Flemming & Burris
[2022] FedCFamC2F 735
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Flemming & Burris [2022] FedCFamC2F 735
File number(s): MLC 10916 of 2021 Judgment of: JUDGE O'SHANNESSY Date of judgment: 19 May 2022 Catchwords: FAMILY LAW – final hearing – property orders – ex tempore judgment – dispute as to value of regional property – cross examination of property valuer – dispute as to contributions – orders for costs including some costs of the proceedings. Legislation: Family Law Act1975 (Cth) ss 4AA, 90SM, 90SF, 117 Cases cited: Hickey and Hickey and the Attorney-General [2003] FamCA 395
Keskin & Keskin and Anor [2019] FamCAFC 236
Stanford v Stanford [2012] HCA 52
Division: Division 2 Family Law Number of paragraphs: 82 Date of hearing: 18-19 May 2022 Place: Shepparton (Via Microsoft Teams) Counsel for the Applicant: Mr K Nicholson Solicitor for the Applicant: C Law Firm The Respondent: Appearing on his own behalf ORDERS
MLC 10916 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS FLEMMING
Applicant
AND: MR BURRIS
Respondent
ORDER MADE BY:
JUDGE O'SHANNESSY
DATE OF ORDER:
19 MAY 2022
THE COURT ORDERS THAT:
1.The Respondent pay to the Applicant the sum of $228,500 ("the payment") plus costs of $10,215 on or before 4.00 pm Thursday 25 August 2022 (90 days) ("the date").
2.Contemporaneously with the payment:-
(a)The Applicant do all such acts and sign all such documents as may be required to transfer to the Respondent at the expense of the Respondent all of her interest in the real property known as D Street, Town E, more particularly described as Certificate of Title Volume … Folio … ("the real property");
(b)The Respondent indemnify the Applicant against any liability pursuant to the ANZ mortgage ("the mortgage") and all rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind;
(c)The Respondent discharge and/or refinance the mortgage so that the Applicant has no liability in relation thereto.
3.In the event that the whole of the payment has not been made by the date and/or the mortgage has not been discharged or refinanced by the date then the parties do all acts and things to cause the real property be sold ("the sale") and the proceeds of the sale applied as follows:-
(a)Firstly, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the mortgage and any other encumbrance affecting the real property;
(c)Thirdly, so much of the payment as is then outstanding together with interest thereon at the rate of 7% per annum adjusted monthly from the date until the date of payment;
(d)The balance to the Respondent.
4.Pending the payment or completion of the sale:-
(a)The Respondent have the sole right to occupy the real property. During such of occupation the Respondent pay all instalments pursuant to the mortgage and all rates, taxes and like apportionable outgoings of the real property as they fall due;
(b)The parties hold their respective interests in the real property upon Trust pursuant to these Orders;
(c)Neither party further encumber the real property without the consent in writing of the other party.
5.There be liberty reserved to either party to apply to the Court with respect to the terms and conditions and execution of the sale.
6.The Applicant retain the Motor Vehicle 1.
SUPERANNUATION:
7.That paragraphs 7 to 13 inclusive of these Orders are binding upon the Trustee of the Super Fund F.
8.That a base amount of $99,264 is allocated as required by s90XT(4) of the Family Law Act 1975 to the Applicant out of the Respondent's interest in the fund being member number - …53.
9.In accordance with s90XT(1)(a) of the Family Law Act 1975:-
(a)The Applicant is entitled to be paid the amount calculated in accordance with PT6 of the Family Law (Superannuation) Regulations 2001;
(b)The Respondent's entitlement to payments out of his interest in the fund and the entitlement of such other person to whom a splitable payment may be payable, is correspondingly reduced by force of this Order.
10.That the Trustee of the fund Super Fund F ("the Trustee") shall do all such acts and sign all documents as may be 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 by paragraph 8 of this Order;
(b)Pay the entitlement whenever the Trustee makes a splitable payment out of the Respondent's interest in the fund.
11.These Orders have effect from the operative time and the operative time is 4 business days from the date of service of a sealed copy of this Order upon the Trustee by way of pre-paid post.
12.That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any moneys under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders and the chattels situated in or on the real property being deemed to be in the possession of the Respondent; and
(b)Any money standing to the credit of the parties in a bank account are to be retained by the party in whose name the account appears; and
(c)Each party hereby foregoes any claim they may have to any superannuation benefit that is belonging to or owned by the other save as provided for in these orders; and
(d)All insurance policies are to become the sole property of the owner named herein; and
(e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(f)Any joint tenancy of the Applicant and Respondent in any real or personal estate is hereby expressly severed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Flemming & Burris has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE O’SHANNESSY
These are the settled reasons of an ex tempore judgment.
The matter of Flemming & Burris came for final hearing before me in the March circuit sittings of this Court sitting at Shepparton. That circuit was conducted electronically over Microsoft Teams because of the continuing COVID-19 pandemic. When the matter came on for hearing in March 2022, Mr Burris (‘the Respondent’), sought an adjournment of the matter to enable preparation of further expert evidence to qualify or challenge the then existing single expert valuation of Mr G. I adjourned the matter on his application (which was opposed) and reserved costs.
The matter then came for hearing before me in the May circuit of this Court. The Respondent represented himself, and Mr Nicholson of counsel represented Ms Flemming (‘the Applicant’). This circuit was conducted over Microsoft Teams, again due to the continuing COVID-19 pandemic.
The question I must determine is how to divide the parties' property after a long relationship. The Applicant is 54 years of age and works as a manager in retail sales. The Respondent is 53 years of age and works as a manager in community service. The parties commenced to live together in a de facto relationship, within the definition of section 4AA of the Family Law Act 1975 (Cth) (‘the Act’), in late l992. The parties did not marry but lived together until November 2020.
The parties were fortunate to have two children, [child 1] who was born in 1999, and [child 2] born in 2002. The matters in dispute in this proceeding include the value of the parties' property at Town E, an area near Region H in the state of Victoria. The other matter that is in dispute is the weight to be given to the different contributions of the parties over their long relationship. In addition, the parties dispute what weight should be given to the parties' disparity of income at this point after that long relationship. There are also some disputes in regard to the quantification of the asset pool. The proceedings were conducted before me in an efficient manner by counsel for the Applicant and by the Respondent appearing in person.
The material relied upon by the Applicant was:
•The Initiating Application filed 5 October 2021
•The Applicant’s Affidavit filed 19 April 2022
•The Applicant’s Financial Statement filed 19 April 2022
•The Respondent’s Affidavit filed 15 February 2022
•The Respondent’s Affidavit filed 10 May 2022
The material relied upon by the Respondent was:
•The Respondent’s Affidavit filed 10 May 2022
•The Respondent’s Financial Statement filed 10 November 2021
•The Respondent’s Financial Questionnaire filed on 10 November 2021
The exhibits tendered during the proceedings were:
H1 Cross examination questions list sent by the Respondent to Mr Cummins
W1 Screenshots of the Applicant’s bank accounts
W2 Financial questionnaire by the Respondent
W3 Superannuation form 6 from the Applicant
C1 Invoices from Mr G
H2 Costs notice of 2 March 2022
W4 Letter from Super Fund F
The list of assets and liabilities from the Applicant's outline of case as is below:
Property interests, superannuation and financial resources Description Ownership Applicant’s Value Respondent’s value ASSETS 1 D Street, Town E Property Joint $600,000 $550,000 2 Joint Bank account Joint $11,400 $6,000 3 Wife’s Bank Vic account Wife $48,000 $55,000 4 Husband’s Bank Vic account Husband $2,701 $Nil 5 Motor Vehicle 1 Wife $12,000 $$15,000 6 Farm plant and equipment Joint $10,000 $5,000 7 Funds owed to Wife Wife $15,000 $15,000 Assets subtotal $699,101 646,000 LIABILITIES 8 Mortgage Joint $137,500 $137,500 Liabilities subtotal $137,500 $137,500 SUPERANNUATION Name of Fund Type of interest Member Applicant’s value Respondent’s value 9 Super Fund J Accumulation Wife $88,765 $84,000 10 Super Fund D Accumulation Husband $292,000 $286,000 Superannuation subtotal $380,765 $370,000 TOTAL (assets – liabilities) $561,601 $508,500 TOTAL (assets – liabilities + superannuation) $942,866 $878,500
LAW OF ALTERATION OF PROPERTY OF A DE FACTO RELATIONSHIP
This as an application for property alteration or settlement pursuant to Part VIIIAB of the Act and I set out the key provisions that it is common ground I am to apply below.
Section 90SM(1), (3) and (4) of the Act states:
Section 90SM – Alteration of property interests
(1) In property settlement proceedings after the breakdown of a de facto relationship, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the de facto relationship or either of them--altering the interests of the parties to the de facto relationship in the property; or
...
including:
(c) an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the de facto relationship; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the de facto relationship or a child of the de facto relationship, such settlement or transfer of property as the court determines.
...
(3) The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court must take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(c) the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and
(e) the matters referred to in subsection 90SF(3) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.
By section 90SM(4)(e) I am to take into account section 90SF(3) and that provision states as follows:
Section 90SF – Matters to be taken into consideration in relation to maintenance
(3) The matters to be so taken into account are:
(a) the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship ); and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 90SM in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(o) the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i) a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii) a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(p) the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i) a party to the subject de facto relationship; or
(ii) a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(q) any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
(r) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(s) the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
(t) the terms of any financial agreement that is binding on a party to the subject de facto relationship.
Those provisions were brought into the Act (and hence give this Court the task of determining property alteration or property settlement arising from de facto relationships) from 1 March 2009. The concepts within those provisions (largely but not entirely) mirror corresponding provisions in Part VIII of the Act that apply to property alteration or property settlement arising from legal marriage.
Stanford v Stanford
In the High Court of Australia case of Stanford v Stanford [2012] HCA 52; (2012) FLC 93-518 (‘Stanford’) the majority stated some fundamental propositions about section 79 proceedings. Section 90SM(3) mirrors section 79(2) and so Stanford is applicable in this case.
In Stanford the essential issue was whether it was just and equitable to make any property order at all, in circumstances where the consortium vitae or marriage relationship had not broken down by way of a separation. The parties had become physically separated due to the ill-health of one of them and that party being in residential care and the other remaining in the matrimonial home. The proceedings, for the party in ill-health, were conducted by a case guardian who was also the beneficiary under the will of that party.
The Family Court of Western Australia had made an order for a property settlement that would have necessitated the sale of the former matrimonial home where the husband continued to reside. For 37 years prior to the wife moving to a nursing home, the parties had made their matrimonial home in a house registered in the husband's name.
The wife’s expenses in accommodation were being met and she had the benefit of a sum set aside in the event she needed anything further. It was the second marriage for both of the parties. The wife's case guardian was a daughter from her previous marriage. The husband appealed to the Full Court of the Family Court of Australia and before the conclusion of that appeal the wife died.
In the High Court the husband’s argument that there was no power in the circumstances to make a property settlement order was dismissed and the case turned on whether, considering section 79(2), it was just and equitable to make a property settlement order at all and whether the circumstances of section 79(8) of the Act, which relates to the continuation of proceedings after the death of the parties, had been complied with.
The High Court varied the order of the Full Court and found that in the circumstances it was not just and equitable that a property settlement or property alteration order be made at all (and also that section 79(8) had not been complied with). This was so despite 37 years of marriage and contribution by the wife. Section 79(4) contribution, even 37 years of it, was not to be conflated with the section 79(2) “just and equitable” requirement but should be considered separately and first. The result of the High Court's order was that the property settlement order as originally made was dismissed with costs.
Apart from the general observations about section 79, the High Court also observed that community of ownership arising from marriage has no place in the common law and that it should not be concluded that the making of an order is just and equitable only because of, or by reference to, the matters in section 79 without a separate consideration of section 79(2).
The majority observed at [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... The question posed by s 79(2) (and/or section 90SM(3)) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
The majority continued at [41-42]:
...The fundamental propositions that have been identified require a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interest during the continuance of the marriage.
In many cases where an application is made for property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice by made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and the wife. No less importantly, the express implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship... And the assumption that any adjustment of those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4) (and/or section 90SM(3)).
In this case it is common ground that the parties no longer have, and will not have in the future, the common use of the major asset of the parties, the jointly owned former relationship home.
In addition to those considerations each party here contends that it is just and equitable that I make section 90SM(4) property alteration orders. Because of those matters I find that it is just and equitable to make property alteration orders in this case.
In Stanford the High Court did not go on to comment upon how section 79(4) should be applied where it was just and equitable that a property alteration or settlement order be made. Stanford was not concerned with the nuts and bolts of how section 79(4), or section 90SM(4), was to be applied in the ordinary run of cases, to the extent there is such a thing.
THE PREFERRED APPROACH
In Keskin & Keskin and Anor [2019] FamCAFC 236; (2019) FLC 93-932 (‘Keskin’) the Full Court, Strickland, Kent & Austin JJ, at [44] approved what was the age old and pre-Stanford “preferred approach” as to the how the nuts and bolts of section 79(4), and hence section 90SM, fitted together:
[20] In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) [2003] FamCA 395; (2003) FLC 93-143 at [39] the Full Court, in setting out what the case law revealed as the “preferred approach” to the determination of an application under s 79 of the Act, referred to four inter-related steps, including that “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”. The Full Court did not purport to elevate the preferred approach as being mandatory, as was observed by a later Full Court in Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 at [61]- [63], [72]. However, adoption of that preferred approach is a means by which many of the mandatory factors in s 75(2) of the Act, in particular paragraph (b) – the income, property and financial resources of each of the parties; paragraph (ha) – ability of a creditor to recover debt; paragraph (n) – the terms of any proposed order under s 79 of the Act; can be considered, as these must be considered, in determining any adjustment pursuant to s 75(2) of the Act. Conversely, if the preferred approach is not adopted there must be a means discernible from the reasons to identify that these relevant mandatory s 75(2) factors have been considered, and how they have been brought into account, in the making of any s 75(2) adjustment...
That preferred approach set out at [39] of Hickey and Hickey and the Attorney-General [2003] FamCA 395; (2003) FLC 93-143 (‘Hickey’) is as follows (citations omitted):
[39] The case law reveals that there is a preferred approach to the determination of an application pursuant to the provisions of section 79. That approach involves four interrelated 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 hearing. Secondly the court should identify and assess the contributions of the parties within the meaning of section 79(4)(a), (b) & (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 section 79(4) (d), (e), (f) & (g) (“the other factors”) including, because of section 79(4), the matters referred to in section 75(2) so far as they are relevant and determine the adjustment study (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.
[Emphasis added.]
Lest it be said there is a conflict between the High Court’s disavowal of “entitlement” to a section 79 order by mere separation and/or section 79(4) contribution on the one hand, and the use of the word “entitlements” in the Hickey passage cited above, I regard the use of that word in the above context as synonymous with “assessment.” I will have regard to what I find to be the contribution based assessment rather than entitlement.
The division or adjustment of property acquired over the parties’ lifetime is a serious, stressful and emotionally intense legal matter. Many family lawyers find that failing to have regard to the preferred approach in negotiations, mediation or litigation (including submissions) is likely to widen the areas of dispute and make resolution by agreement more difficult and often results in a party, or both, merely seeking what he or she simply wants or regards as fair from his or her point of view.
The preferred approach assists me in making a principled and orderly determination of the parties’ property dispute and the parties helpfully addressed me about those matters.
MATTERS IN DISPUTE
I note that both parties seek that there be orders and each implicitly submits that it is just and equitable that I make orders. The dispute is the weight to be given to the various factors. Before coming to the law, I make these general observations. I found both parties to be honest people doing the best they could to assist the Court in sorting out their dispute about how their property should be divided. There were no submissions made by counsel for the Applicant relating to the Respondent's credibility, nor any submissions made by the Respondent relating to the Applicant's credibility. The parties did not disagree about very many things. They disagreed about the weight to be given to various facts as a matter of law, and the value of their major asset.
Step 1: The Asset Pool
Turning to the disputes as to step 1 of the proceedings and each of the items of the pool, the first major dispute is the value of the former matrimonial home on what is known as a lifestyle/rural block. The parties moved to this block from Melbourne in about 2016 and had purchased that property with the assistance of a mortgage loan and the proceeds of sale of their previous properties for about $415,000. The property is of 40 hectares and is some short distance out of town, and is described as having attractive views. It has an undulating terrain but rises to what can be described as the back of the property, that is further away from the house. I described the property to the valuer as a nice property, and he agreed.
It must be noted that the Respondent seeks to retain the property and joins with the Applicant in seeking that there be a sum paid to her contemporaneously with her transferring all her right, title and interest in the property, and the Respondent refinancing the existing mortgage.
The Respondent seeks that I determine the value of that property as $500,000. The jointly retained expert Mr G has asserted at the time of his December 2021 valuation that the value of the property was $600,000. At the time when the property was inspected by the valuer, the Respondent showed him around and pointed out to Mr G various defects in the building of the property. The valuation report included the following descriptions of the property:
The subject property comprises an older single storey contemporary 3 bedroom / 3 bathroom brick veneer dwelling, with a colourbond metal deck roof, on a site area of approximately 40 hectares. Ancillary improvements include a large pergola, double brick garage and machinery shed. The land includes a mix of cleared grazing country plus rising bushland, and offers expansive district views.
…
Condition of structures – comment:
The owner has provided advice on the property (mainly building) condition. The following comment is made around that advice, including its impact on market value and marketability.
Dwelling condition
Condition presents as reasonable, however fitout is dated overall, and there are signs of associated wear and tear. Whilst generally considered to be in keeping with the building's age (including internal fitout), and part of 'general maintenance’ more significant items, consistent with that observed at inspection, are as follows:
…
Overall comment is that the valuation assumes, based on observations made at inspection, the buildings to be in reasonable structural condition, with no items of a significant structural nature requiring attention. In the event of formal building advice including commercially based costings being received, it is recommended this be forwarded to [K Valuers], for comment on potential valuation impact.
[Emphasis added]
It must also be noted and it is common ground that for the purpose of a bank valuation it was the same valuer Mr G who had valued the property for the bank in December of 2020. Hence I find that at the time Mr G came to value the property as a joint expert for the purpose of these proceedings, he was familiar with the property.
I understand from the evidence given by the valuer under cross-examination from the Respondent, that in December 2020 he had asserted a value for bank purposes of $530,000. Arising from the Respondent's application to adjourn the final hearing in March 2021, the parties jointly retained an expert who prepared a report as to the defects in the property. To the extent that that expert had expertise to assert a cost of rectification of various matters, that expert asserted that roughly $55,000 could be spent improving the property. There were a number of further matters that the building expert was unable to fix a cost to. That building report was then provided pursuant to the March 2021 orders to Mr G, the expert. He considered that report and went one step further and estimated, based on his experience, the likely value of the further rectification works described in the building report that values had not been affixed to.
There was no challenge or quarrel with the values that Mr G affixed to those items by either the Applicant or the Respondent in December 2020. The net result of that was that Mr G provided an addendum to his first report in which he asserted that due to the nature of the property, the dwelling and sheds would not be the driving factor for a purchaser in the current market of a lifestyle/rural property. Nonetheless, Mr G opined in his addendum that, knowing of those defects, the value of the property and the market value of the property was unchanged in his opinion. He asserted this on the basis that the age of the property meant that any prospective purchaser would be alerted to likely defects or deterioration in the property.
Hence, the precise identification of those defects would not materially affect the value in Mr G's opinion. Mr G opined further that if all of the identified works were undertaken at a cost of about $85,000, then the property would have the increased or improved value of up to $733,000. That is, if the property was repaired to take account of each and every defect identified in the report, it would have considerably greater value than “as is”. The Respondent was critical of Mr G's report and his addendum. He challenged the report on what he saw as a too large an increase in the value of the property from the December 2020 valuation. Implicit in his criticism of Mr G's opinion was the circumstance that the defects to the property had not been pointed out to the valuer for the bank valuation in December 2020, but they had been pointed out by the Respondent to the valuer for the December 2021 valuation for the purpose of these proceedings.
The Respondent further criticises the valuation on the basis that the valuer only walked around the house block and sheds, and did not walk over or drive over the remaining bulk of the property. In articulate terms, the valuer explained that to walk over the entire property was not necessary. He had examined aerial photographs of the property, had inspected it in December 2020 and then again in December 2021, and was confident that his understanding and description of the property was accurate.
The increase in the valuation from December 2020 to December 2021 appeared to confound the Respondent. Mr G's evidence was that there is currently a rising and active market for lifestyle/rural blocks within convenient travel distance to a major regional centres, such as the parties' property.
I have taken into account all of the criticisms made of Mr G's report by the Respondent. I am satisfied that Mr G has considerable expertise and knowledge of the market demands for, and the nature of, properties in the area of the parties' property. Mr G's reports, both his first report and his addendum report, are detailed and careful. Mr G was careful in his evidence in a long cross-examination by the Respondent. Mr G carefully considered each of the propositions and questions put to him by the Respondent.
Conclusion as to the value
For those reasons I accept Mr G’s evidence and I find that the value of the property is, as asserted by the Applicant, $600,000.
The next dispute in regard to the pool is what I would describe as the Applicant's "keep". The Applicant asserts her keep is of four items: a loan due from her daughter of $15,000; a motor car with an agreed value for the purpose of these proceedings at $15,000; and remaining funds in a bank of about $48,000, or a total of $78,000.
The Respondent asserts that bundle of assets should be treated by me as $85,000 on the basis that the Applicant had available to her after separation, as a result of decisions he made with the Applicant's consultation, that she receive the total sum of $70,000 or $71,000, being the whole of the party's then existing savings and the proceeds of sale of their tractor and of their Motor Vehicle 2.
It is common ground that soon after separation the Applicant was provided with $70,000 or $71,000. It is also not contested that the Applicant applied some of those funds to payment of a bond, rent in advance and the establishment of her rental premises in a nearby regional city. In those circumstances, I find that it is proper, just and equitable to treat the Applicant as having funds in the bank of about $48,000, not the notional sum of $55,000 that she would have otherwise had if she if she had not spent money on establishment of a rental property. I note that the $15,000 lent to her daughter came from the $70,000 or $71,000 that the parties provided to the Applicant soon after separation. Hence the Applicant's keep should be regarded as $78,000, not $85,000 as sought by the Respondent.
The next item of property in dispute is what I regard as the Respondent's "keep". It is common ground that at a time after separation the Respondent applied about $11,400 from funds in their then-active joint account, indirectly via withdrawals and deposits, to payment of his legal fees. Where legal fees of a party are paid from funds that would otherwise be available or could have been available for distribution between the parties, it is just and equitable that they be treated as an asset in the hands of the party getting the benefit of that payment or, in colloquial terms, be regarded as an add-back. In frank and helpful terms, the Respondent conceded that those funds came from a tax refund that was available to him from earnings that he had made during the 2020 financial year, during cohabitation.
It was otherwise accepted that the Respondent at the moment had about $200 in the bank, and the Respondent's estimate of the value of his plant and equipment was agreed at $5000. I note that the Applicant had chosen not to dispute in the hearing before me matters such as whether her motor car was of a slightly lower value than that asserted by the Respondent, or whether the items that the Respondent retained such as remaining farm plant and equipment was at the slightly lower value as asserted by him. The long and the short of it is, on those less important chattels, the Applicant accepted what the Respondent said without challenge before me in these proceedings. Likewise, she accepted what he said he had available in savings as at this time. Hence I find that the Respondent's keep is $16,620.
The remaining issue is the issue of superannuation. There was some dispute as to whether the Respondent had complied with my earlier orders that would ensure up-to-date figures of both parties' superannuation were available to me at this time. I directed during the hearing the Respondent to obtain overnight a current figure for his superannuation, as pressed by counsel for the Applicant. The Applicant's solicitors had obtained on or about 1 March this year a form 6 which showed a valuation or value of the Respondent's superannuation as $292,482. It was not disputed that proximate to this hearing the Applicant had superannuation of $88,765. On the morning of the second day of the hearing, the Respondent produced a printout from his superannuation company or trustee website which showed that the balance as at 11 May 2022 of his superannuation was $287,293.65.
It was asserted that I should accept the form 6 valuation taken on 1 March, not the website figure on 11 May. It was not in contention that the superannuation fund was other than an accumulation fund. I find and accept that the value of the Respondent's superannuation is $287,293.65.
Hence I find that a summary of the pool of assets is as follows. Equity in the home and lifestyle/rural block after deduction of the mortgage is $462,500, as asserted by the Applicant. I find that the Applicant's keep is $78,000 and the Respondent's keep is $16,620. Hence the non-super pool is $557,120. The superannuation pool to be divided between the parties is $376,058 (omitting cents) and the “pool” is as set out in the following table in these settled reasons:
Equity in home/lifestyle/rural block $462,500 Applicant’s ‘keep’ $78,000 Respondent’s ‘keep’ $16,620 Total non-superannuation assets $557,120 Applicant’s superannuation $88,765 Respondent’s superannuation $287,293 Total superannuation $376,058 Total assets $933,178
Step 2: Contributions
I now move to step 2 of the preferred approach. The matter in dispute between the parties was the weight to be given to the greater direct contributions initially and during the relationship, and the greater earnings and application of those earnings to capital items by the Respondent.
It was not disputed that at the time the parties got together that the Applicant had assets of little value and, worse, was burdened with debt which ultimately drove her to declare bankruptcy in or about 1994. The debt that the Applicant brought into the relationship related to a family business, which she had worked in and where she was not paid for her services. When the business had been unsuccessful, some part of that debt was attributed to her. However, at the time of the parties commencing living together she was in paid employment in a retail outlet.
On the other hand, the Respondent was in paid employment, having commenced that paid employment in 1989. He brought in some modest amount of superannuation from that paid employment and he asserted, in closing but not in evidence, some small amount of superannuation from when he commenced work on a part-time basis at about 16 years of age. I accept that the Respondent had some superannuation at the commencement of the relationship. He estimates that I should attribute an overall value of that superannuation, and its earnings since, of something in the order of $50,000, and that I should put that $50,000 aside, or quarantine it, from the division.
Another significant matter of the financial history of the parties is that in or about 2000 the Respondent took a redundancy package of about $100,000 from the employment that he had had during the relationship to that point in time. He applied all of that to reduction of the parties' mortgage on what was then their de facto relationship home. However, I have no actual value of what the Respondent’s superannuation was at the commencement of the cohabitation.
The Respondent asserts that he had equity in a property purchased in early 1993 of about $15,000. There is no documentary evidence of what equity or deposit he had paid. It is common ground that he borrowed the bulk of the purchase price. However, I find on the balance of probabilities that it would have been necessary in 1993 for the Respondent to have had a deposit in savings. The exact amount of that is not known but I accept the Respondent's evidence that it is likely to have been in the order of $15,000. Further to that, a few years later he received an inheritance in the sum of $20,000.
Hence, the Respondent points to his equity or deposit on a flat of about $15,000, his superannuation that he had when the parties got together, his period of employment of about three years which would likely be reflected in the redundancy payment that would be received eight years later, and his inheritance, as indicating that he made a greater initial contribution. I accept the evidence and assertions of the Respondent in that regard. There is a lack of documentary evidence as to exactly what the equity was, what the superannuation was, whether there was a calculation on the redundancy package based on the entire period of employment, and the amount of the inheritance. Save for the fact that his evidence in that regard was uncorroborated by documents, it was not otherwise challenged. Notwithstanding the lack of documents, I find that the Respondent was attempting to be accurate in those matters and I accept his evidence.
In addition, at this second step dealing with contribution, the Respondent asserts that his greater effort in earning income was applied to capital, and in that circumstance his hard work should be given additional weight. Further, he asserts that at all times he was supportive of the working life and career life of the Applicant, and that he urged her to undertake training and to accept positions of responsibility for the personal advancement of herself, but also for the advancement of the family.
It is undisputed that he was supportive of the Applicant’s working life. Further, it appears he holds the Applicant's abilities in high regard. However, he was disappointed that she did not undertake further education or training to advance her career.
I accept the following evidence from the Applicant's evidence from her affidavit filed 19 April:
16. After I finished at the … business in around 1992 and took my position with … Employer L, I remained in that position until I took maternity leave. I went back to work at the toy company part time after [child’s] birth. I had a job share arrangement of 3 days one week and 4 days the following week. I believe I took approximately 6 months of maternity leave for each child.
17. I worked for [store 1] in [suburb] for approximately 10 years commencing in around 2006. Initially the work was casual employment between 9:00am and 3:00pm as the children were in Primary School and I was needed to provide care when they were not at school. I continued in my role as primary home maker, cooking, cleaning, shopping and gardening. My position at [store 1] became permanent part time and as the children grew older I took on a supervisor's role with more hours and some weekend work. I was offered nightshift manager which meant I finished work at 7:00am, came home and got the children ready for school and tidied up, slept until 2:30pm, and then collected the children from school. I maintained this position for a period of 6 months. A vacancy came up for a full time department manager which I accepted. This was the position I held when we relocated to [Town M]. Unfortunately [town] [store 1] could only offer me a casual position. I am now working full time at [store 2] as a shop manager. I started my career with [store 2] in the [town] store, I was promoted to Manager at the [Town N] store, then manager of the [Town O] store. I am now the paid manager at the [Town P] store. I received an income of $57,652 gross per annum for 2021. My tax was $9,203. My income was usually directed towards groceries, clothing and children's expenses.
It needs to be observed that the Applicant's work life included not only the issue of caring for the children and the home but at times included nightshifts ending at 7 am. I conclude that both the Applicant and the Respondent worked very hard in different roles over many years. Because of that hard work, whether in paid employment in the middle of a nightshift or during the day, or in the often arduous nature of the Respondent's employment, or in homemaking and caring for the children, the parties’ contributions during their relationship will in my analysis have equal weight.
Hence, the dispute between the parties comes down to whether I should regard their contributions over the 28 years or so of the relationship as equal, as sought by the Applicant, or as in the Respondent's favour as sought by him. The Respondent seeks that I regard those contributions as 60/40 in his favour. The consequence of that is that he presses, once the numbers are looked at, that his contribution overall be regarded as valued or assessed at one and a half times the Applicant's contribution. 60 per cent is one and a half times 40 per cent. It starts off by saying, well, I should be regarded as having a 10 per cent greater contribution than the other party. But, of course, if two people have 10 apples to divide up and they are initially divided equally but, when one apple is put on the other side, one of the parties ends up with one and a half times what the other does. When looked at in those terms, it can be seen that it would not be a proper exercise of my discretion pursuant to the legislation to regard the Respondent's overall contribution as one and a half times the Applicant's. It is urged by the Applicant that I should treat it as equal.
I must take into account all of the parties' contribution. The long ago contributions as well as the many years of contributions since. I do regard the Respondent as having made a greater contribution initially and, to a degree, that should be recognised. However, the extent of the many years of contribution, year after year after year, day after day and night after night, of both their contributions mean that that initial disparity of contribution is outweighed very substantially by the enormous and continuing contributions of both of them ever since. I conclude, in percentage terms consistent with the preferred approach, that overall the parties' contributions should be regarded as 51 per cent to the Respondent and 49 per cent to the Applicant. That is, there is a small contribution disparity. I make that finding notwithstanding that the proceeds of sale of the first property brought in by the Respondent, which after some years of cohabitation were about $80,000, directly funded the next property which funded the next and so on.
Step 3: Section 90F(3) factors
I now move to step 3. It was asserted in opening by the Applicant that I should regard the income disparity between the two parties as warranting an adjustment of five to 10 per cent, or in the range of five to 10 per cent. In closing, that was described as only five per cent. At my invitation, counsel for the Applicant undertook the exercise of identifying what the post-taxation disparity of income between the parties was.
Consistent with the Applicant's many years of hard work and approach of supporting herself and the family where she could, post-separation she obtained a position of modest payment but significant responsibility in retail. The Applicant earns, and it is not disputed, about $1052 per week in paid employment and pays taxation of about $172, leaving net of tax about $880 per week or leaving $45,760 per annum net of tax.
The Respondent has had a less interrupted employment career and trajectory, though it has been interrupted at times. His current occupation is consistent with the expertise built up in a long, hard-working life. He earns considerably more in gross terms than the Applicant. His weekly salary is in the order of $1830 per week with tax of $434, leaving a net of tax figure of $1396 per week or, net of tax, $72,592 per annum.
Hence, the parties have a disparity of income between them of about a tad under $27,000 per annum. The Applicant is 54 and the Respondent 53. They are both likely to have many years of working life ahead of them. That is particularly so, given their personal characteristics of always seeking work and seeking to find a way to be gainfully employed.
The Respondent seeks that there should be no prospective factor adjustment pursuant to section 90SF at this third step of the preferred approach. I find that balancing all of those matters, I should look at the non-superannuation and the superannuation assets differently. Indeed, both parties sought that I do so. That is self-evidently appropriate as the reality is that neither party will be able to afford to retire and take their superannuation for many years. Each of them will be working for many years and are likely to retire at about the same time and at that time will be unable to have any further income, save for the possibility of some very modest part-time employment.
Balancing all of those matters, I find that a third step, section 90SF(3) adjustment should be made and it should be made in the Applicant's favour as to the non-superannuation assets. It should be made in a greater figure than five per cent and in my judgment, should be made in a figure of six per cent, which is about $33,000. That would create, at six per cent, a disparity between the parties on account of section 90SF factors of about $66,000.
I am fortified in giving weight to the income disparity by the circumstances that post-separation, by his usual and characteristic care and lack of extravagance with money, the Respondent has been able to save and spend about $30,000 on improvements on the property. The bulk of that was actually put in place after the valuation. I find that the cosmetic improvements, though costing some $30,000, would be unlikely to add in any significant way to the value of the property. However, that the Respondent had the capacity to spend that money from savings indicates the significance of the income disparity.
The Applicant's career trajectory or progression in her occupation was interrupted by two significant matters. The first is that her employment was suspended for the birth and caring of each of the children. The second is that she had a not insignificant position in retail which she resigned and started all over again, upon choosing to move to regional Victoria with the Respondent for the advancement of their family's overall welfare. She has been successful in doing so but it may be that her income would be greater, had she remained in the previous position. It was a slight exaggeration in her affidavit to say that she had no choice in relocating, however I accept that she felt that she had no choice in the circumstances of the Respondent being the major income earner and she was then in an intact relationship, including having the care of two children. At the time that the Applicant had to cease her previous employment and relocate to regional Victoria to support the Respondent in his new employment and care for the children, as they were about 16 and 14. The Applicant could have simply refused to cooperate and stayed where she was. To expect that she would do so in an intact de facto relationship where each party supports the other is unrealistic.
I also take into account the circumstance that since separation, the Respondent has had the advantage of remaining in the matrimonial property, albeit he has serviced the mortgage and paid the rates and insurances. The net cost of that is about $100 per week less than the rent that the Applicant has had to pay in rent.
Step 4: Division of assets
Balancing all those matters, I find that it is just and equitable that the parties' non-super assets should be divided in the proportions of 45/55. 55 per cent of $557,120 is $306,416, less the Applicant’s ‘keep’ of $78,000, the Applicant will require a payment of $228,416 which I round to $228,500. I note that is very close to the $230,000 sought by the Applicant in her outline of case.
Hence, I will adopt the form of the orders of the Applicant but insert the figure of $228,500 instead of the figure of $230,000 and I will allow the Respondent the further period of 90 days (not 60) to make that payment and refinance the mortgage before there is a default sale.
In the circumstances where the Respondent presses to retain that property, I have considered whether I should have a percentage based on the sale or whether it should be a fixed value for the default provision. Based upon all of the submissions to me and allowing that a default sale will put the risk or benefit of any increased value but also the cost of sale on the Respondent, if I fix the sum (and it would be shared if I make a percentage division), I have determined that it is just and equitable in the circumstances (where the Respondent appears realistic and makes every endeavour to retain the property) that I should fix the default provision for a provision of a fixed sum.
As to the superannuation, I have taken into account that the Respondent brought in some superannuation back in 1992 in my overall contribution analysis and on the non-superannuation assets. However, balancing all of 90SM and 90SF in regard to the superannuation, I find that the superannuation should be divided on an equal basis in the circumstances of the future section 90SF circumstances of the parties being likely to be roughly equal at the time of separation. This is notwithstanding that the Respondent is likely to make greater contribution than the Applicant in the meantime because of his greater income. However, I have taken that greater income into account in the six per cent section 90SF(3) adjustment. Hence the figure for the superannuation adjustment should be $99,264, not the figure in the Applicant’s outline of case of roughly $101,000. I note that procedural fairness has been provided to the trustee of the super fund.
I find that those orders overall are just and equitable.
Application for costs
I was also pressed to deal with the issue of costs that had been reserved. The Applicant seeks an order for costs effectively in the sum of $2,978, including one half of the fees of Mr G's attendance, being $1,235. Mr G was available throughout the whole of the day yesterday, 18 May 2022. He was briefly, if at all, cross-examined by counsel for the Applicant but was extensively and carefully cross-examined over some considerable time by the Respondent. His attendance over the whole of the day was necessary. His fees overall for his attendance are, in my view, reasonable.
The issue in regard to those fees where it was only the Respondent who sought that he be available for cross-examination is whether those fees should be paid equally as they have been billed, or whether the Respondent should pay to the Applicant what is her half of those fees as well. I take into account the whole of the matters under section 117 of the Act and the most significant matters that I take into account are as follows.
Both parties have the financial capacity to contribute to those fees. The endeavour that the Respondent pursued was to achieve a significant reduction in the value of the matrimonial home, which he sought to keep. Based on his opinions and views of the world, it was not unreasonable that he do so. I do not find that it was unreasonable that he do so, however the avenue that he pursued has been entirely unsuccessful. The time and money expended on the challenge to the valuer's report, which include the costs thrown away and reserved for the March 2022 sitting, did not achieve any outcome. In fact, the careful cross-examination of Mr G only served to convince me that Mr G's opinions were carefully obtained as a result of his considerable expertise. He brought considerable judgment, knowledge and experience to bear in his opinion which I have ultimately accepted.
The starting point for costs is that each party pay their own and that each party pay half of the expert's fees. The professional fees sought of the $2,978 figure includes one half of the addendum report that was necessary as a result of the building report. The starting point is subject to the further provisions of section 117(2). The exercise was entirely unsuccessful and costs are compensatory, not in any way punishment. Only scale costs are sought. Only the actual costs of the expert are sought. In all of the circumstances, it is appropriate that the Applicant does not bear the costs of the Respondent’s endeavour to challenge the value, legitimate though the challenge was. Hence, the order will need to be amended so that in addition to the sum of $228,500, the Respondent will at that time pay to the Applicant a sum of $4,215 in terms of costs thrown away.
I thank the parties for their efficient conduct of the litigation with the number of issues in dispute. With less efficient handling, the matter could have taken many days instead of the time that it took. I am grateful to counsel, but that also means the Applicant had instructions enabling her counsel to make ready concessions about items of only small value but that can take a lot of time to resolve. That also reflects well on the Respondent, despite having strong views and opinions about certain matters. He conducted the proceedings within reasonable parameters as to time.
Further costs application
After delivery of this ex tempore judgment a further application for costs was made on the basis that the payment of a sum of $228,500 was very close to the sum sought to be paid by the Applicant ($230,000). I determined that some scale costs should be paid and further short reasons were delivered ex tempore. Those costs plus the sum of $4,215 total $10,215 as specified in order one of my orders.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of Judge O'Shannessy. Associate:
Dated: 7 June 2022
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