FRASER & FRASER
[2015] FCCA 2777
•13 October 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FRASER & FRASER | [2015] FCCA 2777 |
| Catchwords: FAMILY LAW – Property – 5 to 6 year cohabitation – weight to be given to Husband’s initial contributions – loss incurred from investment in (business omitted) – post separation debts included. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 79 |
| Af Petersens (1981) FLC 91-095 Bevan & Bevan [2013] FamCAFC 116 Cabbell & Cabbell [2009] FamCAFC 205 NHC & RCH (2004) FLC 93-204 C & C (2000) FLC 93 - 220 Field & Basson [2013] FamCAFC 32 G & G [2000] FamCA 1075 Hearne & Hearne [2015] FamCAFC 178 Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 In the Marriage of Burke (1981) FLC 91-055 JEL & DDF (2001) FLC 93,075 Kowalski and Kowalski (1993) FLC 92-342 Norbis and Norbis (1986) 161 CLR 513 Norman & Norman [2010] FamCAFC 66 Pierce & Pierce (1999) FLC 92-844 Stanford & Stanford [2012] HCA 52 Sippel & Sippel [2004] FamCA 201 Tomasetti & Tomasetti [2000] FamCA 314 Williams & Williams [2007] FamCA 313 |
| Applicant: | MS FRASER |
| Respondent: | MR FRASER |
| File Number: | SYC 6778 of 2013 |
| Judgment of: | Judge Sexton |
| Hearing dates: | 29, 30 April 2015 and 13 July 2015 |
| Date of Last Submission: | 13 July 2015 |
| Delivered at: | Sydney |
| Delivered on: | 13 October 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Othen |
| Solicitors for the Applicant: | Parker Law |
| Counsel for the Respondent: | Ms Picker |
| Solicitors for the Respondent: | John Byrnes & Associates |
THE COURT ORDERS THAT:
Within 2 calendar months, by way of property settlement, the Respondent Husband pay to the Applicant Wife the sum of $211,938.24.
Each party be entitled to all superannuation entitlements held in that party’s name.
Except as otherwise provided in these orders, the Husband and the Wife be solely entitled to the exclusion of the other to all other real and personal property of whatsoever nature and kind in the possession, custody and control of each of the parties as at the date of these Orders.
Except as otherwise provided in these orders, the Husband and the Wife remain liable for any debts, howsoever arising, in their own name at the date of these Orders and in this respect shall indemnify, keep indemnified and hold harmless the other from any liability in relation thereto.
In the event the Husband or the Wife refuses or neglects to comply with any of the Orders herein, the Registrar of the Federal Circuit Court at its Sydney Registry be appointed pursuant to section 106A of the Act to execute, in the name of the Husband or the Wife as the case may be, all deeds and instruments necessary to give effect to the orders herein, or any of them, and do all acts and things necessary to give validity and operation to the said deeds and instruments.
IT IS NOTED that publication of this judgment under the pseudonym Fraser & Fraser is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT AT SYDNEY |
SYC 6778 of 2013
| MS FRASER |
Applicant
And
| MR FRASER |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant Wife seeks an adjustment of the parties’ property interests. Until the third day of hearing, the Husband was also seeking orders for property adjustment, but his counsel then advised the Court that the Husband seeks orders providing for each party to retain all assets and liabilities held by each of them and for no further adjustment.
The parties cohabited for a period between 5 and 6 years. They commenced cohabitation in (omitted) 2006, married on (omitted) 2007, separated for approximately 9 months in 2009 and finally on 23 November 2012.
On the date of final separation, the Husband was charged with assault of the Wife. The Husband entered a plea of guilty and was penalised with a section 10 good behaviour bond. An Apprehended Violence Order made against the Husband at the same time prohibited him from attending the former matrimonial home at Property H for a period of 6 months. The Husband owned the Property H property at the time of commencement of cohabitation. He grew up in the home and it was bequeathed to him by his mother.
The Wife commenced these proceedings in November 2013. Although the Apprehended Violence Order had expired, the Wife remained living in the Property H property. By order of this Court, the Wife vacated the Property H home in late November 2014, and the Husband returned to live there. The Wife is temporarily renting the home of a friend who is overseas.
There are no children of the marriage, although the Wife has an adult daughter from a previous relationship. The parties went through seven cycles of IVF, four in Australia and three in the (country omitted) between (omitted) 2007 and (omitted) 2009. All were unsuccessful and resulted in the Wife suffering two miscarriages. The parties agree these unsuccessful attempts to have a baby placed significant stress on their relationship, both emotionally and financially.
The Husband asked the Wife to sign a section 90B Agreement a few days before the parties’ wedding. Given the proximity of the wedding date, the Wife undertook (before the wedding) to sign the Agreement immediately after the wedding. The parties entered into a section 90C Agreement a few days after the wedding. The Agreement provided for each party to retain his/her own assets and to divide joint assets in proportion to the financial contribution each made to the acquisition of that asset, in the event the marriage broke down.
At the commencement of this hearing, the Husband sought to rely on that Financial Agreement. The Wife sought to have the Agreement set aside, claiming that she was under duress at the time of signing, and claiming the parties had intermingled their financial affairs during their relationship such as to make it impracticable to give effect to the Agreement.
On the first morning of hearing, the Husband consented to an order to set aside the Agreement and the Court made that order.
Both parties owned real estate at the time cohabitation commenced. The Husband owned the former matrimonial home at Property H, a property at Property A, both subject to mortgage, as well as a half share in a property in Property E. The Husband sold his Property A property at the time of the parties’ marriage and later his share in the Property E property. He retains and lives in the Property H property. Prior to cohabitation, the Wife owned a property in Property W subject to mortgage, which she later sold. With funds from the sale of the Property W property, she purchased an investment unit in Property K which she retains, and is currently tenanted.
The parties commenced cohabitation in the Wife's Property W property, while the Husband rented his Property H property. The Husband deposes to the Wife's daughter living with them at Property W while completing her degree at university, but she is otherwise not referred to in the evidence. The parties moved to the Husband's Property H property in (omitted) 2010, after it had been renovated. During 6 of the 9 months the parties were separated in 2009, the Husband lived in the Property H property in its largely unfurnished state.
Each party was represented by counsel; the Wife by Mr Othen and the Husband by Ms Picker. The hearing was listed for three days to commence on 29 April 2015, but due to the Husband's counsel's personal circumstances, the hearing could not proceed on the third day, and was adjourned to 13 July 2015.
Orders sought
The Wife seeks up to 35% (30-35% on contributions and up to 5% on section 75(2) factors) of the net asset pool including superannuation (on her assessment of the value of the net assets). Counsel for the Wife submits that the orders she seeks would require the Husband to make a payment to her of $450,000 which he says is "justifiable"[1] on each party's estimate of the net value of the assets. The Wife seeks an order for the sale of the Property H property, in the event the Husband defaults on the order for payment to the Wife.[2]
[1] At page 28 of the transcript of proceedings 29 April 2015
[2] Exhibit 1
On the first day of hearing, the Husband was seeking orders for the Wife to pay him $100,000 and to return to him certain furniture/chattels, and otherwise for each party to retain what was held by each of them. As earlier noted, on the final day of hearing the Husband sought the return by the Wife to him of certain chattels, and no other property adjustment. The Husband's counsel submitted this would give the Wife approximately 15-20% of the net assets of the parties. Before the end of the hearing, although the Husband alleged the Wife had "stripped" the Property H home before vacating it and removed many items belonging to him, allegations denied by the Wife, the parties were able to reach agreement on the division of their furniture and household chattels and an order was made to reflect that agreement. The Husband then amended his Minute of Order seeking orders that the Wife's application be dismissed, and that each party be declared the owner in law and in equity of all property in that party's possession or control.[3]
[3] Exhibit 2A
Background Facts
The Wife is aged 54 years. She has a month to month contract with her brother as an (occupation omitted) in an (employer omitted) company run by her brother. She is in temporary rental accommodation while awaiting the outcome of these proceedings. The Wife has not re-partnered.
The Husband is aged 47 years. He is a (occupation omitted) at (employer omitted). According to his Financial Statement sworn in April 2015, Ms D lives in his household.
The Wife's credit
The Husband’s counsel submits that where the parties have different positions on any issue material to the outcome of the case, the Husband's evidence should be preferred to that of the Wife.Counsel submits that the Wife misled the Court and the Husband about the timing of the death of her golden retriever, "(omitted)", to support her application to remain living in the former matrimonial home at Property H. Counsel submits that the Court was told the Wife could not move out of the Property H property because she had to house her large dog. The Wife acknowledges at this hearing that “(omitted)” died on (omitted) 2014, but in oral evidence in April 2015 the Wife said that the dog had died “about 5 months earlier” (approximately (omitted) 2014). She says at this hearing, that she was given a new dog immediately after (omitted)’s death.
This Court made orders on 17 October 2014 for the Wife to vacate the Property H property noting that the Husband agreed to look after the dog if the Wife requested him to do so. I recall that the Court (and the Husband) understood the “dog” being referred to at that hearing was the dog “(omitted)". However, in the absence of the transcript of those proceedings, which was not made available at this hearing, I am unable to make a finding that the Wife deliberately misled the Court at that time to defeat the Husband’s application to return to the Property H home, or whether the Wife was referring to the new dog. I therefore make no adverse finding against the Wife’s credit.
Legal principles
Section 79 of the Family Law Act 1975 (Cth) gives the Court power to alter the interests of the parties to a marriage in the property of the parties to that marriage. Prior to the High Court’s decision of Stanford & Stanford [2012] HCA 52, it was generally accepted that the approach to the determination of an application under s.79 involved a “4 step process:” identification of the pool of assets, an assessment of contributions, both direct and indirect, an assessment of s.75(2) factors, and consideration as to whether the actual orders are, in all the circumstances, just and equitable.[4] This trial was conducted substantially in accordance with this 4 step process, and neither counsel submitted that the Court’s approach should change as a result of Stanford.
[4] Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93 - 143
The Full Court in Bevan & Bevan [2013] FamCAFC 116 discussed the impact of the High Court’s decision in Stanford on the 4 step approach. The Full Court said that Stanford will serve as a reminder that the 4 step process “merely illuminates the path to the ultimate result”… “it is no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.”[5]
[5] Bevan & Bevan [2013] FamCAFC 116 at paragraphs 71 & 72
The Full Court in Bevan emphasised that the pre-condition to making any order for property adjustment is a finding that it is just and equitable to do so in accordance with s.79(2), but did not accept that s.79(2) forms a threshold issue or that the requirements of s.79 must be followed in a particular order.
Section 79(2) provides:
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]
[6] Family Law Act 1975 (Cth), s.79(2)
The Full Court in Bevan said that the three “fundamental propositions” laid down by the High Court “will provide useful guidance to trial judges in approaching the task under s79” and summarised them as:
a) Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
b) The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
c) A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4) and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.[7]
[7] Bevan at paragraph 73
In the recent Full Court decision of Hearne & Hearne [2015] FamCAFC 178[8], the Appellant argued that “unless a finding is made as to whether it is just and equitable to alter property interests, the court has no power to make a s.79 order.” The Full Court rejected that submission. His Honour Justice Strickland said[9]:
It is readily apparent from what the plurality said in Stanford, that “satisfaction of the s 79(2) requirement can be inferred, at least in part, from the issues joined, and importantly, not joined, between the parties” (Chapman & Chapman (2014) FLC 93-592 at [22]). Further, there need not be an express finding that the hurdle of s 79(2) has been overcome; it can be by necessary implication from the totality of the trial judge’s reasons for judgment….
[8] Per Strickland, Ryan & Austin JJ (Delivered September 2015)
[9] At paragraph 71
The first step requires identification of the property in which the parties have a legal or equitable interest.[10] The Court may make such orders “as it considers appropriate” and shall not make any order to alter the parties’ property interests, unless it considers it is “just and equitable” to make the order.[11] The Court must determine what orders are just and equitable by applying s.79(4) of the Act.
[10] Bevan at paragraph 77
[11] Family Law Act 1975 (Cth), ss.79(1) & (2)
The High Court explained the meaning of “just and equitable” as follows:
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.[12]
(Footnotes omitted)
[12] Stanford & Stanford [2012] HCA 52 at paragraph 36
Existing property interests of the parties
The parties agree on many of the items of property held by each of them at the date of hearing, and their values. The issues in dispute are the value of the Wife’s interest in the business known as ‘(business omitted)’, whether the whole of the Husband’s debt to the (omitted) Bank, resulting from the failure of (business omitted), should be included, whether the $4,000 paid by the Husband to the Wife in late 2014 should be added back, and how post separation debts should be treated.
(business omitted)
Shortly before the parties separated, the Wife started a (omitted) business known as "(business omitted)", but says it was never successful. The Wife’s taxation return for the 2013 financial year[13], does not disclose the value of the stock or the equipment. A figure of $14,127 is disclosed for “purchases and other costs” but no figure is included for the opening or closing stock itself. A depreciated value for the equipment is disclosed as $3,237. The Wife does not provide her later taxation returns. The Husband contends the business has a value of $16,000. In cross examination, the Wife says the business has no sale value. She says she cannot sell the stock ((omitted)) which she estimates cost her approximately $3,000 in raw materials and having the items made. The items are currently in storage and she expects she will donate them to charity. On the basis of the evidence available, I am not satisfied the business has any current realisable value. If the Wife still has possession of the depreciated items referred to in her 2013 taxation return, I am satisfied they are included in the chattels excluded from the Balance Sheet.
[13] Exhibit 3
Husband's (omitted) Bank loan
In July 2008, with the knowledge and consent of the Wife, the Husband borrowed $150,000 from (omitted) Bank to invest in (business omitted). The purpose of the investment was to offset a capital gains tax liability of approximately $75,000 following the sale of the Property A property, owned by the Husband before cohabitation commenced. (business omitted) collapsed. A class action by a number of investors, including the Husband, ultimately failed. Interest accrued on the (omitted) Bank debt over a period of approximately 7 years. The Husband repaid (omitted) Bank by borrowing the funds from the (omitted) Bank, secured against the Property H property. There is no dispute that the Husband owes the (omitted) Bank an amount of $285,000 as a result of the collapse of the (business omitted), $150,000 for the original loan + $135,000 in accrued interest. The Husband understands he will be reimbursed for the whole of the interest by way of tax refunds over the next few years, but says that given the level of his current income, it may take a number of years to be reimbursed. The Wife's counsel submits that the $135,000 should therefore be omitted from the balance sheet, and the debt included at $150,000, not $285,000. The Husband’s counsel submits that the whole of the debt should be included, and the interest component of $135,000 treated as a financial resource of the Husband.
There is no doubt that the Husband presently owes $285,000 to the (omitted) Bank, as a result of a failed venture jointly undertaken by the parties. While the Wife seeks to distance herself from the Husband’s decision not to meet the interest payments on the debt while the litigation was ongoing, I find no justification to permit her to do so. The Husband had expected to win the litigation. The parties had the use of funds not paid by way of interest on the loan during the course of the litigation. There is no evidence that the Wife opposed the Husband’s position at the relevant time. The existing debt of $285,000 will be included as the Husband's liability in the balance sheet, but there will be an adjustment under s.75(2) to take account of the tax relief the Husband expects to receive over time.
Payment to wife pursuant to orders of October 2014
In October 2014, the Husband was ordered to pay the Wife a sum of $4,000 when she was required to vacate the former matrimonial home at Property H. The Husband now asks the Court to include that sum of $4,000 as an "add back" on the Wife's side of the ledger. The Wife says she used those funds to pay removalist expenses when she was impecunious. The Husband's counsel, quite properly in my view, acknowledges in submissions that this payment should be taken into account as a financial contribution by the Husband, not as a balance sheet issue.
Post separation debts
The Wife has increased her loan against the Property K property by $25,000 to meet legal fees and has credit card debts, while the Husband has borrowed $10,000 from a friend to meet legal fees. The Wife also has a substantial debt to her brother arising from her circumstances after separation, and I accept Mr M’s evidence that he wants to be repaid. The Husband also has a car loan.
The Wife's counsel submits that all the post separation debts, including legal fees should be included in the balance sheet. In relation to her legal fees, counsel submits it would be unfair on the Wife to exclude her debt for legal fees because she has been unable to meet fees from her earnings, while the Husband has had the earnings to meet legal fees from his own resources. The Husband has a higher salary than the Wife, and in addition has a pension of approximately $25,000, tax free.
The Husband's counsel submits that all the post separation debts should be excluded.
The authorities make clear that the Court has a discretion as to whether to include or exclude liabilities incurred after separation[14].
[14] See for example Af Petersens (1981) FLC 91-095; NHC & RCH (2004) FLC 93-204; Z & Z [2005] FamCA 996
However, in the circumstances of the present case, I accept the Wife's counsel's submission that it would cause an injustice to the Wife for the parties’ post separation debts to be excluded, given the difference in each party's income positions and the circumstances leading to that difference. I find it noteworthy that the Husband seeks to have his debt of $285,000 included, as well as his car loan, when both debts have continued to accrue since separation. I find that to exclude all other post separation debts would result in an injustice to the Wife. The post separation debts of both parties have therefore been included in the balance sheet.
Existing property of the parties
The Court was provided with a Balance Sheet on the final day of hearing which was relied on during counsels' oral submissions. As already noted, the parties then agreed on the division of furniture, chattels and personal items. The parties therefore agreed to exclude the value of each party’s household contents and personal items from the list of assets available for distributions. They also agreed to exclude bank accounts with modest credit balances.
As a result of my findings on the disputed items, I am satisfied the existing assets and liabilities of the parties available for distribution as at the date of hearing are as follows:
Assets and liabilities at the date of hearing
$
Property at Property K (Wife)
500,000
(omitted) Audi motor vehicle (Wife)
19,500
(business omitted) stock (Wife)
Nil
Mortgage on Property K property (Wife)
-186,701
Visa card (Wife)
-8,493
American Express (Wife)
-423
Debt owed to Mr M
-56,753
(omitted) Super
91,040
Total net assets held by Wife
358,170
Property H (Husband)
2,100,000
(omitted) Holden motor vehicle
21,250
(business omitted)
Nil
Debt to (omitted) Bank
-285,000
Car loan
-20,600
Loan from friend
-10,000
(omitted) Superannuation
28,904
Total net assets held by Husband
1,834,554
TOTAL EXISTING NET ASSETS OF PARTIES
2,192,724
If there were no property adjustment, the Wife would receive 16% of the parties’ net assets and the Husband 84%. Given my findings in relation to contributions and s.75(2) factors, I am not satisfied that such a result would be just and equitable.
When the hearing started, each party was seeking orders for property adjustment under s.79. The Husband later changed his position. On the final day of hearing, the only adjustment sought by the Husband related to household furniture, chattels and personalty, and that issue was resolved. The Husband’s counsel, correctly in my view, did not then ask the Court to address the s.79(2) question as a threshold issue; that is, whether any order for adjustment of property should be made.
Contributions
In accordance with s.79(4), the court must consider all the contributions, both financial and non-financial to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family during cohabitation and after separation. The Court must consider the contributions in an overall sense.[15] The Full Court has held that it is not necessary for the Court to justify its decision in property cases by reference to precise mathematical calculations, but rather a broad approach is preferred.[16] The Court is nevertheless required to undertake an evaluation of each party’s respective contributions.[17]The Court must examine what actually happened, not make assumptions about what happened. It is not sufficiently rigorous to assume that what one party did is equal to what the other party did and conclude there is no distinction to be made in relation to each party's contributions.
[15] Norman & Norman [2010] FamCAFC 66; Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143; Kowalski and Kowalski (1993) FLC 92-342; G & G [2000] FamCA 1075
[16] In the Marriage of Burke (1981) FLC 91-055
[17] JEL & DDF (2001) FLC 93,075
Neither counsel asked me to deal with this matter on an asset by asset basis. I have therefore adopted the global approach. In Norbis and Norbis,[18] the High Court held that either approach is legitimate but also said:
…there is much to be said for the view that in most cases the global approach is the more convenient.
[18] (1986) 161 CLR 513
Although the parties have been separated for almost three years, there is no requirement on the Court to separately assess matters occurring after separation in arriving at an assessment of contributions.[19] Given the parties continued to have a financial relationship after the date of separation, I have assessed each party's contributions overall.
[19] Sippel & Sippel [2004] FamCA 201
In relation to the parties' superannuation interests, it is open to the Court to decide whether to treat superannuation interests as a separate list of assets, or as part of one asset list. The majority of the Full Court in C & C[20] said there is no binding principle as to the exercise of the Court’s discretion in deciding whether a one list or two list approach should be adopted. Neither party’s counsel made submissions on this issue. At the time of hearing, neither party had significant superannuation interests when considered in the context of the overall net asset position. I have therefore found it convenient to address the superannuation and the non-superannuation assets in the one list.
[20] (2000) FLC 93-220
Section 79(4) contributions
The Wife deposes to the parties keeping their financial arrangements separate until they married in September 2007, and entered into a s.90C Agreement a few days later. Following their wedding. the parties opened a joint account with the (omitted) Bank [(omitted(]. The parties continued to live in the Wife's Property W property, and the Husband deposited the rent from his Property H property to the joint account.
Financial contributions
The parties’ assets and values are set out in the schedules to the s.90C Agreement of September 2007[21], as at 10 months after cohabitation commenced. Schedule 1 of the Agreement states that the Husband owned real estate (100% Property H, 50% Property E and sale proceeds Property A) with a net value of approximately $1.4m, superannuation with a value of $85,000, antiques valued at $56,500 and a Jeep valued at $5,000. Schedule 2 of the Agreement states that the Wife owned real estate (Property W) with a net value of $385,000, superannuation of approximately $85,000, furniture, jewellery and artworks valued at $120,000, and an Audi motor vehicle under lease with no equity. The Wife deposes to providing her solicitor with estimates of values of her assets at the time, based on replacement costs (not on market value). She says there was no formal financial disclosure between the parties at the time the Agreement was entered into. The Husband too, says he did not make independent inquiries as to the value of the Wife's Property W property at that time.
[21] Annexure C to Wife’s affidavit sworn on 1 April 2015
At paragraphs 7 and 8 of her Affidavit, the Wife deposes to what each party owned 10 months earlier when they commenced living together. In relation to her own asset position, she deposes to the same value for her Property W property, $15,000 less in superannuation, and $105,000 less in furniture, jewellery and artworks, a total net asset worth of $470,000. (Not the figure included by the Wife at paragraph 7; her total is inaccurate when one adds the figures).
The Wife bought her property in Property W in (omitted) 2006 (approximately 6 months prior to cohabitation) for $835,000 with funds from her property settlement with her former husband. The Husband’s counsel submits that this should be accepted as the value of the Wife’s real estate at the time cohabitation commenced, rather than the $1,000,000 claimed by the Wife, especially as the property only sold for $1,050,000 5 years later in (omitted) 2011. The Wife says she improved the property in 2006, and the market improved in the period prior to cohabitation. She put in a heated towel rail, replaced the spa pump, added plantation shutters, replaced the air conditioning, the range hood, oven and dishwasher. She says the market dropped at the time she was selling the property in late 2011, and she took the first offer she received. In the absence of any independent evidence of the value of the Wife's Property W property at the date of cohabitation, I have accepted the Wife’s estimated value of $1 million.
I am therefore satisfied that at the commencement of cohabitation, the Wife held assets with a total net value of $470,000, $385,000 of which consisted of her equity in the Property W property.
In relation to the Husband’s position, the Wife deposes to his assets and their value being the same in (omitted) 2006 as at (omitted) 2007, a net asset worth of $1.561m. The Husband now disputes the value of his superannuation included in that figure, because on 21 January 2010 he deposited $358,746.56 into the parties' joint account as his superannuation entitlement (a much greater amount than the $85,000 disclosed in the s.90C Agreement). The Wife’s counsel concedes the Husband’s contention is reasonable. I also accept the Husband's evidence that he was not anticipating the proceeds of the sale of Property A at the time cohabitation commenced and that an estimated value of $600,000 for the property is a reasonable estimate of its value. (This is very close to the sale figure 10 months later). I am therefore satisfied that the Husband held net assets at the commencement of cohabitation with a net value of approximately $1.84m, $1.42m of which consisted of his equity in real estate.
I accept the Wife’s counsel’s submission that there was an approximately 80/20 differential in the value of the assets each party brought into the relationship in (omitted) 2006. I accept that the differential is considerably greater (as submitted by the Husband’s counsel) if the Husband’s payout from his retirement from the (employer omitted) is included.
In Cabbell & Cabbell[22] the Full Court affirmed[23] that given the wide discretion exercised under s.79, there is:
…no formula…which prescribes how a court should deal with initial contributions in cases of property adjustment.
[22] [2009] FamCAFC 205
[23] At paragraph 42
The Full Court then referred to the comprehensive discussion in Pierce & Pierce[24] as to the weight to be afforded to initial contributions, in particular at [28], where the Full Court said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the Husband and the Wife. In considering the weight to be attached to the initial contribution.... regard must be had to the use made by the parties of that contribution.[25]
[24] (1999) FLC 92-844 at 85,881
[25] Affirmed in Field & Basson [2013] FamCAFC 32 at paragraph 51
In Williams case[26] the Court said that appropriate recognition had to be given to the value of the property at the time of hearing, or when realised, rather than simply paying attention to the initial value at commencement, while also recognising the other contributions over time. The Full Court in Cabbell reaffirmed the principles in Williams,[27] where the Full Court said:[28]
We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties.
[26] Williams & Williams [2007] FamCA 313
[27] Ibid
[28] Ibid at paragraph 26
As already noted, the Husband's initial contributions were significantly greater than those of the Wife and generated the majority of the value of the assets now available for division. I am satisfied his initial contributions should be given substantial weight.
It is common ground that the parties commenced cohabitation in the Wife’s property at Property W in (omitted) 2006. The Wife says that the parties kept their financial arrangements separate until they married in (omitted) 2007 and the Husband did not contribute financially to the Property W property while the parties lived there before their wedding. The Wife’s assertion is not seriously challenged by the Husband and is consistent with the contents of the Financial Agreement the parties signed after their marriage in 2007. It was not until after their marriage that the parties opened a joint account.
Prior to the parties’ wedding, the Husband entered into a contract for the sale of his Property A unit at Property A. Weeks after the wedding, in (omitted) 2007, the Husband deposited the net sale proceeds into the parties’ joint account in the sum of $594,751.44. The Husband then transferred $249,000 to the Wife’s loan account reducing her loan on Property W from $414,830.42 to $165,830.42. He transferred $299,998.13 to his line of credit secured on his Property H property. The Husband deposes to not knowing, at the time of sale, that he would incur a substantial capital gains tax liability as a result of the sale of Property A. The Husband invested in (business omitted) to offset this liability. The Wife’s counsel submits the Court should take the debt resulting from that investment into account, when assessing the weight to be given to the Husband’s contribution from the sale of Property A. I address the issue later in these Reasons.
When the parties began living together in (omitted) 2006 the Wife was employed full time by (employer omitted) as a (occupation omitted), earning approximately $135,000 a year. The Husband was in receipt of an income from the (employer omitted). The parties s.90C Financial Agreement[29] discloses that the Husband was in receipt of gross income of approximately $75,000 per annum and the Wife $135,000 per annum.
[29] Annexure C to Wife’s affidavit sworn on 1 April 2015
The Wife was retrenched in 2009, spent a few months at (employer omitted), a (omitted) company, before moving to (employer omitted) for two years. In 2011 the Wife spent 3 months working at (employer omitted). She deposes to ceasing work in (omitted) 2011 with the Husband's agreement. She then set up her (business omitted) business called "(business omitted)". She says she increased her mortgage on Property K by $20,000 to establish the business, which was never successful, and from which she earned minimal income and suffered substantial losses. The Wife had either no income or very little income when the parties separated. The Husband says the Wife was not in continuous employment until (omitted) 2011 when she started the business. He says the Wife did not work at all for several months in 2009.
I find the evidence adduced by the Wife inadequate as to her employment history and income. Apart from her 2013 taxation return[30], which discloses a business loss of $42,570, she does not provide any taxation returns or taxation assessments to verify her income during the marriage.
[30] Exhibit 3
The parties were trying to have a baby from 2007 to 2009 and undertook seven IVF cycles. The Wife suffered two miscarriages. The Wife’s evidence does not, however, link her attempts to become pregnant with her employment history. On the employment history provided, I accept the Husband’s evidence that the Wife was not continually employed before (omitted) 2011, and I am satisfied she earned very little income after that date.
The Husband retired from the (employer omitted) medically unfit on (omitted) 2009. He received in excess of $420,000 from his employer upon his retirement, excluding the payments from (omitted) Super. The Husband commenced employment with (employer omitted) in (omitted) 2010 which he left in (omitted) 2011, and in (omitted) 2011, he commenced his current position with (employer omitted). The Husband deposes to a current income of $1327 a week before tax or $69,000 a year. In addition he receives a tax free pension of an estimated $25,000 a year.
In (omitted) 2008, the Husband purchased an investment property at Property O. It was renovated and sold in (omitted) 2009. The parties agree this investment resulted in a loss, although differ as to the precise extent of the loss. According to the Wife, the Husband sold his interest in the Property E property in or around late 2009/2010. She has no recollection of the Husband receiving any funds from the sale. The Husband adduces no evidence in relation to the sale of the Property E property in his trial affidavit.
In (omitted) 2008, as already noted, the Husband borrowed $150,000, with the Wife’s consent, to invest in (business omitted) to offset a $75,000 CGT liability arising from the sale of the Husband's Property A property. The parties together consulted a Mr S who advised the Husband to invest. The parties paid $15,000 GST from joint funds, and made loan repayments until July 2009 from the joint account. (business omitted) went into liquidation in 2009 and the Husband joined a class action against it. The Wife says the parties together paid the legal fees for the litigation until separation, and thereafter the Husband met those fees. The Husband stopped paying the loan while the class action was on foot. Interest accrued on the loan. The class action was unsuccessful. The Wife says it was the Husband’s decision not to pay the interest while the litigation was pursued and therefore that the Husband have sole responsibility for the interest component of the outstanding debt arising from the venture. As already noted, I am not persuaded the evidence supports such a conclusion. I find the Wife was involved in the decision to invest and likely to have been aware of the interest accruing. Even if she was not aware, I am satisfied the Wife would have benefited from the parties’ available funds during the litigation period.
In late 2009, the Husband received payments of $31,196 and $392,559 by way of payouts from the (employer omitted) when he retired on medical grounds. And as already noted, in early 2010, the Husband received $358,746 from (omitted) Super by way of disability benefits, all of which was applied either to the parties’ assets, or to living or other expenses for the parties’ benefit. The Husband now has only a small superannuation entitlement arising from his employment since leaving the (employer omitted).
Each party adduces evidence in relation to the movement of funds between various accounts during the marriage. The wife would routinely transfer funds into either a mortgage account or into the interest bearing joint account and transfer it out again through the day to day account to pay bills. It is common ground that the redraw facility on the Wife’s loan account secured by Property W was used by the parties to meet various expenses, that the Wife’s loan account balance was significantly reduced when the Husband transferred substantial funds to the loan account from the proceeds of sale of his Property A property, that he deposited approximately $393,000 to the loan account from his payout from the (employer omitted), and that the Wife deposited $292,601 to the Husband’s loan secured by Property H, when she sold the Property W property in (omitted) 2011. The evidence is unclear as to how much of the payment by the Wife from the sale of Property W was, in effect, reimbursement of the funds contributed by the Husband to the Wife’s loan account.
Despite considerable cross examination of the Wife on the way she managed the accounts, I am not persuaded anything of significance turns on these arrangements.
When the parties commenced cohabitation, the Husband tenanted his property at Property H. After their marriage, the Husband deposited the rent into the parties' joint account. In 2009, the Husband moved into the property for a few months when the parties had temporarily separated. Between (omitted) 2009 and (omitted) 2010, the parties planned and renovated the Property H property, the renovations commencing in (omitted) 2010 when the tenants moved out. The Husband borrowed funds to meet the costs of the renovation and the parties drew on the Wife's variable loan account (into which the Husband’s funds had been deposited) to meet the costs of the architect and building costs.
The Wife says she calculated the total cost of renovations of the Property H property at approximately $300,000, from bank statements, direct transfers, invoices (emailed and hard copy). She says, and I accept, that they spent approximately $37,000 on the fitout, of which she contributed at least $20,000 because her employer, (omitted), had affiliations with various suppliers, was able to achieve low prices, and chose to pay her owed entitlements by way of appliances, locks and handles on doors and windows. The Wife says the kitchen was built around the appliances. The Husband says the Property H renovations cost approximately $600,000, funded from borrowings in his name of $300,000 and from his lump sum payments. In cross examination the Husband acknowledged that the building loan (a sum in excess of $290,000) was paid out from the proceeds from sale of the Wife's Property W property. The Husband also acknowledged that around that time, the parties discussed the possibility of the Property H property being transferred into joint names but took no further steps when he was told they would incur stamp duty.
After the sale of her Property W property in (omitted) 2011, after discharge of the mortgage and costs of sale, the Wife contributed $292,601 to the loan on the Property H property, paid credit card debts and purchased a property at Property K/Property K for $425,000, using part sale proceeds and a loan from the (omitted) Bank in joint names. That property has since been tenanted. The Wife says she used the loan account on Property K as a day to day account, depositing funds in excess of the mortgage repayments and paying expenses from that account.
Other contributions
The Husband says he contributed $40,913 towards the cost of the parties' wedding and $127,347 on costs related to the IVF procedures, including food, travel, car rental and accommodation expenses in the (country omitted). His evidence was not challenged. In accordance with Court order in October 2014, the Husband also paid the Wife an amount of $4,000 towards the costs of her move from the former matrimonial home at the end of 2014 (by order of the Court).
On (omitted) 2009, the parties purchased an Audi motor vehicle for the Wife for $64,500, using $33,000 from the joint account (sourced from the Husband) and a trade in amount of $25,000 for the Wife's previous Audi.
The Wife says she largely relied on financial support from her family from soon after separation. Her business was not generating an income and while the Husband has paid approximately $17,000 towards expenses on the Property H home, including $50 a week by way of telephone accounts, internet and Foxtel until (omitted) 2013, and the Wife was not paying any rent, the Wife needed money to meet all other expenses. I accept the Wife’s evidence, corroborated by her brother, Mr M, that her brother gave her $1,000 in cash each week, for approximately 50 weeks, and she received other financial gifts from her family. (The Wife’s debt to her brother is included in the balance sheet). The Wife did not commence employment with her brother’s business known as Mr D until late 2013. Since (omitted) 2013, the Wife has been working on a month to month contract as an (occupation omitted) earning $1152 a week, but as a contractor responsible for her own tax and superannuation contributions.
The Wife refinanced the loan on her property at Property K/Property K in December 2014. The loan had been jointly owned by her and the Husband, and the Husband's name was removed when she refinanced. She increased the loan by $25,000 in part to meet legal fees and a credit card debt. She receives $500 a week in rent and pays $257 a week in loan repayments. The Wife says her income from the Property K property exceeds her expenses on the property by approximately $50 a week, calculated annually. Counsel for the Husband cross examined the Wife on her expenditure after separation, which I find was reasonable.
The Wife lived in the former matrimonial home from the date of separation in November 2012 until late November 2014 when the Court ordered her to vacate the property. As earlier noted, the Husband was excluded from the home for a period of 6 months as a result of the assault on the Wife on the day of separation and the Apprehended Violence Order which followed. The Wife’s unchallenged evidence is that she has replaced certain items in the home, including a ceiling fan, a light fitting, the fridge, the television and that she paid for a new hot water heater. The Wife paid the water rates and the home and contents insurance when living in the Property H home.
Non-financial contributions
There was an issue as to what the Husband contributed to the Property W property by way of maintenance/improvements and upkeep when the parties were living there. The Husband says he was responsible for painting its interior and contributed to domestic cleaning. He says he hired equipment from (omitted) to clean the exterior of the home three times. I accept his evidence. There was also an issue about the extent of each party’s non-financial contributions to the renovations of the Property H property although the Husband acknowledges that the Wife made decisions about colours, fixtures and fittings. I accept that the Wife attended bathroom and light shops, researched online and through magazines and had significant input into the final result. I accept her evidence that she hung the artwork in the home. However, I am satisfied that both parties attended site meetings, both were involved in the design and landscaping of the front and back gardens and that their non-financial contributions to the renovations was approximately equal.
I accept that the Wife took majority responsibility for the move from Property W to Property H.
I accept the Wife’s evidence that she was mainly responsible for food planning, laundry, cooking, shopping and housework, that she undertook cleaning although they had a cleaner for a period they were living at Property H. I accept the Wife shopped for the Husband’s clothing. It is common ground that the Husband was involved in the outside maintenance and regularly washed the Wife’s car. I find that the Wife made a greater contribution than the Husband to the day to day domestic tasks.
I accept the Wife’s evidence that she cleaned and maintained the Property H home from the time of separation until November 2014 when she moved out. I accept she undertook gardening, including trimming. The Husband has undertaken those tasks since late November 2014.
I find that both parties contributed to the welfare of the family as a result of their participation in an IVF programme.
Assessment of Contributions
The Wife’s counsel submits that contributions overall should be assessed as 30-35% to the Wife and 65-70% to the Husband. Counsel submits that the Husband’s financial contributions during the marriage were substantially greater than those of the Wife, but in broad terms, each party’s non-financial and post separation contributions were equal. At the end of the hearing, the Husband’s counsel submits the assessment based on contributions overall should be assessed at 15% to the Wife and 85% to the Husband.
The period of cohabitation was relatively short. As already noted, and as acknowledged by the Wife’s counsel, while both parties brought in real estate at the commencement of cohabitation, I find the Husband made substantially greater financial contributions than the Wife, in particular because of his significantly greater initial contributions which generated the majority of the value of the assets now available for division, his substantial lump sum payments during the marriage, and his more consistent earning pattern. I agree with Mr Othen that the parties’ non-financial contributions were approximately equal apart from the Wife’s greater contribution to domestic tasks day to day.
Having regard to all these findings, I assess the Wife’s contribution entitlement at 21% and the Husband’s at 79%.
The effect, if any, of any proposed order upon the earning capacity of each party
This is not a relevant factor.
Relevant Section 75(2) Factors
The age and state of health of each of the parties.
At the date of hearing, the Wife was 54 years and the Husband 47 years of age. I agree with the Wife’s counsel that the Husband therefore is likely to have a greater opportunity to generate income and therefore acquire assets, borrow to invest and contribute to superannuation.
The Wife says she has suffered back pain as a result of being assaulted by the Husband which makes it difficult for her to sit for long periods and has limited her running regime. However, she adduces no medical evidence as to whether or how her back pain affects her capacity to earn an income. The Husband denies causing the Wife any physical injury during the incident on the day of separation. While the Husband says he suffered mental health issues which resulted in his medical retirement from the (employer omitted), he does not refer to any current difficulties. I find no basis for an adjustment in relation to health issues.
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
The Husband earns more than the Wife by way of salary, and in addition receives a tax free pension of approximately $25,000 a year. In addition to her salary, the Wife also receives income from her investment property at Property K, but when expenses on the property are taken into account, she receives an average of $50 a week. As a contractor, the Wife will be required to pay her own tax, which she says she has deferred. Even if the Husband’s counsel is correct (counsel attempted to adduce evidence from the Bar Table) that the Husband’s pension will cease when he is 65 years, I am satisfied that the Husband is considerably better resourced financially than the Wife by way of income. I note here that the Husband’s Financial Statement sworn in April 2015 discloses that Ms D lives in his household earning an estimated $564 a week. However, as neither party adduces any other evidence relating Ms D, I have not taken it into account.
As already noted, I have taken into account that the Husband anticipates tax relief of $135,000 over time, the interest component of his debt to the (omitted) Bank. I questioned both counsel as to whether this whole interest component would ultimately be available to the Husband by way of tax relief and I was assured this was so by both counsel.
The responsibilities of either party to support any other person.
There is no evidence before me that either party has dependents for whom he or she has a legal obligation to support.
The eligibility of either party for a pension or benefit under any superannuation fund or scheme and the rate being paid to either party.
As far as the Court is aware, neither party is eligible for a pension, allowance or benefit under any law of the Commonwealth or State.
A standard of living that in all the circumstances is reasonable.
I am satisfied and take into account that the Wife’s standard of living has reduced since separation, particularly since she left the former matrimonial home. She is renting from a friend while the Husband is living in the Property H home.
Any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account.
The Wife owned a home prior to the parties’ cohabitation, albeit subject to mortgage. Her current equity in her investment property is less than the value of her equity in the Property W home at the commencement of cohabitation. Her income is considerably lower than it was at the date of cohabitation.
The Wife’s investment property is tenanted and was not purchased for the purpose of her own residence. She is living in temporary accommodation. The Wife will need to re-house.
The Husband, on the other hand, is in his own home. I accept he needs to acquire furniture for his Property H home.[31]
[31] Annexure H of Husband’s affidavit sworn on 8 July 2015
Assessment of section 75(2) factors
The Court must weigh all the s.75(2) factors together and then make one adjustment.[32]
[32] Tomasetti & Tomasetti [2000] FamCA 314
Mr Othen submits that the Wife should be entitled to a 5% adjustment in her favour if the Court decides the $135,000 should be treated as a financial resource, which is the finding I have made. Ms Picker submits there should be no adjustment, though does not suggest an alternate way to take the reimbursement of $135,000 into account.
On a weighing of the factors to which I have referred under s.75(2), I have decided the Wife will receive an adjustment of 5%. This means the net assets of the parties will be divided as to 26% to the Wife and 74% to the Husband.
Is the result just and equitable?
The Court must be satisfied that the actual orders provide for a just and equitable distribution of the property of the parties.[33]
[33] Family Law Act 1975 (Cth), s.79(2)
The parties own property with a net value of $2,192,724 inclusive of superannuation. There is no property held jointly. Neither party seeks a transfer of any items of property in the other's name or a superannuation splitting order.
On the basis of a 26/74 division, the Wife would be entitled to receive assets with a value of $570,108.24. The Husband would be entitled to receive 74% of the assets with a value of $1,622.615.76.
The Wife has net assets in her name with a value of $358,170 including her investment property subject to mortgage, her car, superannuation and additional liabilities of $65,669. She would therefore need a payment of $211,938.24 to receive her entitlement.
The Husband has net assets in his name with a value of $1,834,554 including his home in Property H, subject to mortgage and his car, subject to a loan and superannuation. He has additional liabilities of $10,000. His current net assets would exceed his entitlement by an amount of $211,938.24.
On a 26/74 percentage division, the Wife will have assets and liabilities set out in the following table:
| Assets to be retained by Wife | $ |
| Property in Property K | 500,000 |
| Audi motor vehicle | 19,500 |
| (business omitted) business | Nil |
| Loan secured by way of mortgage on Property K | -186,701 |
| Debt owed to Mr M | -56,753 |
| Debt owed to American express | -423 |
| Visa card debt | -8493 |
| (omitted) personal superannuation | 91,040 |
| Payment from the Husband | 211,938.24 |
| TOTAL | 570,108.24 |
The Husband will have the assets and liabilities set out in the following table:
| Assets to be retained by Husband | $ |
| Property in Property H | 2,100,000 |
| Holden motor vehicle | 21,250 |
| (business omitted) | Nil |
| Debt to (omitted) Bank | -285,000 |
| Debt on motor vehicle | -20,600 |
| Debt to friend | -10,000 |
| (omitted) Superannuation | 28,904 |
| Payment to the Wife | -211,938.24 |
| TOTAL | 1,622,615.76 |
I am satisfied the Husband has the capacity to meet the payment to the Wife without the need to sell his Property H home. I have therefore not made the default order in relation to the sale of the Property H property as sought by the Wife.
Having regard to my findings in this case, I am satisfied that the orders set out at the beginning of these Reasons are just and equitable.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of Judge Sexton
Associate:
Date:13 October 2015
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Injunction
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Fiduciary Duty
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