Cunningham and Riley (No.2)
[2017] FCCA 1968
•13 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CUNNINGHAM & RILEY (No.2) | [2017] FCCA 1968 |
| Catchwords: FAMILY LAW – Application for alteration of property interests – where the vast majority of the pool of assets held by the de facto wife at time of cohabitation, being proceeds of a compensation settlement – should orders be made – assessment of contribution and future needs – just and equitable. |
| Legislation: Family Law Act 1975, ss.90SF, 90SM, 117(1) |
| Cases cited: Aleksovski & Aleksovski (1996) FLC 92-705 Bevan & Bevan [2013] FamCAFC 116 Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395 |
| Applicant: | MR CUNNINGHAM |
| Respondent: | MS RILEY |
| File Number: | WOC 845 of 2015 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 31 July 2017 and 1 August 2017 |
| Date of Last Submission: | 5 September 2017 |
| Delivered at: | Wollongong |
| Delivered on: | 13 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Maurice |
| Solicitors for the Applicant: | Johnson Horsley Lawyers |
| Counsel for the Respondent: | Ms Gillies |
| Solicitors for the Respondent: | Lough & Wells Lawyers |
ORDERS
Within 60 days hereof the Respondent pay to the Applicant the amount of $67,695.
Otherwise the parties be declared solely entitled to all other assets registered in their name, legally owned them or to which he or she is otherwise beneficially entitled (including superannuation entitlements).
THE COURT NOTES THAT:
A. (omitted) has advised that it will abide by any orders it makes concerning the property settlement.
IT IS NOTED that publication of this judgment under the pseudonym Cunningham & Riley (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT WOLLONGONG |
WOC 845 of 2015
| MR CUNNINGHAM |
Applicant
AND
| MS RILEY |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain the orders made in relation to the property settlement between the parties to this case. They were in a de facto relationship. For ease of reference, even though they were not married, they will be referred to as the Husband and the Wife.
Background
The Applicant Husband will be 40 years old by the time these reasons for judgment are published. He is an employed (occupation omitted). The Respondent Wife is 35 years old. She describes herself as being engaged in home duties. In 1995, when the Mother was only 13 years old, she suffered a serious brain injury as a result of an accident at a (omitted) track. In 2003, the Mother gave birth to her daughter X, who is now 13 years old. X’s father, Mr Brook, was joined to the proceedings but did not participate.
The Husband and the Wife commenced their relationship in 2006, and cohabitation in 2007. There is a relatively minor issue about when precisely they commenced cohabitation, but nothing turns on this. The parties lived together as a family, which included X. On (omitted) 2009 their son, Y was born. He is now 8 years old, and pursuant to consent orders that the parents entered into on 7 June 2017, he will shortly live week about with each of his parents. X lives with the Wife who is solely responsible for her care. X does not spend time with the Husband.
In May 2012, the Mother purchased a property in the (omitted) region which became the former matrimonial home. It was purchased in her sole name using the proceeds of a compensation settlement that the Mother had received in 2007. The nature of the Mother’s settlement, as well as the nature and continuing effect of the injuries that the suffered, are issues in this case that will be discussed below.
The relationship between the parties was not always easy. The subsequent litigation was, undoubtedly, very difficult for them. In any event, the Husband and the Wife separated in June 2015. The Husband initially remained in the home, but then moved out on 12 July 2015. Parenting proceedings were commenced as a result of what the Husband considered to be difficulties in arrangements to spend time with both Y and X. As foreshadowed, those proceedings were eventually settled.
The Issues Raised in the Hearing
The balance sheet was agreed as follows:
| Ownership | Description | Wife / de facto partner’s value | Husband / de facto partner’s value | ||
| ASSETS | |||||
| 1. | W | Property A | $ 650,000 | $ 650,000 | |
| 2. | W | (omitted) share portfolio | $ 481,223 | $ 481,223 | |
| 3. | W | (omitted) Account #(omitted) (as at 5/5/2017) | $ 3,356 | $ 3,356 | |
| 4. | W | (omitted) Savings Account #(omitted) As at 3/3/2017 | $ 1,459 | $ 1,459 | |
| 5. | W | Toyota (omitted) motor vehicle | $ 27,500 | $ 27,500 | |
| 6. | H | (vehicle omitted) motor vehicle | $ 15,000 | $ 15,000 | |
| 7. | H | (omitted) Account (omitted) (as at 31/12/2016) | $ 803 | $ 803 | |
| 8. | H | (omitted) Account (omitted) (as at 31/12/2016) | $ 41 | $ 41 | |
| 9. | H | (omitted) Account (omitted) (as at 31/3/2016) | $ 151 | $ 151 | |
| 10. | H | (omitted) Bank Account (omitted) (as at 30/4/2017) | $ 966 | $ 966 | |
| 11. | W | Jewellery | $ 1,000 | $ 1,000 | |
| Total | $ 1,181,499 | $ 1,181,499 |
| ADDBACKS | ||||
| 12. | ||||
| 13. | ||||
| Total | $ | $ |
| LIABILITIES | ||||
| 14. | H | (omitted) Bank Personal Loan (as at 31/12/2016) | $ 28,155 | $ 28,155 |
| 15. | H | (omitted) Bank Credit Card (as at 26/4/2017) | $ 8,147 | $ 8,147 |
| 16. | H | (omitted) Credit Card (as at 10/5/2017) | $ 7,763 | $ 7,736 |
| 17. | H | Loan from mother (legals and household expenses) | $ 89,820 | $ 89,820 |
| Total | $ 133,885 | $ 133,885 |
| UNPAID LEGAL FEES | ||||
| 18. | W | Unpaid legal fees | $ 129,345 | $ 129,345 |
| 19. | H | Unpaid legal fees | $ 18,500 | $ 18,500 |
| Total | $ 147,845 | $ 147,845 |
| SUPERANNUATION | |||||
| Member | Name of Fund | Type of Interest | Wife / de facto partner’s value | Husband / de facto partner’s value | |
| 20. | H | (omitted) Super (as at 31/12/2016) | Accumulation | $ 110,689 | $ 110,689 |
| Total | $ 110,689 | $ 110,689 |
There were no valuation issues, but the Court does need to determine whether some items should remain on the balance sheet. Again, this will be discussed below.
It will be seen that the vast majority of the assets are in the Wife’s name, having as source, the compensation settlement she received. However, she has no superannuation, whilst the Husband does.
The Husband sought orders which required the Wife to pay him a sum which represented a finding of 30 per cent assessed as his contribution to the asset pool. He contended that once contribution was assessed at 30 per cent, there would be no further adjustment for future needs under s.90SF(3).
The Wife contended that she should not be required to pay to the Husband anything, but that he should simply retain that which he already has - the most significant component of which is his superannuation. In effect, the Wife’s case was that it was not just and equitable for any order to be made by way of adjustment of property interests. Implicit in the Wife’s case, however, was the contention that even if the Court decided that it was just and equitable to make an order, any assessment of contribution and future needs would result in the outcome that she contended for in any event, i.e. that the Husband would simply retain that which he has.
A number of issues are raised in this case. The Court will need to rule on whether the liabilities contended by each party to be included on the balance sheet should, in fact, be so included. The Court will need to consider whether it is just and equitable to make any order altering property interests.
If the Court finds that it is just and equitable, it will need to assess very closely the arguments made about each party’s contribution, financial and non-financial, direct and indirect. This will involve examining the nature of the Wife’s compensation payment. The Court will then need to consider whether there should be a future needs adjustment under s.90SF(3), and this will involve assessing the Wife’s capacity for her employment having regard to the brain injury she suffered, as well as other issues.
Representation
Both parties were very competently represented by their solicitors and Counsel. Mr Maurice appeared for the Husband, and Ms Gillies for the Wife.
The Evidence
The Applicant relied upon the following material:
a)Initiating Application filed 20.8.15;
b)Minute of Orders sought;
c)Relevant parts of Applicant's trial affidavit sworn 25.5.17;
d)Financial Statement of Applicant sworn 25.5.17;
e)Affidavit of Ms J sworn 26.5.17;
f)Excerpts from Dr K's Report;
g)Objections to Respondent's affidavits;
h)Summary of contradictions and inaccuracies in Respondent's oral evidence;
i)Summary of Respondent's oral evidence about her working capacity; and
j)Calculations of Applicant's entitlement
The Respondent relied upon the following material:
a)Response to Initiating Application filed 26.5.17;
b)Affidavit of Ms Riley sworn 26.5.17;
c)Affidavit of Ms Riley sworn 28.7.17;
d)Financial statement sworn 28.7.17;
e)Affidavit of Ms D (representative from (omitted)) sworn 26.5.17;
f)Affidavit of Ms M sworn 26.5.17;
g)Affidavit of Ms C sworn 26.5.17;
h)Affidavit of Dr J sworn 17.11.16; and
i)Paragraphs 6-26, 29-32,70-72, 104-118, 123-128, 136-137, 143-145, 148-149, 154-156, 180 and 315-344 of Dr K’s report.
The Applicable Law
This is an application under s.90SM of the Family Law Act 1975 (‘the Act’) which relevantly provides:
Alteration of property interests
(1) In property settlement proceedings after the breakdown of a de facto relationship, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the de facto relationship or either of them--altering the interests of the parties to the de facto relationship in the property; or
(b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the de facto relationship--altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c) an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the de facto relationship; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the de facto relationship or a child of the de facto relationship, such settlement or transfer of property as the court determines.
Note 1: The geographical requirement in section 90SK must be satisfied.
Note 2: The court must be satisfied of at least one of the matters in section 90SB.
Note 3: For child of a de facto relationship, see section 90RB.(2) If a party to the de facto relationship dies after the breakdown of the de facto relationship, an order made under subsection (1) in property settlement proceedings may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(3) The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court must take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) 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 de facto relationship 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 de facto relationship, or a child of the de facto relationship:
(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) 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 de facto relationship or either of them; and
(c) the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and
(e) the matters referred to in subsection 90SF(3) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.
Section 90SM(4) incorporates the provisions contained in s.90SF(3) of the Act, which states:
(3) The matters to be so taken into account are:
(a) the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship); and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 90SM in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(o) the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i) a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii) a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(p) the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i) a party to the subject de facto relationship; or
(ii) a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(q) any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
(r) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(s) the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
(t) the terms of any financial agreement that is binding on a party to the subject de facto relationship.
In Bevan & Bevan [2013] FamCAFC 116 the Full Court of the Family Court of Australia considered the High Court’s decision in Stanford & Stanford [2012] HCA 52 which provided guidance on how s.90SM was to be interpreted and implemented. Bevan endorsed the continuing application of the four-step approach articulated by the Full Court in Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395, but on the basis that it is a shorthand distillation of the words of s.90SM, as opposed to being a statutory edict. The four steps articulated in Hickey at paragraph 39 are:
1. Identify and value the property, liabilities and financial resources of the parties; and
2. Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
3. Identify and assess the other facts relevant under s.90SM(4)(d)-(g) including s.90SF(3) and determine the adjustment (if any) to be made to the contribution entitlements at step two;
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
The decisions in Stanford and Bevan also emphasise the importance of making findings that any order is just and equitable for the purposes of s.90SM(4), independent of the s.90SF(3) process. In most cases, such as the present one, it makes no difference to the outcome of the alteration of property interests exercise. Even if the just and equitable consideration were treated as a threshold issue in this case the parties have, by their actions (separation, and re-ordering of their financial lives since then), and claims (divergent claims about their property under s.90SM of the Act), indicated that they themselves consider it just and equitable that some order be made under s.90SM adjusting their property interests as presently held. For the reasons discussed below, it is clearly just and equitable in this case to make an order.
Both decisions also emphasise the importance of identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. This is not inconsistent with step one in Hickey.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution made by the parties. In this regard, I need to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
26. We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
Credit issues
In this case, a notable feature of the evidence of both the Husband and the Wife was their very different depictions of contributions made during their relationship. It is trite to say they cannot both be right. Unless there is corroborative evidence, the Court prefers the evidence of the Husband where it conflicts with that of the Wife. The Court finds his evidence more reliable compared to that of the Wife. He was responsive, cooperative, consistent and understated in his evidence. He made sensible concessions, admitting mistakes and remained dignified and collected, notwithstanding a rigorous and robust cross-examination by Ms Gillies, Counsel for the Wife. The Court accepts that, at times, and just like the Wife, he exaggerated his contribution and adopted a pernickety approach to the case he advanced about the Wife’s capacity to work. The Court finds these are not matters that undermined the credibility of the Husband’s evidence.
By contrast, and notwithstanding the strident submissions as to credit made by Ms Gillies, the Wife’s evidence lacked clarity, was inconsistent, vague and often unresponsive. The Court wishes to make it very plain that it is not finding the Wife to be a witness whose evidence should not be believed. Rather, the Court’s finding is that her evidence was unreliable, compared to that of the Husband. She often simply could not recall certain things. Like so many witnesses in these cases, the Wife had a tendency to exaggerate her own contributions but minimised those of the Husband. The absence of trust between these parties was palpable during their evidence. It seemed, however, that the Husband focused on facts and managed to keep the emotion out of his evidence. At times, the Wife did precisely the opposite.
There was considerable evidence before the Court about the impact on the Wife of the injuries that she tragically suffered as a teenager. For example, she relied on an affidavit from Dr J, a Forensic Psychiatrist. His report dated 11 October 2016 sets out the problems that the Wife had reported to him. For example, at paragraph 18 of his report, Dr J records the Wife describing herself as having difficulties with memory and concentration. She also mentioned that she became pedantic with regard to instructions. She had difficulty with learning and struggled to take in complex information. Many of these self-reported attributes became apparent during the Wife’s cross-examination. Again, the Court wishes to emphasise that it finds the Wife’s evidence to be unreliable, as opposed to dishonest.
The Balance Sheet
The agreed balance sheet became Exhibit “X”, and is as reproduced above.
The strong impression formed from the evidence is that items 14-17 are liabilities that were incurred after separation. The evidence suggests that a very substantial component of this related to the legal fees that the Husband incurred. The Court is not convinced that the post-separation liabilities of the Husband ought to be included in the balance sheet. The onus of proof in this regard was on the Husband. He failed to lead probative evidence that might have led to another conclusion.
The same conclusion applies to items 18 and 19, being unpaid legal fees. There is simply no basis acceptable to the Court for including these liabilities on the balance sheet. Accordingly, items 14-19 inclusive should be marked nil. The Court will take into account these liabilities in a general sense under s.90SF(3).
On its own initiative, the Court will also remove from the balance sheet items 7-11 inclusive. These are small amounts which complicate the balance sheet and increase the risk of mathematical error should an adjustment be made. There is no discernible prejudice to either the Husband or the Wife in removing these items in seeking to simplify the process that the Court must undertake. Accordingly, items 7-11 will be marked nil.
The Court thus finds the balance sheet for the purposes of this case to be as follows:
| ASSETS | |||
| 1. | W | Property A | $ 650,000 |
| 2. | W | (omitted) share portfolio | $ 481,223 |
| 3. | W | (omitted) Account #(omitted) (as at 5/5/2017) | $ 3,356 |
| 4. | W | (omitted) Savings Account #(omitted) As at 3/3/2017 | $ 1,459 |
| 5. | W | Toyota (omitted) motor vehicle | $ 27,500 |
| 6. | H | (vehicle omitted) motor vehicle | $ 15,000 |
| 7. | H | (omitted) Account (omitted) (as at 31/12/2016) | $ NIL |
| 8. | H | (omitted) Account (omitted) (as at 31/12/2016) | $ NIL |
| 9. | H | (omitted) Account (omitted) (as at 31/3/2016) | $ NIL |
| 10. | H | (omitted) Bank Account (omitted) (as at 30/4/2017) | $ NIL |
| 11. | W | Jewellery | $ NIL |
| TOTAL: | $1,178,538 | ||
| ADDBACKS | |||
| 12. | |||
| 13. | |||
| LIABILITIES | |||
| 14. | H | (omitted) Bank Personal Loan (as at 31/12/2016) | $ NIL |
| 15. | H | (omitted) Bank Credit Card (as at 26/4/2017) | $ NIL |
| 16. | H | (omitted) credit card (as at 10/5/2017) | $ NIL |
| 17. | H | Loan from mother (legals and household expenses) | $ NIL |
| UNPAID LEGAL FEES | |||
| 18. | W | Unpaid legal fees | $ NIL |
| 19. | H | Unpaid legal fees | $ NIL |
| SUPERANNUATION | ||||
| Member | Name of Fund | Type of Interest | Value | |
| 20. | H | (omitted) Super (as at 31/12/2016) | Accumulation | $ 110,689 |
| TOTAL: | $110,689 | |||
Is it Just and Equitable to Make an Order?
Under s.90SM(3), the Court must decide whether it is just and equitable to make an order altering the interests in property that have been found above. In deciding what is just and equitable, the Court must, of necessity, consider the other matters set out in s.90SM, relating to contribution for example. This is not, of course, an exercise in quantification at this stage, but rather an exercise of characterisation. It could be just and equitable, for example, to make an order adjusting property because of the contribution that has been made, but then quantify that contribution as being relatively low. The mere fact that the contribution might be assessed as being relatively low does not detract from the characterisation of the contribution as being one that must be taken into account. Otherwise, it would be unjust and inequitable.
In this case, what is apparent from the evidence is that the parties separated their finances far less than the Wife contended for, and the Wife’s dependence on the income that the Husband earned was greatly minimised by her. It is undoubtedly the case that almost all of the non-superannuation represents the proceeds of the compensation settlement the Wife received. That does not mean that it is not just and equitable to make an order. What it might mean is that any order is a modest one, depending on the evidence.
In any event, the focus of s.90SM is not just on financial contribution. If it were, some of the Wife’s arguments about justice and equity might be more compelling. The Court must consider the full range of contributions contemplated by s.90SM. In this regard, the Husband emphasises that it was a relationship that lasted between 2007 and 2015, which produced a child, who lives with his father on an equal-time basis and that involved the Husband making a contribution to the care and support of the Wife’s child from a previous relationship, X. Moreover, the Husband asserts that he made other non-financial contributions.
The Court concludes, having regard to all of the evidence, that it is just and equitable to make an order under s.90SM(3). The quantification of that order is an entirely different issue.
Assessing Contribution
There is no doubt that, at cohabitation, the Wife had a trust fund with a balance of slightly in excess of $1.2 million. The Husband probably had furniture, a car and some superannuation. He also had a HECS debt which was not extinguished until 2012, and possibly a credit card debt.
The balance sheet reflects the assets that they now have. The Wife’s funds, derived from her compensation, are represented in the former matrimonial home, with an agreed value of $650,000, and her (omitted) share portfolio with a value of $481,223. She has the other funds available to her through her bank accounts, as well as the Toyota motor vehicle. Her only liability is for unpaid legal fees and there was no dispute that these would be paid out of the funds held by (omitted).
The Husband’s superannuation has increased in value and represents his only major asset other than his motor vehicle. He has substantial liabilities, mainly for legal costs as well.
Whatever happened during the period of cohabitation, the observation made by the Husband’s Counsel seems apt: the money brought into the relationship by the Wife has been preserved, notwithstanding three important considerations. Firstly, she has lived what the Court believes to be a modest but comfortable life in that period. Secondly, the Wife and both X and Y had all of their costs of living met partly through the weekly stipend she received and partly, the Court finds, through the financial support she received from the Husband. Thirdly, the Wife’s wealth was preserved notwithstanding management fees of what appears to be not less than $17,000 each year.
The Court accepts that the Husband was probably earning, on average, between $80,000 and $90,000 during the period of the relationship.
The Husband’s case is that the only financial advantage to him that is apparent after the end of this relationship is that his superannuation has increased but, he contends, this is not available to him for about 20 years.
The Husband gives a summary of his contributions during the relationship at paragraph 283 of his trial affidavit. The summary was admitted without objection, but there was substantial cross-examination of the matters contained therein. For the most part, the Court accepts the Husband’s evidence about his contribution.
For example, his contention that the family used his salary to live off must surely be the case. The weekly allowance that the Wife receives from (omitted) is currently a mere $350 per week. At times during the relationship she received between $450 - $537.50 weekly. The Court does not accept that this amount would be enough to meet the reasonable living expenses of the family. The Wife’s contention that at no time did the Husband financially support her, or X her daughter, is implausible. In reaching this conclusion the Court is well aware of the evidence which indicates the nature and extent of further payments made for the benefit of the Wife through her fund. These payments met expenses which included some utilities for the former matrimonial home, household maintenance, fees relating to X’s education, the Wife’s motor vehicle expenses, health insurance etc. The Court is also aware, however, of what the Wife deposes to in her Financial Statement sworn 28 July 2017. Her income is $480, $350 of which is her stipend, the balance is $130 per week child support for Y paid by the Husband. The Wife’s weekly expenses total $1,409 per week, a deficit of $1,001 per week. Even if some of the expenses the Wife claims are reimbursed to her by her trust fund, there remains a sizeable deficit. This is probably the clearest picture the Wife gives in her evidence of family living expenses without the Husband’s income. It supports the Court’s conclusion.
Whilst it is true that the capital expenses relating to the former matrimonial home were met from her settlement funds, it does not detract from the reality that the stipend that the Wife derived from her fund could not possibly have met all of the living expenses of the family that the Husband and the Wife formed, and which included X - who the Husband regarded as his psychological daughter, even though not biologically so.
The Wife contended that she and the Husband did not share or co-mingle their finances. This could only be true in the most technical of senses in that they did not have joint bank accounts, joint assets or joint liabilities. That is not to say, however, that the parties did not apply what finances were available to them for the benefit of the family that they had, consensually, established.
The Wife conceded that she received no financial support in respect of X, from X’s biological father. The Husband deposes to contributing to many aspects of X’s living expenses which included food, entertainment and curricular and extracurricular activities. The Wife’s insistence in her evidence that she, somehow, managed to meet all of X’s needs on her own without any assistance from the husband is implausible.
The Wife’s own evidence about the impact on her life of the accident she suffered includes:
a)She is excessively labile in her emotions;
b)She suffers recurrent severe anxiety;
c)She has some difficulties controlling the volume of her voice and on occasions will speak too loudly;
d)She had difficulties with learning, noting that she is best in the area of picking up practical skills;
e)She struggles to take in complex information;
f)She becomes pedantic with regard to instructions;
g)She feels forced to follow routines;
h)She has difficulties with memory, and tends to use photographs to assist in this domain;
i)She had difficulties with concentration;
j)She needs to make a list when she goes shopping;
k)She does not like change and values routine in her life.
There must be substance in the Husband’s contention that part of his contribution to this family was to directly and indirectly manage the consequences on the family including himself of the difficulties the Wife experienced.
None of the above comments should be interpreted as seeking to diminish the substantial, indeed overwhelming, financial contribution that the Wife made through her settlement. This is an incontrovertible fact. It is the Wife’s rigid insistence that the Husband made no contribution that is unreasonable in the circumstances. The real challenge in this case is to quantify the contribution made by both parties.
Quantification of contribution in this case is a challenging task for the Court. It was rendered much more difficult by the polarised and, no doubt, emotionally driven positions adopted by the parties. The Wife’s rigid stance that the Husband made no contribution (other than to his own assets i.e. his superannuation) was matched by the rigidity of the Husband’s claim for 30% of all of the assets, including his superannuation. Nowhere in the Husband’s case is it possible to discern how the figure of 30% is calculated. It is as unprincipled as the Wife’s claim is unfounded.
It is clear that the Husband made no contribution to the acquisition or improvement of the Wife’s compensation settlement. His claim is based on conservation of the same. When one reduces the Husband’s contention to its simplest essence, it is this: the Wife would not have been able to conserve as much of her settlement as she has, but for the financial contribution that the Husband made during their relationship. At the time of cohabitation $1,220, 957.44 was held in trust for her. As at the date of the hearing, the total value of assets represented by those moneys was $1,113,122,30. Almost 11 years has passed since the relationship commenced, and for at least 8 of those years the relationship subsisted. Of course the fund earned money during this period, but it also incurred fees ($17,000 per annum) and paid out both capital and expenses in that period. The Court believes there is substance to the Husband’s claim to have contributed to the conservation of this fund.
The Wife’s contention about the compensation settlement emphasised the nature of the payment she received, especially that it included an award for future earnings and expenses. To that extent, her Counsel submitted, it represents a capitalised income stream. The proposition may be correct insofar as part of the award relates to future earnings, but the position is by no means as clear in relation to future expenses. In any event, the judgments in question (both of the trial Judge and the NSW Court of Appeal) were in evidence. What becomes clear from a reading of the same is that a significant part of the award did not relate to economic loss, so the income stream contention only goes so far. In any event the Court believes there is a real risk that the Court be led astray, and thus failing to do justice and equity to both parties, if the focus remains solely on the nature of the payment the Wife received. It must be remembered that the Husband is not contending that he contributed to the acquisition or improvement of the settlement (and its subsequent manifestation in the form of the family home), his contention is that he contributed to its conservation, thus rendering less significant the nature of the payment the Wife received. This case is to that extent different from the cases cited by Counsel including Aleksovski (1996) FLC 92-705.
The Husband’s contribution argument extends further to include his financial and non-financial support for X since age 3, a child he treated as psychologically his own, in a context where X had little to nothing to do with her biological father, and where the Wife received minimal if any financial support from him. As foreshadowed earlier in these reasons, the Husband also contends that he made a contribution to the welfare of the family arising out of the disabilities the Wife suffered.
None of the above should distract the Court from the reality that the Wife made a much greater financial contribution to compared to the Husband, and she made at least the same, if not more, non-financial contribution as that made by the Husband. Doing the best the Court can in these circumstances, the Husband’s contribution is assessed at 20% of the total asset pool of $1,289,227 thus making it $257,845.40, of which $110,689 is his own superannuation, and $15,000 represents the agreed value of his motor vehicle. The net payment to him would, therefore, be $132,156.40.
An adjustment under s.90SF(3)?
The Husband contends that there should be no such adjustment. The Wife’s position was more difficult to discern. She contended, in effect, that the Husband made no contribution to her assets, and on this basis there would be no s.90SF adjustment. If the Court finds, however, that the Husband had made a contribution, the Wife contended that even after considering s.90SF matters the Court would reach the same conclusion i.e. the Husband should be left with only his own assets. The polarised views of the parties are again plainly evident. The Court will need to make its own assessment, having regard to the findings made about contribution.
As the Court has assessed the Husband’s contribution at 20% of the total asset pool, it is not possible to discern in his case any claim to a s.90SF(3) adjustment in his favour. No such adjustment is possible on the evidence before the Court.
Taking the Wife’s case at its highest, given that the Court has assessed her contribution at 80%, this must mean that her s.90SF(3) claim is for the difference between the remaining 20% and the value of the assets the Husband comprised in the pool. These assets (superannuation $110,689 and motor vehicle $15,000, total $125,689 or 9.7% of the total pool). The Wife must therefore be claiming an adjustment under s.90SF(3) of 10.3%.
They are both young (39 and 35). The Husband is in good health. The Wife has an acquired brain injury which does not affect her ability to care for her children, manage her household, or attend to domestic work. The Court rejects the Husband’s contentions that the Wife is able to work in paid employment during the alternate week when the child Y lives with his father. The contention is fanciful and again merely reflects the ongoing enmity between these parties. The facts are plain. The Wife has never worked in paid employment outside of the home. This is because of her acquired brain injury. The aggregated evidence before the Court does not incline it to suddenly believe that she can work, or that she has an earning capacity in any meaningful sense. The Court does not need the evidence of Dr J to make this finding as it is a self-evident finding available on any objective adjudication of the facts. To suggest otherwise was the nadir of the Husband’s case. It is one thing for evidence to suggest the Wife has capacity to adequately parent. It is quite another to then seek to extrapolate from that evidence an earning capacity outside of the home. By contrast the Husband has a significant earning capacity, and there is no evidence to suggest that it will be adversely affected by his care of Y.
To the extent that the Wife sought to lead evidence that her trust fund monies will not support her for the rest of her life, the evidence led does not enable the Court to make that finding. The Court is not satisfied that the evidence given by Ms D was expert evidence. It was not possible to discern from her written and oral evidence how she reached her conclusion. It was clear to the Court that she was not using a methodology that was independently informed, or even checked or cross-referenced. The evidence of Ms D was unhelpful.
There is a significant disparity in the incomes derived by the parties, but the Wife’s assets and financial resources are significantly greater than that of the Husband’s. His major asset is one that he will not be able to access before retirement. It is likely that the value of the Wife’s non-real estate assets will diminish over time, especially as she is now meeting all of her living expenses without the Husband’s financial support (with the exception of child support). Nonetheless, she owns unencumbered real estate which might, over time, increase in value.
The Wife will share in the care of Y, and be solely responsible for her biological child, X. The duration of this de facto relationship did not affect the Wife’s earning capacity and arguably the same result pertains to the Husband. The Husband pays child support in relation to Y. The Wife is presently not in receipt of Centrelink benefits, but the evidence suggests that at times in the past she has been in receipt of the same. Both parties have substantial liabilities for legal fees which will be paid out of the assets they receive in this case.
The reality for the Wife is that any payment that she must make to the Husband will come from her trust fund. This of course depletes the capital and income available to her.
The Court believes that an adjustment under s.90SF(3) in the Wife’s favour is warranted on the facts before it, but not in the amount sought by the Wife. An Adjustment of 5% will be made in her favour.
Just and Equitable Conclusion?
The Court’s cumulative findings result in an adjustment as between Husband and Wife of 15:85%. This means the Husband’s entitlement is calculated as follows:
·15% x ($1,178,538 +110,689) = $193,384
·Less value of superannuation ($110,689)
·Less value of motor vehicle ($15,000)
·Net payment to the Husband = $67,695
The Wife will retain the balance of the property pool
· 85% x (1,178,538 – 110,689) = $1,095,342
The significant disparity between these amounts is justified on the evidence of this case. The Court is satisfied that it is as just and equitable as the circumstances allow.
Costs of the Independent Children’s Lawyer
The parties settled parenting proceedings that would have extended the hearing time by at least 3 further days. The settlement was no doubt facilitated by the Independent Children’s Lawyer as well as the expert report prepared by Dr K. A considerable cost-saving to the taxpayer has thus been achieved. The role of the Independent Children’s Lawyer was invaluable in this case. Nonetheless the Court believes that s.117(1) should be applied and thus there be no order for the payment of the costs of the Independent Children’s Lawyer.
Objections
At the commencement of the hearing, substantial objections were made by each party. The Husband’s Counsel conceded the objections made by Counsel for the Wife in her Outline of Case document. As for the objections to the Wife’s evidence, in order to save Court time, both Counsel agreed that the determination on evidence could be dealt with in final reasons for judgment. For ease of reference, these rulings are found in a schedule to these reasons.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 13 October 2017
Schedule 1
Objection Rulings
Respondent's Affidavit sworn 26 May, 2017, object to:
Objection Ruling
- paragraphs 20 – 28 inclusive
20-25 inclusive, struck out, irrelevant
- paragraphs 33 - 35 inclusive
Struck out, irrelevant
- paragraphs 37, 38, 40, 41, 42 & 43
37 struck out, conclusion
- paragraphs 47 – 174 inclusive
- paragraphs 177 -216
- paragraphs 217 – 235
47-77, 79-111, 113-216 struck out, irrelevant
Respondent's Affidavit sworn 28 July, 2017, object to
7. paragraphs 4 and 6
Ms M sworn 26 May, 2017, object to
8. paragraphs 5 – 10 inclusive Objection sustained: all struck out. 9. paragraphs 11 - 21 10. paragraphs 26 – 45 inclusive 11. paragraphs 53 – 60 inclusive
Ms C sworn 26 May, 2017, object to
12. Paragraphs 28 & 30 Objection sustained: all struck out 13. paragraphs 33 - 44 inclusive 14. paragraphs 47 – 50 inclusive 15. paragraphs 55 – 156 inclusive 16. paragraphs 168 - 189
Key Legal Topics
Areas of Law
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Civil Procedure
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Family Law
Legal Concepts
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Costs
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Damages
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Remedies
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