 20 May 2008. She says she met the husband's late uncle in 1982 whilst attending, with her husband, a family funeral. The wife deposes to the fact that the property at Property J is across the road from the [J[ [omitted] barracks where she would often stay, as much as six nights a month, whilst working for [omitted]. She alleges that she would often visit the husband's uncle, make him a cup of tea, wash up his dishes, and generally tidy up his house.
As a result of this, the wife asserts they developed a good friendship. She says that in 1989 the husband's uncle asked her whether the parties would be able to lend him $10,500 so that he might retain the Property J property as part of the property settlement. She asserts that the husband's uncle promised that they would get the money back with interest, or the property when he died. She conveyed this conversation to the husband as a result of which, in due course, they advanced $9,000 to the husband's uncle. In evidence was a receipt dated
25 September 1989evidencing the payment of $9,000 by the husband to Messrs Commins Thompson Solicitors at Wagga. It is a trust account receipt and it does refer to settlement funds re matrimonial. There was no serious challenge to any significant part of the wife's evidence, by the husband's counsel, in this regard. It is clear, therefore, that the parties advanced $9,000 to the husband's uncle in September 1989. He died three years later on 30 September 1992 and the property at Property J was left to the husband. There is not much other evidence relating to the circumstances of the inheritance. It is common ground that the $9,000 was not repaid. There is no evidence before me to indicate what the value of the Property J property was at the time that the husband inherited the same. I note that a number of issues were raised in cross-examination about what each party did to improve and conserve the Property J property after it was received by the husband. What is clear from this evidence is that both parties did, during the course of the marriage, do things that either directly or indirectly, and whether financially or non-financially, contributed to the preservation and/or improvement to the Property J property.
If I have understood the husband's case properly, his claim for 60 per cent on contribution is primarily based on his inheritance of the Property J property. The situation on the facts of the present case is far less clear than it was, for example, in the Full Court's decision in Gosper (1987) FLC 91-818 where it was quite clear that the inheritance was intended to benefit or was derived solely as a result of the efforts of one party. It is hard to resist the inference that the wife's relationship with the deceased for a period of years prior to his death, and the parties' joint loan to the deceased, at least contributed in some way to the receipt of the inheritance by the husband. Even if I was prepared to assess some additional contribution on the husband's part as a result of this inheritance, the fact is that it was received 12 years before separation and I am satisfied, on balance, that both the husband and the wife contributed in some way to the preservation and improvement of this property.
The J property represents less than 10 per cent of the non-superannuation pool, and about 7.5 per cent of the total pool of assets. These figures are based on the current value to the parties today, and not its value at the time of inheritance. One can only imagine the present value of the $9,000 that the parties advanced to the deceased in 1989. On balance, having regard to the perhaps unusual circumstances in this case, I do not regard that it is appropriate to make an adjustment in the husband's favour having regard to this inheritance.
The second contentious issue between the parties as regards contribution is the claim for a 2.5 per cent adjustment in the wife's favour for post-separation contribution. In submissions, her counsel articulated this claim as having two distinct bases. The first was that the wife continued to service the mortgage on the former matrimonial home after separation. That is not disputed by the husband, but I could not ignore the fact that she also had the benefit of occupation of the former matrimonial home, for the children and herself. Indeed, there is evidence that enables me to conclude that the granny flat attached to the former matrimonial home either could have been let out, or was in fact let out, during the post-separation period. Whilst I generally found the evidence of the wife to be credible, the evidence she gave about the granny flat was somewhat less than convincing. It is probably the case that she received some benefit, financial or otherwise, as a result of other persons occupying the granny flat after separation. Having regard to the above, insofar as her claim for a post-separation adjustment for contribution is based on her servicing the mortgage, I would not be prepared to accede to the same.
However, her claim for post-separation contribution is also advanced on the basis that she was solely responsible for the care of [Y], a child with special needs. The evidence in this regard is quite compelling and again, it was not seriously challenged by the husband's counsel in cross-examination. [Y] was 10 years old at the time of separation and he lived with his mother until he was about 14, when he then went to live with his father. It is true that the husband paid child support for [Y] and was involved, from time to time, in his care, and in meeting his special needs. However, it would do no justice to the wife's efforts to say that his contribution in this regard was anything like hers. The wife's evidence about [Y]’s special needs commences at paragraph 33 of her affidavit filed 20 May 2008 and continues through to paragraph 38. It is patently obvious that many of the difficulties that she experienced occurred in the post-separation period. As I indicated before, she experienced ill-health as well. Having regard to all of the evidence, and without minimising the efforts that the husband himself played in the post-separation period, I am satisfied that a further adjustment in the wife's favour is appropriate under the circumstances. I believe that an adjustment in her favour of 2 per cent is just and equitable, having regard to all the evidence, and the circumstances of this case.
Section 75(2) considerations
On behalf of the wife, it is submitted that there should be an adjustment of about 12.5 per cent in her favour, having regard to the s.75(2) considerations that favour her, on the facts of this case. The husband says there should be no such adjustment, particularly in view of the fact that the husband is now responsible for the care of [Y].
The wife's circumstances are such that she is now a full-time student who is seeking to retrain with a view to re-entering the workforce with better qualifications. Her only source of income is Centrelink benefits and the child support that the husband pays in respect of [Z]. Her total weekly income from all sources is about $485 per week. [Z] is 12 years old. The wife appears to live a quite frugal lifestyle, has minimal savings, occupies the former matrimonial home, and has a number of other personal liabilities that called for no adjustment in the proceedings. She is about six years younger than the husband. If the wife retains the former matrimonial home, she will be able to derive income by renting out the granny flat.
The husband states in his financial statement filed 22 May 2008 that he earns about $830 per week from his income [in the Transport Industry]. In cross-examination, however, he conceded that that figure was based upon his 2007 tax return and that his current weekly income is probably about $1,350 per week. His de facto partner, Ms H, earns about $900 per week. His superannuation entitlements total about $343,000, compared to the wife's which is $463. Clearly he is in a stronger financial position when compared to the wife. He has repartnered. However, he does have the care of their son [Y] who is in year 9 and is undertaking his education by correspondence. He deposes that this involves three to four hours work per day, which is supervised by either the husband or his partner. The husband also pays child support for [Z]. Even though the husband in his affidavit may have sought to minimise, in some respects, the challenges associated with parenting a teenager with special needs, I cannot ignore all of the evidence that is presented before me about [Y].
On balance, there are s.75(2) considerations that operate in favour of both the husband and the wife. However, I find that the wife's needs remain greater, particularly as she is not in the workforce and is seeking to retrain so that she may re-enter the workforce gainfully. It is true that she has an earning capacity, but, if she chooses to exercise that fully, it will be at the expense of her retraining.
Having regard to all of these factors, I believe that a s.75(2) adjustment in her favour of 8 per cent is appropriate.
Conclusion in relation to contribution and s.75(2) considerations
Having regard to the matters set out above, the wife would receive
52 per cent on contribution, and 8 per cent as a s.75(2) adjustment, or a total of 60 per cent.
Implementation of orders, and just and equitable
In terms of implementing the orders, there are a number of challenges. The husband would like to retain Property J as there is a sentimental attachment to it. However, he would also like funds in order to purchase alternative accommodation for his partner and himself on the Central Coast. On his behalf it was submitted that it would be quite inappropriate to leave most of his entitlement in the form of superannuation to which he has no access for the foreseeable future. To leave him with no cash, according to his counsel, could not possibly be just and equitable.
From the wife's perspective, she would clearly like to retain the former matrimonial home. She seeks, therefore, to minimise the super split in her favour, and in fact prefers the Property J property, plus the moneys held in trust by the parties' conveyancing lawyers, to be paid to her.
The wife’s 60% of the net combined pool of $842,509 is $505,505.40. If she retains Property W plus the other items owned by her, her financial position is as follows:
Property W
390,000
(less mortgage)
(70,000)
Furniture etc.
1,000
Wife’s Toyota
2,375
Encompass
11
Greater Building Society
30
Christmas Club
140
St George Account
20
Add-back (W)
9,300
Superannuation
464
333,340
This is significantly short of her entitlement. If I give to her the proceeds of sale of Property N, then: 56,022
389,362
This still leaves the wife in need of a further $116,143 that could only come either from the Property J property, or the husband’s superannuation. I am not inclined, on the facts of this case, to leave the husband with no real estate. The husband should retain Property J, and the balance of the wife’s entitlement must come out of his superannuation.
If I adopt the approach outlined above, the husband’s 40% of the net combined pool of $842,509 is $337,003.60. If he retains Property J plus the items accrued by him, his financial position is as follows:
Property J
65,000
IAG Shares
1,702
Tools
200
Contents
2,000
Box Trailer
50
Encompass
60
Add-back (husband)
44,000
St George Mastercard
(2560)
Superannuation
342,695
(Super split to wife)
(116,143)
$337,004
On behalf of the husband it was submitted it would not be just and equitable for him to be left with no liquid funds with which to purchase accommodation and to have most of his entitlement in superannuation. Based on the orders I propose, however, he will retain Property J (and the option to sell it) and he has the notional fund of $44,000 that he chose to spend after separation. I am satisfied the order is just and equitable from his perspective.
Having regard to the two helpful decisions of Moore J in Levick & Levick (2003) FamCA 40 and Turner & Turner (2003) FamCA 1163 I am satisfied that what I propose above is just and equitable as between the parties, and balances their respective needs, and capacities to provide for those needs, as between superannuation and non-superannuation assets. It provides both of them with the opportunity to start again independently of the other with an equitable capital base having regard to their age, needs, circumstances and earning capacity, and with some measure of provision for their long term superannuation needs.
Possible Demutualisation of MBF
As indicated above the parties have agreed that should either of them receive cash or an allocation of shares as a result of the demutualisation of the health fund to which they contributed during their marriage, they will distribute the benefits of such to each other. The husband proposed, however, that any such order should be limited to two years from the date of these orders. The wife proposed that it be unlimited as to time. The principle of the distribution of a benefit that was accrued during a marriage as a result of the contributions made by both spouses is a sound one. To make the order indefinite as to time, however, is not just impractical but is contrary to the stated principle. The greater the passage of time, the less it can be said that the benefit is attributable to or arises out of the marriage. In any event I am required by s.81 of the Act to attempt to finalise matters as between the parties. Under the circumstances I believe five years is a just and equitable time limit to impose, having regard to the matters discussed above.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate:
Date:
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