GILMARTIN & GILMARTIN
[2016] FCCA 3135
•8 December 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GILMARTIN & GILMARTIN | [2016] FCCA 3135 |
| Catchwords: HELD – It is just and equitable for the Court to make orders dealing with the property of the parties – the Husband’s inheritance to be included in the asset pool for division between the parties. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79(2), 79(4) |
| Cases cited: Bonnici v Bonnici (1992) FLC 92-272 |
| Applicant: | MS GILMARTIN |
| Respondent: | MR GILMARTIN |
| File Number: | MLC 6664 of 2016 |
| Judgment of: | Judge Bender |
| Hearing date: | 18 October 2016 |
| Date of Last Submission: | 18 October 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 8 December 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms Teicher |
| Solicitors for the Applicant: | Mirabellas Solicitors |
| Counsel for the Respondent: | Mr Stanley |
| Solicitors for the Respondent: | Plaza Legal |
ORDERS
The Application of the Husband that the Wife’s Initiating Application filed 18 July 2016 be dismissed and that the Wife pay the Husband’s costs is hereby dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Gilmartin & Gilmartin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 6664 of 2016
| MS GILMARTIN |
Applicant
And
| MR GILMARTIN |
Respondent
REASONS FOR JUDGMENT
Introduction
This judgment relates to the Wife’s Application seeking orders adjusting the property between the parties pursuant to section 79 of the Family Law Act 1975 (Cth) (“the Act”).
At the time of the filing of that Application on 18 July 2016, the Registry acquiesced to the Wife’s request for an urgent abridgment with respect to interim orders whereby she sought that the Husband be restrained from dealing with the parties’ self-managed superannuation fund as well as the proceeds from the estate of the Husband’s mother, Ms W.
The Wife’s Application first came before the Court on 2 August 2016. Solicitors appeared on behalf of the Respondent but had not prepared responding material at that time given the urgent abridgment of the matter. The matter was adjourned to allow responding material to be filed and an interim order was made restraining the Husband by injunction from receiving, transferring, withdrawing or dealing with any of the proceeds from the estate of the Husband’s mother.
On 24 August 2016 the Husband filed a Response, Answering Affidavit and Financial Statement. In his Response the Husband seeks that the Wife’s Application be dismissed and that the Wife pay his costs on an indemnity basis.
The matter returned to Court on 31 August 2016, at which time it became apparent there existed a threshold issue between the parties with respect to the principles outlined in the matter of Stanford v Stanford [2012] HCA 52, namely whether it would be just and equitable for this Court to make orders adjusting the parties’ property interests.
Orders were made adjourning the matter to 18 October 2016 for hearing of the threshold issue and for the parties to file any further affidavits they sought to rely upon in relation to that discrete issue by
11 October 2016.
On 18 October 2016 the hearing with respect to the Stanford (supra) argument proceeded by way of oral submissions. The parties were not required for cross-examination.
Background
The parties were married on (omitted) 1989 and separated in March 2014. There are two children of the marriage, Ms S born (omitted) 1993 (“Ms S”) and X born (omitted) 1999 (“X”).
At the commencement of the relationship the parties did not own any assets of significant value.
In 1991 the parties purchased a property at Property C. The Wife deposes to the parties having paid $125,000 for the property, whilst the Husband’s evidence is that the property was purchased for $95,000. That property was sold in 1995 for between $125,000-$137,000.
In 1993 the Wife left her position as an (occupation omitted) in order to undertake home duties and be a full-time parent of Ms S.
In 1995 the parties purchased a property at Property O for $175,000 (“the former matrimonial home”). $150,000 of the purchase price consisted of a mortgage taken out with (omitted) Bank.
In 1993 the Husband commenced an (omitted) business, which he operated until its liquidation in 1998. The Husband was subsequently charged with defrauding the Commonwealth by way of unpaid taxes in excess of $380,000 with respect to this business. The Husband was convicted and in November 2004 was sentenced to a term of imprisonment. The Husband was released on home detention in
July 2005.
In 2001 the parties, together with members of the Husband’s family, purchased the (business omitted) in New South Wales (“the (omitted) business”). The (omitted) business was managed by various members of the family at various times, including by the parties whilst they lived in Queensland for the period from 2005 to 2007 following the Husband’s release from prison.
It is the Wife’s evidence that she, the Husband, the Husband’s two brothers and the Husband’s mother were all directors and equal shareholders in the (omitted) business.
It is the Husband’s evidence that his mother was never a director of the (omitted) business and that from at least 2004 the only directors were the Wife and the Husband’s brother Mr D.
The (omitted) business was liquidated in 2008 due to what the parties agree was poor management. The Husband also asserts that his brother and sister-in-law stole from the business when managing it. After settlement of the sale of the business $900,000 remained owing to (omitted) Bank.
The former matrimonial home was sold in 2008 for approximately $480,000. The total net proceeds of sale went to meeting a portion of the debts outstanding from the (omitted) business.
The parties returned to Melbourne in approximately July/August 2009, whereupon they rented premises until the time of their separation in 2014.
It is the Wife’s evidence that the Husband’s mother also sold her home at or around this time and that part of the proceeds of sale of her was used to pay the debt arising from the (omitted) business and the remainder was used to purchase a unit.
In June 2009 the Husband was declared bankrupt. The Husband was released from his bankruptcy in June 2012.
It is common ground that at the time of separation the parties’ assets consisted of a caravan, two motor vehicles, a small amount of savings in a joint bank account, approximately $12,000 of (omitted) shares and other various chattels.
The parties agree that at the time of separation there was a credit card debt of approximately $5,000-$6,000 outstanding.
At paragraph (30) of her Affidavit sworn 15 July 2016 and at paragraph (10)(h) of her Affidavit sworn 13 October 2016 the Wife deposes to an outstanding debt of $20,000 owed by the parties jointly to the Wife’s mother at the date of separation. The Wife deposes to that debt being the remainder owing from a $90,000 loan taken out by the parties for the business and other purposes approximately twenty years ago.
At paragraph (70) of his Affidavit sworn 24 August 2016 the Husband deposes that the $20,000 debt outstanding to the Wife’s mother was included in his list of creditors and discharged as a result of his bankruptcy in 2012.
The parties agree that approximately $70,000 had been repaid to the Wife’s mother by way of partial satisfaction of that debt.
On 1 December 2014 the Husband sent the Wife an email, a copy of which is annexed to his Affidavit sworn 24 August 2016. That email inter alia provided as follows:
“I am sorry but for me it is over. I just cannot do “this” anymore. You say it’s your moods due to stage of life but your violent rages go beyond that – seriously! I accept then, that I am the problem but as you will never forgive and forget I must move on. I want to move on.
I am genuinely sorry for whatever hurt I am causing you but it is time we both moved forward. I cannot help how I feel.
It is not my intention to punish you or be vindictive I just want to go forward.
I have thought about what we need to do and I am trying to be fair to you.
My thinking is I keep the Mazda & Van and you keep the shares, Hyundai house contents (except my personal stuff) & what was Dad’s/Grandma’s) & money in bank (though this will go till some of the bills also).
I will pay off the credit card, in my time as work allows not in any time declared by you.
Of course I will assist with the bills wherever possible and contribute towards X’s schooling etc and we need to have an open dialogue for this. You are not going to dictate how and when I see X or when I communicate with her. Equally I will respect your own space and we need to discuss this from time to time…”
On 2 December 2014 the Wife replied to the Husband’s email by way of an SMS wherein she stated:
“The devision (sic) of our worldly assets is fine. I will have my holiday with X at (omitted). I am quite capable of looking after her. I have fought so hard to keep goings Im at peace now. I will move on and start to begin enjoying life again. I accept my irrational outbursts have hurt peopld (sic) but stop using this against me. You have silently failed as well and need to take that responsibility on. Good bye.”
The Estate of Ms W
On 22 February 2016 the Husband’s mother, Ms W passed away.
On 15 December 2012 the Husband’s mother executed a will (“the 2012 will”) wherein she appointed the Husband as executor and the Wife as the alternate executor in the event the Husband had passed away.
The 2012 will provides for the Husband to be sole beneficiary of his mother’s estate and provides for the Wife to be the sole beneficiary in the event the Husband failed to survive her. In the event that neither the Husband nor the Wife failed to survive the Husband’s mother, their children Ms S and X were to become joint beneficiaries.
The 2012 will specifically excluded the Husband’s three brothers, Mr B, Mr V and Mr D from any of the inheritance whatsoever.
On 17 February 2016 the Husband’s mother executed a second will (“the 2016 will”). Again, the Husband was named sole executor and beneficiary of his mother’s estate. However, the 2016 will removes the Wife as alternative executor and appoints Ms S to that position in the event the Husband died prior to his mother. The Wife is also removed as a beneficiary to the estate. Ms S and X remained joint beneficiaries in the event of the Husband’s death.
It is the Wife’s evidence that the Husband’s mother’s estate consisted mainly of her unit which has been sold. She estimates the value of the unit to be $100,000-$150,000.
It is the Husband’s evidence that he stands to receive $100,000 from his late mother’s estate. It is his further evidence however, that his brother Mr D is intending to challenge the 2016 will in order to claim an interest in their mother’s estate.
On 7 June 2016 a summons for probate was filed with the Supreme Court of New South Wales in relation to the Husband’s mother’s estate.
On 24 June 2016 the Wife lodged a caveat with the Supreme Court in order to stop probate being granted. In that caveat the Wife asserts that she holds an interest as: “The Caveator was the daughter-in-law of the deceased and has a claim to the estate.”
On 13 July 2016 solicitors acting for the Husband with respect to his mother’s estate wrote to solicitors acting on behalf of the Wife seeking the removal of the caveat by 19 July 2016.
As has been mentioned above, the Wife subsequently commenced proceedings in this Court by way of her Initiating Application on
18 July 2016.
The Wife’s Submissions
The Wife relies upon her Affidavits sworn 15 July 2016 and 13 October 2016, as well as her Financial Statement sworn 15 July 2016. Counsel who appeared on behalf of the Wife made oral submissions at the hearing on 18 October 2016.
It is submitted on behalf of the Wife that this is a matter where it would be just and equitable for there to be a division of the property between the parties pursuant to section 79 of the Act.
At paragraph (28) of her Affidavit sworn 15 July 2016 the Wife deposes to what she believes are the current existing assets of the parties. It is the Wife’s evidence that in addition to the assets existing at the date of separation, the parties each have superannuation entitlements, she in the sum of $25,000 and the Husband an unknown amount. It is noted the Husband’s evidence is he has approximately $14,500 in his superannuation fund.
Furthermore, it was submitted on behalf of the Wife that the Husband’s inheritance from his late mother’s estate ought to be included in the pool of assets for division between the parties.
In terms of liabilities it is the Wife’s evidence that there is an outstanding credit card debt of approximately $5,000. The Wife also maintains that there is an outstanding debt of $20,000 owed to her parents by the parties arising from a personal loan.
It is submitted on behalf of the Wife that the following circumstances support her position that the Court ought to exercise its discretion in finding that it would be just and equitable to make orders adjusting the property between the parties, including the estate of the Husband’s mother:
a)the Wife earns approximately $50,000 as an (occupation omitted) worker, whilst the Husband has a much greater earning capacity given the various qualifications he holds. The Wife submits the Husband is currently working as a (occupation omitted) earning at least $80,000 per year. The Husband denies that he is currently employed;
b)the Wife’s future earning capacity is limited due to a depressive illness which has caused her to be periodically unable to work. There was no medical evidence placed before the Court by the Wife to substantiate her evidence in this regard;
c)throughout the duration of the parties’ relationship, it was the Wife who contributed primarily to the domestic upkeep of a household, including being the primary carer for Ms S and X as well as being the major contributor financially whilst the Husband was incarcerated in 2004/2005;
d)X continues to live with the Wife who continues to financially support her daughter’s education without the appropriate level of child support or other financial assistance from the Husband;
e)during the relationship the Husband conducted their accounts in a way which was deliberately designed to withhold details of the parties’ financial situation from her in circumstances where the Husband and his family – including his mother – owned and/or operated a number of businesses during that period which involved suspect accounting practices;
f)further to the Wife’s lack of involvement or knowledge in the Husband’s businesses, she submits that the realisation of the former matrimonial home in 2008 to cover the (omitted) business debt took place in circumstances where she was not privy to the discussions surrounding how those debts would be repaid and in circumstances where other family members with a more direct relationship to the (omitted business) should have made greater contributions to repaying the bank; and
g)in relation to the purported agreement between the parties by way of email/SMS correspondence in late 2014 as to the division of their assets at the time of separation, it is submitted on behalf of the Wife that such agreement was informal and was agreed to by her without legal advice and in circumstances where she was suffering from depression related to the breakdown of the marriage.
As mentioned previously, the Wife submits that she holds an interest in the estate of the Husband’s mother to the extent that any inheritance received by the Husband ought to be included in the pool of assets between the parties for division.
Counsel for the Wife referred the Court to the judgment of the Full Court in the matter of Bishop v Bishop [2013] FamCAFC 138 wherein reference was made by the Court to comments made by the plurality in the matter of Bonnici v Bonnici (1992) FLC 92-272. Counsel made particular reference to the following paragraphs:
“26. As his Honour went on to explain, Bonnici was a case where the husband received late in the marriage an inheritance of approximately $430,000 in circumstances where the value of the parties’ other assets was approximately $585000. The Full Court made the following observations in relation to the treatment of inherited monies …
…
The more difficult issue in this case is as to whether the [inheritance] … should be treated differently from other types of property in which the parties clearly have an interest.
The answer, we consider, must depend upon the circumstances of individual cases. If, for example, in the present case, there had been no other assets than the husband’s inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in the support of a family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and indeed incumbent upon a Court to make a property settlement in her favour from such an inheritance.
It was put to Counsel for the Wife that those paragraphs of Bonnici cannot be properly considered in isolation, but rather need to be read with the succeeding paragraphs, which provide as follows:
43. A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
44. The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a property. See James v James (1978) FLC 90-487. But there was no evidence of this in the present case despite submissions by counsel for the wife to the contrary. Accordingly, we think that in the present case the moneys received by the husband from the sale of the freehold and from his uncle’s estate should not be brought into account.
It was submitted on behalf of the Mother that there are “very unusual circumstances” that exist in the present case which would allow departure from the principle in Bonnici (supra) as outlined above.
In particular it was submitted:
a)the proceeds of sale of the former matrimonial home were used to repay debts arising from a business venture in which the Husband’s mother held an interest. This had the effect of protecting the Husband’s mother’s own assets; and
b)the 2012 will which named the Husband as the sole beneficiary and the Wife as the alternate beneficiary was made in order to recompense the Husband and the Wife for their considerable contribution to repaying the debt.
Counsel appearing on behalf of the Wife referred the Court to the decision of Sinclair & Sinclair [2012] FamCA 388 wherein Cronin J states at paragraph (23):
23. “Isolating or quarantining an inheritance must be cautiously done to ensure earlier important contributions to the family, in particular, are not ignored. As will be seen by the evidence here there is a distinct possibility of that happening if the focus is entirely on the assets received by the wife from inheritances and gifts.”
In the present case it is submitted on behalf of the Wife that she made an important and onerous contribution to the family through the repayment of the debt arising from the Husband’s family’s business by way of the sale of the former matrimonial home to the bank.
It was also submitted on behalf of the Wife that in addition to the difficulties stemming from the financial situation which arose when the (omitted) business failed, the Wife made other important contributions to the family as she spent the majority of the parties’ marriage being the primary homemaker and caregiver for the parties’ two children including for a period when the Husband was incarcerated in 2004/2005.
It was further submitted by Counsel on behalf of the Wife, in reliance on the passage she quoted from Bonnici (supra), that if included, the Husband’s inheritance from his mother’s estate would be the only significant asset of the parties.
It is the Wife’s evidence that it was the Husband’s conduct during the course of the marriage, including his involvement in a number of unsuccessful family businesses and his brief term of incarceration, which directly or indirectly led both to the depletion of the parties’ resources as well as the Wife being in the position of the primary homemaker and carer for the parties’ two children.
The Wife submits that in combination, the disposition of the former matrimonial home to repay the debt from the (omitted) business, her role as primary homemaker and caregiver during the marriage, the Husband’s conduct which left her with little control of the parties’ financial resources and resulted in his imprisonment and the Wife’s limited earning capacity in comparison to the Husbands are all factors that should result in the Court being in a position to find it would be just and equitable that there be a division of the pool of assets between the parties and that the Husband’s inheritance from his mother’s estate should be included in that pool, particularly given that it is the only significant asset for division between the parties.
The Wife maintains there is an outstanding debt of some $20,000 owed by the parties jointly to her mother as well as an outstanding credit card debt of $5,000-$6,000. It is the Wife’s position that without orders for a property settlement she will be left with little more than debt and that this is further cause for there to be orders made adjusting the parties’ property interests.
The Husband’s Submissions
The Husband relies upon his Affidavit sworn 24 August 2016 and his Financial Statement sworn 24 August 2016. Counsel who appeared on behalf of the Wife made oral submissions at the hearing on 18 October 2016.
The Husband seeks orders that the Wife’s Initiating Application be dismissed and that the Wife be ordered to pay his legal costs on an indemnity basis.
It was submitted on behalf of the Husband that it would not be just and equitable for the Court to exercise its discretion to adjust the equitable and property interests of the parties. The Husband advances four strands of reasoning to support this submission.
The first argument advanced on behalf of the Husband is that there has been “accord and satisfaction” to finalise the parties’ interests. To support this submission the Husband relies upon his email to the Wife dated 1 December 2014 and her SMS response of the following day.
It is submitted on behalf of the Husband that even though this exchange of correspondence carries none of the formal hallmarks of a contract or of a financial agreement, it was a satisfactory and pragmatic way of dealing with the distribution of the small asset pool which existed at the time of the separation and it allowed the parties to get on with their lives.
Counsel appearing on behalf of the Husband referred the Court to the decision of the Full Court in DW & GT [2005] FamCA 161. It was submitted that this decision supports the view that an informal agreement may be one of the matters the Court can consider in determining whether orders should be made affecting the parties’ property interests.
It is the Husband’s further submission that the parties’ behaviour since late 2014 supports the proposition that the parties gave effect to their informal agreement, at least until the death of the Husband’s mother. It is submitted this further militates against the Court making orders disturbing the agreement in circumstances where great injustice would not arise by retaining the status quo.
The second of the Husband’s submissions is that the Court in Bonnici (supra) held that except in “very unusual circumstances”, an inheritance received at the end or following dissolution of a marriage is to be the benefit of the party that receives it. The Husband submits that in this matter there are no very unusual circumstances which justify a departure from that principle.
Counsel appearing on behalf of the Husband submitted that while an inheritance does not fall into “a protected category”, there must be circumstances present which permit its inclusion into the pool of assets. Relying on Bonnici, Counsel submitted that such circumstances might include the care of the testator or the preservation of the testator’s property by the non-inheriting party, neither of which is present in this matter.
It was further submitted on behalf of the Husband that Counsel for the Wife in asserting that very unusual circumstances exist in this matter, has asked the Court to include or create a new category by which the Court may infer very unusual circumstances are present. Counsel urged the Court to refrain from doing so and submitted that the Court should adopt a more narrow approach to the reasoning outlined in Bonnici.
The third of the Husband’s submissions is that even if it were considered just and equitable for the Court to make an order adjusting the parties’ legal and equitable property interests, the Wife would be unlikely to receive any entitlement greater than that which she has already received following the parties’ separation.
At paragraph (40) of his Affidavit sworn 24 August 2016, the Husband sets out that his brother Mr D may challenge the 2016 will and is therefore considering a Part IV family provision claim against the estate. As a result, the Husband deposes to being unclear as to the exact amount he stands to inherit from his mother’s estate at this stage, noting the total value of his mother’s estate is approximately $100,000.
In the Husband’s Financial Statement he deposes to his total liabilities of $113,303, which includes a debt of $38,890 owed by him to (omitted) Finance relating to his purchase of a motor vehicle post separation. The Husband deposes in his Financial Statement to having $40,878 worth of assets, the major asset being the (omitted) motor vehicle he purchased post separation and which he values at $31,000.
Counsel appearing on behalf of the Husband highlighted the marked discrepancy between the Husband’s significant personal liabilities and his limited assets to support his submission that any division of the parties’ property would likely result in limited financial gain for the Wife.
Given the outstanding liabilities of both parties, the Husband’s brother’s potential interest in their mother’s inheritance (noting that such interests are purely speculative at this early stage), as well as each parties’ accumulating legal costs, it is the submission of the Husband that if the Court determines it is appropriate to make orders adjusting the parties’ interests, it may well be that the parties are left with little more than debt.
It is argued on behalf of the Husband that absent his mother’s inheritance, the only property for division between the parties is their respective superannuation interests.
Counsel for the Husband described the real possibility of the outcome of any property proceedings as being a matter where the Wife ought to be “careful what she wishes for”.
The fourth and final strand of the Husband’s submission that it is not just and equitable for there to be property orders made affecting these parties is it would be a disproportionate and impractical manner of property settlement for these parties.
It is the Husband’s submission that if the Court were to accede to the Wife’s Application that there be orders adjusting the parties’ property, the matter would proceed through the discovery process, further directions hearings and potentially a contested final hearing. Such a process, it is submitted, would involve trawling through the failure of the (omitted) business, the Husband’s bankruptcy and the parties’ various interests therein. The Husband submits that this process would incur further debt and further stress for parties who had, prior to the Husband’s mother’s death in February 2016, managed to sensibly and pragmatically distribute their assets and move on from a hurtful time in their lives.
Counsel for the Wife, relying upon the decision in DW v GT (supra), submitted in response to the Husband’s submission that the 2014 agreement is relevant when considering whether orders should be made adjusting the parties property interests that where orders are sought which are inconsistent with the prior agreement, the Court must consider the financial and other circumstances of the parties as they exist at the time of the hearing of the Application and not at the time the prior agreement was made.
Given that she now asserts an interest in the Husband’s inheritance, the Wife submits that the asset pool available for distribution has increased significantly since the 2014 agreement and that even if the 2014 agreement could be considered to have been a pragmatic and proportionate way in which to distribute their interests in 2014, this is no longer the case.
The Law
Section 79 of the Act defines the Court’s powers in determining applications for property settlement. Section 79(2) of the Act provides that:
“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.”
Section 79(4) of the Act sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interests of the parties in property. Those matters are:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or 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 marriage 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 marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or 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 marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, 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 marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under section 75(2) of the Act are as follows:
(a) the age and state of health of each of the parties; 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 marriage 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 (3), 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) where the parties have separated or divorced, 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
(ha) 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 marriage 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 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; 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
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The High Court in the matter of Stanford v Stanford [2012] HCA 52 held that prior to making orders for the division of the property in which the parties have an equitable interest in accordance with the provisions of section 79 of the Family Law Act 1975 (“the Act”), the Court must first determine that it is just and equitable that the Court make such orders.
The High Court in Stanford (supra) held that in the majority of matters the decision as to whether it is just and equitable for the court to make property orders is easily resolved by the breakdown of the marital relationship and the mutual desire of both parties for orders altering their respective property interests.
In the case the Husband takes issue with the Wife’s Application and submits that it would not be just and equitable for the Court to make property orders.
In Bevan v Bevan [2013] FamCAFC 116 the Full Court considered the decision of Stanford (supra). At paragraph (73) of that decision the plurality summarised the three “fundamental propositions” laid down by the High Court in Stanford as follows:
1. 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);
2. 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;
3. 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.
The High Court in Stanford (supra) held that prior to determining whether it is just and equitable to make orders affecting the parties entitlement to property, the Court must first determine the parties existing interests in that property.
It is the Wife’s evidence that the parties’ retained and/or disposed of their assets since separation as follows:
The Wife:
a)Hyundai motor vehicle valued at $20,000-$25,000 which she retains;
b)Joint bank account savings of $5,000 utilised by the Wife to pay rent and living expenses for she, Ms S and X following separation. The Husband asserts that the joint bank account contained approximately $10,000 worth of savings.
The Husband:
a)(omitted) caravan, which was sold in February 2015 for $10,900;
b)Mazda motor vehicle valued at $12,000. It is the Husband’s evidence he sold this vehicle to his mother in July 2015 for $4,500. The vehicle was subsequently given to Ms S as a gift.
Joint:
a)(omitted) Shares to the value of $10,000-$12,000 which are registered to the parties’ “Gilmartin Superannuation Fund”. The Husband agrees the shares are registered in that name, but that the actual superannuation fund was registered in the late 1990s, never operated, held no assets and has since been deregistered;
b)
Furniture and other chattels which were divided evenly between the parties save for the majority of white goods which were retained by the Wife. At paragraph (71) of his Affidavit sworn
24 August 2016 the Husband deposes to the Wife retaining all of the household furniture and contents at separation.
It is the Wife’s evidence that the parties’ have held and continue to hold the following liabilities since separation:
a)a (omitted) credit card in the Wife’s name with an outstanding balance of $5,000, that credit card having been utilised by her prior to separation for family expenses. The Husband’s evidence is that the credit card debt was $6,000 at separation but that he has since paid $3,380 towards that debt;
b)a $20,000 debt arising from a personal loan owed to the Wife’s mother jointly by the parties. The Husband asserts the Wife’s mother was included as a creditor as part of his bankruptcy in 2009 and the debt was discharged at that time.
Conclusion
The Husband’s inheritance
Given that it is submitted by the Wife that the Husband’s inheritance if included would form the only significant item of value for division between these parties, it is necessary to first consider whether that inheritance should be included in the pool of assets prior to determining whether it would be just and equitable to make orders altering the parties’ property interests.
There is no doubt that the inheritance shortly to be received by the Husband is property for the purposes of the Act. The question arises however as to how that property ought to be treated.
It is submitted on behalf of the Husband that the inheritance which was received after separation and for which the Wife made absolutely no contribution, should be excluded from the pool of assets available for distribution between the parties. It is argued that if the Court was minded to acquiesce to the Wife’s Application that there be property orders made, the inheritance ought to be considered a financial resource of the Husband only.
In the matter of Bonnici (supra) the Husband inherited approximately $350,000 shortly prior to the parties separation. The Full Court held at 43 and 44 as follows:
[43] A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
[44] The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the Husband or Wife as the case may be or other particular services to protect the property. See James & James (1978) FLC 90-487.
In this matter there is no evidence before the Court as to the relationship between the Wife and the Husband’s mother during the parties’ relationship. It is not asserted that the Wife contributed in any meaningful way to the physical care of her mother-in-law prior to her death in 2016. It is noted that for the last two years of the Husband’s mother’s life the parties had been separated.
Nevertheless, it is submitted on behalf of the Wife that this is a matter that falls in the category of “very unusual circumstances” such that the Husband’s inheritance should be included in the pool of assets for division between the parties.
Counsel for the Wife relies in particular on the following passage from Bonnici (supra):
“If, for example, in the present case, there had been no other asset than the husband’s inheritance but the wife had, as his Honour found, clearly carried the main financial burden in the support of the family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and, indeed, incumbent upon a court to make a property settlement in her favour from such an inheritance.”
Counsel for the Husband in the course of his oral submissions conceded that there are no other assets of significant value in the pool for distribution between the parties and absent the inclusion of the inheritance in the pool, it would be neither pragmatic nor proportionate for there to be property orders made in this matter as the parties would end up with little more than debt.
In circumstances where the parties are ad idem as to the absence of any other significant assets in this matter, I agree with the Wife’s submission that the Husband’s inheritance would form the only substantial asset for distribution between these parties.
Furthermore, the Husband does not dispute the Wife’s evidence that she was the primary homemaker and care-provider for Ms S and X during the course of the marriage. The Husband does however dispute the extent to which X currently remains in the Wife’s care.
The Wife submits that the sale of the former matrimonial home to the bank to partially meet the debts incurred by the Husband’s family with respect to the (omitted) business in which the Husband’s mother held an interest, was an onerous and significant contribution made by her to protect the Husband’s mother’s own assets.
There is conflicting evidence as to which members of the Husband’s family acted as director of the (omitted) business at various times during their ownership of it. The extent of the Husband’s mother’s financial interest in that business is also disputed. Unfortunately, there is insufficient evidence currently before the Court to permit an accurate attribution of each family member’s varying interest in that business.
It would appear the Husband’s mother sold her home at or around the time the (omitted) business was sold and part of the proceeds of sale were used towards that debt. However, the Husband’s mother was able to retain sufficient funds from that sale to purchase the unit that now forms the major asset of her estate.
In accordance with the decision of Bonnici, the Court must be satisfied that “very unusual circumstances” exist which permit an inheritance received after separation to be included in the asset pool.
While the Full Court in Bonnici provided two explicit examples that would meet the “very unusual circumstances” test outlined therein, Counsel for the Wife correctly pointed out that those two examples are not exclusive and that other factors might be properly considered.
I am satisfied that the absence of any other significant asset held by the parties, the Wife’s contribution as primary homemaker and caregiver during the course of the marriage, the proceeds of sale of the former matrimonial home being used to partially repay a debt incurred by the Husband’s family and the resultant protection of the Husband’s mother’s own assets by that sale in circumstances where the Wife asserts she had little input into the financial decisions made by the Husband and his family, and that the Wife was a named beneficiary in the 2012 will of the Husband’s mother, equates to “very unusual circumstances”.
I am therefore satisfied that the Husband’s inheritance from his late mother’s estate should be included in the pool of assets for division between the parties.
Just and Equitable
Whilst the asset pool for division between the parties is small, the inclusion into the pool of the Husband’s inheritance from his late mother’s estate significantly increases the value of the pool insofar as it becomes the most substantial asset for distribution.
As was submitted on behalf of the Wife, the inclusion of the Husband’s inheritance places the parties into a position where they have a significant asset of value for the first time since the sale of the former matrimonial home in 2009. Whilst the parties dispute the value of the inheritance, probate has not yet been granted and the precise value of the inheritance is therefore yet to be fully determined.
Nevertheless, the value of the Husband’s inheritance stands to range from approximately $100,000-$150,000.
It is the Wife’s evidence that she currently has the primary care of the youngest daughter, X. The Husband disputes the extent to which X is in the Wife’s care. On the evidence currently before the Court it is not possible to determine the extent to which the present care of X will form a basis upon which to adjust the parties’ property interests pursuant to section 75(2) of the Act.
Furthermore, the Wife raises the disparity in the parties’ respective future earning capacity as a further factor relevant to any orders that would be made by this Court adjusting the parties’ property interests. The Husband denies working presently. Once again, the evidence before the Court is insufficient to make a determination in this regard and any finding by the Court would require further affidavit material and/or the giving of viva voce evidence at final hearing.
What is however apparent on the evidence before the Court and not, as I understand it, disputed by the Husband, is that the Wife was the primary homemaker and full-time caregiver of the parties’ two children during the marriage. This is particularly relevant in the present case given the burden the Wife carried alone in caring for Ms S and X during the Husband’s incarceration in 2004 and 2005.
At the time the Wife filed her Application with the Court seeking property orders in July 2016, the parties had been separated on the Husband’s evidence for some two and a half years and on the Wife’s evidence approximately 20 months.
The email/SMS correspondence between the parties in December 2014 which purported to divide their assets as they existed at the date of separation, took place less than two years ago in circumstances where that correspondence makes it clear both parties were suffering from grief and distress as a result of the breakdown of their marriage.
The Husband submits that where the parties’ informal agreement was subsequently acted upon and/or carried out, this should militate against the making of orders which serve to alter the terms of that agreement.
It is apparent from the decision in DW & GT (supra) that an informal agreement may be one of the matters to consider in determining whether it would be just and equitable to make orders affecting the parties’ property interests, where a subsequent application is made for property orders pursuant to the Act.
In DW & GT (supra) the Full Court held at paragraph (39):
“The earlier agreement should be considered (as an indication of what the parties may have regarded as just and equitable at the time), but its provisions only given effect if they coincide with an order which is just and equitable according to s 79 at the time of the hearing”
The “agreement” between the parties in 2014 was made without legal advice, in circumstances of great emotional upheaval and involved a very limited adjustment of the interests of these parties. Rather than the parties having “carried out” the terms of their informal agreement, the evidence seems to suggest that they each, and particularly the Wife, simply tried to move on with their lives from what Counsel for the Husband described as a “hurtful time”.
The finding of the Court that the Husband’s inheritance should form part of the pool of assets for division between the parties means the parties’ agreement does not coincide with orders that would be made at this time.
As previously noted, the Full Court in Bevan (supra) held that when considering whether it is just and equitable to make an order adjusting the parties’ existing property interests, it is appropriate to consider section 79(4) factors as “while the s 79(2) and s 79(4) issues must not be conflated, they are intertwined because the text of the Act links them”.
In this matter, a consideration of the section 79(4) factors, being the contributions each of the parties have made prior to, during and post separation, and the relevant section 75(2) factors, would result in there being an adjustment of property, including the inheritance, between the parties.
Accordingly, the Court is satisfied this is a matter where it would be just and equitable to make orders affecting the parties’ interests in their property.
The matter will therefore be listed so that orders can be made for the future management of the matter.
I certify that the preceding one hundred and twenty two (122) paragraphs are a true copy of the reasons for judgment of Judge Bender
Date: 8 December 2016
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