Cornell & Stokes
[2008] FMCAfam 774
•25 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CORNELL & STOKES | [2008] FMCAfam 774 |
| FAMILY LAW – Property settlement proceedings – death of one party – approach to be taken by the court. FAMILY LAW – Property settlement proceedings – appropriate treatment of overseas pensions and retirement investments. |
| Family Law Act 1975 (Cth), ss.75, 79, 90MD, 90ME, 90MS, 90MT |
| Fisher v Fisher (1986) 161 CLR 438 Spassof v Burgazoff (1995) 18 Fam LR 719 Mellifont v Attorney General (Qld) (1991) 173 CLR 232 Homsy v Yassa (1994) FLC 92-442 Doyle & Doyle (1989) FLC 92-027 North and North (1987) FLC 91-831 Mason v Mason (1994) FLC 92-446 Smithers & Smithers [2007] FMCAfam 143 Parrott v Public Trustee of NSW (1994) FLC 92-473 Smythe & Smythe [2007] FamCA 1212 Bourke v Bourke (1998) Fam CA 69 Wilson & Ors v Kelly [2001] Fam CA 650 Tasmanian Trustees Ltd (Administrators of Estate of Gleeson, B J) & Gleeson, D W (1990) FLC 92-156 Rutter [2004] FamCA 424 Ford & Marchant [2001] Fam CA 1585 Hickey & Hickey (2003) FLC 93-143 Mallett v Mallett (1984) 156 CLR 605 Norbis v Norbis (1986) 161 CLR 513 Chorn v Hopkins (2003) FLC 93-204 Hein & Hein (1995) Fam CA 58 Perrett & Perrett (1990) FLC 92-101 Allen & Allen [2008] FMCAfam 18 Maciel & Maciel [2007] FMCAfam 262 FHL v EHL (2006) FamCA Pierce v Pierce (1999) FLC 92-444 In the Marriage of Kennon (1997) 22 FamLR 1; (1997) FLC 92-757 In the Marriage of Ferraro (1993) FLC 92-335 Farmer v Bramley (2000) FLC 93-060 Wilkinson & Wilkinson (2005) FLC 93-222; (2005) 33 Fam LR 373 |
| Applicant: | MR CORNELL AS EXECUTOR OF THE ESTATE OF MS STOKES |
| Respondent: | MR STOKES |
| File Number: | BRC 2142 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 23 May 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 25 July 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Carew |
| Solicitors for the Applicant: | Schultz Toomey O'Brien Lawyers |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | In person |
ORDERS
That within twenty eight (28) days of the date of these orders, the respondent pay to the applicant the sum of $31,293.58.
That otherwise each party retain each asset in their respective possession, free of any claim by the other.
That the applicant take all steps as are necessary to cause any caveat lodged against the property at Property M to be removed.
That should either party fail to execute any document required to give effect to these orders, having been requested to do so, the Registrar of this Court shall be authorised, pursuant to s.106A Family Law Act1975, to execute any such document on that party’s behalf.
IT IS NOTED that publication of this judgment under the pseudonym Cornell & Stokes is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 2142 of 2007
| MR CORNELL AS EXECUTOR OF THE ESTATE OF MS STOKES |
Applicant
And
| MR STOKES |
Respondent
REASONS FOR JUDGMENT
These proceedings concern the making of property settlement orders pursuant to s.79 Family Law Act1975 (“the Act”).
Ms Stokes and the respondent husband were married in 1989 and separated in February 2005. There were no children of the marriage. The marriage was the second for Ms Stokes and the third for the respondent husband. At the time they were married Ms Stokes had in her care one daughter who was then aged 10. The husband also had the care of a daughter aged 10.
By application filed 22 July 2005 in the Family Court of Australia,
Ms Stokes sought orders:
a)That an accounting take place of the assets and liabilities of the parties and that the nett assets of the marriage be distributed as to 70% thereof to the Applicant wife and 30% thereof to the Respondent husband
b)That the husband and wife shall do all acts and execute such necessary documents to give effect to the terms of this Order. In the event that either the husband or the wife fails within fourteen (14) days to do so, a Deputy Registrar of the Family Court of Australia at Brisbane is empowered to execute all such necessary documents in lieu of the defaulting party
c)That the respondent husband pay the applicant wife’s costs of and incidental to this Application
d)Such further or other order as this Honourable Court deems appropriate
Ms Stokes died in December 2005. The executor of her estate was substituted as applicant.
By his response filed 21 May 2007, the husband sought orders:
(1)That the now deceased wife’s application filed 22 July 2005 be dismissed.
(2)That each party be declared the sole beneficial owner of the investments, vehicles, monies and bank accounts, furniture, chattels and artworks in his or her respective possession or registered name.
(3)That each party be declared the sole beneficial owner of his or her respective pension, life assurance and annuity entitlements.
(4)That the executor/caveator shall do all acts and execute such documents as to remove the caveat he placed on the registered joint tenancy marital Property M, NSW.
(5)That no further claims be made on behalf of the applicant, the executor or his or her representatives on the finances, funds and property of the respondent husband.
(6)That the executor applicant pay the respondent’s costs of and incidental to this application.
(7)Such further or other orders as this honourable court deems appropriate.
Shortly prior to the final hearing the applicant notified the respondent and the Court that she sought the following orders:
(1)That the notional pool of assets available for distribution between the parties be identified and valued as follows:
a) monies in possession of the deceased as at separation
$40,123.60
Less the wife’s spousal maintenance calculated at $261.00 per week by 40 weeks
$10,440.00
TOTAL
$ 29,683.00
b) jewellery valuation in possession of wife
$ 190.00
c) chattels in possession of wife
$ 205.00
d) Mr G painting
$ 5,000.00
e) former matrimonial property situated at Property M in accordance with valuation
$380,000.00
f) valuation of husband’s home content pursuant to valuation
$ 3,050.00
g) valuation of motor vehicle
$ 20,000.00
h) financial resources in possession of husband as at date of separation
i) Royal and Alliance bond account [3]
$107,835.00
ii) Prudential high yield bond account [6]
$ 13,257.00
iii) Bank of Scotland account [1]
$ 52,112.50
iv) Threadneedle account number [5]
$ 51,720.00
v) GE drawndown account [U]
$109,860.00
vi) GE personal pension account [A]
$ 52,870.00
vii) Natwest pension fund
$ 24,250.00
viii) UK Teacher’s pension
$ 86,154.00
ix) Spanish tax refund
$ 7,734.00
x) Spanish Villa retention fund
$ 1,547.00
i) monies used by husband from joint Suncorp account
$ 2,957.00
j) boat proceeds in possession of husband
$ 20,000.00
k) interest earned on investments post separation retained by husband
$ 30,942.00
(2)That the notional pool of assets be divided between the parties on the basis the Estate receive 40% thereof and the husband receive 60% thereof.
(3)That the former matrimonial property situated at Property M be immediately listed for sale and the husband do all acts and things to co-operate in relation to such sale and on the usual terms by private treaty and if not sold within three months, then to auction and the net proceeds shall be calculated as follows:
(a)Less sale proceeds and commission; and
(b)That the balance thereof form the notional pool of assets to be divided between the parties.
(4)That the husband retain for his own sole use and benefit absolutely the following:
a) Mercedes motor vehicle
$ 20,000.00
b) home contents valued at
$ 3,050.00
c) Royal and Alliance bond account [3]
$107,835.00
d) Prudential high yield bond account [6]
$ 13,257.00
e) Bank of Scotland account [1]
$ 52,112.50
f) Threadneedle account number [5]
$ 51,720.00
g) GE drawndown account [U]
$109,860.00
h) GE personal pension account [A]
$ 52,870.00
i) Natwest pension fund
$ 24,250.00
j) UK Teacher’s pension
$ 86,154.00
k) Spanish tax refund
$ 7,734.00
l) Spanish Villa retention fund
$ 1,547.00
m) monies used by husband from joint Suncorp account
$ 2,957.00
n) boat proceeds in possession of husband
$ 20,000.00
o) interest earned on investments post separation retained by husband
$ 30,942.00
(5)That the wife retain for her own sole use and benefit absolutely the following:
a) Cash
$ 29,683.60
b) Jewellery
$ 190.00
c) Chattels in her possession pursuant to valuation
$ 205.00
d) Painting by Mr G pursuant to valuation
$ 5,000.00
(6)That upon sale of the former matrimonial home, the husband and wife be entitled to an adjustment which provides the husband with 60% of the net realisable assets and provides to the Estate 40% of the net realisable assets.
The first matter that must be considered is the approach that the Court should take where one of the parties to the marriage has died since the institution of the proceedings. In that regard s.79(8) of the Act provides:
(8) Where, before property settlement proceedings are completed, a party to the marriage dies:
(a) the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings;
(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; or
(iv) any of the vested bankruptcy property in relation to a bankrupt party to the marriage; and
(c) an order made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
Section 79(8)(b) has been the subject of not inconsiderable judicial attention. In Fisher v Fisher (1986) 161 CLR 438 at 457-8 Brennan J said:
“The death of a spouse will not always extinguish or satisfy the moral claims of the surviving spouse and children to which effect would have been given if the proceedings had been completed. Section 79(8) empowers the Family Court to give effect to the moral claims in respect of the property of the spouses which was made available to answer those claims by the commencement of the proceedings, provided “it is still appropriate to make an order with respect to property”: s. 79(8)(b)(ii). That qualification on the power, coupled with par. (ca)(i) of the definition of “matrimonial cause”, ensure that the jurisdiction is exercised only in cases where the moral obligations arising out of the marriage remain unsatisfied.
Section 79(8) provides machinery for the discharge of those moral obligations in priority to any rights in the property of a party to a marriage which arise by testamentary disposition of that party’s property or by any other devolution of that property on that party’s death.”
Earlier, on page 457, his Honour had said that the jurisdiction to make an order after the death of one spouse derives from s.79(8) not s.79(1) of the Act. This was not the unanimous view of the Court.
Gibbs CJ (with whom Wilson J agreed) said at 448:
“It is true that s. 79(8) provides for the creation of new proprietary rights after a marriage has been terminated by death. However, those rights may be created only if proceedings with respect to the property of the parties to the marriage or either of them had been commenced while the marriage was subsisting and only if the proceedings are continued by or against the legal personal representative of the deceased spouse; further we are concerned only with the case in which the proceedings arose out of the marital relationship. An order may be made under the subsection only if the Family Court is of the opinion that it would have made an order with respect to property if the deceased party had not died and that it is still appropriate to make an order with respect to property. We are not concerned to consider in what circumstances it would be appropriate to make an order that would benefit complete strangers, but clearly the discretionary power to make an order under s. 79(8)(b) should not be exercised lightly.” (Emphasis mine)
The obiter comments by Gibbs CJ, Brennan and Wilson JJ that an order should only be made under s.79(8)(b)(ii) in limited circumstances does not appear to have been embraced in subsequent decisions of the Family Court and of this Court. Such an approach was followed in Spassof v Burgazoff (1995) 18 Fam LR 719.
I should add that although the decision in Fisher was not followed in Mellifont v Attorney General (Qld) (1991) 173 CLR 232, nothing said in that latter case cast doubt on the correctness of the obiter comments to which I have referred.
In Homsy v Yassa (1994) FLC 92-442 Coleman J said, at p. 80,613:
“In North and North; The Public Trustee of New South Wales Intervener) (1987) FLC 91-831 Gee J considered in detail the operation of section 79(8) and the approach to be taken to the section. So far as the formation of the first requisite opinion is concerned, his Honour accepted (page 76,248) that, it was not necessary that the Court should “work out the precise order that it would have made had it been hearing the application” prior to the death of the deceased. His Honour accepted that it was sufficient for the purpose of forming that opinion that the Court, having considered the contributions of the parties pursuant to section 79 and the matters referred to in section 75(2), was satisfied that in all the circumstances of the case it was just and equitable to make an order on such application. The relevant date for forming the first opinion was, in his Honour’s view, the day prior to the death of the deceased.
Turning to the second matter of opinion (page 76,251), his Honour said that the question was whether, having regard to all the circumstances of the case, including the facts and circumstances which have occurred since and by reason of the death of the deceased, it is still “appropriate” or “proper” or “apt” in justice and in equity to alter the interest of the parties in their property . . .
I respectfully agree that the proper approach to section 79(8) is as his Honour indicated in North and North; The Public Trustee of New South Wales Intervener)(supra) and propose approaching the matter on that basis.”
In Doyle & Doyle (1989) FLC 92-027 Lindemayer J made findings under s.79(4) (a) – (c) before dealing with s.79(8). In determining whether an order would have been made his Honour referred to North and North (1987) FLC 91-831 as authority for the proposition that the relevant time for determining whether a property order would have been made if the deceased party had not dies is the day before his or her death, but doubted its correctness. At pp 77,397 – 8 his Honour said:
“I turn, then, to consider the question posed by sec. 79(8)(b)(ii), namely whether I consider it “still appropriate to make an order with respect to property” notwithstanding the changed circumstances flowing from the wife’s death, and if so what order is “appropriate” in these circumstances.
The Act itself gives no clear guidance as to how the Court should determine this question. It apparently leaves the matter entirely to the discretion of the Court. The criteria for the exercise of that discretion, namely that it is “appropriate”, is the same as that for the exercise of the discretion, under sec. 79(1), to make an order between living spouses or former spouses. Furthermore, sec. 79(2), which provides that the Court shall not make an order “under this section” unless it is satisfied that it is “just and equitable” to make the order, also applies, since sec. 79(8) is part of “this section”. Likewise, it would seem that sec. 79(4), which provides that in considering what order (if any) should be made “under this section”, the Court shall take into account the various matters referred to in para. (a) to (f) thereof inclusive, must also apply. However, as some of those matters, particularly many of the matters referred to in sec. 75(2) which are brought into account by sec. 79(4)(e), are apt to refer only to parties who are living, it is very difficult to apply them in a case where one of the parties is dead. This much is therefore clear, that the intention of the legislature was that the discretion of the Court under sec. 79(8) should be no more fettered than its discretion under sec. 79(1) which as Gibbs CJ said in Mallett v Mallett (1984) FLC 91-057 at p. 79,111, is “largely unfettered”. When the legislature gives the Court an unfettered discretion, the Court should not seek to limit that discretion by imposing upon itself rules for the exercise of it. All that the Court is required to do in exercising that discretion is to act judicially, and not arbitrarily or capriciously.”
In Mason v Mason (1994) FLC 92-446 the Full Court of the Family Court adopted the passage from Doyle which I have set out.
In Smithers & Smithers [2007] FMCAfam 143 Halligan FM at [40] considered that whether it was “still appropriate” to make an order falls to be determined having regard to relevant considerations in ss.79(4) and 75(2) of the Act.
His Honour reviewed the authorities at [60] – [63], in particular the decision of the Full Court in Parrott v Public Trustee of NSW (1994) FLC 92-473. At [61] his Honour said:
“In my view Parrott stands as authority for the following propositions:
(a)it must be presumed from the enactment of s. 79(8) that the legislature intended that one party to a marriage which has broken down to the point that proceedings have been commenced for orders altering the interests of the parties in property should not profit by the fortuitous death of the other party prior to the determination of those proceedings;
(b)however, it is clear that the death of one party has a profound effect upon the balance of the s. 75(2) factors;
(c)the deceased has a prima facie moral entitlement to the share gained by contribution during his or her lifetime and, if so desired, to dispose of the same to persons who are strangers to the marriage;
(d)the size of the pool of divisible assets, the level of future need of the surviving spouse, and the extent to which the surviving spouse’s contribution based entitlement will meet that need, are important factors in determining the extent of any adjustment to the surviving spouse.
Although his Honour’s decision was overturned in Smythe & Smythe [2007] FamCA 1212 his Honour’s statement of the law just referred to was not challenged: at [14], [26].
In Bourke v Bourke (1998) Fam CA 69 at paragraphs [4.8] – [4.10] the Full Court said:
“4.8Having thus decided that the trial Judge was correct in concluding, upon the interpretation of s.79A(1C) which he adopted, that the first condition of that sub-section, imposed by paragraph (b)(i) had been met, it is unnecessary for us to express any concluded view about the question of interpretation of that sub-section which arises from the apparently different views expressed by Gee J and Lindenmayer J in North and Doyle (both supra), respectively, about the interpretation of the corresponding s.79(8). However, we think it may be useful to express our tentative views on that question, for the possible guidance of trial Judges called upon to grapple with either sub-section in future.
4.9With respect to both of the Judges referred to, we think that it is perhaps potentially confusing, and may ultimately lead to error, to focus one’s attention too closely on the task of discerning the temporal intent of the sub-section, rather than upon the discernment of its conceptual intent. What the sub-section requires is for the Court to consider and decide whether, if the deceased spouse had not died, the Court would have made an order in the proceedings. In considering that question the Court obviously must have regard to the substantive circumstances, relevant to the exercise of the jurisdiction invoked by the initiating application, which existed immediately before the death of the deceased spouse. However, that does not mean that the Court is obliged to answer that question as if the substantive proceedings so initiated had actually come before the Court for determination on the day before, or on the day of (but, to use the trial Judge’s expression, “just before”) the death. As we have indicated, such an approach would pick up and render fatal to the proceedings any procedural impediment to the exercise of the jurisdiction (such as the absence of filed material properly identifying and valuing all relevant property of the parties, or a failure of the applicant to specify, with precision, the order sought) which existed at that time. For the reasons which his Honour gave in the passage which we have previously adopted, that simply cannot be correct.
4.10Essentially, what we think this paragraph of the sub-section requires is for the Court to be satisfied that, at the time of the death, the deceased spouse had a good cause of action for an order under (in this case, s.79A(1A)), in respect of which he or she had regularly invoked the Court’s jurisdiction before his or her death. That was clearly the case here, and the existence of some merely procedural obstacle to the making of an immediate order, does not detract from that conclusion.”
See also Wilson & Ors v Kelly [2001] Fam CA 650 to the same effect.
I do not think that once the Court is satisfied of the prerequisite in s.79(8)(b)(i), it should then approach the matter simply by applying ss.79(4) and 75(2) of the Act. That would deprive s.79(8)(b)(ii) of any utility. In my view, that subsection requires the Court to take into account the death of one of the parties to the marriage and ask whether it is still appropriate to make an order effectively in favour of the beneficiaries of that party’s estate. A more restrained or limited approach should be taken, as supported by the obiter remarks of Gibbs CJ and Brennan and Wilson JJ in Fisher. That may mean, in practical terms, that what the court really looks to is the contributions based entitlement of the deceased party, which the surviving party has a moral obligation to meet, and to then ask whether that entitlement should be adjusted for s.75(2) factors relating to the surviving spouse, or for any other reason.
This view is supported by Dickey, Family Law, 5th ed. at 551 where the learned author says:
“The property order that the court may make under subs. (8) need not be the same as that which it would have made had the deceased spouse not died (citing Menzies v Evans (1988) FLC 91-969 at 77,009 – 77,010). Indeed, it usually will not be the same as the fact that a spouse is dead means that no regard need be had to his or her general future economic position under s. 79(4)(e). The deceased’s entitlement to an alteration of property will accordingly be based primarily upon his or her contributions to property and to the welfare of the family (citing Parrott).
From the above authorities, I conclude that the appropriate way in which to deal with a case where one of the parties has died since the commencement of proceedings is as follows:
a)The party representing the deceased party to the marriage must demonstrate that, at the time of the death of the party so represented, the court would have made an order in favour of that party. In so doing, the party is not limited to the state of evidence at the date of death;
b)In reaching an opinion about that first prerequisite imposed by s.79(8)(b)(i) of the Act, the Court is not required to determine precisely what orders would have been made in that deceased party’s favour, just that an order would have been made in that party’s favour;
c)To reach that opinion, the Court must embark upon the exercise in s.79(4) of the Act;
d)Having determined that it would have made an order in the deceased party’s favour had he or she survived, the Court must then consider whether it is still appropriate to make an order;
e)In that regard, the Court’s discretion should not be exercised lightly, and should only be exercised in limited circumstances, so as to satisfy moral obligations that remain unsatisfied;
f)The deceased party to the marriage has a prima facie moral entitlement to his or her contributions based entitlements to matrimonial property;
g)The size of the pool and the needs of the surviving spouse, including s.75(2) factors must be taken into account in formulating any orders.
In this process, the onus of establishing the appropriateness of making a property order post mortem rests on the representative of the deceased party: Tasmanian Trustees Ltd (Administrators of Estate of Gleeson, B J) & Gleeson, D W (1990) FLC 92-156, applied by Carmody J in Rutter [2004] FamCA 424; and by Boland J in Ford & Marchant [2001] Fam CA 1585.
In Hickey & Hickey (2003) FLC 93-143 at [39] the Full Court of the Family Court of Australia stated:
“The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79 (4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79 (4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determine and resolve what order is just and equitable in all the circumstances of the case.”
In Mallett v Mallett (1984) 156 CLR 605, the High Court made it clear that s.79(1) and (2) of the Act confer on the Court a very wide discretion to make such order as thought fit, when satisfied that it is just and equitable to do so. Gibbs CJ, at 608, observed that there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account.
His Honour identified the principles as the need to achieve finality (s.81 of the Act) and that the parties to a marriage are equal in status. However, the Court expressly eschewed any presumption of an equal division of property, or that it should be the normal starting point for the exercise of the court’s discretion (Gibbs CJ at 610, Mason J at 625, Wilson J at 636, Deane J at 640-1, Dawson J at 648).
In Norbis v Norbis (1986) 161 CLR 513, the High Court reiterated that although s.79 of the Act confers a very wide discretion on the court, that discretion is not unlimited. Its exercise is conditioned on a number of matters: that the order is just and equitable (s.79(2)); that the matters specified in s.79(4) are taken into account; and the general principles embodied in ss.43 and 81 (see Mason J at 521). In Norbis the Court was primarily dealing with the argument as to whether an asset by asset approach or a global approach was appropriate to the determination of contributions. Not surprisingly, the Court concluded that no fixed rule could be applied. However, at 523 Mason J observed that “there is much to be said for the view that in most cases the global approach is the more convenient” (see also Wilson and Dawson JJ at 530-532).
At the final hearing the applicant relied on the following evidence:
a)Financial statement of Ms Stokes filed 22 July 2005;
b)Affidavit of Mr W filed 27 April 2007 (agreement)
c)Affidavit of Mr A filed 9 May 2007 (agreement)
d)Affidavit of Ms W filed 11 May 2007
e)Affidavit of Mr Cornell filed 11 May 2007
f)Affidavit of Ms J filed 21 May 2007(agreement)
g)Affidavit of Mr S filed 21 May 2007 (not required for cross examination)
h)Affidavit of Mr P filed 21 May 2007
i)Affidavit of Mr M filed by leave on 22 May 2007
j)Paragraphs 29 – 35 of the affidavit of Ms Stokes filed 22 July 2005
The witnesses Mr W, Mr A, Ms J, Mr S, Mr P and Mr M gave evidence as to the value of certain assets. They were not required for cross examination.
The respondent husband relied on his own affidavits, and was cross examined.
It was common ground that the assets or financial resources held by the parties comprise:
a)The former matrimonial home at Property M $380,000
b)Mercedes motor vehicle 12,500
c)Husband’s furniture 3,050
d)Wife’s furniture 205
e)Husband’s Suncorp bank account 2,957
f)Husband’s boat and trailer proceeds 20,000
g)Wife’s jewellery 190
h)Husband’s tax refund 7,734
i)Spanish villa retention held by husband 1,547
j)Painting by Mr G 5,000
k)Loan to wife’s daughter
l)Bank of Scotland account
m)National Australia Bank account add back
n)Proceeds of sale of wife’s motor vehicle
o)Husband’s Natwest Bank lump sum
p)Threadneedle Max ISA account
q)Prudential High Yield Bond
r)GE Pension drawdown
s)GE Pension annuity
t)Royal & Sun Alliance Bond
u)United Teachers Pension
Items a to j had an agreed value.
As to item k, the undisputed evidence was that the deceased lent her daughter Ms W the sum of $25,000 in July 2005, to purchase a motor vehicle.
Ms W’ evidence, at paragraph 54 of her affidavit, was that on finding a vehicle she only required $20,000 and therefore gave her mother $5,000 in cash in part repayment of the loan.
The sum of $20,000 was admittedly repaid on 3 November 2005, and deposited into her mother’s account.
There was a factual contest as to whether the $5,000 was repaid as alleged by Ms W. I am not satisfied that the sum of $5,000 was repaid as alleged. In making that finding, I have relied on the following:
a)Ms W has not given evidence about when she acquired her motor vehicle. Presumably, because she had to borrow money from her mother to buy the car, it was acquired in late July or August 2005. She has not explained why, if she did not need the extra $5,000, it took her until 12 October 2005 to give the money back to her mother. This lack of explanation casts doubt over her account;
b)Ms W does not explain why the sum of $5,000 was not deposited to her mother’s bank account. The latter payment, also made in cash, was deposited to the mother’s bank account;
c)Ms W relies, as evidence of her repayment, on her bank statement showing a withdrawal of $5,000 on 12 October 2005. The bank statement is entirely equivocal about the recipient of the monies withdrawn. Ms W’s version may have had more credence if the withdrawal of $5,000 was out of the ordinary, but the one page of bank statement exhibited to her affidavit shows withdrawals of $1,600 on 14 October and $4,300 on 28 October;
d)There was a telling inconsistency between the evidence of Ms W and that of Mr Cornell. Whereas Ms W said that the $5,000 was repaid first, in October, and the $20,000 in November, Cornell gave evidence (T34.20) that when their finance was finalised the sum of $20,000 was paid back first. He said that when Ms Stokes said she needed some money, the sum of $5,000 was paid back at a later date.
I therefore find that $5,000 remains owing by Ms W to the estate of her late mother. As matters turn out, Ms W is the sole beneficiary of her late mother’s estate, so she will not have to repay the money. Nevertheless for the purpose of determining the asset pool, the finding is necessary.
As to item l, the dispute between the parties is whether the pool should include the balance of the account at the date of separation ($52,112, according to the applicant) or at the date of final hearing ($41,000, according to the respondent). As the passage from Hickey extracted above makes clear, the assets should be valued at the date of the final hearing. A question may arise as to whether there has been expenditure since the date of separation that justifies a notional add back. In the present case, I accept that the respondent husband has used any monies withdrawn by him from the Bank of Scotland account for reasonable living expenses. I therefore use the respondent’s figure of $41,000 as the appropriate one for this asset.
As to item m, the applicant accepts that monies should be added back, on account of expenditure made since separation from the deceased’s National Australia Bank account. When Ms Stokes died, the credit balance of her bank account was $40,832.98. From this was deducted the funeral expenses. The balance of $36,504.15 has subsequently been transferred to the executor and the beneficiary of Ms Stokes’ estate and used for their own living expenses. It is recognised that monies must be notionally added back, but there is a dispute as to the quantum of the add back.
Ms W says that the estate paid funeral expenses of $4,376, but as the bank statements exhibited to her affidavit (at exhibit LW61) show this expense was in fact deducted from the deceased’s bank account on
11 January 2006. Although no authority was cited to me as to whether expenses incurred as a result of the death of a party to the marriage should be notionally added back to the pool, I do not think that they should be. Whilst funeral expenses are not what one might ordinarily have in mind when considering ‘reasonable living expenses’, it seems to me that if a person makes provision during their lifetime for the expenses that will be incurred on their death (for example, by pre-paying for their funeral) such expenditure would not be added back on the analysis given in cases such as Chorn v Hopkins (2003) FLC 93-204.
The legal expenses incurred by the estate are a different matter.
They are within a well recognised category of expenses that are ordinarily added back. Legal expenses of $6,332.65 were incurred. There is nothing on the face of the solicitors’ receipt to indicate that they were incurred in connection with the administration of the deceased estate. Rather the descriptor “property settlement” is used, which indicates that they were incurred in connection with these proceedings. An additional sum of $500 documented at exhibit LW64 must also be added back.
The amount that should prima facie be added back is therefore $36,504.15 plus $500, an amount of $37,004.15.
In the orders sought by the applicant, a deduction is sought on account of 40 weeks spousal maintenance at the rate of $261 per week.
By a consent order made on 6 October 2005 the respondent husband was ordered to pay:
a)$650 per calendar month, by direct deposit to the bank account of Ms Stokes;
b)an initial payment of $2,600 by direct deposit to the same bank account.
The bank statements, ex LW61 to the affidavit of Ms W, confirm that the payment of $2,600 was made on 13 October 2005. Payments of $650.00 were made on 2 November and 2 December 2005.
The respondent has therefore complied with his obligations under the order. Whilst in the orders sought by the applicant a deduction was sought on account of ‘spousal maintenance’ there was no obligation on the part of the husband to pay any monies additional to those he in fact paid. In submissions (at T83.5) no attempt was made to justify a deduction on account of spousal maintenance. Rather, it was contended that the balance of the bank account should be reduced by an amount that represents day to day living expenses. The balance of the account which I have used is as at the date of death. There would be no day to day living expenses after that date. I reject the argument that there should be any further deduction to the add back sum of $37,004.15As to item n, it was accepted by the applicant that there should be an add back for the proceeds of sale of the motor vehicle owned by
Ms Stokes at the date of her death. The vehicle was sold for $10,900. However, there was evidence, which I accept, that before sale work was done to the motor vehicle at a cost of $997.90. The amount that should be added back is therefore $9,952.10.As to the balance of the items, the respondent has a number of investments and pension accounts that pay him an income in his retirement. There was an argument initially advanced on behalf of the applicant that where a pension is payable, it should be capitalised and included in the pool of assets. Unfortunately for the applicant there was no evidence of a capitalised value in the case of a number of the policies. Indeed, at one point counsel for the applicant submitted that the argument as to whether amounts should be included in the pool of assets depended upon the construction of the various policies held by the husband. None of those policies were put into evidence.
A more fundamental issue arose, as to how the entitlement to receipt of foreign income should be treated.
Part VIIIB of the Act cannot apply because there is no evidence that any of the husband’s investments are an ‘eligible superannuation plan’ as that term is defined in s.90MD of the Act. The husband could therefore not have a ‘superannuation interest’ in any of those investments. No court order can therefore be made pursuant to s.90MS of the Act. No splitting order was sought by the applicant, nor could any be made under s.90ME and 90MT of the Act.
How then should the entitlements of the husband be treated?
An overseas pension was treated as a relevant consideration under s.79(4)(e) of the Act, namely as a financial resource of the party entitled to receive it, in Hein & Hein (1995) Fam CA 58. There the Full Court referred to Perrett & Perrett (1990) FLC 92-101 as an example of the importance that needs to be given to treating a future pension right as a continuing financial resource under s.75(2) of the Act.In Allen & Allen [2008] FMCAfam 18 Baumann FM at [15] – [16] treated a pension entitlement of the husband from a British employer as a financial resource, a relevant factor under s.75(2), and not as a superannuation interest and therefore not included in the pool of assets.
In Maciel & Maciel [2007] FMCAfam 262 Baumann FM had to determine how the husband’s US Navy pension and US social security benefits should be dealt with. At [25] – [26] his Honour determined that the pension was not an eligible superannuation plan. He concluded that the husband’s entitlements were financial resources and to be considered under s.75(2) of the Act. His Honour said that this approach was consistent with the Full Court decision in FHL v EHL (2006) FamCA where the Court approved the trial judge’s treatment of the wife’s interest in two French superannuation funds as a “financial resource”.
The first investment that must be considered is what is described as the Natwest Personal Private Pension. To support a submission that this investment has a tax free cash value of GBP2,425 and a cashed in value of GBP7,275 the applicant relied on exhibit LW51 to Ms W’s affidavit. This document is described as a “Personal Pension Annuity Illustration”. It is not a policy document, nor even a policy schedule.
It simply gives an illustration of what sums will be available, based on certain assumptions. The document has no probative value whatsoever.
Exhibit PS29 to the husband’s affidavit reveals that a policy was taken out, but its terms are not disclosed. The husband says, at paragraph 23 of his affidavit, that the policy is an income generating pension plan. He says that under the law of the United Kingdom, it can only be used to purchase an annuity in the United Kingdom. The husband accepts that there is a lump sum option of 25% of the investment, which as at 11 November 2005 was GBP2,425.27. However, in making this statement, the husband relies on the same documents as was produced by Ms W.
The illustration was prepared on 11 November 2005. It assumes that an annuity would be paid from that date. The husband’s evidence is that he has not yet purchased the pension rights. The illustration itself indicates that the figures illustrated are not guaranteed.
With the complete paucity of evidence surrounding this investment, I would not be prepared to include any sum in the asset pool. I would also not be prepared to assess the worth of the financial resource to the husband.
The next item is the Threadneedle Investments account. The applicant alleges that the respondent husband has two accounts with balances of GBP13,713 and GBP6,975 respectively. The applicant relies on ex PS30 to the husband’s affidavit as providing evidence of the existence of and value of this investment. The documents produced in that exhibit show that the husband has had investments in different asset classes. From my analysis of the documents, which span different dates, as at 4 January 2006 (being the date of the most recent statements) the husband had high yield bonds worth GBP7,195.20, GBP7,281.83 and GBP8,166.18 respectively, a total of GBP22,643.21. At an exchange rate of 0.4168 Australian dollars to the English pound ( at the date of final hearing this equates to $54,326.32. There is nothing to suggest that this investment could not be cashed in at its value on the date of redemption. Using the best evidence available, this asset should be included at the value of $54,326.32.
Next, there is the Prudential High Yield Bond. The applicant says that this has a value of GBP5,303 and relies on exhibits LW48 and LW49 to the affidavit of Ms W. The former exhibit is a schedule of policies prepared by Layton Blackham Group on 23 September 2004. Presumably, they were advisors to the respondent husband and his then wife. The policies themselves are not proved in evidence. The schedule records that the parties had a Prudential High Yield Bond that had a then current value of GBP5,270.34. There is a notation in the schedule relating to this policy:
“Regular income withdrawals of 4.8% per annum payable monthly. Total withdrawals as at 22/09/04 – GBP16,460.79 (GBP40 per month). Surrender value is same as fund value.”
Exhibit LW49 is another schedule prepared by the same author that gives a value as at 10 May 2005 of GBP5,336.46.
The evidence as to the value of this investment is less than satisfactory. Withdrawals would have been made between the most recent schedule and the date of final hearing. Nothing is known as to the rate of return on the bond. If the same average payment of GBP40 per month was withdrawn between 10 May 2005 and the date of final hearing the balance of the investment would be reduced to GBP4,376.46.
The husband says in his affidavit that he continues to receive income from this investment. There is simply no evidence that enables me to assess the likely income produced by the bond that would perhaps have offset the monthly withdrawals. No evidence was led as to whether the income or withdrawals attracted the imposition of income tax. It is apparent from the schedule (to which the respondent husband made no dissent in his affidavit) that the investment could be surrendered for its then value. It should therefore be included in the asset pool at GBP4,376.46 or, using the same exchange rate to which I have already referred, $10,500.The applicant in an amended schedule of assets and liabilities sent by email to the Court on 23 May 2007 concedes that no lump sum value can be ascribed to the GE Pension Drawdown or the GE Pension Annuity.
The next item is a Royal & Sun Alliance Bond. In her affidavit Ms W estimates that this is worth GBP43,134, and again relies on exhibits LW48 and LW49.
The investment seems to be treated in the schedule in much the same way as the Prudential investment. As at 23 September 2004 it is given a value of GBP44,385.12. There is a notation in the schedule:
“Regular income withdrawals of GBP343.75 per month. Surrender value as at 22/09/04 – GBP33,237.35)”
In the schedule prepared on 10 May 2005, the value is stated at GBP41,883.77. In the notation, the income withdrawal amounts are the same. The following additional notation appears:
“Surrender value @ 9.5.05 – GBP33,334.46 to inc. 19.2% MVA & 1.5% encashment charges.”
Unfortunately, the evidence does not permit me to put a value on this investment for the purposes of including it in the asset pool. There is no evidence as to the amount of withdrawals following 10 May 2005. There is no evidence as to how the surrender value is calculated. It can be observed that the surrender value as a proportion of total value changes between 22 September 2004 and 10 May 2005. There is no evidence as to whether the figure given in the schedule of 10 May 2005 is inclusive or exclusive of the charges that potentially amount to 20.7% of the surrender value.
Without this evidence, any figure selected by me would be somewhat arbitrary. I therefore do not include the investment in the asset pool, but will take into account as a financial resource available to the husband.
In the amended schedule of assets and liabilities to which I have referred the applicant accepts that no lump sum value can be ascribed to the teachers’ pension received by the husband. To that extent, the evidence sought to be adduced from Mr M is of no probative value.
There was a factual contest as to whether Mr Cornell or Ms W, or the deceased took paintings from the former matrimonial home. I do not have to resolve that contest as I am satisfied by the evidence of Ms J, which was not challenged, that the paintings had no commercial value.
In the circumstances, the total pool of assets available for distribution is assessed at $590,965.57.
Sections 79(4)(a) to (c) of the Act provide:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
It was conceded on behalf of the applicant that the husband provided greater assets than the wife at the outset of the relationship. Counsel submitted that the question is after a 15 year marriage how much weight should be given to the greater initial contribution referring to Pierce v Pierce (1999) FLC 92-444. However, it is not only the initial contributions that have to be considered, but also those made during the currency of the relationship, both financial and non-financial.
Before looking at the evidence relating to contributions, I should record the concession by counsel for the applicant that no case was advanced in reliance on the principles discussed in cases such as In the Marriage of Kennon (1997) 22 FamLR 1; (1997) FLC 92-757. Paragraphs 28 – 40 and exhibits LW16 – LW21 of Ms W’ affidavit were not relied upon.
Ms W says that at the commencement of the relationship the wife had:
a)A property (Property H) in the United Kingdom that was sold in 1992 for GBP 66,115;
b)A motor vehicle with an estimated value of GBP 10,000;
c)An inheritance of GBP 15,000;
d)An entitlement pursuant to orders made by the Ipswich County Court to be paid GBP 4,000 per annum and GBP 1,200 per annum for her daughter until she attained 17 years of age;
e)A painting by Mr G (the wife’s grandfather) titled “[X]”, that was subsequently sold during the marriage for GBP 38,000 and the painting with an agreed value of $5000, included in the matrimonial assets.
The husband had a property (Property C) that was sold just prior to the marriage. With the proceeds, the husband purchased a property at Property S, and had GBP53,557.41 in cash left over.
The husband also had approximately GBP18,000 in a bank account, being the balance remaining from the proceeds of a life assurance policy paid out consequent upon the death of his second wife.
At the time of the marriage the husband was working as a sales manager for an international sports goods manufacturer. He had pension entitlements accumulated during the course of his employment. That employment brought the husband to Australia for a short period, where he married the deceased wife.
The husband’s initial contributions were therefore significantly greater than those of the wife. What is also important is that the husband’s initial contributions were subsequently used to acquire property during the marriage. There was no evidence led as to what the parties did with the deceased’s initial financial contributions or her financial contribution during the relationship from the sale of her family heirloom painting. There is no evidence that the wife’s contributions were put into the acquisition of any particular asset.
The parties were married in Australia in 1989 but returned to live in England in 1990. The respondent husband then secured employment as a teacher, and he remained in full time employment as a teacher until 1997. The husband says that he worked as a casual teacher until 2001, when the parties retired to live in Spain. When living in Spain the husband worked as a teacher at an international school. The husband says that he also operated a business as a [medical professional] between 1991 and 2000. The deceased assisted him in that business by working as a receptionist and bookkeeper. The wife was not separately remunerated for doing that work, but rather the income from the business was utilised by both parties to meet their living expenses.
The wife also gained qualifications as a reflexologist. I am not persuaded that this qualification enabled the wife to contribute any significant income to the household. I am satisfied that it was very much a part time or hobby business of the wife.
The applicant accepts that the respondent husband was the primary income earner during the course of the marriage.
I accept, as does the respondent husband, that the deceased wife contributed in a substantial non-financial way during the marriage.
She had the primary care not only of her own daughter, but also of the husband’s daughter. I accept that the wife attended to the majority of the household chores.
In In the Marriage of Ferraro (1993) FLC 92-335 the Full Court highlighted the difficulty involved in evaluating and balancing fundamentally different activities. It also reinforced that the court’s task includes evaluating the significance of the various contributions, the weighting of which is ultimately a matter for the court. The Full Court said:
“The task of evaluating and comparing the parties’ respective contributions where one party has exclusively been the breadwinner and the other the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a “level playing field”. Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a home maker contribution is vulnerable to subjective value judgments as to what constitutes a competent home maker and parent and cannot be readily equated to the value of assets acquired. This leads to a tendency to undervalue the home maker role. However, there are cases where the performance of those roles has what may be described as “special features” about it either adding to or detracting from what may be described as the norm. For example, in relation to the home maker role the evidence may demonstrate the carrying out of responsibilities well beyond the norm as, for example, where the home maker has the responsibility for the home and children entirely or almost entirely without assistance from the other party for long periods or cases such as the care of a handicapped or special needs child. On the other hand, in the breadwinner role the facts may demonstrate an outstanding application of time and energy to producing income and the application of what some of the cases have referred to as “special skills”.
I must also bear in mind that contributions are not required to be tied to the acquisition, conservation or improvement of a particular asset and are to be taken into account generally as contributions in a total sense: Farmer v Bramley (2000) FLC 93-060. However, as was observed by the Full Court in Wilkinson & Wilkinson (2005) FLC 93-222; (2005) 33 Fam LR 373 at paragraph [26]:
“It may well be useful for an asset by asset approach to be employed in cases where the parties have significant superannuation interests, particularly where there has been a relatively long period of time between separation and trial, or in a case where a significant portion of a party's superannuation interests or of other assets has been acquired prior to the parties' cohabitation.”
In this case, the Natwest policy was acquired by the contributions of the husband’s earnings during the marriage.
The Royal & Sun Alliance Bond was acquired with the proceeds of a GRE endowment policy that matured on 3 October 2000 that the husband and his second wife had purchased in 1975. The husband says, and there was no evidence to the contrary, that he contributed additional funds, but 71% of the purchase price of the bond came from the proceeds of that earlier policy.
The property owned by the husband at the commencement of the relationship was sold to acquire the property in which the parties lived at Property Q. That property was sold when the parties retired to Spain, and the proceeds of sale were used to acquire a Spanish villa. The parties took out a mortgage that was serviced by the husband’s earnings as a teacher, and from his pension income.
The husband says that from the proceeds of sale of the property at Property Q he used GBP50,000 to acquire the investments with Threadneedle Investments and also with Fidelity. The latter investments were cashed in by the wife in April 2005 following separation, and from which she received approximately $65,000, that formed the large part of the balance of her National Australia Bank account. The husband says that the investment with Threadneedle Investments was acquired wholly from his financial contributions made at the time of the marriage. There is no evidence to contradict this.
There was evidence that in 1997 the husband received GBP17,547 in compensation arising out of the circumstances in which his GE Pension policies were assigned by his employer. Although the actual details of this were a little vague, it appears to be common ground that the husband contributed this sum to the marriage. His explanation of how the funds came to be paid was not challenged.
The husband’s evidence was that the vast majority of his entitlements (which he estimates at 90% and 60% respectively) to the GE Pension and Annuity were accumulated before the parties married. The husband’s entitlement to a teacher’s pension obviously arose from his work as a teacher during the marriage.
The parties emigrated to live in Australia and in September 2004 and they purchased the property at Property M for approximately $385,000. The husband says that the purchase price was funded from the proceeds of sale of the Spanish villa and from his savings. Again, there is no evidence to contradict this.
During their retirement, both in Spain and for the short time that they were together in Australia, the parties lived off income produced by the husband’s investments.
It can thus be seen that the husband made by far the greater financial contributions during the marriage. The wife’s contributions were predominantly non-financial, although I accept that her financial contributions allowed the parties to live a more comfortable lifestyle than they might otherwise have done. The wife also assisted the husband in his business.
I assess the contributions based entitlements at 70% to the husband and 30% to the wife.
I am satisfied therefore, pursuant to s.79(8)(b)(i) of the Act that, at the date of her death, the Court would have made an order in the wife’s favour.
There is no evidence about the respondent husband’s state of health. He is an apparently robust 62 year old gentleman. He lives off his various investments that produce an income for him to live on. He is not entitled to the receipt of any Australian government benefits by the terms of his Retirement Visa, nor is he entitled to access free health services provided to Australian citizens. He must pay for such services himself.
I think that it is still appropriate to make an order in the wife’s (applicant’s) favour. During the party’s 15 year marriage the wife contributed both financially and non-financially.
However, I think that orders that are made should reflect the fact that of the current assets available, many were acquired using the husband’s pre-marriage funds. I refer to the property at Property M, the Threadneedle account, the Royal & Sun Alliance bond, and the GE Pension accounts.
I also take into account that the husband derives his retirement income from the various investments that have been listed. They do constitute a financial resource available to him, but the forced sale of those policies that are capable of surrender will deprive the husband of the income that he needs to live. The wife’s UK pension ceased on her death and is not payable to a beneficiary. The husband does not have a lavish lifestyle. Those investments that he has provide him with sufficient on which to live.
In my view, an adjustment in the husband’s favour for these s.75(2) factors, and to make an order that is appropriate in the circumstances, of 15% is called for.
In those circumstances, the applicant would be entitled to property valued at $88,644.83.
The applicant has the wife’s property, jewellery and painting with an agreed value of $5,395. There is the loan amount of $5,000 that still has to be repaid. The notional add back of the proceeds of the National Australia bank account and the proceeds of sale of the motor vehicle total $46,956.25. These latter amounts have already been received by the applicant. The total of these components is $57,351.25.
The net effect is that the respondent husband must pay to the applicant the additional sum of $31,293.58. I am satisfied that he is able to do so from his available financial resources. In my view it is appropriate that he do so.
The orders will therefore as set out at the commencement of these reasons.
I certify that the preceding one hundred and three (103) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 25 July 2008
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