D and D - [2007] FMCAfam 89

FEDERAL MAGISTRATES COURT OF AUSTRALIA

D & D

[2007] FMCAfam 89

FAMILY LAW – Alteration of property interests – contribution – future needs – initial contribution.

Family Law Act 1975, ss.75(2), 79

Hickey& Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Pierce (1999) FLC 92-844

Applicant:

Respondent:

File Number:

SYM3623 of 2006

Judgment of:

Altobelli FM

Hearing date:

11 December 2006

Date of Last Submission:

11 December 2006

Delivered at:

Sydney

Delivered on:

26 February 2007

REPRESENTATION

Counsel for the Applicant:

Mr N. Jackson

Solicitors for the Applicant:

RJ Thomas Solicitor

Counsel for the Respondent:

Mr P. Livingston

Solicitors for the Respondent:

Macedone Christie Willis

ORDERS

That the Children shall live with the Mother:
(a)Every week from Monday after school until Wednesday before school; and
(b)Every alternative weekend from Friday after school until the following Monday before school; and
(c)The first half of all gazetted school holidays.
That the children at all other times shall live with the Father.
That the child B continue to attend pre-school on Monday, Tuesday, Wednesday and Friday of each week until such time as she commences primary school.
That the parties do all such acts and execute all such documents as may be required to effect a sale of the property situated in the State of New South Wales to be sold by private treaty at a price agreed upon between the parties and failing such agreement to be determined by the President of the Australian Property Institute of New South Wales or his nominee.
Upon the completion of the sale proceeds of the sale be applied as follows:
(a)To pay all costs, commissions and expenses of the sale and to pay any council and water rates and maintenance levies outstanding in respect of the property; and
(b)To pay the outstanding balance remaining on the mortgage; and
(c)Fifty-five percent (55%) of the remainder is to be paid to the husband; and
(d)The husband is to receive a further amount of $9,199.00; and
(e)The balance then remaining to the Wife.
The wife must do all acts and execute all documents submitted by the husband to transfer to the husband the registration and all the parties’ right, title and interest in the Honda motor vehicle.
The husband be solely liable for and indemnify the Wife against any liability encumbering the Honda CRV Motor Vehicle.
Unless otherwise specified in these orders:
(a)Each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the banks’ record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof and superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements.
(b)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
Except as otherwise provided in these orders each party is declared to have no further interest in the items of property in the possession of the other.
The wife is declared to have sole right title and interest in any interest in her name in any superannuation fund.
The husband is declared to have sole right title and interest in any interest in his name in any superannuation fund.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYM3623 of 2006

Applicant

And

Respondent

REASONS FOR JUDGMENT

Parenting orders

In so far as this matter relates to competing parenting applications, the ambit of the dispute is quite narrow. There are three children.
The orders sought by the father are contained in his amended response filed November 2006. For all practical purposes the orders sought by the father in relation to the children mirror the interim parenting orders made in June 2006 and the current parenting arrangements as set out in paragraph 4 of the report of the family consultant in these proceedings. Importantly, in this respect, paragraph 26 of the family consultant's report recommends that the current interim arrangements become final orders.
To put the matter beyond doubt, the orders sought by the father, and the interim orders relating to the children at the moment, provide in effect, as follows:-

That the children live with the mother:-
a)every week from Monday after school until Wednesday before school; and
b)each alternate weekend from alternate Fridays after school until the following Monday before school; and
c)one half of the school holidays.

The mother's application is, in essence, that the children live with her during one entire period of one week, and with the father for a period of a week and thereafter alternate.
In other words, both parents, and the family consultant, all agree on the fact that equal shared parenting is the best parenting arrangement for these children under the circumstances. Having read all of the material, seen and heard both parents during the hearing, read the family consultant's report, and also heard her evidence in the course of this hearing, there is no doubt in my mind that having regard to all of the above matters, and all of the relevant provisions contained in Part VII of the Family Law Act, this matter is entirely appropriate for an order for equal shared time. The issue in this case was, however, how precisely that was to be implemented. The mother prefers week on/week off. The father and the family consultant prefer the current arrangement.
The principal concern that the wife has about the current arrangement is that there are multiple changeover events during each fortnightly cycle. Thus, for example, the children are moving between parents on Monday after school, Wednesday before school each week, as well as Friday after school and Monday before school each fortnight.
It was also submitted that having regard to the obvious communication difficulties that exist between the mother and father in this case, it was not only the inconvenience to the children, but the possible strain on the already difficult relationship between the parents, that would be exacerbated by perpetuating the existing arrangement with the consequent movements between the households.
The mother's case is that this can be minimised and the greater stability be provided for the children if they simply spend a week in each residence.
The father's case is that the existing arrangement works well. That is also clearly the view of the family consultant who, as indicated above, recommended that the current interim arrangements become final orders. Indeed, at paragraph 21 of the report the family consultant notes that the current interim arrangements have provided a clarity, a routine, consistency and continuity of parental involvement for the children.
Perhaps most significantly, however, the family consultant gave evidence that she raised the possibility of week about time with the child C, but he had reservations about being away from each parent for too long. The family consultant believed that even if the frequency of changes could be seen as disruptive, the children had expressed to her the view that they were quite settled with this arrangement.
The family consultant also gave evidence that as at the time of the interviews, both the mother and the father were content with the existing arrangement. Indeed, the impression I have formed is that any concerns the mother has about the sequencing of changes from one household to another only arose relatively late in these proceedings.
In his closing submissions, Mr Jackson, counsel for the mother, submitted that the family consultant's evidence was quite equivocal in relation to the concerns that the wife has about her employment and geographical restrictions (i.e., where she lives) and how that might impact on the sequencing of the shared parenting arrangement. I do not agree with that submission. I think the family consultant's views in this regard were quite clear and were strengthened by the fact that one of the children expressed reservations about being away from each parent for too long. Whilst it is possible that this arrangement for shared care will evolve naturally, and with the consent of the parties, over time, for all of the reasons set out above, I will implement a shared parenting arrangement that reflects the interim orders that have been made by this Court. Importantly, this is consistent with the report prepared by the family consultant, and is consistent with the views expressed by at least one of the children.

Property alteration of interests

The application for alteration of property interests under s.79 of the Family Law Act in this matter also proceeded within a relatively narrow ambit. In very broad terms, the applicant wife's position was that contribution was basically equal, but that as a result of what she argues is a significant disparity between her earning capacity and that of her husband, there should be an adjustment in her favour under s.75(2) of the Act in the sum of ten per cent.
The position of the respondent husband, as articulated by his counsel, is that he made the greater financial contribution at the commencement of the relationship, and made a more significant post-separation contribution, the combined effect of which weighs contribution 60 per cent in his favour. Counsel for the husband submitted that if this contribution was reflected in the final alteration of property interests, there would be no s.75(2) adjustment.
The approach to alteration of property interests in this matter in cases such as these is well-established. Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s 79. That approach involves four inter- related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (“the other factors'') including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
There was an agreed statement by the parties of their current financial circumstances and that is set out below.

Current financial circumstances of the parties

Item	Ownership	(W) Value
Shop	J	$800,000
Honda Motor Vehicle	J	$22,500
St George Bank	W	Nil
NAB	W	$8,400
Business	W	$4,000
Superannuation	W	$12,289
Business	H	$4,000
Commonwealth Bank	H	$3,646.44
NAB Account	H	$4
St George Bank	H	Nil
Cash	H	$1,500
Superannuation	H	$12, 586
Total	$868,925.44
Item	Ownership	(W) Value
Liabilities
Mortgage	J	$180,025
National Visa	H	$4,500
Capital Finance for Car	H	$30,000
Total Liabilities	$214,525
Total Net Assets	654,400.44

In terms of contribution I find that during the marriage itself the contribution between the parties was equal. Specifically, I find that the financial and non-financial, direct and indirect contribution for the purposes of s.79(4) of the Act to be equal. The reality is that during the course of this marriage both parties worked very hard. Sometimes they were engaged in different types of activities and therefore made different types of contribution.
It is possible, for example, that Mr D made a greater financial contribution and Mrs D a greater non-financial contribution, but at the end of the day in cases such as these the general approach of Australian family law in the context of s.79 is to weigh different types of contribution in the same manner. By no means is there a presumption of equality of contribution, but in this case the weight to be given to their different types of contributions is the same. To the credit of both counsel for the husband and the wife, no one made any serious submission that it should be otherwise.
Counsel for the husband argued, however, that the husband made a greater contribution in the post-separation period, particularly in terms of the care of the children as well as a broader involvement in the management of the business and financial affairs of the parties. However, Mrs D was also involved in the parenting of the children and also contributing in a broad sense to the management of the matrimonial affairs after separation. In any event, Mr and Mrs D separated in December 2005, approximately one year ago, after a

14 year marriage. If there is a disparity in the post-separation contribution made by either party it is so insignificant as to have no weight or impact on the process of adjusting their property interests.
The real issue in this case, therefore, is to whether any adjustment should be made on the basis of the assets held at the commencement of cohabitation. The husband's position is that he should receive an extra five per cent and the wife's position should be that there should be no adjustment.
The husband's evidence about his assets at the time of marriage on December 14 1991 was that he had equity in a home unit at Wiley Park to the value of $88,000, an insurance claim in respect of a Pontiac motor vehicle for which he received $45,000 and savings of $10,000. If this is correct, the total value of the assets held by the husband at or shortly after cohabitation is $143,000. The husband's evidence is that at about the same time his wife had $20,000 in savings, and a loan owing to her in the sum of a further $20,000. The husband therefore concedes that at cohabitation his wife had assets of at least $40,000.
I note that even though the husband asserts they had these assets in December 1991 when they married, by mid 1992 when the husband and the wife purchased land at Lucas Heights for $120,000, they borrowed $75,000 from the State Bank and funded the rest from savings. This indicates that only $45,000 of their own funds was put into Lucas Heights. There was no evidence about what happened to the rest of the money.
On the husband's own evidence, the combined resources available to these parties was $183,000, so it is quite curious that they had to borrow so much in order to buy the land at Lucas Heights. I can only surmise that some of the available funds was used for the wedding, honeymoon, living expenses. I do note that in paragraph 26 of the husband's affidavit filed 30 November 2006 he sold the unit at Wiley Park for $115,000, despite his assertion at paragraph 21 that it was worth $140,000 at the time of the marriage in December 1991.
Assuming that the mortgage had not been significantly reduced between December 1991 and the sale of the Wiley Park unit in early 1992, and having regard to the husband's own evidence that the mortgage was approximately $52,000, if he sold the unit at Wiley Park for $115,000, the equity would, in fact, be approximately $63,000 out of which sale expenses and commissions would have been deducted. Whilst this reduces the extent of the husband's initial financial contribution, it is still significant if I accept the evidence that he gives in this regard.
There was no serious cross-examination of the husband relating to his evidence about assets at or about cohabitation. Indeed, at paragraph 7 of the wife's affidavit filed 4 December 2006 she agrees, in effect, that the husband had the sale proceeds of the home unit and an insurance payout from a written off motor vehicle.
In view of all of these matters I find that the husband's contribution at the commencement of this relationship, or shortly thereafter, consisted of savings in the sum of $10,000, $45,000 representing the proceeds of an insurance claim in relation to a motor vehicle, and the net sale proceeds of a home unit at Wiley Park received shortly after marriage in the sum of approximately $63,000. This totals $118,000.00
The wife's evidence about her initial contributions is that she had savings of $40,000 and a loan owed to her of $27,000. The husband, it should be remembered, agrees that she had $40,000 in total including the loan owed to her. The wife was extensively cross-examined in relation to her evidence about assets at or about cohabitation.
There was considerable cross-examination about the loan owed to the wife by her sister Julie, and brother-in-law Tony Loiero. It is clear that this loan was eventually satisfied and repaid when the wife's parents, Mr and Mrs Nati, paid to her $27,000. The evidence of Mr and Mrs Nati in this regard was not challenged. Their affidavits were read and relied on as part of the wife's case and no cross-examination of the deponents was sought.
Whilst the wife's evidence about the circumstances of the loan and her attempts to recover it, including instructions given to solicitors, is all quite unclear, the clear fact is that $27,000 was received by the wife and contributed into the marriage as a result of a loan that she had made before marriage to her sister and brother-in-law. At most, what the cross-examination of the wife was able to demonstrate to me is that she was not as good with recollection of financial facts as her husband might be.
The wife also asserts that her savings, quite apart from the loan owed to her, amounted to $40,000. It is to be recalled that the husband concedes that she had $20,000. The wife's parents gave uncontroverted evidence that they had gifted their daughter $25,000 and I think this is more objective and independent corroboration of the wife's assertion. I note that in paragraph 28 of the husband's affidavit, even he concedes that his wife's parents provided $20,000, though he described it as a gift to assist with the cost of building.
I find that, on balance, having regard to the wife's evidence, and even allowing for some doubts as regards her capacity to recall details of financial matters, I find that her initial contribution at or shortly after the commencement of the relationship was approximately $67,000, being about $40,000 in either savings or contributions via her parents, and a payment to her of $27,000 in respect of the loan to her sister and brother-in-law. In rough terms, this means an initial contribution on her behalf of $67,000.
Thus, I find that the husband's initial contribution of $118,000 was greater than the wife's initial contribution of $67,000. In very rough terms, his initial financial contribution was about twice the size of hers. But, of course, I need to take into account the fact that this was a

14 year relationship. Mr Jackson, for the wife, submits, in effect, that having regard to this length of time the contribution should be seen as equal. Mr Livingston says that the difference in contribution should be reflected by a five per cent adjustment in the husband's favour.

The Full Court in the marriage of Pierce (1999) FLC 92-844 has suggested that the way to approach the issue of the significance to be attributed to initial contribution is not so much as to regard that initial contribution as being liable to be eroded or diminished, but rather to consider whether the weight to be given to it changes in light of the totality of the later contributions made by each of the spouses, in all the diversity of such contribution. Indeed, the Full Court said at page 85881:
In our opinion it is not so much a matter of erosion of contribution, but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife.
Having regard to that, I cannot ignore the greater initial contribution of the husband, but neither can I put too much weight on it. Doing the best I can and having regard to the fact that I do not need to be mathematically precise, I assess the impact of the husband's initial greater contribution to be 5 per cent and accordingly find that on a contribution based analysis to s 79 his contribution is 55 per cent as opposed to the wife's 45 per cent.
I must then consider the matters raised under s.75(2) of the Family Law Act.
Mr Jackson on behalf of the wife submitted that the most significant

s 75(2) factor operating in this case was the disparity in earning capacities between the husband and the wife. He points to the limited education, training and experience of his client especially when compared to the "highly qualified" husband. The husband is not currently in paid employment, a matter for which he was criticised and extensively cross-examined and, indeed, I find that he is not working to his capacity. For the husband, it was conceded, in reality, that there would be no s.75(2) adjustments in his favour.
The parenting orders that I have made in this matter, reflecting the current interim arrangement, is basically for equal shared care, so many of the s.75(2) factors that normally play out in these cases are evenly balanced. If there are any 75(2) factors at all, I agree with Mr Jackson that they arise out of a disparity in earning capacity.
At the moment both parties are receiving approximately $800 per week, being rental from their sole remaining matrimonial property at Menai. Whilst the husband is highly qualified, I do not find that his earning capacity into the future will be so significant as to warrant an adjustment in the wife's favour. In reality, at no time during the marriage have either of these parties earned a high income, even though they have done relatively well, especially arising out of their property development activities. And the reality is that, even for the husband, he will have an equal responsibility for meeting the needs of the children and caring for them and to that extent his capacity to earn is affected just as much as that of his wife. I do not regard this as a case where either the actual or potential disparity in earning capacity gives rise to a s.75(2) adjustment.
Mr Jackson for the wife submitted that there should be an add-back into the pool for moneys agreed to be distributed by the parties by way of partial property settlement, to be used for a specific purpose, but not so used. Specifically, by way of orders dated 13 June 2006, the parties agreed that $79,000 would be distributed, with $13,500 being used to pay out the husband's credit cards. The evidence is, however, that only $7600 was used for this purpose and $5900 was used for another purpose. Likewise, the husband received a tax refund of $4600, and some relatively minor payments in relation to a refund for unused insurance and superannuation.
Mr Jackson submitted that a total of $8900 ought to be added back, being one half of the amount that, according to the submission, the husband had the benefit of that he should not have had. There are two difficulties with this submission. Firstly, some of the husband's evidence in cross-examination indicated that these funds were used for the benefit of the family. Specifically, the husband said he “spent it on children's things.”
The second issue is a more technical one. Mr Livingston argued that once an agreed schedule of assets and liabilities was submitted to the Court, it was inappropriate to argue add-backs. As Mr Jackson had indicated during the course of the hearing that he was not going to cross-examine the husband extensively about expenditure through his credit cards, this meant that Mr Livingston was denied the opportunity to re-examine the husband on these issues.
At the time of the husband's cross-examination neither the Court, nor Mr Livingston, was aware of the submission that Mr Jackson would make about add-backs. There may well have been some misunderstanding about what Mr Jackson indicated to the Court about the cross-examination in relation to credit card expenses. It may well be that I should have clarified this at the time. I am satisfied that, whatever may have been the case, to allow a claim for add-backs is inappropriate and unfair in a situation where the husband was not on notice of such claim and therefore not given the opportunity to give evidence about the expenditure that may, for example, have provided ample evidence of his assertion that money was used for the benefit of the children.
I must say that, in my opinion, having regard to all of the facts and circumstances in this case, particularly the very high level of involvement by the father in the parenting of these children, it is probably more likely than not that all moneys that might otherwise have been characterised as add-backs have either been used for the benefit of the family consisting of the children or, alternatively, the add-backs are already represented in the agreed pool.
Accordingly, this results in the exercise of a discretion based on contribution and future needs resulting in the husband receiving 55 per cent. I must then ask myself whether this is just and equitable. I believe that it is just and equitable under the circumstances. This is neither a large nor a small pool of assets and this is a case where equal shared parental responsibility and equal shared care applies so that there is no reason why I should consider the result of 55:45 in favour of the husband not to be just and equitable. I believe that it is.
The orders sought contemplate that the one remaining asset of significant value, the Allison Road property, be sold, and that the Honda motor vehicle be transferred to the husband and he assumes responsibility for the debt over this vehicle. Having regard, therefore, to the table below, the alteration of property interests that provides the least impact on the parties would involve a cash adjustment form the proceeds of sale, and I intend to proceed on that basis.

D assets and resources

Asset	Ownership	Value	Note
Allison Crescent, Menai	Joint	To be Sold	Divide as per orders
Honda	Joint	$22,500	Wife transfer to Husband
NAB 2710	W	8,400	Wife retains
Cash from Restaurant Sale	W	$4,000	Wife retains
MTAA Superannuation	W	$12,289	Wife retains
Cash from Restaurant Sale	H	4,000	Husband retains
Commonwealth Bank	H	$3,646	Husband retain
Cash	H	$1,500	Husband retain
Superannuation	H	$12,586	Husband retain
TOTAL ASSETS	$68,921
Liabilities	Ownership	Value	Note
Mortgage	Joint	To be paid from sale as per orders
National Visa	H	$4,500
Capital Finance (Car)	H	$30,000
TOTAL LIABILITIES	$34,500
NET POSITION	$34, 421

HUSBAND		WIFE
Assets & Resources	$44.232	Assets & Resources	24,689
Liabilities	$34,500	Liabilities	$0
Net Position	$9,732	Net Position	$24, 689

In order to achieve and overall settlement of 55:45 to the husband, and with the wife returning the assets and resources in her possession or control, the Husband will need to receive an extra $9,199.00 from sale proceeds.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Altobelli FM

Associate: Lisa Molloy

Date: 26 February 2007