Donovan and Hargrave (No.2)

[2013] FCCA 147

FEDERAL CIRCUIT COURT OF AUSTRALIA

DONOVAN & HARGRAVE (NO.2) [2013] FCCA 147

Catchwords:
FAMILY LAW – Property – Application for property settlement – superannuation splitting order – asset pool – amounts added back – contributions of the parties – where evidence of the parties differs about date of separation – where applicant claims that the parties did not separate until a year after they were divorced – length of marriage to be calculated from date of the parties’ wedding until the date the parties’ divorce became final – where applicant claims that the respondent gambled large sums of money – adjustments under Family law Act 1975 s.75(2) – where children under 18 reside with Respondent.

Legislation:

Family Law Act 1975, ss.44, 75, 79, 81, 90MJ

Family Law (Superannuation) Regulations 2001 Part 6, r.14F
Superannuation Industry (Supervision) Regulations 1994 rr.7A.03, 7A.06, 7A.12

Cases cited:
Donovan & Hargrave [2011] FMCAfam 1468
Hickey & Hickey [2003] FamCA 395; (2003) 30 Fam LR 35; FLC 93-143
Stanford v Stanford [2012] HCA 52

Applicant: MS DONOVAN

Respondent: MR HARGRAVE

File Number: PAC 1122 of 2009

Judgment of: Judge Scarlett

Hearing date: 24 September 2012

Date of Last Submission: 24 September 2012

Delivered at: Sydney

Delivered on: 26 April 2013

REPRESENTATION

Counsel for the Applicant: Mr Jamieson

Solicitors for the Applicant: Gibson Howlin Lawyers

Counsel for the Respondent: The Respondent appeared in person

ORDERS

1. The Respondent is to pay to the Applicant the sum of $50,000.00 by way of settlement of property within three (3) months of the date of these Orders.

2. A base amount of $39,808.95 is allocated, as required by subsection 90MJ(1)(c) of the Family Law Act 1975, to the Applicant MS DONOVAN out of the interest of the Respondent MR HARGRAVE in the [T] Superannuation fund.

3. In accordance with subsection 90MJ(1)(c) of the Family Law Act 1975:

   (a)The Applicant MS DONOVAN is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount referred to in Order (2) above:

   (b)The entitlement of the Respondent MR HARGRAVE to payments out of his interest in the [T] Superannuation Fund and the entitlement of such other person to whom a splittable payment may be payable is correspondingly reduced by force of these Orders.

4. The Trustee of the [T] Superannuation Fund, [omitted] Pty Limited (the Trustee) shall do all acts and things necessary to:

   (a)calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement created for the Applicant MS DONOVAN by Order (2) above;

   (b)pay the entitlement whenever the Trustee makes a splittable payment out of the interest of the Respondent MR HARGRAVE in the [T] Superannuation Fund: and

   (c)That after service of the payment split a notice, pursuant to r.7A.03 of the Superannuation Industry (Supervision) Regulations 1994, the Applicant MS DONOVAN shall do all such acts and things as may be necessary, including but not limited to, exercising her request pursuant to r.7A.06(1) of the Superannuation Industry (Supervision) Regulations 1994 for the rollover or transfer of the transferable benefits out of the interest of the Respondent MR HARGRAVE in the [T] Superannuation Fund to a fund of her choosing in accordance with r.7A.12 of the Superannuation Industry (Supervision) Regulations 1994.

5. The parties NOTE that:

   (a)pursuant to r.14F of the Family Law (Superannuation) Regulations 2001 any payments from the Respondent’s superannuation interest made after the Trustee has rolled over or transferred the transferable benefits to a fund of the Applicant’s choosing are not splittable payments; and

   (b)the Trustee will be relieved of its obligations to calculate and split payments under these Orders in the event that the transferable benefits are transferred to a fund of the Applicant’s choosing in accordance with the requirements under the Superannuation Industry (Supervision) Regulations 1994.

6. The operative time for these Orders is four (4) business days after the date of service of a sealed copy of these Orders on the Trustee.

7. Written submissions in support of any application for costs are to be filed and served within 21 days of the date of these Orders and written submissions in opposition to any such application are to be filed and served within a further period of 14 days.     

IT IS NOTED that publication of this judgment under the pseudonym Donovan & Hargrave is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

PAC 1122 of 2009

MS DONOVAN

Applicant

And

MR HARGRAVE

Respondent

REASONS FOR JUDGMENT

Application

1. This is an Application for orders for settlement of property. The Applicant is the former wife of the Respondent.

2. The Respondent opposes the Application.

3. The parties were married [in] 1993. Their accounts of the date of separation differ. The Applicant originally claimed that they separated under the one roof in early 2008 but the Respondent claimed that the separation commenced on 24^th December 2006. In her affidavit of 17^th September 2012 that she signed the Divorce Application under duress as she did not agree with the separation date contained within the Application. She deposed that:

   I believe that Mr Hargrave[1] and I separated on or around 2 April 2010 and not 24 December 2006 as indicated in the Application for Divorce.[2]

   [1] The Respondent

   [2] Affidavit of Ms Donovan 17.9.2012 at paragraph [11]

4. There are two children of the marriage, [X], aged 16, and [Y], who is nearly 13 years of age.

5. The parties were divorced by Order of the Federal Magistrates Court at Parramatta on 8^th April 2009, which took effect from 9^th May 2009.

6. The Applicant did not commence proceedings for a settlement of property within twelve months of the date that the divorce became final, but obtained leave under s.44(3) to commence out of time (Donovan & Hargrave[3]). On 13^th December 2011 the Court ordered:

   (1)The Applicant is granted leave under subsection 44(3) of the Family Law Act 1975 to institute proceedings for the division of matrimonial property under section 79 of the Family Law Act.

   (2)The Respondent is to file and serve a Response to the Application for division of matrimonial property, an affidavit in support and a financial statement within one month.

   [3] [2011] FMCAfam 1468

7. The Respondent filed an affidavit and a Financial Statement on 16^th January 2012. He has not filed a Response but it is taken that he opposes the Application.

Orders Sought

1. The Applicant seeks the orders set out in her Amended Application filed on 17^th September 2012, providing that (in summary):

   a)The Respondent should pay to the Applicant the sum of $50,000.00, representing 50% of the proceeds of sale of the former matrimonial home; and

   b)That there should be a superannuation splitting order in respect of the Respondent’s interest in the [T] Superannuation Fund with a base amount of $39,808.95.

Evidence

1. The Applicant relied on:

   a)her affidavit of 17^th September 2012;

   b)her Financial Statement of 17^th September 2012; and

   c)the affidavit of Mr S of 13^th September 2012.

2. The Respondent relied on his affidavits of:

   a)13^th January 2012;

   b)2^nd April 2012;

   c)12^th June 2012;

   d)3^rd July 2012; and

   e)18^th September 2012.

3. He also relied on his Financial Statement of 16^th January 2012.

4. Both the Applicant and the Respondent gave oral evidence. Mr S was not required for cross-examination. His evidence was as an expert witness, valuing the Applicant’s [omitted] business “[omitted]”. He valued that business at “nil”.[4]

   [4] Affidavit of Mr S 13.9.2012 at paragraph [8.0]

The Proper Approach to determination of a Property Application

1. The way a court approaches property matters has been set out by the Full Court of the Family Court in its decision of Hickey & Hickey. In that decision, the Full Court held at [39] that the 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 (citations omitted).[5]

   [5] [2003] FamCA 395: (2003) 30 Fam LR 35; FLC 93-143 at [39] per Nicholson CJ, Ellis & O’Ryan JJ

2. The Court should also have regard to the relatively recent decision of the High Court of Australia in Stanford v Stanford[6], where the majority (French CJ, Hayne, Kiefel and Bell JJ) set out the way a court hearing a property application should deal with the requirement in subsection 79(2) of the Act that prescribes:

   The court shall 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.

   [6] [2012] HCA 52

3. Their Honours held at [36]:

   The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s. 79 is not “to be exercised in accordance with fixed rules”, nevertheless three fundamental propositions must not be obscured.[7]

   [7] [2012] HCA 52 at [36]

4. The three fundamental propositions are:

   37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s. 79(1)(a) itself, which refers to” altering the interests of the parties to the marriage in the property” (emphasis added)…

   38.Second, although s. 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion…

   40.Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including and other contributions) set out in s. 79(4).[8]

   [8] [2012] HCA 52 at [37]-[38], [40]

5. Clearly, the decision in Stanford means that the Court must consider the requirements of s.79(2) before embarking on the four-step process set out in Hickey, or at least before taking the second step, identifying and assessing the contributions of the parties. In other words, satisfaction that it is “just and equitable” to make an order is a condition precedent to considering the matters referred to in s.79(4). First, the Court must be satisfied that it is just and equitable to make an order at all.  

6. It would follow that the Court must consider whether it is just and equitable to make a particular order when the Court is considering “what order (if any” should be made under s.79. Thus, the requirements of s.79(2) must again be borne in mind, in my view, after the Court has undertaken the third step in the process, as the Full Court of the Family Court has held in Hickey.

Just and Equitable

1. Applying the decision of the High Court in Stanford, the first matter to be considered is whether it is just and equitable to make an order s.79 at all. In my view, it is just and equitable, as the parties are now divorced and the Respondent has, in fact, remarried. Their communication is poor and acrimonious.

2. There is a need to make such orders as will finally determine the financial relationship between the parties and avoid further proceedings between them (see Family Law Act, s.81).

The Parties’ Property and Liabilities

1. The Applicant deposed that in or around February 2010 she and the Respondent sold their jointly owned property at Property K, [K]. The parties were represented by a firm of solicitors, BT Legal. The Applicant annexed to her affidavit copies of correspondence from BT Legal, including a settlement statement.

2. In a letter dated 1^st February 2010, BT Legal advised the parties that the balance payable by the purchaser on settlement was $579,842.76, to be distributed as follows:

   a)The solicitors themselves  $677.00

   b)The [omitted] Shire Council  $545.14

   c)[omitted] Water  $215.15

   d)ANZ Banking Group  $462,298.79

   e)The Respondent  $116,106.68[9]

   [9] Affidavit of Ms Donovan 17.9.2012 Annexure “C”

3. The balance of the deposit, after agents’ commission, amounted to $17,106.10.[10] This amount was paid into the Applicant’s business bank account.

   [10] Ibid, Annexure “D”

4. The Applicant set out in her affidavit how this amount was disbursed:

   I withdrew on 8 February $5,000 and $7,000 and gave this to

   
   

   Mr Hargrave as he said he needed it for bills. I kept $5,106.10 in my account from the sale proceeds, but continued to use this money for family and business expenses as were all[11] still residing together until April 2010.[12]

   [11] sic

   [12] Affidavit of Ms Donovan 17.9.2012 at [16]

5. It is the Applicant’s evidence that some of the money was used to pay substantial credit card debts:

   a)ANZ credit cards        $22,500.00

   b)CBA MasterCard        $15,000.00

   c)CBA Visa  $28,000.00.

6. However, the Applicant claims that “I do not believe that all of the credit card expenditure was debts of our marriage as Mr Hargrave was gambling and using cash moneys that should have been used for expenses that instead were paid with credit cards”.[13]

   [13] Affidavit of Ms Donovan 17.9.2012 at [20]

7. The Applicant stated that she continued to make payments on the credit cards in the Respondent’s name.

8. The Applicant deposed that:

   I agreed to the entire sale proceeds to be paid to Mr Hargrave as I was intimidated and scared of him and did not understand that I may be entitled to more than $5,000.00 from the proceeds of sale of the [K] Property.[14]

   [14] Ibid at [26]

9. The Applicant claims that the Respondent had a superannuation entitlement as he had been in employment for most of the duration of the marriage.

10. The Applicant’s claim that the Respondent had been gambling money is supported by the records of the Respondent’s Commonwealth Bank Streamline Account, which show that withdrawals were made at Star City Casino in multiples of $100.00 on the following dates:

    ·10^th March 2009 – four withdrawals each of $1,000.00

    ·16^th March 2009    - two withdrawals each of $1,000.00

    ·31^st March 2009 – withdrawal of $1,000.00

    ·6^th April 2009 – withdrawal of $500.00

    ·14^th April 2009 – three withdrawals each of $1,000.00.[15]

    [15] Ibid at [36]

11. The Applicant also deposed that on 6^th March 2009 the Respondent withdrew $10,000.00 from the parties’ GE money loan and spent most of this money at the Star City Casino.

12. The Respondent has claimed in his affidavit of 3^rd July 2012 that the Applicant has not made a full financial disclosure. He asserts that the Respondent has spent over $50,000.00 on legal fees.

13. The Respondent deposed:

    58.This sum may be significant to me and most others but to [Ms Donovan][16] it is a small amount considering her yearly income from the two [businesses] to be about $2000 per week net after expenses and deductions are taken out.

    59.[Ms Donovan] has always “hidden” this income from me at the beginning of their operations (Property L business from 2001 and Property M business since 2009). I could see from “books” that she kept which record her daily income but as to where she put these incomes only [Ms Donovan] would know. I estimate that she would have at least $400000 to $500000 in cash and assets “hidden” in bank accounts and property in Vietnam.[17]

    [16] i.e. the Applicant

    [17] Affidavit of Mr Hargrave 3.7.2012 at [58]-[59]

14. The Applicant denied that she has hidden money overseas, but says:

    I offer some financial support to my family but not a great amount.[18]

    [18] Affidavit of Ms Donovan 17.9.2012 at [33]

15. The Respondent was cross-examined by Mr Jamieson of counsel, who appeared for the Applicant, about gambling at the Star City Casino. He admitted making some withdrawals of cash in amounts of $1,000.00 but said he did not recall what they were for. The Respondent said that around that time, in 2009, he had a lot of debts and he was “juggling debts” hoping that he would not have to sell his house.

16. Although he initially denied gambling at all and then modified that statement to deny that he was addicted to gambling, the Respondent proceeded to say:

    “At times, out of desperation, I have been to the Casino to pay my debts”…

    “Out of desperation, fearful that we would lose our house, I have been to Star City”.

17. Regrettably, no balance sheet was tendered, but I will do the best I can with the material available.

18. In my view, the entire net proceeds of the sale of the matrimonial home  should be added back into the asset pool. The net proceeds of sale of the house at Property K, [K], amounted to $116, 106.98, which was paid to the Respondent. The balance of deposit amounted to $17,106.10. This amount was paid to the Applicant. Her evidence is that she paid two sums to the Respondent, of $5,000.00 and $7,000.00, and retained the balance.

19. The parties’ Financial Statements provide some guide to the other items in the asset pool.

Non-superannuation Asset Pool

1. I find the value of the non-superannuation asset pool to be:

   a)Net proceeds of sale of [K] (added back)           $116,106.98

   b)Lump sums paid to Respondent from deposit             $12,000.00

   c)Balance of deposit retained by Applicant  $5,106.10

   d)Applicant’s [omitted] business[19]   NIL

   [19] Affidavit of Mr S 13.9.2012

   e)Applicant’s CBA Business Account[20]  $1,359.03

   [20] Applicant’s Financial Statement 17.9.2012

   f)Applicant’s CBA Access Account[21]  $806.23

   [21] Ibid

   g)Applicant’s Toyota Camry motor car[22]  $E6,000.00

   [22] Ibid

   h)Applicant’s household contents[23]  $E5,000.00

   [23] Ibid

   i)Applicant’s [business] equipment Property M[24]      $2,300.00

   [24] Ibid

   j)Half share [business] equipment Property L[25]             $   750.00

   k)Respondent’s home[26] at Property P[27]      $270,000.00

   l)Respondent’s Westpac joint[28] Bank Account[29]            $      1,500.00

m)Respondent’s CBA Bank Account[30]  $          26.00

n)Respondent’s Toyota Echo motor car[31]   not disclosed

Total non-superannuation assets   $420,954.34

[25] Applicant’s Financial Statement 17.9.2012

[26] Held as joint tenant with his wife Ms L

[27] Respondent’s Financial Statement 16.1.2012

[28] Held jointly with his wife Ms L

[29] Respondent’s Financial Statement 16.1.2012

[30] Ibid

[31] Ibid

Liabilities

1. The Applicant claims in her Financial Statement that she owes an estimated amount of $20,000.00 in legal fees but no evidence is provided to support that claim and I am not prepared to allow that claim as a liability.

1. I find the parties’ liabilities to be the following:

   a)Applicant’s Accountant’s fees  $990.00[32]

   b)Respondent’s 50% share of home loan[33]  $246,000.00

   c)Respondent’s 50% share of other mortgage[34]             $123,800.00

d)Respondent’s GE Capital Finance personal loan     $   12,000.00

Total liabilities  $382,790.00

[32] Applicant’s Financial Statement 17.9.2012 Part K

[33] Respondent’s Financial Statement 16.1.2012 Part K

[34] Ibid

Superannuation

1. The Applicant has no superannuation.

2. The Respondent disclosed a superannuation interest with [T] Superfund valued at $79,617.89.

3. I find the value of the parties’ superannuation to be $79,617.89.

4. The gross value of the parties’ non-superannuation asset pool is $420,954.34.

5. The liabilities amount to $382,790.00.

6. After deducting the total liabilities from the total of the non-superannuation asset pool, the net value of the non-superannuation asset pool stands at $38,164.34.

7. The total value of the superannuation stands at $79,617.89.

8. The net total, combining the net non-superannuation asset pool with the superannuation, amounts to $117,782.23.

The Parties’ Contributions

1. The parties were married [in] 1993. Their accounts differ as to when they separated, and on the Applicant’s latest evidence they did not separate until a year after they were divorced. In her affidavit of 17^th September 2012, the Applicant gives the date of physical separation as 12^th April 2010 at paragraph [3] and “on or around 2 April 2010” at paragraph [11] of that same affidavit. In her Amended Application filed on the same day, the Applicant gives the date of separation as 24^th January 2010. I am not prepared to accept this evidence as reliable.

2. The parties’ divorce became final on 9^th May 2009. That date is uncontroversial. That is the date that will be used as the endpoint of the marriage for the purpose of this decision.

3. Thus, from the date the parties were married, on [omitted] 1993, until the date the Divorce Order became final, on 9^th May 2009, the length of the parties’ marriage is calculated as 16 years and [omitted] months. That is normally regarded as a reasonably long marriage.

4. The Respondent worked as a [omitted]. The Applicant was the primary carer for the two children and also worked as a [omitted].

5. There is no evidence of any substantial contribution by either part at the commencement of the marriage. There is, however, evidence of some waste by the Respondent in losing substantial amounts of money by gambling. The Respondent gave evidence that he had become so desperate about the parties’ debts that, fearing they would lose their house, he attempted to recoup money by gambling at the Star City Casino. This appears to be a recipe for disaster and the parties did indeed sell their house to pay off significant amounts of debt. The evidence of substantial withdrawals of money by the Respondent from the bank at Star City amounting to $10,500.00 between 10^th March and 14^th April 2009 is very telling.

6. I assess the parties’ contributions at 55% to the Applicant and 45% to the Respondent.    

Other Factors taken into account under Subsection 79(4)(d) to (g)

1. Paragraph (d) of subsection 79(4) requires the Court to take into account the effect of any proposed order on the earning capacity of either party. In this case, there would appear to be no effect on the earning capacity of either party.

2. Paragraph (e) of subsection 79(4) requires the Court to take into account the matters referred to in subsection 75(2) so far as they are relevant.

3. The Applicant was born [in] 1971. She is, therefore, 42 years of age. Apart from some symptoms of depression as a result of separation from her children, she is otherwise in good health.

4. The Respondent was born [in] 1969. He is almost 44 years old. He is in good health.

5. The Applicant is self-employed as a [omitted] and gives her average weekly income as $730.00 from working in [businesses] at [L] and [M]. She also receives a Families benefit of $10.00 per week from the Australian Government.

6. The Applicant does not own any real estate.

7. The Respondent gives his income in Part D of his Financial Statement as:

   a)Total salary or wages before tax  $1481.97[35]

   b)Child support paid by the Applicant  $   50.00[36]

   c)[occupation omitted]     $200.00.[37]

   [35] Financial Statement Part D Item 9

   [36] Ibid Item 13

   [37] Ibid Item 15

8. This amounts to a total weekly income of $1,731.97, although the Respondent has apparently overlooked the $200.00 from [occupation omitted], as he gives his total average weekly income at both Item 16 and in Part B as $1,531.97.

9. The Respondent and his current wife have purchased a home in [P], which is subject to a mortgage.

10. The parties’ two children, both of whom are under the age of 18 years, live with the Respondent. [X] was born [in] 1997, so he is 16 years of age. [Y] was born [in] 2000. He is [omitted] short of his 13^th birthday.

11. There are no children under the age of 18 living with the Applicant.

12. The Applicant has not repartnered. The Respondent has remarried. His wife has an average weekly income of $950.00.[38]

    [38] Respondent’s Financial Statement, Part E

13. Apart from the Australian Government Families benefit that the Applicant has disclosed, the parties are not otherwise presently eligible for any pension, allowance or benefit.

14. The Applicant Claims in her Financial Statement that she has been assessed to pay Child support in the sum of $198.35 per month but is unable to pay that amount.[39]

    [39] Applicant’s Financial Statement Item 31

15. In my view, there should be an adjustment of 5% in favour of the Respondent, as he has the responsibility for the care of the two children, without currently receiving payments of child support from the Applicant.

16. Thus, I assess the parties’ entitlements at 50% each to the Applicant and the Respondent. However, the Court must still consider whether orders to be made, if any, are just and equitable.

Whether the proposed Orders are just and equitable

1. In my view, the assets to be considered are:

   a)The proceeds of sale of the former matrimonial home at [K]; and

   b)The Respondent’s superannuation.

2. The items such as bank accounts and motor cars should remain in the possession of the parties who already have them.

3. However, it appears that the Applicant did not receive anything like a fair share of the proceeds of sale of the house. Out of a total of received by the parties of $133,213. 08, including the balance of the deposit, the Applicant received just $5,106.10. The balance, some $128,106.98, went to the Respondent.

4. The Applicant seeks just $50,000.00, which to my mind is more than reasonable. She would have a case for a greater amount, had she chosen to argue that proposition.

5. The Applicant also seeks a superannuation splitting order, using as a base amount the figure of $39,808.95, which is half of the gross value of the Respondent’s superannuation, $79617.89, disclosed at Item 45 of Part J of his Financial Statement. The Applicant has no superannuation.

6. In my view, in all the circumstances, it is just and equitable to make a superannuation splitting order in favour of the Applicant, using a base amount of $39,808.95.

7. The Respondent will be given a period of three months to arrange finance so as to pay the Applicant the sum of $50,000.00.

8. If either party wishes to pursue an order for costs, he or she may do so by way of a written submission, to be filed and served on the other party within 21 days. A further 14 days will be allowed for any written submission in reply.    

I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Judge Scarlett

Associate: 

Date:  1 May 2013