GALLAGHER & GALLAGHER
[2013] FamCA 293
•3 May 2013
FAMILY COURT OF AUSTRALIA
| GALLAGHER & GALLAGHER | [2013] FamCA 293 |
| FAMILY LAW – PROPERTY – Contributions – where the parties contributions are assessed as equal prior to separation – where an adjustment is made to account for the wife’s greater contributions post-separation – where the wife made the majority of financial contributions following separation through her continued administration of the parties’ business – where the husband had abdicated his previous responsibility for the parties joint business due to his deteriorating mental health FAMILY LAW – PROPERTY – Future needs – no adjustment in favour of either party for their future needs – where neither party had good prospects of employment – where the father suffered from severe mental health issues – where the mother had a series of chronic physical health issues – where the parties’ future beneficial interests in the estates of elderly parents were too speculative to take into account FAMILY LAW – PROPERTY – Pool of Assets – Addbacks – where the husband’s diminution of his superannuation entitlements prior to settlement was reasonable given his financial hardship and inability to obtain a disability pension at the relevant time |
| Family Law Act 1975 (Cth) s 75 and s 79 |
| Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Stanford & Stanford (2012) FLC 93-518 Omacini & Omacini (2005) FLC 93-218 |
| APPLICANT: | Ms Gallagher |
| RESPONDENT: | Mr Gallagher |
| FILE NUMBER: | NCC | 204 | of | 2011 |
| DATE DELIVERED: | 3 May 2013 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Cleary J |
| HEARING DATES: | 18, 19 and 20 February 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bateman |
| SOLICITOR FOR THE APPLICANT: | Legal Minds |
| COUNSEL FOR THE RESPONDENT: | Mr Cummings |
| SOLICITOR FOR THE RESPONDENT: | O’Hearn Lawyers |
Orders
That the net proceeds of sale of the property at … B Street, Suburb C, after payment of agent’s commission and conveyancing costs, be forthwith divided between the parties in equal shares.
Within 7 days of the date of this order each party shall do all acts and things and give all written authorities necessary to effect a distribution of the Controlled Monies Account held by O’Hearn Lawyers, including accrued interest in the proportion of:
(a) to the wife 42 per cent
(b) to the husband 58 per cent.
That the wife do all acts and sign all documents necessary to effect a transfer of any interest she has in the property known as and situate at … D Street, Suburb E to the husband and the husband indemnify her in respect of any liability howsoever and whensoever arising in respect of that property.
That the parties do all acts and sign all documents necessary to effect a transfer to the wife all the husband’s interest that he may have in the property known as and situate at … F Street, Suburb G and that the wife indemnify the husband in respect of any liability howsoever and whensoever arising from the ownership of that property.
Otherwise than as provided in these Orders the husband and wife shall each retain to the exclusion of the other all assets, liabilities, entitlements and financial resources in that party’s name, possession or control.
The husband shall be responsible for any Capital Gains Tax owing in respect of the property at … D Street, Suburb E.
The wife shall be responsible for any Capital Gains Tax in respect of the property at … F Street, Suburb G.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gallagher & Gallagher has been approved by the Chief Justice pursuant to
s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC204 of 2011
| Ms Gallagher |
Applicant
And
| Mr Gallagher |
Respondent
REASONS FOR JUDGMENT
Introduction
This is a dispute about the final distribution of remaining matrimonial property. The parties have been separated for almost eight years.
The parties met as teenagers and from that time each has worked fulltime and studied for further qualifications. By the date of their marriage in 1974, they had acquired their first home. The parties had three children, the youngest of whom is now in his late twenties. Throughout the marriage each of the parties worked extremely hard. Together they ran businesses and bought, developed and sold property.
After 31 years of life together they separated in 2005. The wife moved to live with her father at Suburb H on the Central Coast of New South Wales. The husband remained living in the family home until it was sold early in 2012.
Both parties have significant problems with their health. They now seek to divide what remains in the asset pool. The asset pool is identified in a joint balance sheet[1].
[1] Exhibit ‘1’
Assets O’ship Description Wife’s
value
Husband’s value 1 Joint O'Hearn Controlled Monies account (proceeds of sale of various properties including matrimonial home) including interest 441,000 441,000 2 Joint Anticipated net proceeds of sale of vacant Land at [B Street, Suburb C] (after agent’s commission and conveyancing fees) 105,000 105,000 3 W [F Street, Suburb G] 290,000 290,000 4 H [D Street, Suburb E] 250,000 250,000 5 Joint Furniture, effects and personal items (already divided between the parties) 10,000 10,000 6 W Household contents, computer, jewellery 2,000 2,000 7 H Husband's Cash at bank (x 2 accounts) 12,000 12,000 8 H IAG Shares x 946 before CGT & broker fees @$5.265 per share as at 18.2.2013 4,980 4,980 9 H Garage effects, [M] collection and tools 2,000 2,000 10 H Motor vehicles: … Toyota Hilux Ute ($2,000); … Holden Commodore sedan ($8,000) 10,000 10,000 11 H Motor Bike … Suzuki 1,800 1,800 12 H Caravan 2,000 2,000 13 H Box Trailer 200 200 14 W Wife's Cash at Bank (includes recent deposit of $10,000 from Superannuation) 14,000 14,000 15 W Interest in deceased estate of mother: 1/8th share of [I Street, Suburb H] 100,000 100,000 Total $1,244,980 $1,244.980 Addbacks
16 H Westpac Super 97,390 97,390 17 W Subaru motor vehicle sold 6,500 6,500 18 H Holden Calais motor vehicle sold 3,000 3,000 19 H Suncorp Line of Credit outgoings on [B Street, Suburb C] 41,093 NIL 20 H Suncorp Line of Credit personal expenditures of husband 95,611 NIL 21 H Proceeds of rental of [J Street, Town K] 14,000 NIL Total $ 257,594 $ 106,890 Liabilities 19 W Westpac Visa and Woolworths Mastercard 2,000 2,000 20 H Loan owing to mother, [Ms L] NIL $10,000 Total $ 2,000 $ 12,000 Superannuation Name of Fund Type of Interest Wife’s
Value
Husband’s
Value
21 W First State Super Accumulation 81,000 81,000 Total $ 81,000 $ 81,000 Financial Resources 22 H Future Inheritance from mother's estate 1/2 share $300,000 NIL 23 W Future Inheritance from Father's estate 1/4 share NIL 100,000 Total $ 300,000 $ 100,000
Notes to Balance Sheet:
Item No
9
The husband has located the [M collection]. The other items are of nominal or no value.
The wife includes estimated value inclusive of the [M] collection and ride on lawn mower that was not sold as part of the matrimonial home and retained by the husband.
19 The wife asserts that the husband has received funds from the parties’ Suncorp Line of Credit account for outgoings during his exclusive occupancy of the former matrimonial home. 20 The wife asserts that the husband has received funds from the parties’ Suncorp Line of Credit account for his personal expenses. 21 The wife asserts that the husband has retained and used the rents from the [Town K] property for his own personal use. 23 The wife does not concede that the funds from [Ms L] were a loan 25 & 26 The husband states that his mother is still living and has full mental capacity.
The wife states that her father is still living and has full mental capacity.
The wife asserts that the parties have an expectation of separate inheritances from each of their surviving parents’ estates.
The adjusted asset pool
In relation to the contested addbacks, I exclude the items at 16, 17, 18, 21, 23, 25 and 26.
Item 16: The husband drew on his superannuation benefits to live on when he was unable to work[2].
[2] Husband’s affidavit sworn 19/12/2012, paras 84 to 89
The principle in Omacini & Omacini (2005) FLC 93-218 establishes that the mere fact that a party has expended money realised from the disposition of assets that existed at the date of separation; without more, would not justify the adding back of those expended funds. The question is was this expenditure reasonable?
In this case I consider the expenditure was not a premature distribution. It was reasonable and appropriate given the husband’s poor health which included an inability to come to grips with his own situation. He found it difficult to cope with the paper work and interview process needed to apply for a pension. I accept that there is no evidence he would have been granted a pension at that time if he had applied.
Items 17 & 18: Likewise the sale of a motor vehicle by each of the parties was a realistic response to their situation.
Item 21: There was said to be rental income on a joint property at J Street, Town K. However, I am not satisfied that the husband received $180 per week. There is a handwritten entry in an exercise book to that effect[3]. The property comprised a residence and shop. I accept that the tenant agreed to do painting I also accept that the shop was dilapidated and the house substandard such that the husband was embarrassed to press for rent.
[3] Exhibit ‘9’
Item 23. The exclusion of Items 25 and 26 is dealt with in pars 48 to 53 of these Reasons. The loan from the husband’s mother was not seriously pursued and I am not satisfied it is a joint liability.
Accordingly I find the net asset pool to be as follows:
Assets $1,244,980
Superannuation $ 81,000
Less Liabilities $ 2,000
$1,323,980
The law
The authoritative approach utilised in the application of s 79 of the Family Law Act 1975 (Cth) (“the Act”) was that established in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [39].
The approach was necessarily a guide and involved four steps (it remains an invaluable tool):
i.Identify the assets and liabilities of the parties.
ii.Analyse the contributions during the relationship up to the date of the hearing.
iii.Consider the application of the factors in s 75(2) of the Act by way of adjustment.
iv.Consider whether the overall outcome is just and equitable in those circumstances.
With the delivery by the High Court of the decision in Stanford & Stanford (2012) FLC 93-518 there has been a sharpening of focus. Their Honours’ made the following statement at [35]:
In every case in which a property settlement order under s 79 is sought it is necessary to satisfy the Court that in all the circumstances it is just and equitable to make the order.
The decision leaves unambiguous that the requirement contained within s 79 is a preliminary enquiry that must be satisfied prior to the Court exercising its powers under s 79 of the Act (see Stanford & Stanford (above) at [48], [51]). The High Court indicated this will generally be satisfied by virtue of the fact that the parties have separated (See Stanford & Stanford (above) at [42]).
The High Court also went on to propound three principles to be applied in the exercise of s 79 of the Act (see Stanford & Stanford (above) at [37]-[40]):
1. The existing legal and equitable interests of the parties in the properties should be identified.
2. The power to make a property settlement order rests upon the law and not judicial discretion. Do not assume that the parties’ rights to or interest in marital property are or should be different from those that then exist.
3. One or other of the parties does not have the inevitable right to have the property of the parties divided between them. Nor the right to an interest in marital property fixed by reference to the matters in
s 79(4).The approach identified by the High Court means that having identified the asset pool by a valuation of the assets and identification of associated liabilities, the Court should ask itself whether having regard to those existing interests, is the Court satisfied that it is just and equitable to make a property settlement order. This fairly gives rise to the question should the position be left untouched, or would it be just and equitable to make an adjustment.
The second principle appears to take the matter a little further that having considered all of the matters in s 79(4) and consequently 75(2), the Court must again ask itself is it just and equitable to make an adjustment, on account of the matters identified or not.
The Third principle suggests that there is no presumption of inevitable alteration.
In this matter, the parties’ implicit assumptions surrounding their existing arrangements for marital property had been brought to an end with the ending of the marital relationship. In particular the two pieces of real estate and the net proceeds of sale of the former matrimonial home should be divided to enable the parties to maintain their now separate lives.
Accordingly, I find that it is just and equitable for a property adjustment order to be made.
Identify the assets and liabilities of the parties
The property of the parties is as set out in the joint Balance Sheet as amended by me.
Contributions – s 79(4)
When the parties began living together after their marriage in 1974, they had a house in Sydney acquired by the sale of a block of land owned by the husband and borrowings secured by mortgage. They had household contents, a motor vehicle and some savings.
The parties had been committed to each other for five years prior to the marriage. I have no doubt that their respective efforts in work and study were made to set up a joint life together once they married.
During the course of the marriage, the parties capitalised on the husband’s qualification in the property industry and the wife’s experience in administration.
They purchased a retail business and their first investment property. This was the commencement of the financial pattern of their marriage.
In the following five years they had three children. Just before the birth of their third child, the parties moved from Sydney to the Lake Macquarie area where they remained.
The majority of the care of the children, especially when they were very young, was undertaken by the wife. The husband assisted with their care when not working and engaged with other extra curricular activities as they grew older.
The parties built a home in Suburb C. They ran businesses, invested in property and developed property businesses, with the husband undertaking the majority of the work increasingly assisted by the wife as the children grew older.
By 2001 a real estate boom had started which brought a volume of lucrative work to the parties, which strained their relationship and health to breaking point.
In 2001 the husband began to suffer serious episodes of mental illness. Unsurprisingly, this ill health affected his ability to work at previous levels. His behaviour became erratic and immensely frustrating to the wife. The burden of running the businesses fell on the wife.
In 2002 the property business was sold. The wife took a year off “to recuperate” before returning to paid employment. The husband was in a low state of functioning for some years. The marriage ended three years later.
I consider that each party contributed to the maximum extent in respect to family life, work and acquisition of assets. The contributions of neither one should be given greater weight than the other. Accordingly at separation the position was one of equal contribution.
Post separation
The wife returned to paid work in 2003 to support the parties. The husband was ill and in a sense, abdicated his previously assumed responsibility as primary bread winner.
In 2004 the parties took out a million dollar loan facility secured over their home to buy and sell property. This was consistent with their past patterns of successful property and business developments. However, neither party and particularly not the husband, were able to utilise the facility to financial advantage. The line of credit became a financial support rather than a means of generating wealth.
The wife took the initiative in addressing the parties’ rapidly deteriorating financial position. The husband appeared unable to come to terms with it. This view is supported by the evidence of Dr N, Psychiatrist, relating to the husband’s inability to give instructions to his solicitor[4].
[4] Exhibit ‘8’
There should be an adjustment in favour of the wife for these post separation contributions so as to create a 10 per cent differential: 55 per cent in favour of the wife and 45 per cent to the husband.
(III) Relevant s 75(2) factors for adjustment
Age and state of health
The wife is aged 60. In 1985 the wife became ill and had a kidney removed and has had recurrent bladder infections since.
In March 2011 she was further diagnosed with a blood disorder which can develop into leukaemia. It is controlled by medication which has side effects, including fatigue. Most recently the wife had experienced a further setback in her health after being diagnosed with breast cancer[5].
[5] Dr O’s Affidavit sworn 15/02/2013, Annexure B
The wife is no longer in paid employment and is unlikely to return to it.
The husband is aged 61. He has experienced mental illness, namely depression, since the parties began operating their property business in the 1990’s. When that condition was diagnosed, anti-depressants were prescribed.
However, in 2001 the husband started to also experience anxiety and panic attacks. His mental health declined. He used alcohol and marijuana to self-medicate. Anti-depressant medication was changed but was not effective in alleviating the symptoms.
In 2003 the husband attempted suicide and continued to struggle with his mental health. He was hospitalised on occasions. After separation in June 2005, the husband’s anxiety and depression worsened. He developed agoraphobia and found it difficult to leave the house unaccompanied.
Commencing in March 2006, the husband undertook extensive counselling and psychotherapy which gradually eliminated his dependence on alcohol and reduced his use of marijuana.
There were two further suicide attempts. The husband continues to be monitored by his general practitioner in relation to medication prescribed by his psychiatrist.
Since 2009 the husband has had difficulties with his heart, high cholesterol and oesophageal reflux. The husband now receives a Disability Pension and is unlikely to return to employment.
The parties are in an equally difficult situation in terms of future employment.
The wife has superannuation which she is now able to access. The husband has used his superannuation funds. Neither party is likely to generate any further interest in superannuation.
Parties’ future inheritance
The Court was urged to consider another factor for adjustment, being the possible future inheritance by each party from their elderly parents (Items 25 and 26).
The wife is a future beneficiary under the current Will of her father, Mr P[6]. The Will was signed in October 2010.
[6] Exhibit ‘5’
Mr P is aged 96, is blind and requires day to day care and assistance. The submission on behalf of the husband is that it is probable that no fresh Will will be made. Therefore under the terms of the Will the wife will have a period of five years rent free occupation of her current residence after her father’s death and an interest in his estate. I reject this submission.
The evidence supports the possibility that the wife’s father may have to draw on his half share of the equity in his home for his own care; in that property, or in another facility. This is especially so since the wife may not be able to go on caring for him as she has done due to her own poor health.
Despite the age of the wife’s father and his undoubted affection for and gratitude towards his daughter, there could be a significant injustice to the wife in assuming that she will in future benefit in a predictable way as a beneficiary.
There is even less substance in the submission that the husband will inevitably inherit from his mother. The husband’s mother is alive and does not lack capacity to make a fresh Will.
Accordingly, I do not consider there should be an adjustment in favour of either party pursuant to s 75(2) of the Act.
Accordingly the percentage division remains unchanged.
(IV) Just and Equitable Distribution
The net asset pool is $1,323,980.
- The wife is to receive 55 per cent $728,189
- The husband is to receive 45 per cent $595,791.
The applicant wife will retain the following assets:
1
Half agreed value of B Street
52,500
2
F Street, Suburb G
290,000
5
Household contents etc – half agreed value
5,000
6
Household contents, computer and jewellery
2,000
14
Cash at bank
14,000
15
Interest in deceased estate of mother
100,000
24
Superannuation
81,000
$544,500
less Credit Card debt
$ 2,000
$542,500
plus payment* from Controlled Monies to bring wife’s overall share to 55 per cent of the net asset pool
*plus interest
$185,689
Total
$728,189
The respondent husband will retain the following assets:
2
Half agreed value of B Street
52,500
4
D Street, Suburb E
250,000
5
Household contents – half agreed value
5,000
7
Cash at bank
12,000
8
Shares
4,980
9
Garage effects, M collection and tools
2,000
10
Motor vehicles (x 2)
10,000
11
Motor bike
1,800
12
Caravan
2,000
13
Box trailer
$ 200
$340,480
plus payment* from Controlled Monies to bring husband’s overall share to 45 per cent of the net asset pool
*plus interest
$255,311
Total
$595,791
The wife will have the property at Suburb G which will provide rental income and possible future accommodation in the event that it would be needed. She will have cash of about $250,000 for contingencies. She has superannuation immediately accessible and an interest in her late mother’s estate. Her income is likely to be rental income and some Centrelink benefit in the immediate future.
The husband will have basic accommodation and cash of approximately $320,000 to upgrade or improve that accommodation. He will otherwise have two vehicles, chattels and be debt free. His income will be a Disability Pension for the foreseeable future.
I do consider that it is just and equitable to alter rights and interests to reflect an overall division of 55 per cent of assets to the wife and 45 per cent to the husband.
I make Orders accordingly.
I certify that the preceding sixty four (64) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 3 May 2013.
Associate:
Date: 3 May 2013.
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Family Law
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Equity & Trusts
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