Downs and Downs (No.2)

[2020] FCCA 663

FEDERAL CIRCUIT COURT OF AUSTRALIA

DOWNS & DOWNS (No.2) [2020] FCCA 663

Catchwords:
FAMILY LAW – Property – application for an alteration of property interests – where all properties in dispute are encumbered – where mortgages, judgment debt and other costs significantly reduce value of real property pool – where chattel values are disputed and not independently valued – where disparity of incomes due to wife’s role as homemaker and mother – where husband pays child support – adjustment in favour of the wife for section 75(2) factors of 20 per cent.

Legislation:

Family Law Act 1975 (Cth), s.75(2)

Cases cited:

J & J [2006] FamCA 442

Applicant: MS DOWNS

Respondent: MR DOWNS

File Number: ADC 953 of 2019

Judgment of: Judge Young

Hearing dates: 26, 27 & 28 February 2020

Date of Last Submission: 28 February 2020

Delivered at: Adelaide

Delivered on: 4 March 2020

REPRESENTATION

Counsel for the Applicant: Ms James

Solicitors for the Applicant: Farrelly Legal

Counsel for the Respondent: In person

Solicitors for the Respondent: In person

ORDERS

1. Within 60 days from the date hereof, the respondent pay the applicant the sum of $81,000.

2. Otherwise each party is to retain any property in his or her name, including real property, bank accounts and chattels.

3. Within 7 days from the date hereof, the respondent disclose to the applicant the location of the Motor Vehicle 1.

IT IS NOTED that publication of this judgment under the pseudonym Downs & Downs (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADC 953 of 2019

MS DOWNS

Applicant

And

MR DOWNS

Respondent

REASONS FOR JUDGMENT

1. These reasons for judgment were delivered orally. They have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.

2. This is an application for alteration of property interests.  The applicant wife is 36 years old and the respondent husband is 38 years old.  The parties have three children aged nine, six and three years.  The children live with the mother and spend time with the father.  The parties began living together in 2007, married in 2009 and separated in mid-2018.  The wife was a student around the time the parties commenced their relationship, ultimately completing a degree, probably around the time the parties commenced living together, though the evidence is not clear about that.

3. At that time the husband was employed in Town F, Victoria.  According to the wife, the husband was also a developer, purchasing and selling properties.  In general, there was minimal evidence as to the value of the properties brought to the relationship by the parties.  In a sense, this was resolved by the wife suggesting overall contributions were equal.  The husband did not submit otherwise. 

4. In 2009, the parties moved to Adelaide.  The wife said she sold a unit in City M and purchased a property in Suburb J, Adelaide, using the proceeds of sale of the unit.  The proceeds have not been particularised in evidence.  The Suburb J property was then used as the matrimonial home.  The husband also purchased a property in Suburb J and sold it after a subdivision, some time during the time the parties lived in Adelaide.  The husband was employed as a fly-in fly-out worker for a substantial part of the marriage.  The wife was employed as a professional with a company in Adelaide.

5. In 2017 the parties relocated to Town D, Victoria and the wife sold her Suburb J property.  The proceeds of sale of the Suburb J property are presently held in cash by the wife in the amount of $103,000, which is the residue of the net proceeds of sale of $127,000 received by her.  $10,000 of the net proceeds of sale was used to pay a joint credit card debt and another $10,000 was given to the husband to pay other debts.  In addition, the wife has a sum of $19,000 in another bank account representing savings since separation.  The wife also has a HECS debt of about $31,000.   

6. The wife complains that the house in Town D was unsuitable and she was financially unsecure during the period she lived there.  The relationship broke down in 2018.  The wife moved back to Adelaide in 2019, living in rental accommodation with her new partner, Mr E.  The wife presently earns about $850 a week as a professional and receives child support from the husband of about $270 a week which, on my calculation, includes arrears of $20 to $30 a week.  Mr E earns about $700 a week, on average, from casual employment. 

7. The difficulties in this case largely revolve around the properties owned by the husband.  There are three pieces of real estate in his sole name.  The former matrimonial home is in Town D, Victoria.  There are also two other properties in Suburb B, South Australia with one located in Street C and the other located in Street A.  Each of these properties was purchased during the relationship.  The values of the properties were agreed between the parties. 

8. It appears that the Street A property is in a rundown condition.  The wife suggests that it was allowed to become run down by the husband.  He said tenants had left it in a dilapidated state.  I am unable to make a finding about that, but it is clear that the property overall is in very poor condition.  It appears that it may have fallen in value, but I am unable to make any findings about the reason for that.  The property is subject to a mortgage to Westpac which, on the face of it, exceeds the value of the property. 

9. There is also a property in the husband’s sole name at Street C, Suburb B.  The agreed value of this property is $220,000; however the building is in an unfinished state, requiring further expenditure of about $100,000 to complete construction.  The builder has claimed a lien for an unpaid contract price and the property is subject to a warrant for sale, to secure that debt and also for costs.  The amount claimed under the warrant for sale is $117,625. 

10. The third property in the husband’s name is the property located at Street C, Town D.  The property is a kit home placed there in about 2016 and is valued at $270,000.  This property is subject to a mortgage to Westpac.  Both the Street A and Town D properties are subject to a caveat lodged by the husband’s mother, who claims an equitable interest as chargee.  The caveat on the Town D property was lodged on 8 March 2019 after the parties’ separation.  The caveat on the Street A property was lodged on 27 June 2019. 

11. Mention should also be made of the fact that the husband purchased the Town D property in 2005.  In 2013, the house on the property burnt down and an insurance payout was received.  The wife says this was about $220,000 to $250,000 and she complains that the husband does not explain how that money was expended.  The husband said in cross-examination that the entirety of the payout was paid to the mortgagee.  That was not challenged. 

12. The present kit home on the Town D land was funded from a self-managed superannuation fund controlled by the parties, a fund where both parties were trustees.  The wife said that she contributed $20,000 to that fund and the husband had contributed $100,000 of his super, both amounts apparently rolled over from industry superannuation accounts.  This occurred some time between 2013 and separation in 2018, probably around about the time of the purchase of the kit home in 2016. 

13. Most or all of the money in the self-managed superannuation fund was used to purchase the kit home.  It was not contested that the use of the superannuation money in this way was a breach of superannuation laws and I find that there will likely be tax consequences for the parties.  Both parties were trustees of the self-managed superannuation fund, as I have mentioned, and both may be responsible for unspecified tax liabilities.  I was not given any evidence on that subject. 

14. There was extensive cross-examination of the husband about the value of various cars and other vehicles he owned.  It is not necessary to go into the details of that beyond the fact that he was cross-examined about 22 cars, a truck and four trailers.  The wife said that these items were valued at $128,500.  In cross-examination the husband gave or offered a total value of $11,400.  Neither party obtained valuations of these vehicles despite an order of the Court to do so. 

15. The wife attempted to suggest that the husband had stymied her attempts to obtain values by failing to provide vehicle identification and chassis numbers of the vehicles when requested.  The correspondence on that issue was not tendered, so I am unwilling to make the finding sought by the wife about that; however I consider that the husband has not taken any steps to make the process of valuing these chattels easy. 

16. One particular vehicle should be mentioned, the Motor Vehicle 1.  The husband said this was worth $5,000, as opposed to the assertion of the wife that it was worth $40,000.  The husband professed not to know where the vehicle was currently located, saying he had left it with his cousin who had stored it in a shed at an unknown location.  The husband said he wished to protect the car from salt air.  I found the husband’s evidence about this to be implausible.  I consider it likely he was attempting to put the car beyond the reach of the wife or beyond the reach of valuation or enforcement action, or each of those.  I propose to make orders that the husband is to disclose the whereabouts of this vehicle within seven days, with a view to facilitating enforcement of the orders that I will make. 

17. All in all, I was unimpressed with the husband’s evidence about the value of these assets.  His evidence in cross-examination was given in a truculent and dismissive manner.  I approach the evidence of the husband about the value of these items with scepticism.  In the absence of admissible evidence of value I propose to treat the husband’s asserted values as admissions against interest. 

18. I reject the wife’s submission that I should accept her asserted values.  I was referred to a decision of the Full Court of the Family Court in J & J [2006] FamCA 442. It was submitted that this was authority for that proposition but, in my view, that case is authority for the proposition that unchallenged evidence of value may be accepted in the case of admissible expert evidence. This was not a case of unchallenged evidence. The wife asserted I should order the sale of these vehicles in the circumstances. I am not satisfied, given the number and poor condition of most of the vehicles, or at least those appearing in photographs which was most of them, that this is a practical course. I consider that the husband was in a position to have these vehicles valued and his failure to do so is a failure to provide full and frank disclosure.

19. Another issue is an alleged debt owed to the husband’s mother.  She did not give evidence and neither party sought to join her in the proceeding.  According to a document which purports to charge the Town D property and the Street A property in favour of the husband’s mother, he owes her $88,477.  The advances to the husband were said to be:

    (a)$50,000 for the purchase of “a motor vehicle” in 2012;

    (b)$17,888 advanced to pay SA Water “for sewerage” in April 2015; no more details were provided;

    (c)A $700 cash advance in December 2018;

    (d)$12,000 for interest on loan repayments in January 2019; again no further details were provided; and

    (e)$8,000 advanced in March 2019 for the husband’s legal costs. 

20. The last three advances were made after separation.  There is no detail about the advance “for sewerage”, whether it is in relation to Street A or Street C or something else.  Recovery of the advance for the “motor vehicle” in 2012 would be statute-barred in Victoria where, as I understand it, the advance was made.  An acknowledgement of debt may enliven liability for the debt or the enforceability of a liability.  Of course, family debts are often treated differently, involving familial rather than legal obligations. 

21. It is also noteworthy that the wife agreed that $50,000 was advanced for “a motor vehicle” in 2012.  She says the vehicle was the Motor Vehicle 1 which the husband has stored at an undisclosed place.  The husband’s evidence about the $50,000 was inconsistent.  At one point he said in cross-examination the money was used to buy a “Motor Vehicle 2 and a Motor Vehicle 3”.  In other words, not “a motor vehicle” as is referred to in the charge document, but two vehicles. 

22. A few minutes later, he said the money was advanced in 2016 or 2017, not 2012. He said $30,000 of this money was used to obtain discharge of a mortgage on a property at Street O, Town F sold by the husband, and the balance was used for work on Street C, with some used to pay lawyers. The husband was clearly confused about this, or his history was unreliable, as the documents signed by him and his mother referred to the advance as having been made in 2012 for “a motor vehicle”.

23. I do not accept the husband’s explanations about this money.  I consider it more likely that the money was advanced by the husband’s mother in 2012 and used to purchase the Motor Vehicle 1.  I reject the husband’s evidence that he purchased the vehicle for $5,000, and I reject his evidence that it is now worth $5,000. 

24. I also do not accept that the husband is indebted to his mother in the sum claimed or that the husband’s mother will insist on repayment. The husband gave some evidence that, certainly at the time the advances were made, his mother was in a comfortable financial position. As to the balance of the moneys referred to in the charge document, I am not satisfied that the husband is indebted to his mother for those sums. They may have been advanced as gifts, including after separation. All in all, the husband’s evidence about these matters is unsatisfactory and unconvincing. As noted, his mother did not give evidence.

25. I have identified the property pool, and I will insert a table in the reasons as published below:

Description	Wife	Husband	Total
Assets
1	Street C, Suburb B	$220,000
2	Street A, Suburb B	$100,000
3	Street C, Town D	$270,000
4	ING Account funds from sale of Suburb J	$103,000
5	ING Account funds post separation savings	$19,000
6	Husband’s furniture and effects in Town D property	$5,000
7	Wife’s furniture and effects	$5,000
8	P and Q shares	$2,500
9	Wife’s Motor Vehicle 4	$15,000
10	Husband’s cars (various) minimum value	$11,400
Total Assets	$142,000	$608,900	$750,900
Liabilities
1	Mortgage to Westpac secured by Street A, Suburb B	$195,313
2	Judgment debt and costs owed to R Pty Ltd subject to warrant for sale over Street A, Suburb B	$117,625
3	Mortgage to Westpac secured by Street C, Town D	$87,058
4	HECS debt of wife at 13 March 2019	$31,415
Total Liabilities	$31,415	$399,996	$431,411
Net Assets	$110,585	$208,904	$319,489
Superannuation
1	Wife’s Super Fund S	$2,622
2	Husband’s Super Fund T	$12,755
Total Superannuation	$2,622	$12,755	$15,377
Total Assets and Superannuation	$113,207	$221,659	$334,866

1. The wife submitted that contributions were equal. The husband did not make any submission about that. I find that contributions were equal. However, I should say something about particular items. The wife’s HECS debt appears to have been largely incurred before the parties began to cohabit, although the evidence was unclear. I consider that the wife’s HECS debt is inseparable from her earning capacity and that that should remain her responsibility for the purpose of these proceedings.

2. The $19,000 in the wife’s bank account has, according to her, been saved since separation. I accept that at least the bulk of that has been saved since separation, having regard to her financial statement filed in March 2019. Neither party sought any adjustment of superannuation interests.

3. Both parties are in good health, relatively young, with solid employment histories.  The wife earns, according to her filed materials, about $44,000 a year for working four days a week on a casual basis.  I note that, however, her pay record which was tendered in evidence provides, if one takes her last 10 pays, an average income of $46,233 a year.  Perhaps not a great difference, but some difference. 

4. The husband said that he earns about $75,000 a year working in unskilled work.  His child support assessment dated 24 January 2020 gave his taxable income as $83,428.  The discrepancy was not explained, although it is possible, as the husband suggested, that there was some capital gain included in his taxable income as described in the child support assessment. 

5. Other than the disparity of incomes between the parties, which I am satisfied reflects the wife’s historical role as a homemaker and mother during the period of the relationship, the other most relevant section 75(2) factor, in my view, is the fact that the mother has responsibility for three young children. I note that the father pays child support, according to his current assessment, in the sum of $251 a week. He is in arrears for a couple of thousand dollars at the moment but I am satisfied that generally speaking he is compliant with the assessment.

6. The wife said that there ought to be an adjustment for section 75(2) factors in her favour of 15 per cent, resulting according to counsel’s submission in a 65/35 per cent split, which of course is actually a 30 per cent adjustment not 15 per cent. The husband did not make any clear submission about this, but I understood the substance of what he wanted was that there should be no orders for adjustment, leaving matters as they lie between the parties.

7. In my view, there ought to be an adjustment in favour of the wife for section 75(2) factors in the order of $60,000. This equates to an adjustment of 20 per cent, or a 60/40 per cent split in the wife’s favour. This, on my calculation as set out in the table which will accompany the published reasons, amounts to an additional payment to the wife, assuming she retains the chattels and moneys currently in her possession, of $81,108. The effect of such a payment is set out in the second table which will be inserted in the published reasons below:

Description	Wife	Husband	Total
Assets
1	Street C, Suburb B	$220,000
2	Street A, Suburb B	$100,000
3	Street C, Town D	$270,000
4	ING Account funds from sale of Suburb J	$103,000
5	ING Account funds post separation savings	$19,000
6	Husband’s furniture and effects in Town D property	$5,000
7	Wife’s furniture and effects	$5,000
8	P and Q shares	$2,500
9	Wife’s Motor Vehicle 4	$15,000
10	Husband’s cars (various) minimum value	$11,400
11	Husband pays wife	$81,108
Total Assets	$223,108	$608,900	$832,008
Liabilities
1	Mortgage to Westpac secured by Street A, Suburb B	$195,313
2	Judgment debt and costs owed to R Pty Ltd subject to warrant for sale over Street C, Suburb B	$117,625
3	Mortgage to Westpac secured by Street C, Town D	$87,058
4	HECS debt of wife at 13 March 2019	$31,415
5	Husband pays wife	$81,108
Total Liabilities	$31,415	$481,108	$512,519
Net Assets	$191,693	$127,796	$319,489
60%	40%
Superannuation
1	Wife’s Super Fund S	$2,622
2	Husband’s Super Fund T	$12,755
Total Superannuation	$2,622	$12,755	$15,377
Total assets and superannuation	$194,315	$140,551	$334,866
58%	42%

1. As all the properties are encumbered, an order for payment in this sum raises difficulties.  The wife sought an order for transfer of the Street C, Suburb B property to her, which theoretically has equity of about $100,000.  However, the husband’s mother has lodged a caveat over that property along with the Town D property.  The wife sought an order for removal of the caveat but, as the mother is not a party to this matter, that is not an order I can make. 

2. I expect there will be serious difficulties in any enforcement of the Court’s orders.  It is not clear to me how it might be best effected and I find the wife’s proposals, particularly in regard to the proposal for transfer of the Street C, Suburb B property to her, to be impracticable. 

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Young

Date:  24 March 2020