DEAVE & PALLIN
[2020] FCCA 415
•11 March 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DEAVE & PALLIN | [2020] FCCA 415 |
| Catchwords: FAMILY LAW – Property – initial contributions – husband’s post-separation contributions – extent of husband’s expenditure post-separation. |
| Legislation: Family Law Act 1975 (Cth), ss.4(1), 75(2), 79 |
| Cases cited: Aleksovski & Aleksovski (1996) FLC ¶92-705 Hickey & Hickey & A-G for the Commonwealth of Australia(Intervener) (2003) FLC ¶93-143 Jabour & Jabour [2019] FamCAFC 78 Rosati v Rosati (1998) FLC ¶92-804 Weir & Weir (1993) FLC ¶92-338 |
| Applicant: | MS DEAVE |
| Respondent: | MR PALLIN |
| File Number: | HBC 1195 of 2017 |
| Judgment of: | Judge Baker |
| Hearing dates: | 21–22 October 2019, 31 January 2020, 12 February 2020 |
| Date of Last Submission: | 12 February 2020 |
| Delivered at: | Hobart |
| Delivered on: | 11 March 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Fitzgerald |
| Solicitors for the Applicant: | Fitzgerald & Browne |
| Counsel for the Respondent: | Mr Turnbull |
| Solicitors for the Respondent: | Jacobs Family Law |
ORDERS
Forthwith the wife shall place the property situated at A Street, Suburb B (“A Street, Suburb B”) on the market for sale and the following provisions shall apply:
(a)The sale price and marketing arrangements shall be agreed between the husband and wife and failing agreement as determined by a valuer nominated by the President of the Real Estate Institute of Tasmania;
(b)The husband and wife both forthwith do all acts and things and sign all necessary documents to effect the sale of the property;
(c)Pending completion of any sale, the wife shall maintain the property and the chattels contained in the property in good order and condition, keep the property and chattels insured, pay the rates, land tax and other outgoings in relation to the property and continue to make regular payments of the mortgage owed in respect of the property;
(d)Upon completion of sale, the proceeds of sale shall be applied as follows:
(i)The payment of rates, water, land tax and other outgoings in the real estate agent’s fees and disbursements;
(ii)Payment of the conveyancing legal fees;
(iii)A sum set aside in trust for capital gains tax as calculated by the wife’s accountant;
(iv)Payment of all monies due under the ANZ mortgage secured on the said property; and
(v)Payment of all monies due under the ANZ supplementary loan.
Liberty to each party to apply in respect of the said sales.
Upon settlement of the sale of the A Street, Suburb B, the wife shall:
(a)Transfer to the husband all her right title and interest in the property situated at C Street, Suburb D (“C Street, Suburb D”); and
(b)Pay to the husband such sum so as to ensure that the husband receives a sum equal to 53 per cent of the non-superannuation property as set out in the Reasons for Judgment.
Contemporaneously with the transfer and payment referred to in paragraph 3, the husband shall refinance the mortgage to ANZ secured over the property situated at C Street, Suburb D.
Pending the settlement of the sale of A Street, Suburb B and the payment pursuant to paragraph 3, the husband shall maintain C Street, Suburb D in good order and condition, keep the property insured, pay the rates and other outgoings in relation to the property and continue to make regular payments of the mortgage and the ANZ supplementary loan owed in respect of the property.
If the husband is unable to refinance the ANZ mortgage contemporaneously with the settlement of the sale of A Street, Suburb B, the husband shall transfer to the wife all his right title and interest in the property situated at C Street, Suburb D.
Contemporaneously with the transfer referred to in paragraph 6, the wife shall do all such acts and things necessary to refinance the ANZ mortgage and shall indemnify the husband in respect thereof.
Contemporaneously with the transfer referred to in paragraph 6, the wife shall pay to the husband such sum as to ensure that the husband receives a sum equal to 53 per cent of the non-superannuation property.
In the event that the wife is unable to refinance the ANZ mortgage secured on C Street, Suburb D, the parties shall place the property on the market for sale and the following provisions shall apply:
(a)The sale price and marketing arrangements shall be agreed between the husband and wife and failing agreement as determined by a valuer nominated by the President of the Real Estate Institute of Tasmania;
(b)The husband and wife both forthwith do all acts and things and sign all necessary documents to effect the sale of the property;
(c)Pending completion of any sale, the husband shall maintain the property and the chattels contained in the property in good order and condition, keep the property and chattels insured, pay the rates, land tax and other outgoings in relation to the property and continue to make regular payments of the mortgage owed in respect of the property;
(d)Upon completion of sale, the proceeds of sale shall be applied as follows:
(i)The payment of rates, water, land tax and other outgoings in the real estate agent’s fees and disbursements;
(ii)Payment of the conveyancing legal fees;
(iii)Payment of all monies due under the ANZ mortgage secured on the said property; and
(iv)The balance paid to the parties in such sums so as to ensure that the husband receives a sum equal to 53 per cent of the non-superannuation property as set out in the Reasons for Judgment and the wife receives a sum equal to 47 per cent of the non-superannuation property.
Each party will retain and the other party shall have no right, entitlement or interest to the following:
(a)All bank accounts in each party’s name;
(b)All superannuation benefits belonging to each party; and
(c)All goods and chattels, including motor vehicles, in each party’s possession.
Each party is liable for any debts in that party’s name and shall indemnify the other party in respect thereof.
Costs be reserved.
IT IS NOTED that publication of this judgment under the pseudonym Deave & Pallin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
HBC 1195 of 2017
| MS DEAVE |
Applicant
And
| MR PALLIN |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for property adjustment by the wife after a seven year relationship. There is a long period of over five years between the date of separation and the date of this hearing.
Background
The parties commenced their relationship in 2007, married in 2010, separated on 2 February 2014 and divorced on 21 August 2018.
There is one child of the relationship, X born in 2013. The parties entered into final parenting orders by consent on 19 March 2019. X is aged 6 and his care is shared equally on a week about basis.
The parties both worked throughout the relationship as public servants. The wife took maternity leave from 2013 and returned to work part-time in 2014. The husband’s employment ceased in 2014. He is incapable of employment, due to his ill health.
Circumstances of the Parties
The wife is 45 years old. She works part-time and lives in a rental property. She lives with a partner. The property owned by the wife at A Street, Suburb B (“A Street, Suburb B”) is rented out.
The husband is 50 years old. He lives in the jointly owned property at C Street, Suburb D (“C Street, Suburb D”). He is currently unemployed and has applied for a disability support pension. He has Major Depressive Disorder, anxiety, a musculoskeletal injury and Crohn’s disease. The unchallenged evidence of his psychiatrist was that he is incapable of managing the stress of paid employment.
Proposals
The wife proposed that C Street, Suburb D be transferred to her. She intends to sell A Street, Suburb B. She sought a division of the property on the basis of 80/20 per cent in her favour. She sought that the parties’ respective superannuation entitlements be retained. She proposed no adjustment for s.75(2) factors.
In his Amended Response and in his Outline of Case both filed 18 October 2019, the husband proposed an order that the wife retain A Street, Suburb B, the husband retain C Street, Suburb D and receive a cash payment of $192,000, the wife indemnify the husband for the ANZ joint loan, and each party retain their respective cars and bank accounts. On a one pool approach, this proposal results in a percentage division of 52 per cent to the husband and 42 per cent to the wife.
In his Outline of Case, the husband proposed that on a two-pool approach, there be a division of the non-superannuation assets on the basis of 65/35 per cent in his favour, with an equal division for contributions, and a credit of 15 per cent in his favour for s.75(2) factors. He proposed a division on the basis of 33/67 per cent in the wife’s favour in relation to superannuation, which means that there is no superannuation split. He also proposed a second option to enable his proposed outcome, not preferred by him, namely a cash payment to him of $47,500 and a superannuation split of the wife’s Super Fund 1 entitlement of $144,600.
Neither party formulated an order for a superannuation split or gave procedural fairness to Super Fund 1 Superannuation.
Issues
The main issue was the extent of the post-separation expenditure of the husband of contributions made by him, and how this affected the contribution based entitlements and/or the award under s.79(4)(e ) of the Family Law Act 1975 (“the Act”).
The Parties
The wife was an impressive witness and her evidence was credible.
The husband was argumentative and, at times, defensive. At times his evidence was unsatisfactory, such as his evidence about the payment of $9,000 twice in several days.
I prefer the wife’s evidence about the minimal contributions the husband made to A Street, Suburb B and her evidence about the E Store debt. I accept her evidence that the husband had this debt at the date of cohabitation. She was certain that he told her that he had a E Store debt at the start of the relationship. Her explanation, that she has never bought anything from E Store because the interest rates and the cost of items are high, was credible.
The wife made an issue of the lack of disclosure made by the husband. He filed an affidavit of documents on 25 January 2019. This included bank statements setting out his post-separation expenditure. He made further disclosure in April 2019 with an up to date index of documents.[1]
[1] Affidavit of the husband filed 17 October 2019, Annexure J.
The husband gave evidence about numerous requests for disclosure made by the wife’s solicitors since August 2018 and his compliance. He also made disclosure of 40 documents on 19 March and 25 March 2018.
Whilst some credit card statements from separation to around the end of August 2014 were not provided, I do not consider that this is a case of non-disclosure in the Weir & Weir[2] sense.
[2] (1993) FLC ¶92-338.
Relevant Law
Section 79 of the Act provides that the Court may make orders in property settlement proceedings to alter the interests of the parties to the marriage in the property.
Section 79(2) of the Act requires that any such order must be “just and equitable”. Section 79(4) provides the matters which are to be taken into account when considering what order should be made. This sub-section provides as follows:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
A court must satisfy the requirements of s.79(2) before it examines what order should be made pursuant to s.79(4).[3]
[3] Stanford & Stanford (2012) 247 CLR 108.
Consequently, in order to determine whether it is just and equitable to make an order, the existing legal and equitable interests of the parties in the property must be identified. Having determined that it is just and equitable to make an order, consideration will then be made about what order should be made assessing the factors in s.79(4).
The Parties’ Interests in Property
The parties did not tender a joint balance sheet. In their respective case outlines the agreed items in the property pool were as follows:
Assets
C Street, Suburb D Joint $430,000
A Street, Suburb B Wife $540,000
Savings Wife $1,128
Savings Husband $750
Motor Vehicle F Husband $1,700
Motor Vehicle G Husband $2,500
Motor Vehicle H Husband $5,000
Motor Vehicle J Wife $6,850
Total $987,928
Liabilities
ANZ Mortgage C Street, Suburb D Joint $312,293
ANZ Loan Joint $36,444
ANZ Credit card Husband $9,850
ANZ Credit card Wife $8,911
ANZ Mortgage on A Street, Suburb B Wife $148,683
Total $516,181
Net Assets $471,747
Superannuation
Super Fund 1; Super Fund 2; Super Fund 3 Wife $242,826
Super Fund 4 Husband $120,974
Total $363,800
It is agreed that the wife has a contingent one third interest in a property at K Street worth approximately $90,000.
Property in Dispute
The wife included in the list of liabilities an estimate of $63,261 for Capital Gains Tax upon the sale of A Street, Suburb B, and an estimate of $26,178 for agent’s commission and marketing on the sale of the A Street, Suburb B Property. The husband agreed to the amount, but did not agree to the inclusion of these figures in the list of liabilities, as he does not accept that the wife intends to sell A Street, Suburb B. I accept the wife’s evidence that she agrees for an order for sale to be made, and will include these figures.[4]
[4] Rosati & Rosati (1998) FLC ¶92-804.
Counsel for the wife submitted that the parties’ respective savings and credit card debts should not be taken into account because they were accumulated post-separation.
Property is defined in s.4(1) of the Act as follows:
Property means:
(a) in relation to the property to the parties to a marriage or either them – means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; or…
A court is required to consider all the property of the parties when considering an order under s.79 of the Act. In Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener),[5] the Full Court of the Family Court stated at [40]:
Section 79… requires the Court to consider the whole of the property of the parties, however and whenever acquired, notwithstanding that the parties may only seek an alteration of interest in some of that property...
[5] (2003) FLC ¶93-143.
The trial date is the appropriate date upon which to ascertain the assets of the parties. I will include the savings in the list of assets. This is also the appropriate date to ascertain the liabilities of the parties. There is no suggestion that the liabilities have been incurred unreasonably or in a deliberate or reckless disregard of the other party’s potential entitlement.[6] I will include the liabilities in the list of liabilities.
[6] Kowaliw & Kowaliw (1981) FLC ¶91-092
The net value of the non-superannuation amounts to $382,308 are as follows:
Assets
C Street, Suburb D Joint $430,000
A Street, Suburb B Wife $540,000
Savings Wife $1,128
Savings Husband $750
Motor Vehicle F Husband $1,700
Motor Vehicle G Husband $2,500
Motor Vehicle H Husband $5,000
Motor Vehicle J Wife $6,850
Total $987,928
Liabilities
ANZ Mortgage C Street, Suburb D Joint $312,293
ANZ Loan Joint $36,444
ANZ Credit card Husband $9,850
ANZ Credit card Wife $8,911
ANZ Mortgage A Street, Suburb B Wife $148,683
CGT on sale of A Street, Suburb B Wife E$63,261
Agent’s commission Wife E$26,178
A Street, Suburb B
Total $605,620
Net Total $382,308
Is it Just and Equitable to make a Property Order?
Having regard to the existing property interests of the parties and their circumstances, I am of the view that it is just and equitable to consider an order for an adjustment of the property between them.
The parties were in a relationship for 7 years and accumulated property together during this time. They have joint assets and liabilities. They need to finalise their financial relationship.
Approach to be taken
Counsel for the wife submitted that there should be a two pool approach, with the non-superannuation assets in one pool and the superannuation in the other pool.
Counsel for the husband made submissions using both approaches, but conceded that a two pool approach was appropriate.
As there was no evidence that the wife’s superannuation entitlement is property within the definition of s.4 of the Act, I consider that it is appropriate to include superannuation in a separate pool.[7]
[7] C & C (2005) FLC ¶93-220.
The global approach is the usual approach in property proceedings. However, it is open to a court to undertake the asset-by-asset approach, if it is more appropriate.[8]
[8] Norbis & Norbis (1986) FLC ¶91-712.
Counsel for both parties adopted a global approach in their case outlines and submissions. At the start of the hearing, I referred to Polonius & York[9] and asked counsel whether they had considered an asset-by-asset approach, having regard to the long period between separation and the hearing date. In Polonius & York,[10] the Full Court agreed with observations made by Finn J in Z & Z[11] at 79,978 as follows:
It is my impression that there are currently coming before the court a significant number of cases in which the period between the parties’ separation and the hearing of their property settlement proceedings is substantial… In these long separation periods, the parties will usually have built up substantial new assets or incurred substantial liabilities. In an endeavour to satisfy the parties that any orders which are eventually made by the court in these somewhat complicated cases are just and equitable, it can in my view, be very useful for judges to assess contributions to property on an asset by asset basis.[12]
[9] [2010] FamCAFC 228.
[10] Ibid.
[11] (2005) FLC ¶93-241.
[12] Polonius and York [2010] FamCAFC 228, [92], citing Z & Z (2005) FLC ¶93-241, 79,978.
The Full Court agreed with these observations and said:
In a case such as this, where there was a marriage of long duration and lengthy period of separation before the hearing of application for property settlement, during which time significant assets were accumulated by one or both parties, it should indicate that in such circumstances it may be more useful to undertake an assessment of contributions on an asset by asset, or, category of asset by category of asset base; see Norbis v Norbis (1986) 161 CLR 513. However, in this case, that was not the approach the Federal Magistrate adopted when assessing the contributions made subsequent to mid-1997.[13]
[13] Polonius & York [2010] FamCAFC 228, [93].
Although the husband received substantial funds post-separation, both counsel submitted that the global approach should be taken. The parties’ relationship was of seven years’ duration. They jointly purchased real estate. They did not obtain valuations of the real estate at separation. They had a child together. They have both contributed to the real estate since separation. In these circumstances, I will adopt the global approach taken by the parties.
Contributions
The parties were in a relationship for 7 years, and were married for 4 of those years. They have been separated for almost 6 years.
Both parties earned income from their employment. The wife received rental income from A Street, Suburb B. The husband earned more than the wife. They both contributed their income for the benefit of the family.
During the relationship, the homemaking tasks were substantially shared.
During the period of seven months after X’s birth when the parties were still living together, the wife was on maternity leave. She breast-fed X and was primarily responsible for his care. The husband assisted with his care when he was not at work.
The wife contributed the property at A Street, Suburb B, which she purchased from her mother for $125,000 in 2001, by obtaining a mortgage of $80,000 and borrowing $45,000 from her mother.
At the commencement of cohabitation, A Street, Suburb B was valued at $350,000 and the mortgage had been extended to approximately $170,000. In 2006, the wife had refinanced the mortgage to undertake substantial renovations. She had done all of the renovations on A Street, Suburb B and about 90 per cent of them on A Street, Suburb B. At cohabitation, she still owed her mother $35,000. She therefore contributed equity of around $145,000.
The wife refinanced again in late 2009 to complete the renovations with the assistance of her father and brother. She reduced her credit card liability by $8,000 and used the balance to finish renovations.
During the relationship, the wife paid interest only payments to her mother of $134.55 per week. In 2005, her mother forgave the sum of $10,000 to reduce the loan of $45,000. In 2011, a further sum of $10,000 was forgiven by her mother. The outstanding loan of $25,000 was discharged from the estate of her late mother in 2015.
The husband’s case was that contributions made by the parties during the relationship and post-separation were equal. During cross-examination, the wife agreed that during cohabitation, contributions were equal, “with the exception of the A Street, Suburb B property”. Her evidence was that she solely maintained A Street, Suburb B and did all the renovations. She maintained the loan by using the rental income from the property. She said that the husband “did not make any significant contributions to the A Street, Suburb B property”.[14]
[14] Case outline of the wife filed 21 October 2019, 6.
During cross-examination, the husband agreed that the wife paid mortgage, council rates, land tax, building insurance and all the maintenance and repairs costs on the A Street, Suburb B property. He also said that he did “recall any number of activities that we did together that were related to the property over time,” including mowing the lawns and gardening.
The parties lived at A Street, Suburb B from 2007 to 2009. They shared household expenses equally and paid personal expenses separately, including maintenance of their respective vehicles. During this period, the husband used A Street, Suburb B for storage and paid $200 per week to the wife, as he did not like having tenants living there. The wife used this to pay the loan. She had a tenant move out. She had previously rented it and received income, which assisted to pay the mortgage.
I accept the wife’s evidence that the husband did not assist with maintenance of A Street, Suburb B, except for mowing the lawn.
In 2010, the parties jointly purchased the property at C Street, Suburb D for the sum of $320,500. They borrowed $370,000 and A Street, Suburb B was security for the loan. Approximately $20,000 of that loan was used to reduce the husband’s credit card liabilities and a E Store debt, which I consider he had at the date of cohabitation.
The parties jointly obtained a further loan in 2011 to purchase a vehicle and pay other expenses (“the joint loan”). In 2013, this loan was increased to $47,126 to purchase another vehicle and pay other expenses. Both parties contributed to the outgoings of C Street, Suburb D during the relationship. There is equity in the property of $81,263.
For approximately four months when the parties separated, the wife remained living in C Street, Suburb D with X, and the husband lived in A Street, Suburb B. The husband paid the mortgage on C Street, Suburb D and the joint loan during that time. He has continued to pay the mortgage. He has also paid the joint loan of around $80 per week. Part of this loan was used to purchase his Motor Vehicle G . He has maintained C Street, Suburb D. Apart from the period of four months, he has had the benefit of living in the property.
The wife rents a property in Suburb L. She has continued to receive the rental income for A Street, Suburb B and is solely responsible for paying the mortgage and maintaining the property. She deposed that she has been unable to borrow against the property to complete overdue maintenance and repairs. The parties agreed that A Street, Suburb B had increased in value to $540,000 at the time of the hearing, the mortgage was $148,683, and the equity was therefore $391,317.
After separation, the wife was primarily responsible for X’s care. In 2016, the parties negotiated a parenting plan, where X lived with the wife and spent time with the husband. X’s time with him increased over time. In March 2019, parenting orders were made by consent on a final basis. Since June 2019, X has lived with the parties on a week about basis. The husband paid child support to the wife and paid the family’s private health insurance premiums.
Funds received by the husband post-separation
The husband ceased employment with the Employer M in 2014. He has received the following sums:
a)2015: $235,000 for compensation for a work injury and to settle a complaint to the Anti-Discrimination Commissioner.[15] A damages award for pain and suffering should be regarded as the sole contribution of the person who was awarded damages.[16] The Deed of Release did not specify how the award was quantified. In these circumstances, I consider that the award was the sole contribution of the husband.
b)2015: $18,000 for annual leave and long service leave. At least part of the annual leave and long service leave payment is likely to have accumulated during the relationship. However, there was no evidence about the calculation of any of these entitlements.
c)2017: $134,500 Super Fund 4 insurance benefit for total and permanent disablement. This was paid to his Super Fund 4 account. The total and permanent disablement payment is of the same character as a payment for damages for economic loss. There was no evidence of whether the husband paid premiums for a policy, or whether this was an entitlement of his employment.
d)May 2018: $33,000 after payment of legal fees, being a claw back of miscalculated income protection.
e)Income protection: in 2015 - $11,898; in 2016 - $77,935; in 2017 - $29,994; and in 2018 - $36,417 equally a total of $156,194. There was no evidence of whether the husband paid premiums for income protection or whether it was an entitlement of his employment.
[15] Affidavit of the husband filed 18 March 2019, Annexure A.
[16] Aleksovski & Aleksovski (1996) FLC ¶92-705.
It was not disputed that the husband received into his bank accounts over five years a total of $725,988, which included $250,720 of superannuation withdrawals.[17]
[17] Exhibit H2.
It was disputed how the husband had spent these funds. His evidence was that he had spent it on reasonable living expenses, including mortgage payments, health insurance and a payment of about $67,000 to the wife, which included child support. He submitted that these sums should be characterised as post-separation contributions.
In her case outline, the wife submitted that all the funds received by the husband post-separation should be excluded from the pool for division,
as they were received post-separation. However, they are a significant financial resource under Section 75(2). Their significance means that as the husband has already received those moneys and largely spent the monies he has already had the benefit of those. Accordingly, there should be no adjustment made in his favour under Section 75(2).
The wife’s counsel made it clear that her case was not that the husband has been wanton or reckless in spending the funds, and she was not seeking an add-back of funds as in Kowaliw & Kowaliw.[18] Her case was that the husband should not receive an adjustment under s.75(2) because he has in the main had the benefit of the funds, and he has not explained the expenditure of over $340,000, which is no longer available for division. Counsel for the wife submitted that the husband’s expenditure was “irresponsible” in the context of this marriage, because of the large sums spent. He submitted that it is almost double what the wife spent in 6 years, which should be taken into account.
[18] (1981) FLC ¶91-092.
Parties are entitled to reasonably conduct their affairs post-separation.[19] In AJO & GRO,[20] where the husband had spent funds received post-separation from the sale of shares, the proceeds of a sale of property and funds withdrawn from joint bank accounts, the Full Court stated that it was a necessary requirement of a trial judge to make some assessment of the reasonableness or otherwise of the expenditure, and:
[19] NHC & RCH (2004) FLC ¶93-204; C & C [1998] FamCA 143; and Gollings & Scott (2007) FLC ¶93-319.
[20] (2005) FLC ¶93-218.
The need to satisfy that requirement was particularly critical in a case such as this because:
(a) The appellant husband had at least prima facie provided a full explanation and accounting as to how the money had been expended…[21]
[21] Ibid [39].
In respect of the $725,988 paid into his bank accounts, the husband set out his expenditure of $385,235 in Exhibit H2. The wife agreed that of the sum of $385,235, the husband has expended around $345,000 on reasonable expenses since separation. She disputed payments made by him totalling $40,146.[22] In relation to these payments, the husband’s evidence was that he had accumulated approximately $50,000 in credit card debt by the time he received the lump sum workers’ compensation of $235,000 in 2015. He said that he paid that debt as soon as he received the funds. He said that he provided credit card statements to show this debt and expenditure. Counsel for the wife called for those statements.
[22] Exhibit H2.
On the following day of the hearing, the husband clarified that the credit card debt was about $40,000, and not $50,000. Three documents were tendered. The first document was an aide-memoire prepared by the husband’s counsel, which contained a table setting out his expenditure from 1 July 2014 to 30 June 2019;[23] the second document was a Bank of Melbourne credit card statement for the period 15 December 2014 to 14 January 2015,[24] and the third document was an ANZ credit card statement for the period 24 November 2014 to 23 December 2014.[25]
[23] Ibid.
[24] Exhibit H3.
[25] Exhibit H4.
The husband had withdrawn a total of $40,146 from the funds of $235,000 “to pay credit cards and one of (sic) payment to loan”. He had paid $20,940 off the ANZ credit card, $10,206 off the Bank of Melbourne credit card, and he spent $9,000. He agreed that the sum of $9,000 was the amount he thought was paid off the joint loan.
His evidence in relation to the expenditure of $9,000 was unclear. Counsel for the wife asked him about an entry on his Commonwealth Bank statement dated 22 January 2015 and titled “Transfer to other bank – NetBank, one-off car loan, debit $9000”. His evidence was that he had transferred the money from his “Smart Access” bank account to another Commonwealth Bank account called a “holding account,” so that he could earn interest on the money in that account. He said it would not have been a payment for the wife, as the entry did not have her name on it. He tried to explain the entry and then said he was confused. He did not agree that the transfer was for the purchase of the Motor Vehicle G from the wife.
I accept the submission of counsel for the wife that the husband transferred $9,000 from one account to another account, there was no evidence the money was paid to a third party, and it remained unexplained how this money was spent.
The husband deposed that at separation, he had a debt of $3,000 on his Bank of Melbourne credit card, and a debt of $5,632.75 on his NAB credit card. He had to set up his house at C Street, Suburb D and, although he had some furniture taken from A Street, Suburb B, he is likely to have spent some funds on furniture, other household items, and items for X.
Although the husband had made the ANZ and Bank of Melbourne credit card payments referred to in paragraph 64, he did not provide statements to explain this expenditure. Notwithstanding this, I consider that the expenditure and increase in the credit card debt over 10 months was not unreasonable.
In respect of the expenditure of $385,235, the husband asserted in his affidavit that he paid the wife $43,865 child support and further sums totalling $39,500. The wife accepted that he paid her $39,500 between January 2015 and June 2015, including a lump sum of $11,000 for child support not assessed between February 2014 and February 2015. She accepted that the husband paid her lump sums of child support of $28,200. She tendered bank statements of accounts into which the payments from the husband had been made.[26] In Exhibit H2, the husband accepted the wife’s evidence that the sum, which he paid her for child support was $28,200, and not $43,865, as asserted. The husband, therefore paid the wife sums totalling $67,700.
[26] Exhibit W2.
I am satisfied that apart from the unexplained sum of $9,000, the husband expended $385,235 on reasonable expenses over a period of around five years. These expenses including payments for mortgage, health insurance, motor vehicle insurance and registration, house insurance, telephone and internet accounts, child support, holidays, income tax, lump sum payments to the wife and legal fees, as set out in Exhibit H2. I agree with counsel for the husband’s submission that the husband was paying the sum of around $510 per week for the mortgage and loan, whereas the wife was paying rent of $155 per week, as she had rent assistance from her partner.
The husband asserted that additional sums totalling $340,435 or $1,309 per week over five years were used for living expenses. It was submitted by counsel for the husband that this was “not dissimilar to the amount that the wife has had available to her per week from her own employment”. The husband’s expenses included food, electricity, petrol, medical, pharmacy, clothes, toiletries, and entertainment, which were not included in Exhibit H2. An examination of the husband’s tendered bank statements indicated that he has made payments for these expenses, and he has frequented cafes and restaurants regularly.
The husband disclosed ANZ credit card statements from 25 August 2014 to 23 October 2018. Statements from 20 November 2014 to 23 December 2014[27] indicate expenditure on living expenses such as petrol, food and cafes, pet expenses and travel. Statements from 15 December 2014 to 14 January 2015,[28] indicate similar expenditure. His tendered ME bank statements also indicate expenditure on living expenses.[29] The purchases amount to around $4,500 per month, equating to $54,000 per annum or $270,000 over five years. In his financial statement, he deposed that his weekly discretionary expenditure was $820 per week. In her financial statement, the wife estimated her discretionary expenditure was $791 per week.
[27] Exhibit H4.
[28] Exhibit H3.
[29] Exhibit H5.
In closing, counsel for the wife submitted that the wife used her entire income, which is a net average of $54,000, ($270,000 over five years) for expenses including mortgage, internet, and car expenses. It was submitted that in contrast, the husband has spent some money legitimately, but has otherwise “a lot of money left over and above what he has spent and identified for himself in the main and, at times, for X…”
The wife gave some examples of unexplained cash withdrawals totalling $52,234. The husband explained two of the cash withdrawals of $1,510 and $8,000. In respect of a payment of $2,000, he explained that on 8 January 2015 his credit card debt was reduced from $12,081 to $10,081 by payment of $2,000.
He did not explain the other withdrawals from 2015 to 2017 amounting to $40,724. For example, he had “no specific recollection” of a withdrawal of $18,914 on 20 September 2016. He said he had a record of having deposited $15,000 into ME Bank at Australia Post and he had a memory of paying off his ANZ credit card, which may have been “about $10,000”. He said his intention had been to supply details of these transactions and disclose what he had done with these and any other cash withdrawals, which he had made between 2015 and 2017, but he had not done so.
In re-examination, counsel for the husband tendered a series of statements,[30] seeking to have the husband explain what had happened to the funds. He transferred $12,000 to another account, and then transferred the funds back into the account between October and December 2016. He said that “he would have expended those on day-to-day expenses.”
[30] Exhibit H5.
Counsel for the husband submitted that, although the husband was not frugal in his expenditure of the funds, there was no evidence that he wasted funds by gambling or excessive alcohol consumption. I accept that there was no evidence of this. I consider that the husband has expended most of the funds on reasonable living expenses.
However, the husband was unable to satisfactorily explain around $50,000 of the expenditure, including $9,000, as discussed. I am not satisfied by his evidence that he expended those funds on reasonable living expenses. I intend to take this into account under s.75(2)(o).
Conclusion about Contributions
It is a well-accepted principle that, in property cases, a court is not required to assess the contribution of parties with mathematical precision.[31] The reason for this is that many of the matters which the Court is required to take into account pursuant to s 79(4), are not at all capable of precise calculation, even if such calculation were desired.[32]
[31] See Norbis & Norbis (1986) FLC ¶91-712, 75,168; Brandt & Brandt (1997) FLC ¶92-578 at 84,343; and Quinn & Quinn (1979) FLC ¶90-677, 78,615.
[32] Anthony Dickey, Family Law (5th ed, 2007) 532; see also Zyk & Zyk (1995) FLC ¶92-644, 82,509-82,510.
The wife made an initial contribution of A Street, Suburb B. It was submitted by counsel for the wife that this was the largest asset in a modest pool and the division should be 80 per cent in the wife’s favour primarily, due to this contribution. Counsel for the husband submitted that, having regard to all the contributions of the parties over a twelve year period, their contributions are equal.
The way initial contributions of assets to a marriage are to be treated was considered by the Full Court in Pierce & Pierce:[33]
In our opinion, it is not so much an 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. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to use made by the parties of that contribution. In the present case that use was a substantial contribution of the purchase of the matrimonial home.[34]
[33] (1999) FLC ¶92-844.
[34] Ibid [28].
In the recent decision of Jabour & Jabour,[35] the Full Court stated:
…the import of Pierce is that the weight to be attached to an initial contribution must be assessed against the rubric of all the contributions, both financial and non-financial, made by the parties over the course of their relationship.[36]
[35] [2019] FamCAFC 78.
[36] Ibid [55].
Their Honours also quoted Dickons & Dickons,[37] noting that the Full Court in that decision:
…expressly rejected the notion that there must be a relationship between contributions and what they produced in terms of property saying:
14.As is plain from earlier decisions of this Court, regard must be had to the use made of contributions of various types so as to compare the contributions made by each of the parties during the course of, and over the length of, their relationship (see, for example, In the Marriage of Pierce (1998) FLC 92-844) But that is an entirely different proposition to, as it were, causally linking contributions with their asserted financial “product” or “value”. The former recognises that the nature, form and extent of contributions made by each of the parties might differ; the latter suggests that the absence of a causal link counts as no contribution at all.[38]
[37] [2012] FamCAFC 154.
[38] Jabour & Jabour [2019] FamCAFC 78, [61].
I am of the view that the contribution of A Street, Suburb B should be given weight. It had substantial equity at cohabitation, it enabled the parties to purchase C Street, Suburb D, and it provided accommodation for the parties for two years. The wife’s mother contributed by providing $15,000 and contributing on behalf of the wife $45,000 towards its acquisition. It is the major non-superannuation asset and has increased in value. However, it must be seen in the context of all the other contributions of the parties, as indicated by the Full Court.[39] Both parties have made contributions over the period of the relationship and post-separation.
[39] Ibid.
Both parties contributed income during the relationship. The husband’s income was greater than the wife’s income. The wife was the primary carer of X during the relationship. Both parties made homemaking contributions. The wife paid for the outgoings and renovations in respect of A Street, Suburb B, and maintained it.
Post-separation, the wife primarily cared for X until June 2019. She has paid the outgoings in respect of A Street, Suburb B since separation, and has made the mortgage payments with the assistance of rental payments from tenants.
The husband made post-separation contributions of his compensation funds, income protection and annual and long service leave, which have been expended. He has provided lump sum payments to the wife and paid her health insurance. He has paid for the cost of three surgical procedures for X. He paid for two family holidays to Queensland. He has also made child support payments to the wife.[40] He has paid the mortgage in respect of C Street, Suburb D and the supplementary ANZ loan. I take into account that he has also had the benefit of living there. He has maintained C Street, Suburb D.
[40] Kirby & Kirby (2004) FLC ¶93-188.
The husband made parenting contributions post-separation and he has shared X’s care equally since June 2019.
The wife submitted that her contributions outweighed those of the husband on the basis of an 80/20 division. This would result in the wife retaining all the non-superannuation assets to a value of $305,846 and the husband would receive assets to a value of $76,462. I consider this does not give sufficient credit to the husband for his contributions. I also consider that the husband’s submission that the contributions were equal does not give the wife sufficient credit for her contributions.
Having regard to all the contributions of the parties over a twelve year period, I consider that the wife has made a greater contribution. I assess them by attributing 60 per cent to the wife and 40 per cent to the husband.
Superannuation
At cohabitation, the parties had similar amounts of superannuation of $58,500 (the wife) and around $57,000 (the husband). At separation, the wife’s superannuation was worth $123,957 and the husband’s superannuation was worth $146,871. The husband’s superannuation was comprised of $34,294 with Super Fund 2 and $115,858 with Super Fund 3.
There was no evidence about whether either party contributed to their superannuation entitlements other than by employer contributions during the marriage.
Since separation, the wife has continued to earn an income and her superannuation has increased by $118,869. It is now worth $242,826.
After separation, the husband contributed $134,500, a total and permanent disablement payment from Super Fund 4, into his superannuation. He has withdrawn a total of $250,720 for living expenses between 2016 and 2019.[41] He was incapacitated for employment without income. His superannuation with Super Fund 4 is now worth $120,974.
[41] Exhibit H2.
In my view, the contributions to superannuation have been equal. It was the case of both parties that they each retain their entitlements.
On 12 February 2020, I relisted the matter primarily for clarification from the husband’s counsel why a superannuation split was not being sought by the husband, when his case was that the superannuation contributions should be assessed as equal. His proposal was there should be a 33/67 division outcome in the wife’s favour. The husband’s counsel explained that the husband’s position was that if each party retained their superannuation, the disparity in their superannuation should be considered under s.75(2). The decision of C & C[42] was cited and counsel referred to paragraph 69 as having special application in this case:
69. In the present case, therefore, we see no error in the trial Judge's approach whereby he did not include the parties' superannuation interests in the same list or pool as the parties other assets. However, we do consider that he fell into error by not applying the provisions of s 79(4)(a) to (g), particularly the requirements to assess the parties' contributions to their superannuation interests (either under s 79(4)(a) and (b) or s 75(2)(j)), and to consider the impact of their present and future superannuation entitlements in determining if any adjustment should be made on account of any of the other matters in s 75(2) given the value of those interests relative to the other property of the parties.[43]
[42] (2005) FLC ¶93-220.
[43] Ibid [69].
The husband’s counsel reiterated that neither party was seeking a superannuation split, but there should be an adjustment on the non-superannuation assets under s.75(2) for that and should be included in the 15 per cent credit in his favour, as proposed by him.
Section 79(4)(e) Factors
The husband is 50 years of age. He has Major Depressive Disorder, anxiety, musculoskeletal injury and Crohn’s disease. The unchallenged evidence of Dr N and Dr O is that he has suffered from this for some years, the condition is now chronic, and it is likely the disability will continue. The husband does not believe he could return to employment. He receives New Start of $307 per week, $43 per week Family Tax Benefit, and $86 per week child support. He has applied for a Disability Support Pension, which if accepted, the parties agreed will provide him with a weekly income of $426. It is unlikely that the husband will earn any further income from paid employment or be able to increase his superannuation entitlement.
The wife is 45 years of age. In her financial statement filed 9 October 2019, the wife deposed that her weekly salary is $1,249 and income from the rent of A Street, Suburb B is $580 per week. In evidence-in-chief, the wife said that at the time of trial she had just changed jobs and would be earning $80,000 per annum gross. She works 58.8 hours per fortnight. She agreed that she still receives rental income from A Street, Suburb B, which was “about 13,000 gross per annum” on her last three tax returns. She estimated that after tax the rental income is $165 per week or $8,580 per year.
The wife rents a property in Suburb L for $370 per week. She has a partner who earns $1,540 per week. He contributes $115 per week to the rent, but does not pay any expenses for the wife.
The wife will not receive rental income after the sale of A Street, Suburb B. Nevertheless, there will be a disparity of income between the parties.
X lives with the parties on an equal shared care basis. The wife pays the husband child support of $86 per week.
On a contribution based entitlement, the wife will receive property to the value of $229,385 and the husband will receive property to a value of $152,923. There is a large disparity of property.
In respect of superannuation, the wife will retain superannuation to a value of $242,826 and the husband $120,974. There is also a large disparity. The wife will be able to earn income and increase her superannuation entitlement for many years until she retires. The husband is incapable of employment and is therefore unlikely to accrue any further superannuation.
The wife has a financial resource of around $90,000, which she will receive upon her elderly father’s death.
I take into account the husband’s unexplained expenditure post separation.
Having regard to all the above factors, the husband should receive an adjustment of 13 per cent on the non-superannuation assets, which amounts to a credit of $49,700 in monetary terms.
This will result in the parties receiving non-superannuation assets to a value of $179,685 for the wife and $202,623 for the husband.
In respect of C Street, Suburb D, the wife gave evidence that she can afford to borrow funds and has pre-approval to buy C Street, Suburb D. Her case is that the husband has not obtained finance and is unlikely to be able to afford to retain the property, as he would need to refinance the mortgage and loan secured on the property. During cross-examination, the wife agreed that “possibly” the husband should be given the first option to purchase the property.
The husband’s evidence was that he was told by his bank that until he knew what his future income would be, any application for finance was pointless.
If the property is put on the market for sale, it is possible that a third party may purchase it. There are also the costs associated with a sale, for which the parties would be responsible.
I am of the view that the husband should be given the opportunity to purchase the property. He has lived in the property since 2014 and has maintained it. The prospect of having to find a new rental home, with a possible uncertain rental period, and possible multiple moves, is distressing for him.
I consider that if the husband is unable to afford to retain C Street, Suburb D, the wife should then have the option to retain it.
The wife will retain the following:
Savings $1,128
Motor Vehicle J $6,850
A Street, Suburb B estimated
sale price $540,000
Total assets$547,978
Less A Street, Suburb B expenses:
ANZ Mortgage $148,683ANZ Loan $36,444
Capital Gains Tax $63,261
Agent’s commission $26,178
Less ANZ credit card $8,911
Less Cash payment to husband $84,816
Total liabilities $368,293
Total $179,685
The husband will receive the following:
C Street, Suburb D $430,000
Savings $750
Motor Vehicle F $1,700
Motor Vehicle G $2,500
Motor Vehicle H $5,000
Cash payment from wife $84,816
Total assets $524,766
Less ANZ Mortgage C Street, Suburb D $312,293
Less ANZ Credit card $9,850
Total liabilities $322,143
Total$202,623
These amounts will change if A Street, Suburb B achieves a different sale price, or the agent’s commission or CGT changes.
The wife will retain superannuation of $242,836 and the husband will retain superannuation of $120,974.
Overall, I consider that this result is just and equitable and appropriate between the parties.
I certify that the preceding one-hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of Judge Baker
Date: 11 March 2020
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