Cullen and Nolan
[2008] FMCAfam 966
•9 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CULLEN & NOLAN | [2008] FMCAfam 966 |
| FAMILY LAW – Alteration of property interests – add-back of premature distribution of assets – nature of wife’s interest in home in view of her mother’s equitable interest – characterisation of interest by way of prospective inheritance – treatment of post-separation liabilities – assessment of contribution and future needs – just and equitable order. |
| Family Law Act 1975 ss.75(2), 79 |
| C & C (2005) FLC 93-220 Williams & Williams [2007] FamCA 313 |
| Applicant: | MS CULLEN |
| Respondent: | MR NOLAN |
| File number: | SYC 3097 of 2007 |
| Judgment of: | Altobelli FM |
| Hearing date: | 10 June 2008 |
| Date of last submission: | 10 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 9 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Jackson |
| Solicitors for the Applicant: | Uther Webster & Evans |
| Counsel for the Respondent: | Mr Kearney |
| Solicitors for the Respondent: | Barkus Edwards Doolan |
ORDERS
That within sixty (60) days of the date of this Order, the Wife do all acts and things and sign all document necessary to pay to the Husband the sum of $358,848.00.
That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or subsequent Orders, the Wife retain and be declared to be the sole legal and beneficial owner of all her right, title and interest in and to:-
(a)The property known as and situated at Property B in the State of New South Wales and contained in folio identifier Lot [omitted] in Deposited Plan [omitted].
(b)All cash at bank and other moneys invested by her.
(c)All personal effects in her possession.
(d)The Toyota Camry motor vehicle registration number [omitted] in her possession.
(e)All her superannuation entitlements.
(f)All other personal and real property in her possession, custody or control as at the date of these Orders.
That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or subsequent Orders, the Husband retain and be declared to be the sole legal and beneficial owner of all his right, title and interest in and to:-
(a)All cash at bank and other moneys invested by him.
(b)All personal effects in his possession.
(c)All his superannuation entitlements.
(d)All cash and stock forming part of his business.
(e)All other personal and real property in his possession, custody or control as at the date of these Orders.
That in the event that the Husband or Wife refuses or neglects to comply with any of the provisions of these Orders within seven (7) days of a document being forwarded to either of them for their completion, a Deputy Registrar or Registrar or other Officer of the Federal Magistrates Court of Australia at Sydney be appointed pursuant to s.106A of the Act, to execute all such deeds and documents in the name of the defaulting party and to do all acts and things necessary to give validity to the said Orders.
That the Registrar or Deputy Registrar or other Officer is authorised to execute any such necessary instrument upon being satisfied by affidavit that refusal, neglect or default, as the case may be, has occurred.
The parties have leave to relist this matter before Federal Magistrate Altobelli on seven (7) days notice in relation to the implementation or enforcement of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Cullen & Nolan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 3097 of 2007
| MS CULLEN |
Applicant
And
| MR NOLAN |
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 an application for property settlement.
The applicant is Ms Cullen, who is 43 years old. The respondent is her husband, Mr Nolan, who is 54 years old. They commenced cohabitation late in December 1995. At the time the wife had a child from a previous marriage, [Y] born in 1990. [Y] is now 18 years old, but was nearly 6 at the time of cohabitation. In 1997 the wife gave birth to their child [X]. [X] is 11 years old and he lives in a shared care arrangement with both parents. In 1997 the husband and the wife married. They separated on 26 January 2005, initially under the same roof, but by March 2005 the husband had physically moved out of the former matrimonial home at Property B. The husband and the wife divorced on 15 July 2007. The wife had already commenced these proceedings on 30 August 2006, and the matter came before me for hearing on 10 June 2008. Both parties were legally represented at the hearing. Mr Jackson of counsel appeared on behalf of the wife, and
Mr Kearney of counsel appeared on behalf of the husband.
Background
At cohabitation the wife had an interest in a unit at Property G together with her mother. In fact, she lived in the unit with her son [Y]. On cohabitation the husband moved into the unit. The wife asserts that the husband had no significant assets at that time, and had a number of liabilities. The husband asserts that he had an interest in several businesses in which he had been involved. The husband's background is in the music record business. In addition, the husband asserts that he had some superannuation entitlements, furniture and a record collection. It seems common ground between the parties that as from the date of cohabitation the husband commenced paying one-half of the mortgage payments attributable to the wife's share in the Property G property. There is an issue between the parties as to what, precisely, they had at the time of cohabitation and how their initial contribution should be assessed in the context of the present property settlement.
In 1999 the Property G property was sold for a total consideration of $415,000, and the wife and her mother purchased the former matrimonial home at Property B for $495,000, together with the stamp duty and out-of-pocket expenses relating to the purchase. The husband asserts that he made contributions that resulted in the Property G unit selling for a significantly enhanced value. The husband and the wife seem to agree that the wife's mother, Mrs C, made financial contributions to the purchase of both properties. There is an issue between the parties as to how, precisely, the interest of the wife and her mother in the former matrimonial home ought to be characterised, and then assessed in the context of the current property settlement. As will be discussed below, the wife's legal interest as disclosed on the title to the property does not appear to correspond with what I will henceforth describe as her equitable interest, having regard to the financial contribution she made towards those properties.
During cohabitation both the husband and the wife worked in different capacities, though it appears common ground between the parties that at all relevant times the wife earned more. They were both involved in homemaking and parenting. There is a dispute between the parties about how contribution, both financial and non-financial, direct and indirect, should be assessed during the cohabitation.
In 2000 the wife was made redundant from her employer, the [omitted], and received approximately $70,000 by way of redundancy benefits. She asserts that this money was used to fund renovations on the former matrimonial home and that her financial contribution in this regard was significantly greater than that made by the husband.
Shortly before the parties separated in January 2005, as a result of a sewer main problem beneath their home the parties received the sum $141,530 by way of compensation. However, the cost of rectification was only $57,504, thus meaning they retained the balance of about $84,000. Out of this amount the husband received $57,000, and the wife about $28,000. There is an issue between the parties as to whether these amounts should be added back to the property pool.
After separation the parties were unable to reach agreement about property settlement. They seem to have engaged in a cooperative shared parenting arrangement in relation to [X]. The wife initially paid informal child support which appears to have been subsequently formalised. The wife asserts that she has made a greater post-separation contribution than the husband, but this is largely attributable to increases in the value of her superannuation between the date of separation, and the date of the hearing.
After separation the husband seems to have incurred some substantial personal liabilities and there is an issue between the parties as to how they ought to be characterised, and then assessed as part of the property settlement.
At the commencement of the hearing I was presented with an agreed schedule of assets, liabilities and financial resources. I reproduce that schedule below (with errors in calculation corrected), but I note that there was complete agreement between the parties as to the valuation of assets. In relation to liabilities, the wife did not appear to dispute the quantum of the husband's personal liabilities, but argued that they ought to be characterised as his personal debts that do not reduce the size of the property pool, but are nonetheless relevant in determining whether the outcome is just and equitable in the end result.
| ASSETS | Husband’s Estimate ($) | Wife’s Estimate ($) | Agreed/Not Agreed | |
| 1 | Property B. Total value $1,100,000 (Wife’s share 75%) | $825,000 | $825,000 | Agreed |
| 2 | Wife’s Toyota Vienta vehicle | $5,000 | $5,000 | Agreed |
| 3 | Wife’s contents | $4,000 | $4,000 | Agreed |
| 4 | Wife’s superannuation: | |||
| 4.1 Aus Super (formerly Superannuation Trust of Australia) | $61, 841 | $155,346 | Agreed | |
| 4.2 PSS – Public Sector Superannuation Scheme | $93,505 | |||
| 5 | Husband’s business – stock only | $5,500 | $5,500 | Agreed |
| 6 | Husband’s contents (including record collection) | $3,000 | $3,000 | Agreed |
| 7 | Husband’s superannuation – MLC MasterKey | $25,761 | $25,425 | Agreed |
| 8 | Wife’s Savings – Credit Union of Australia | $3,500 | $3,500 | Agreed |
| 9 | Husband’s savings | |||
| 9.1 NAB – 3 accounts | $44 | $44 | Agreed | |
| 9.2 ANZ | $470 | $470 | Agreed | |
| 10 | Australian Stock Horse “P” | $5,000 | $5,000 | Agreed |
| 11 | TOTAL ASSETS | 1,032,621 | 1,032,285 | |
| LIABILITIES | ||||
| 12 | Mortgage – Credit Union | $114,580 | $114,580 | Agreed |
| 13 | Wife’s loan from her mother Mrs C | $13,000 | $13,000 | Agreed |
| 14 | Husband’s loan from Mr J | $4,500 | ? | ? |
| 15 | Husband’s loan from Mr S | $2,000 | ? | ? |
| 16 | Husband’s loan from AMFL | $8,390 | $8,390 | ? |
| 17 | Husband’s loan from [X] | $930 | ? | ? |
| 18 | Husband’s load from Mr D (loan for legal fees) | $14,745 | ? | ? |
| 19 | Husband’s GST | $605 | $605 | Agreed |
| 20 | Husband’s credit cards | ||
| 20.1 ANZ Visa | $9,493 | $29,094 | Agreed |
| 20.2 NAB Visa | $5,013 | ||
| 20.3 Virgin Mastercard | $14,588 | ||
| 21 | Husband’s business liabilities | ||
| 21.1 Ebay | $1,586 | ? | ? |
| 21.2 Mr T | $285 | ? | ? |
| 21.3 Mr D | $1,458 | ? | ? |
| 21.4 Accountant | $650 | ? | ? |
| 22 | TOTAL LIABILITIES | $191,823 | $165,669 |
| 23 | NET ASSETS | ||
| 11 | Assets | $1,032,621 | $1,032,285 |
| 22 | Less Liabilities | $191,823 | $165,669 |
| 24 | TOTAL | $840,798 | $866,616 |
| 25 | FINANCIAL RESOURCES | ||
| 26 | Husband’s | Nil | |
| 27 | Wife’s | Nil | |
| 28 | TOTAL | Nil |
During the course of the hearing the parties, through their counsel, agreed that there was no issue about add-backs of paid legal fees, or liabilities relating to legal fees.
The applicant wife sought an order that by way of property settlement she pay to the husband the sum of $47,171 and that she otherwise retain the former matrimonial home at Property B, and all other property and assets in her possession and control. In his final submissions counsel for the wife Mr Jackson explained that this figure represented the overwhelmingly greater contribution that the wife made before, during and after the marriage (on his assessment either 85 or 90 per cent to the wife) less a s.75(2) adjustment in favour of the husband of between 12-15 per cent. He submitted that, in the end result, a just and equitable outcome in favour of the husband would see him receive 25 per cent of the net assets available to the parties.
The respondent husband's application, however, was that the wife pay to the husband $450,000 and that he otherwise retain items in his possession and control. This would leave the wife with her interest in the former matrimonial home, together with the items in her possession and control. In his written submissions counsel for the husband
Mr Kearney explains that contribution should be assessed as to 55 per cent in favour of the wife, and 45 per cent to the husband, but that there should be a s.75(2) adjustment in favour of the husband in the amount of 10 per cent, thus resulting in an overall settlement of 55:45 in the husband's favour. Despite the inordinate length of time it took for this matter to come on for hearing (30 August 2006 - 10 June 2008), the matter was conducted before me efficiently, and effectively, thus reflecting positively on the parties and their legal representatives.
The Issues
I perceive the issues in this case to be as follows:
(1)The characterisation and assessment of the value of the wife's interest in the former matrimonial home at Property B.
(2)Whether the $57,000 paid to the husband, and $28,000 paid to the wife at about the time of separation, should be added back into the property pool, by way of premature distribution of joint assets.
(3)How should the husband's post-separation liabilities be characterised, and then treated in the assessment for property settlement?
(4)How should contribution be assessed as at the date of cohabitation, as at the date of separation, and then for the period between separation and the hearing?
(5)What adjustment should there be in the husband's favour as a result of factors arising under s.75(2) of the Act?
(6)What is the just and equitable order to make under the circumstances of this case?
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 wife 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 that 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 towards 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 or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing 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.
The characterisation and assessment of the value of the wife's interest in the former matrimonial home
The agreed schedule of assets lists as the main asset the former matrimonial home at Property B. It has an agreed total value of $1,100,000, but as the wife's share is agreed to be 75 per cent, the dollar figure appearing in the schedule is in fact $825,000. The issue about characterisation and assessment of the value of this asset arises as follows. On behalf of the wife it was conceded that the wife will, in time, inherit her mother's 25 per cent share in the former matrimonial home, and that she will not have to compete with her siblings in this regard. Mr Jackson emphasised, however, that the timing of all this was quite unclear. He submitted, on behalf of the wife, that the wife's interest in the mother's share of the property was, at best, a financial resource, but it simply was not property for the purposes of s.79(2). By contrast, of course, Mr Kearney for the husband asserted that in reality the entirety of the equity in the property belonged to the wife and that her real interest in the property was equivalent to its full value, ie $1,100,000. He asserts that on the wife's own evidence the property is, in reality, hers and that it should be treated as such for the purposes of the property settlement. Mr Kearney's submission is somewhat at odds with the presentation by him of an agreed position that the wife's share in the property had a value of $825,000. He cannot now resile from that position and, in any event, for me to accept that the wife's legal interest was 100 per cent of the equity in the property as opposed to
75 per cent would involve ignoring the clear evidence of the equitable interest that the wife's mother has in that property.
The evidence about the respective contributions made, and interests in the former matrimonial home, and its predecessor, the unit at Property G is contained in the affidavits of the wife filed 16 May 2008, and her mother filed 1 July 2007. By way of summary and overview of this evidence, the home unit at Property G was purchased late in December 1994. The purchase price was $193,250. There is no evidence about the stamp duty and the purchase costs associated with this transaction. It is possible that these expenses might have resulted in the total purchase price of this property being rounded up to about $200,000, a figure which is consistent with the evidence of the mother and the wife as to what they respectively contributed. The mother deposes to having contributed $90,000 of her own funds towards the purchase price, and the wife $110,000, all of it derived by way of a loan from the Endeavour Credit Union. Thus, whatever may have been the legal ownership of this property, its equitable ownership was approximately 45 per cent to the wife's mother and 55 per cent to the wife. It is interesting to note, at this point, that within 12 months of the wife acquiring her interest in this property, paying the mortgage, and indeed occupying the same with her son [Y], the husband moved in and commenced contributing to the mortgage.
In any event, on 30 June 1999 the Property G property was sold for $415,000. The evidence indicates that this price was apportioned as to $295,000 directly attributable to the transfer of the property, and $120,000 separately attributable in an unspecified way. I will consider this in further detail below, in the context of assessing the contribution of the parties during cohabitation. It is clear, however, that the total consideration received was $415,000.
The wife and her mother then purchased the former matrimonial home at Property B. The mother's interest in the property at Property G was rolled over into the Property B property, but she also contributed a further $45,646 representing payment of stamp duty on the contract, on the mortgage and payment of the legals associated with the purchase. The wife's equity in the property at Property G was also rolled over into the Property B property, but she also borrowed further moneys from the Endeavour Credit Union. The evidence indicates that on settlement of the sale of Property G the mortgage on that property had been reduced to $86,407, and that the further loan obtained in order to purchase Property B was $155,600.
Now, it is interesting to observe that the mother's equity in the property at Property B must have been greater than her equity in Property G as she injected further funds. At the very least, the mother's equity would have remained about 45 per cent, but, in all likelihood, it was more. The wife's equity in the property remained at about 55 per cent at most, but, for the reasons set out above, was probably slightly less. The value of the wife's interest in the property increased in dollar terms because of the significant windfall associated with the circumstances of the sale of the property, which will be discussed below in the context of assessing contribution.
Thus, in attempting to ascertain the wife's beneficial interest in the former matrimonial home based on the above exercise, one would have thought it was no greater than 55 per cent. Nonetheless, the agreed position presented by the husband and wife at the hearing was that the wife ought to be treated as having a 75 per cent share. The Court is, under the circumstances, bound by that agreement. The legal title does not appear to represent the underlying equitable interests. Nonetheless, the fact is that the wife's mother gave evidence by way of affidavit in the proceedings and thus was clearly on notice of the proceedings. Thus, she could have intervened had she so desired. It is clear from her evidence that her generous contribution for the benefit of her daughter was, in effect, an advance on an inheritance. At paragraph 4 of her affidavit she states:
[Ms Cullen], I'm happy to contribute towards the costs of the property. It will mean less for you when I die of course because I've still got all your brothers and sisters to think of. You have a good, secure job, so it should be easy for you to get a mortgage.
All of the evidence leads me to conclude that, firstly, the wife's mother has an equitable interest in the former matrimonial home to the extent of not less than 25 per cent of its value. Secondly, however, the wife's mother intends that the wife will receive the benefit of it when the wife's mother dies. The wife's mother's evidence in this regard was not challenged. Accordingly, the only property for present purposes is the wife's 75 per cent share valued at $825,000. However, the wife also has what I would characterise as a financial resource in that her mother, who holds a 25 per cent share in the property worth $275,000, has indicated that this will be passed to the wife when she, the mother, dies. Of course, this will be at some time in the future. Mr Jackson, on behalf of the wife, correctly referred me to the Full Court's decision in White & Tulloch v White (1995) FLC 92-640 and reminded me that I ought to be cautious about treating the prospective inheritance as a financial resource. But as the Full Court said in that case, there is no absolute rule, and ultimately it depends on the facts of each case.
On the facts of this case it is significant, in my opinion that the wife presents to the Court as her real interest in the former matrimonial home a 75 per cent share, even though the evidence indicates that her equitable or beneficial interest is in fact only 55 per cent. In my mind, this reflects a real confidence on her part that her mother will not assert her equitable interest against her. This being the case, it enhances the husband's submission that the mother's remaining interest in the property is, in the eyes of the wife in these proceedings, clearly held for her benefit. The wife's own evidence in cross-examination confirms this. The situation is, accordingly, a far clearer and stronger case than the mere expectancy of an inheritance at some time in the future. I am satisfied that the mother's remaining 25 per cent share in the former matrimonial home is, in fact, a financial resource available to the wife at some time in the future.
Add-backs of moneys paid at or about separation
In the background to this case I referred to the financial benefit that the parties received following on a claim for compensation arising from a sewer main problem beneath the former matrimonial home. In short, the parties benefited to the extent of about $84,000, representing the difference between the amount they received by way of insurance payment, and the amount expended to rectify the defect. The evidence indicates that at about the time of separation the parties agreed that the husband would receive two amounts, $17,000 and $40,000, ie $57,000. The remaining funds, $28,000, stayed in the wife's account.
The evidence indicates that on 4 February 2005 both the husband and the wife signed a document that had been prepared by the wife's solicitor entitled "Acknowledgment of Receipt of Partial Property Settlement". In that document the husband acknowledges and confirms that he has received from his wife $57,000 "to be taken into account in the property settlement to be formalised by way of Family Court Orders between [Ms Cullen] and myself notwithstanding that at the time Orders are made by the Court, I may no longer hold the balance of 57,000.00". On behalf of the wife it is asserted that both amounts should be added back and on behalf of the husband it is asserted that neither amount should be added back. In relation to the add-back pertaining to the wife, the only adjustment that needs to be made is that $5,000 of that money was used to purchase the Australian stock horse "[P]", which is already separately identified in the property pool. I concur that if I add back these funds, the add-back for the wife should only be $23,000. There was only the faintest of arguments on behalf of the wife, against this add-back.
The husband's evidence in cross-examination indicates that these funds, which were available to him at the time of separation, appear to have been consumed by him in a relatively short period of time. The husband was not able to provide a clear or satisfactory explanation as to how, precisely, these funds were used. That is not to say, I hasten to point out, that I disbelieve the husband's evidence in this regard. Rather, it is a case that his recollection about detailed financial matters is clearly not very good.
In his submissions Mr Jackson submitted that what has occurred in this case is the classic premature distribution of matrimonial assets that was found by the Full Court in Townsend v Townsend (1995) FLC 92-569 to be a situation where those funds ought to be brought back into the pool of assets on a notional basis before making a distribution. On behalf of the husband, however, Mr Kearney submits that as the funds were used for reasonable day-to-day expenses of the parties, they ought not to be added back to the pool, in accordance with the Full Court's decision in AJO v GRO (2005) FLC 93-218. On the facts of this case, however, there are two clear reasons why the funds should be added back as notional property. Firstly, I am not satisfied that the evidence establishes that the funds were used for reasonable day-to-day expenses of the parties. I am far from satisfied about the husband's evidence in this regard. It lacked particularity and his evidence lacked credibility. Secondly, the evidence indicates that the parties expressly agreed, in writing, after at least one of them received legal advice, that the husband's share of the funds ought to be taken into account in the property settlement even if he no longer held the same at the time of the hearing. It is appropriate in the circumstances of this case to give effect to the parties' agreement and, in order to do justice and equity to the husband, to treat the moneys advanced to the wife in the same manner. Accordingly, $57,000 is notionally added back into the pool on the husband's side of the ledger, and $23,000 is notionally added back to the pool on the wife's side of the ledger. No evidence was advanced on behalf of the wife to indicate that there should not be an add-back.
The characterisation and treatment of the husband's personal liabilities
The details of these liabilities are set out in the agreed schedule of assets set out above. I note that the husband's GST liability of $605 is agreed. As the parties have agreed not to pursue the question of add-backs for legal fees, I think it is inappropriate to admit as a liability a loan that the husband obtained to pay legal fees. On behalf of the husband it is submitted, and I accept, that as the wife's evidence indicates that her Toyota Vienta motor vehicle was purchased with a loan from her mother, that under the circumstances, and in the absence of any formal valuation of the vehicle, both the motor vehicle and the asserted loan should be excluded from the property pool. Again, Mr Kearney submits on behalf of the husband that only $1,500 out of the Mr J loan of $4,500 is a pre-separation debt and should be included in the pool. The Mr S and AMFL debts are clearly post-separation, as is the husband's loan from [X], and his credit card debts. At most, the husband argues that these debts were incurred in reaccommodating himself but that that does not mean that these debts acquire a status whereby they should be treated as joint debts which are deducted from the gross value of the assets, before dividing the property pool. As for the husband's business liabilities, this is, in my opinion, properly included in a joint pool as they clearly relate to an asset, ie the stock of the husband's business, in respect of which there is an agreed value.
I note that whilst these post-separation debts are not relevant for the purposes of inclusion in an asset pool, they are certainly relevant in considering the effect of the orders that I make.
The final pool of assets, liabilities, and financial resources
Having regard to the findings that I have made above, the pool of assets, liabilities and financial resources is as stated below:
| ASSETS | ||
| 1 | Property B. Total value $1,100,000 (Wife’s share 75%) | $825,000 |
| 2 | Wife’s contents | $4,000 |
| 3 | Wife’s superannuation: | |
| 3.1 Aus Super (formerly Superannuation Trust of Australia) | $61, 841 | |
| 3.2 PSS – Public Sector Superannuation Scheme | $93,505 | |
| 4 | Husband’s business – stock only | $5,500 |
| 5 | Husband’s contents (including record collection) | $3,000 |
| 6 | Husband’s superannuation – MLC MasterKey | $25,761 |
| 7 | Wife’s Savings – Credit Union of Australia | $3,500 |
| 8 | Husband’s savings | |
| 8.1 NAB – 3 accounts | $44 | |
| 8.2 ANZ | $470 | |
| 9 | Australian Stock Horse “P” | $5,000 |
| 10 | Add-backs | |
| 10.1 Wife | $23,000 | |
| 10.2 Husband | $57,000 | |
| 11 | TOTAL ASSETS | $1,107,621 |
| LIABILITIES | ||
| 12 | Mortgage – Credit Union | $114,580 |
| 13 | Husband’s loan from Mr J | $1,500 |
| 14 | Husband’s GST | $605 |
| 15 | Husband’s business liabilities | |
| 15.1 Ebay | $1,586 | |
| 15.2 Mr T | $285 | |
| 15.3 Mr D | $1,458 | |
| 15.4 Accountant | $650 | |
| 16 | TOTAL LIABILITIES | $120,664 |
| 17 | NET ASSETS | |
| 11 | Assets | $1,107,621 |
| 16 | Less Liabilities | $120,664 |
| 18 | TOTAL | $986,957 |
| 19 | FINANCIAL RESOURCES | |
| 20 | Husband’s | Nil |
| 21 | Wife’s – mother’s share in the property | $275,000 |
| 22 | TOTAL | $275,000 |
| Net non-superannuation pool | $805,850 | |
| Net superannuation pool | $181,107 |
Assessing Contribution
It is important in this case to attempt to assess contribution as at the date of cohabitation, as at the date of separation, and thereafter as at the date of hearing, having regard to any post-separation contributions.
The parties commenced cohabitation in December 1995. At that time the evidence indicates that the wife had already been contributing to the Public Sector Superannuation Scheme for three years. There is no evidence to indicate precisely what her entitlement was as at the date of separation, but it is, nonetheless, a factor I take into account in a general way.
The wife also had her interest in the property at Property G which had been purchased about a year prior to the commencement of cohabitation. However, the evidence indicates that all the money she contributed towards the purchase price was borrowed from the Endeavour Credit Union and, indeed, that the husband commenced contributing one-half of the mortgage payments from the time he started living with her. Having regard to the fact that when the Property G unit was sold on 30 June 1999 the mortgage to the Endeavour Credit Union had only reduced by $23,593 from the original amount of $110,000, it is highly likely that the wife's equity in her share of the Property G property was negligible at cohabitation.
The husband asserts that at cohabitation he had an interest in three businesses, all relating to the record industry. He also asserts that he had a record collection to the value of $40,000. Moreover, he asserts that he had superannuation entitlements of approximately $7,000. I am satisfied that his superannuation entitlement was at least $7,000 at the time. This is based on his oral evidence in cross-examination, and I accept the same, even though he was unable to produce a document in that regard. He asserts that his record collection was sold for $32,000 within a relatively short period of time after cohabitation. He agrees that most of that money was lost on unsuccessful business ventures, though some of it may have gone into purchasing stock. Accordingly, even if the husband did have the valuable record collection that he asserts, it was not contributed in any way to the marriage. The husband is not able to attribute a value to any of his businesses as at the time of cohabitation. The onus of proof in this regard was always on him. I find that the only asset that the husband had at cohabitation was superannuation entitlements of about $7,000.
During the marriage, in about 2000, the wife was made redundant from the [omitted], her employer, and received about $70,000. As the wife commenced her employment with the [omitted] shortly prior to the commencement of cohabitation, I would not regard the receipt of the redundancy package of $70,000 as a specific sole contribution on her behalf. That package was accumulated, for all practical purposes, during the relationship.
The evidence led by both the husband and the wife about the sale of Property G leads, in my opinion, to the reasonable inference that it was sold at more than its market value mainly because of the "gumption" of the husband (to use the wife’s own words) in approaching the proprietor of the nearby hotel to purchase the unit, instead of facing a campaign of complaints about noise and disturbance caused by the hotel's patrons. It is somewhat difficult to characterise this contribution by the husband. Interestingly, both the wife, and her mother, seem to concede in their affidavit evidence, at least implicitly, if not explicitly, that were it not for the husband's actions the premium would not have been realised. The documents indicate that this transaction was effected by way of payment of two distinct amounts - one for the property itself ($295,000) and the second as a separate undescribed component ($120,000). I do not accept the submissions made on behalf of the wife by Mr Jackson that there was no evidence of the market value and, therefore, it was impossible to establish that an additional amount was paid, thus leading to the result that it was impossible to establish that the additional amount was realised as a result of acts of the husband. I think this submission does not do justice to or adequately reflect the facts of this case. The documents clearly indicate the differentiation in the price paid as the consideration for the sale of the Property G property. I think the more difficult task is characterising the husband's contribution. By no means is it a special contribution as in, for example, the Full Court's decision in Ferraro (1993) FLC 92-335. Nonetheless, it is a contribution made by the husband, recognised by the wife, that somehow needs to be taken into account in the overall assessment exercise for s.79(4) purposes.
The wife needs to receive credit for the contribution made by the generosity of her mother. Insofar as the wife's mother made a contribution by way of gift in providing moneys for the benefit of the wife, it is a contribution of the wife: Gosper v Gosper (1987) FLC 91-818. This type of contribution is a substantial one. As indicated before, the wife's mother's equity in Property G was at least 45 per cent arising from the $90,000 she contributed towards its purchase price. The wife's mother then allowed that equity to be reused by the wife in purchasing the former matrimonial home. Moreover, the wife's mother added a further $45,646, thus increasing her equity. Referring back to the discussion above about how to characterise the benefit to the wife of her mother's co-ownership in the former matrimonial home and the likelihood that she would inherit, I think it must logically follow that if the mother's interest in the former matrimonial home is a financial resource available to the wife, then the mother's contribution towards the acquisition of the wife's equity in her share of the home is a contribution of the wife. As indicated above, the evidence indicates that purely from the perspective of financial contribution, the wife's equity in the former matrimonial home should be no more than 55 per cent, but instead, both parties recognise that it is 75 per cent. But 20 per cent of that 75 per cent is purely and simply the result of the mother's generosity during her lifetime. Thus, approximately a quarter of the current value of the wife’s interest in the former matrimonial home can only be attributed to the generosity of the wife's mother. Conversely, it could not be said that the combined contributions of the husband and the wife resulted in the acquisition of anything more than three-quarters of the value of the wife’s interest in the former matrimonial home.
Of course, one cannot be precise in making these assessments as to contribution. One must have regard to the myriad other contributions that took place after the acquisition of the former matrimonial home on 30 June 1999. One must remember that there has been a very significant increase in the value of this property as a result of market forces, and that it is very difficult to attribute this benefit to a contribution by either the husband or the wife.
The wife did consistently earn more than the husband throughout their cohabitation and marriage. However his financial contribution was nonetheless significant, particularly as regards assisting the wife in making mortgage payments. Whilst the husband’s contribution to the wife receiving the premium on the sale of Property G is difficult to quantify, it is even more problematic not to give him credit in some unspecified way for this outcome. If one puts aside financial contribution, I am satisfied from the evidence that they both actively participated to the best of their ability towards direct and indirect non-financial contributions during the marriage as homemaker and parent.
Overall I believe that the real difference in terms of the financial contribution of the husband and the wife is the fact that approximately one-quarter of the wife’s interest in the current value of her interest in the former matrimonial home is exclusively attributable to the wife, through the generosity of her mother. The home itself represents the vast majority of the value of the non-superannuation assets. In these circumstances it is just and equitable to assess the husband’s contributions to non-superannuation assets at separation to be 37.5 percent and the wife’s at 62.5 percent. The gross dollar value of this to the husband is $309,375, and to the wife $515,625. I am satisfied that when one has regard to the diverse forms of financial and non-financial contribution made by both of them over a considerable period of time, that this is a just and equitable assessment of contribution on the facts of this case.
The final issue in relation to contribution is the wife's assertion that she made a greater post-separation contribution. Almost three and a half years elapsed between the date of the hearing and separation. In particular, the wife asserts that during this period she funded the maintenance costs, mortgage and other outgoings in respect of the former matrimonial home. She also arranged for some painting to be done, for timber floors to be polished, and gutters and timber supports to be replaced. All of these things were at her own expense. Of course, the wife has also had the benefit of occupying the former matrimonial home and, in my opinion that offsets the post-separation contribution which she asserts. It should be remembered that both husband and wife were involved in parenting during this period.
I think there is strength in the wife's claim for post-separation contribution in relation to her superannuation entitlements. The evidence indicates that her SAT super account balance as at
31 December 2004, a month before separation, was $19,942.49. The current balance is $61,841. Moreover, the evidence indicates that the wife's Public Sector Superannuation Scheme benefit as at 1 July 2005 was $79,646.87, whereas the current balance is $93,505. In relation to both of these superannuation funds, I accept that the husband could not be said to have made a contribution towards the accumulation of superannuation after separation, though I accept that such contribution did occur during the period of cohabitation. In very broad terms, therefore, one-third of the wife’s superannuation accrued after separation, and two-thirds before. Her contribution towards her fund should be assessed at 66.6 percent and the husband’s as 33.3 percent. Of course the same exercise applies to the husband’s super fund.
He had $7,000 at cohabitation and $27,000 at the date of the hearing. His contribution towards his fund should be assessed at 60 percent and the wife’s as 40 percent. With a view to simplifying matters, however, I will leave the husband’s superannuation fund where it is with no adjustment to the wife, and make an adjustment to the wife’s contribution to her fund by increasing it to 73 percent. In the end result the husband gets superannuation to a value of $27,000 + (27 percent @ 155,000 = 41,850) = $68,850, and the wife receives 73 percent @155,000 = $113,150). As neither party sought a splitting order, the adjustment will need to be in cash. The adjustment in his favour of $41,850 needs, in my opinion, to be discounted to reflect the reality that he will receive it now, but the wife won’t receive her superannuation for many years, and will probably have to pay tax on it. I will reduce this adjustment to $36,000.
Conclusion in relation to contribution
It is apparent from my analysis above that I regard this as a case where the two pools approach is warranted in terms of assessing contribution: C & C (2005) FLC 93-220.
Contribution to the non-superannuation pool should be assessed at
62.5 percent to the wife, and 37.5 percent to the husband. Contribution to the superannuation pool should be assessed as being 73 percent to the wife and 27 percent to the husband, in each case to be allocated solely out of the wife’s superannuation fund or funds but subject to the discount referred to in paragraph 46. I am satisfied that this represents the best the court can do under the circumstances to achieve justice and equity between the parties in the unique facts of this case.
Assessing the s.75(2) adjustment in favour of the husband
On behalf of the wife, Mr Jackson submitted that a s.75(2) adjustment in favour of the husband was appropriate and that it should be in the range of 12-15 per cent if contribution were assessed in favour of the wife in the range of 85-90 per cent. He submitted, however, that if contribution was assessed at 70:30 in favour of the wife, the s.75(2) adjustment would be considerably lower. He acknowledged that the husband was 12 years older than the wife and did not have her earning capacity.
On behalf of the husband, Mr Kearney submitted that if contribution were assessed at 55:45 in favour of the wife, then the most appropriate s.75(2) consideration was 10 per cent.
Both counsel have, of course, linked their assessment of the s.75(2) considerations to the final assessment of contributions. This is, of course, relevant, though not a determinative factor in its own right.
On the facts of this case the significant s.75(2) considerations are as follows. Whilst both husband and wife appear to be in good health, the husband is considerably older than the wife. This is bound to reflect on their physical and mental capacity for appropriate gainful employment. Hers is clearly stronger than his, both in the sense that she will work for a longer period, but also in the sense that she is likely to earn more. Moreover, the wife will be in a stronger overall financial position, having regard to the assessment of contribution that I have made, but also having regard to the significant financial resource available to her insofar as she has access to her mother's equity in the property and will inherit the same. They both have the care of their child [X]. Out of the husband's share of his property settlement he will need to pay various personal liabilities. The mother will be responsible for paying child support, and that will help offset some of the costs of the husband in caring for [X] whilst he is responsible for his care. The wife has access to a much more significant superannuation entitlement than that of the husband and, in this regard, I note that no splitting order was sought by either party. Issues of standard of living are not relevant in this case, nor was any maintenance order sought. There are no issues of creditors or of a parent wishing to continue in that role, nor has either party re-cohabited. I am satisfied that the marriage has not affected the earning capacity of either of the husband or the wife.
Having regard to all of those factors, I believe that a s.75(2) adjustment in favour of the husband in the amount of 10 per cent is adequate. Accordingly, the s.75(2) adjustment will be 10 per cent. It should be applied to the non-superannuation pool, but not the superannuation pool, because of how much of that was accumulated after separation. I remain satisfied that 10% of the non-superannuation pool is appropriate under the circumstances.
Just and equitable orders
The final question for determination is how to implement the alteration of property interests referred to above, by way of orders, in a just and equitable manner.
The outcome in my assessment of contribution and future needs referred to above is as follows:
Non-superannuation assets
Husband 47.5% Wife 52.5%
Superannuation assets
Husband 27% Wife 73%
(Refer to paragraph 46 – this applies to wife’s superannuation only)
This translates into an entitlement for the husband as follows:
47.5% at $805,850 = $382,778
plus super adjusted = $36,000
as per paragraph 46
plus Husband’s own = $25,761
super= $444,539
This represents about 45% of the total pool of assets.
Out of this, of course, must be deducted the husband’s assets and liabilities:
Business stock
$5,500.00
Contents
$3,000.00
Superannuation
$25,761.00
Savings
$514.00
Add-back
$57,000.00
Mr J loan
($1,500.00)
GST
($605.00)
Business liabilities
($3,979.00)
$85,691.00
On this basis the wife’s payment to the husband should be:
$444,539 - $85,691 = $358,848
From the wife’s perspective, this translates into:
52.5% at $805,850 = $423,071
155,000 – 36,000 = $119,000$542,071
This represents about 55% of the total pool of assets. Out of this needs to be deducted what she has:
Property B
$825,000
Contents
$4,000
Superannuation
$155,346
Savings
$3,500
Stock Horse
$5,000
Add-back
$23,000
Mortgage
($114,580)
Payment to husband
($358,848)
$542,418
One must not forget, however, that the wife has available to her by way of a financial resource her mother’s interest in the Property B property that is valued at $275,000.
There are a number of unusual features to this case that go to the question of whether the orders are just and equitable to the parties so far as it impacts on them. Firstly the wife did not seek a splitting order of her superannu ation notwithstanding that this would have, in my opinion, been a suitable case for it. As it is the effect of my order is that she will need to pay the husband $358,848 or face the sale of her share in the Property B property. This might have been mitigated by a super splitting order. Secondly, the husband did not seek an order for sale of property in order to implement an order for payment to him. This might reflect a confidence on his part that whatever the sum ordered, the wife would be able to meet the same. Alternatively it might reflect a recognition of the complexity arising from the co-ownership of the property as between the wife and her mother. The Court simply does not know.
Under the circumstances I believe these orders are just and equitable. After the husband has paid out his personal liabilities he will have a sizable deposit towards the purchase of accommodation should he desire, but it is highly unlikely that he can purchase something outright in a location that would enable shared parenting to continue. From the wife’s perspective the payment to the husband is a sizable one, but she has considerable equity in the property, a good earning capacity, as resources available to her in the form of her mother’s interest in the property.
I have a duty to attempt to finalise matters as between the parties. I will order payment and allow 60 days for this to occur. If payment is not made, however, I will grant leave to the parties to relist before me as regards implementation and/or enforcement of my order.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate:
Date: 9 September 2008
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