Granger and Granger
[2018] FCCA 51
•12 January 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GRANGER & GRANGER | [2018] FCCA 51 |
| Catchwords: FAMILY LAW – Property – 40 year marriage – Dispute about the value of a rural property – where the husband wishes to retain the property – where the property is not easy to value but where the court has a duty to determine its value – where the wife inherited $700,000.00 eighteen months before the marriage ended – where the wife argues that her inheritance should be quarantined – where this would lead to insufficient recognition of the husband’s contributions during the marriage including receipt of an inheritance which was lost due to a failed investment - global approach to the assessment of contributions adopted – where the s.75(2) matters favour the husband slightly because the wife is still employed and accruing superannuation but where the wife is past normal retirement age – no adjustment for s.75(2) matters. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 79 |
| Cases cited: Aleksovski & Aleksovski (1996) FLC 92-705 Commonwealth v Milledge (1953) 90 CLR 157 Norbis & Norbis (1986) FLC 91-712 |
| Applicant: | MS GRANGER |
| Respondent: | MR GRANGER |
| File Number: | NCC 1472 of 2014 |
| Judgment of: | Judge Terry |
| Hearing dates: | 14 & 15 March 2017 |
| Date of Last Submission: | 15 March 2017 |
| Delivered at: | Armidale |
| Delivered on: | 12 January 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bithrey |
| Solicitors for the Applicant: | APJ Law |
| Counsel for the Respondent: | Mr Edwards |
| Solicitors for the Respondent: | David Edwards & Associates |
ORDERS
Within 90 days of the date hereof the husband shall pay to the wife the sum of $115,564.20.
Contemporaneously with the husband complying with Order (1) the wife shall sign all documents and do all acts and things required to transfer to the husband at the expense of the husband the whole of her right title and interest in the property known as “Property A”, Property A, Folio Identifier (omitted) (“Property A”).
If the husband fails to comply with Order (1) then the parties shall do all acts and things required to sell Property A and for that purpose:
(a)The property shall be listed for sale by private treaty with a real estate agent agreed between the parties and failing agreement as nominated by the president of the Real Estate Institute of NSW.
(b)The listing price of the property shall be as agreed between the parties and failing agreement as nominated by the agent.
(c)The sale price of the property shall be as agreed between the parties and failing agreement as nominated by the agent.
(d)The parties shall co-operate in every way with the agent in relation to the marketing of the property for sale including making the keys readily available and allowing inspection of the property at all times reasonably requested by the agent.
(e)Upon agreement being reached for sale of the property the parties shall execute the contract of sale and all other documents necessary to complete the sale including all transfer documentation forthwith upon its submission to them by the agent or their solicitor.
The proceeds of sale shall be utilised as follows:
(a)To pay the costs, commissions and expenses of sale including any rates adjustments.
(b)To pay the balance as to 60 % less $241,435.80 to the wife and 40% plus $241,435.80 to husband.
The wife is declared the owner to the exclusion of the husband of the (vehicle omitted) and the Mitsubishi (omitted).
The husband is declared the owner to the exclusion of the wife of all plant, machinery, fertiliser, stock and household contents located on or connected with Property A.
Each party is otherwise declared the owner of all assets in their possession or under their control.
If either party refuses or neglects to sign or execute and return a document within 14 days of a written request to do so then the Registrar of the Newcastle Registry of the Federal Circuit Court is appointed under Section 106A of the Family Law Act 1975 to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an affidavit of a solicitor on behalf of the requesting party as to the said neglect or refusal.
IT IS NOTED that publication of this judgment under the pseudonym Granger & Granger is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1472 of 2014
| MS GRANGER |
Applicant
And
| MR GRANGER |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property settlement proceedings arising out of a marriage of nearly 40 years which ended in 2013.
The issues which consumed a large amount of time at the trial were:
i)The value of “Property A”, a rural lifestyle property which is the principal asset acquired by the parties during their marriage.
The husband said that it was worth $595,000.00; the wife that it was worth $800,000.00.
ii)How an inheritance of $700,000.00 received by the wife should be treated.
The wife said that her inheritance should be quarantined and that she that she should keep the assets deriving from it and also receive 50% of the matrimonial assets. This would among other things, see the husband bearing the entire loss resulting from the failure of a company into which the inheritance he received during the marriage was invested.
The husband said that the wife should keep the assets deriving from her inheritance and that he should keep Property A and the plant and equipment and stock on it without being required to make any payment to the wife. This would see the wife receiving little more from the matrimonial pool than the small amount of superannuation she acquired during the marriage.
The parties arrived at these unfortunate positions by taking a flawed approach to the resolution of the matter. They began with the proposition that they had a right to keep certain assets untouched by the other party (the wife assets deriving from her inheritance; the husband Property A) and then twisted and turned with legal arguments and percentages to try and justify this outcome.
This puts the cart before the horse. It is not the proper way to approach a property matter and regardless of the value of Property A neither of the proposed outcomes is within a range of just and equitable.
The evidence
The wife relied on her application filed on 17 August 2015, her affidavit filed on 11 July 2016, her financial statement filed on 9 February 2017 and the affidavit of Mr J, a property valuer, filed on 9 August 2016.
The husband relied on his response filed on 10 September 2015, his affidavit filed on 13 February 2017 and his financial statement filed on 13 March 2017 and he asked the court to accept the evidence of Mr L, a valuer who valued Property A on the joint instructions of the parties in February 2016.[1]
[1] Exhibit “A”
He also relied on the affidavit of Mr D filed on 14 February 2017.
Mr D purported to give evidence relevant to the valuation of Property A but his evidence did not assist me.
Both parties filed case outline documents which contained their proposals for a final property settlement.
I heard this matter in March 2017. Due to pressure of work in the registry I have not delivered a judgment in a timely fashion and for that I apologise. I note however that the parties have not sought to relist the matter and I am entitled to assume that there have been no significant changes of circumstances since judgment was reserved.
Background
There is very little dispute about the factual background to the matter.
The parties married on (omitted) 1973 when they were 22 and 26 respectively. They have two children, Mr R born on (omitted) 1979 and Ms J, born on (omitted) 1982. They separated in January 2013 when the wife left the former matrimonial home and were thus married for nearly 40 years.
At the time of the marriage the husband owned 1000 acres in (omitted) called “(omitted)” which he had purchased from his father a year earlier.
The parties lived with the husband’s parents for the first six months of their marriage and ran (omitted) which was stocked with cattle and sheep.
In 1979 the parties purchased “Property A” for $70,000.00, borrowing the majority of the purchase price. Property A was a bush block and the parties ran cattle on it and developed it over time. In 1984 they built a garage/temporary dwelling on it while they built the main house and they moved into the main house in 1986.
The parties created a partnership known as Granger for the purpose of purchasing Property A and working the property. They were both involved in the partnership in differing capacities. The wife did the books and some physical work and the husband did the majority of the physical work.
The wife had a variety of paid (omitted) jobs throughout the marriage. For a period of time the husband also did a variety of paid work including on a (omitted) and (omitted) farm and as a (occupation omitted). However from some date which is unclear to me he became solely occupied in running Property A.
Two inheritances were received during the marriage. The husband received $176,750.00 in mid-2005. He spent $76,000.00 on items to do with the property and invested $100,000.00 with (omitted). This entity went into liquidation in 2012 and the investment was lost.
The wife inherited $700,000.00 in 2011. She used $30,000.00 to purchase a Mitsubishi (omitted) truck and $27,000.00 to purchase a (vehicle omitted) and she gave $30,000.00 to her daughter.
The wife did not tell the husband about the size of her inheritance.
The parties separated in January 2013 when the wife left Property A. Later that year she used part of her inheritance to purchase Property B known as “Property B”.
The wife lives in that home and works full time as a (occupation omitted) at (employer omitted), a job she has been doing since 2001.
Since separation the wife has received two sums of money totalling $15,800.00 from the estate of her uncle Mr G. She said that this money had been held in trust for her and was careful not to say when her uncle died and this issue was not explored during cross-examination.
The money the wife received from this inheritance is sitting in a separate bank account.
The husband lives on Property A and supports himself using a combination of the aged pension, money from (employment omitted), income from the farming enterprise and income from (omitted) which has a (omitted) on the property. The partnership was wound up at the end of the 2015 financial year.
The value of Property A
Evidence about the value of Property A consumed the majority of the time at trial.
In December 2015 the parties jointly instructed Mr L of (omitted) to value the property and in his report dated 10 February 2016 he valued it at $595.000.00.
The wife was not happy with this valuation and believed that the property was worth more; in an earlier financial statement she estimated its value at $1m. She commissioned Mr J of (omitted) Valuations to prepare a valuation and in his report dated July 2006 he valued the property at $800,000.00.
Prior to the trial the two valuers conferred but neither was prepared to shift their opinion. They did however prepare a joint statement about the matters of disagreement between them with detailed information about why each considered that their position about particular issues was right and the position of the other was wrong.[2]
[2] Exhibit C
The valuers were cross-examined using the “Hot Tub” method, that is, they went into the witness box together and began by outlining their respective positions.
Mr L was then cross-examined by the wife’s counsel and Mr J was asked on occasions to comment on the opinions he expressed and there were some robust exchanges between the valuers.
The husband’s counsel then cross-examined Mr J and Mr L was asked on occasion to comment on the opinions he expressed and there were again some robust exchanges between the valuers.
The valuers agreed on two things namely that:
i)Property A was a rural lifestyle property and was not a commercially viable property.
ii)There were a limited number of sales which could be used as comparable sales and no sales of properties which closely resembled Property A.
The approach Mr L took to the task was to start by considering the comparable sales and forming a view as to the value of Property A based on those sales. As a cross-check he then considered the components of the property (the land and the buildings on it) and what the information in the comparable sales suggested were reasonable figures to place on the components and formed his final opinion as to value.
Mr J was of the view that the sales data did not provide sufficient information to allow him to form an opinion about value using the comparable sales method. He valued the property from two separate angles:
i)He valued the component parts including the land, buildings and value of the (business omitted) and came to an opinion of value by adding up the components;
ii)He valued the property on its carrying capacity using a ((omitted) Equivalent).
Mr J formed the view that the property was worth $910,000.00 using the first method and $780,000.00 using the second method. His conclusion was that the property was worth $800,000.00, almost exactly half of these two figures added together.
There are problems with Mr J’s approach. First, he used the carrying capacity of the property to arrive at a figure which represented the bottom of his range but he conceded during cross-examination that the property was not a commercially viable property and that this was not an appropriate method to use to value this property.
The wife’s counsel submitted that this was not fatal to his case and that Mr J’s opinion should still be preferred because if the value arrived at using carrying capacity was ignored it left only the higher value of $910,000.00.
I do not accept this; it concerning that Mr J approached his task by using methodology which he admitted in the witness box was flawed.
In addition, the figure Mr J arrived at using the component approach is flawed if there are errors in the valuation of the components and there are a number of reasons to be concerned that this may be the case.
One is that Mr J determined the values of the various components of the land (wooded, improved pasture, cleared) by extracting rates from other sales which he said were not comparable.
Another is that there was a dispute about whether Mr J had correctly identified the amount of improved pasture on Property A. Mr L’s opinion was that it amounted to (omitted) hectares. Mr J asserted that it amounted to (omitted) hectares but he was not able to provide a convincing basis for this belief.
The wife asserted during cross-examination that she had examined an aerial view of the property and that it showed (omitted) hectares of improved land but conceded that she was going by colours and that she could not be certain how much of the land she saw in the aerial photograph was cleared land.
I cannot in those circumstances be satisfied on the balance of probabilities that the property has the higher proportion of cleared land and the significance of this is that if the carrying capacity method is discounted as a proper valuation method Mr J’s only method of valuing it was the component method. He had no regard to sales material nor did he separately consider what a buyer might be willing to pay for the property and if I cannot be sure that the value he placed on the components is accurate I cannot be satisfied for that reason alone that his valuation is valid.
Another component issue was that Mr J arrived at a value for improvements which was much higher than Mr L’s value. Mr L gave evidence about the basis for his estimate which I prefer to the evidence of Mr J.
Yet another component issue was that Mr J asserted that the capitalised value of the yearly fee paid to the husband for keeping the easement to the (omitted) accessible was $60,000.00 and included that as one component in arriving at a figure of $910,000.00. Mr L said that an examination of the contract the husband had with (business omitted) indicated that the contract was with the husband personally, and that if the husband sold the land, (business omitted) might decide to use an independent contractor to keep the easement accessible. He disputed that the value of the land should include a component for the capitalised value to the husband of the contract with (business omitted).
Once again I prefer Mr L’s evidence and am not satisfied that an amount for the capitalised value of the (omitted) Contract should be included to arrive at a value of the land.
Mr J was firm in his position that there were no comparable sales and that this made valuation of the property by use of comparable sales problematic, but there is some sales data and Mr J made no attempt in his valuation to consider the valuation of the property from the perspective of what a willing but not anxious buyer might be prepared to pay for it. He did not make any attempt to cross-check his component approach with any of the sales data.
There is a considerable discrepancy between the values attributed to the property by Mr L and Mr J. They both acknowledged that it was a difficult property to value and a solution occasionally adopted when there are difficulties valuing a property is to order its sale.
However although the wife’s counsel asked me to find that there was no prospect of the husband being able to keep Property A because there was no evidence that he could borrow or obtain funds if he was required to make a payment to the wife, he did not go so far as to press me to order the sale of the property as the only means of properly fixing its value, rather he advocated strongly for acceptance of Mr J’s value.
Sometimes people are able to come up with funds to acquire property through the auspices of friends and family and given that the husband strongly wishes to retain Property A if he can, I consider that I have an obligation to make a decision about its value. Comprehensive valuations have been prepared by men who are experienced valuers, and cross-examination has exposed reasons for preferring one valuation to the other. I do not consider that this is a case in which it would be reasonable for me to avoid the task of fixing a valuation, rather I must as the High Court said in Commonwealth & Milledge:
…by a commonsense endeavour after consideration of all of the material before the court fix a sum satisfactory to the mind of the court as representing the value contained in the land….[3]
[3] Commonwealth & Milledge (1953) 90CLR 157
I prefer Mr L’s approach to his task and am satisfied that there are some errors in Mr J’s approach, including accepting the wife’s assertion about the cleared area of Property A, using a capitalised value for the (omitted) contract as one of his components and failing to step back and consider the likely sale price of the property as opposed to the value of its components.
I intend to include “Property A” in the pool at a value of $595,000.00.
The assets, liabilities and superannuation
The parties have the following assets:
Description
Ownership
Value
Property A
Joint
$595,000.00
Plant & Equipment on Property A
Joint
$31,600.00
Livestock on Property A
Joint
$75,000.00
Savings
Wife
$22,600.00
Property B
Wife
$550,000.00
Shares
Wife
$123,018.00
Motor Vehicles ((vehicle omitted) and Mitsubishi (omitted)
Wife
$20,500.00
Savings
Husband
$17, 879.00
Total
$1,435,597.00
Both parties have furniture and household contents to which they ascribed a modest value and it was agreed that these items should not be included in the pool.
There was no suggestion during final submissions that the husband was likely to receive any further distributions arising out of the liquidation of (omitted).
The value of the plant and equipment on Property A was agreed as was the value of Property B, the wife’s shares and the wife’s motor vehicle.
In his financial statement the husband said that the livestock on Property A was worth $22,445.00. During cross-examination he made admissions about the livestock which rendered this figure unreliable. He said that he had (omitted) head of cattle worth $70,000.00 and (omitted) sheep worth $5,000.00 and I accept as submitted by the wife’s counsel that the livestock should be included at $75,000.00.
At the time of separation the husband had savings of $58,123.00. He now has $17,879.00 and he admitted that some of his savings had been spent on legal fees.
After being requested to provide evidence of his paid legal fees, the husband revealed that he had paid $14,000.00 to one previous solicitor and $14,000.00 to another, a total of $28,000.00, and that he had also paid Mr Edwards $15,000.00.[4] He has paid legal fees of $42,000.00 in all.
[4] Exhibit G. I think I can safely exclude consideration of the likely cost of the leg of lamb which the husband gave to Mr Edwards.
According to a document the wife provided upon being requested to do so she has paid legal fees of $32,700.00. She did not disclose the exact source of those funds, only indicating that they had been paid by her personally,[5] but given her income it is difficult to believe they have all been paid from income. Some may have derived from her inheritance or income earnt on it or from share dividends deriving from the inheritance and the wife’s inheritance was clearly received during the parties’ relationship.
[5] Exhibit F
It is within the court’s discretion whether to add back to the pool money which existed at separation but has since been spent by one party alone, even when the money has been spent on legal fees. I cannot exclude the possibility that the wife has also used money which existed at separation to pay legal fees and I do not intend to add a notional amount to the pool representing savings the husband once had but no longer has.
The parties have no relevant liabilities. The wife has a small credit card debt but the parties have been separated for four years and it is not appropriate to include it as a debt in which the husband should share. The debt the husband owes for rates and electricity stands in the same category.
The husband has no superannuation. The wife has the following:
Description
Ownership
Value
(omitted) Superannuation Fund
Wife
$74,190.00
Total
$74,190.00
The parties have non-superannuation assets of $1,435,597.00 and superannuation of $74,190.00, a total of $1,509,787.00.
The applicable law
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property.
S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford[6] the High Court stressed that when an application for a property settlement was made the court must first identify the parties interests in property and then consider whether it was just and equitable to make an order altering those interests. It stressed that this question could not be answered simply by considering whether a party had made contributions as set out in s. 79(4) of the Family Law Act 1975.
[6] Stanford & Stanford (2012) FLC93-495
I am satisfied that it is just and equitable to consider making property settlement orders in this case. It clearly comes within the following situation referred to in Stanford:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship and the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
I intend to take the usual steps to resolve the question of what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s79(4)(a), (b) and (c) and to express those contributions as a percentage;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which includes the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
Whether a global or two pools approach should be adopted
The wife’s counsel submitted that the assets derived from the money the wife inherited from her mother’s estate namely Property B, the wife’s share portfolio and the wife’s motor vehicles worth $693,518.00 in total should be placed into a separate pool and that contributions should be assessed separately to that pool and to a second the pool containing the remainder of the assets which could fairly be described as matrimonial assets. He submitted that it was essential that this be done so that the court did not lose sight of the significance of the wife’s inheritance. [7]
[7] For some reason not explained wife’s counsel did not include the money the wife inherited from her uncle which appears to me to be sitting in a separate account and to be part of her savings.
He further submitted that contributions to the first pool should be assessed as 100% by the wife and contributions to the matrimonial pool should be assessed as equal.
The husband’s position about which approach should be adopted was never made clear. The husband’s case was that he should keep Property A and the stock and equipment on it and his counsel’s only reference to percentages was in a document handed up during closing submissions in which he attempted to demonstrate that this would not be an unfair outcome.[8]
[8] Exhibit I tendered during closing submissions
Conclusion about the basis on which contributions should be assessed
It is not correct to say as the wife’s counsel asserted that the court must assess contributions to the assets derived from the wife’s inheritance separately. The court always has the option of assessing contributions globally to one pool of assets or assessing contributions to separate pools, and which option is adopted is a matter for the discretion of the judge hearing the case. [9]
[9] Norbis & Norbis (1986) FLC 91-712
In Bonnici & Bonnici, a case in which the husband received a large inheritance, the Full Court expressed the view that it might well have been preferable for the trial judge to assess contributions separately to the husband’s inheritance to ensure that the size and importance of it was not lost sight of. They added however that a global assessment of contributions would have been perfectly acceptable if the trial judge had adequately explained how he took the inheritance into account.[10]
[10] Bonnici & Bonnici (1992) FLC 92-272
I do not accept, albeit that the wife received her inheritance late in the marriage and to a large extent managed to keep it separate and intact until separation, that it is appropriate to assess contributions separately to the assets deriving from it. It creates a risk that the husband’s contributions during a 40 year marriage will be undervalued.
In Aleksovski & Aleksovski the Full Court was considering an appeal in which the wife received a large damages award about a year prior to separation and used the money to purchase a unit. The trial judge effectively quarantined the unit and found that contributions to the remaining assets were 60% by the wife and 40% by the husband and that the wife should receive a 15% adjustment for s. 75(2) matters.[11]
[11] Aleksovski & Aleksovski (1996) FLC 92-705
The Full Court considered that the outcome was manifestly unjust and that the trial judge had failed to give appropriate weight to the husband’s contributions.
Baker & Rowlands JJ put the matter blandly as follows:
Trial Judges must weigh and assess contributions of all kinds and from all sources made by each of the parties throughout the cohabitation. Whilst weight must be given to a contribution which a party makes shortly before separation, less weight may be given to a contribution made by a party early in the cohabitation period of a long marriage.
Kay J put it more colourfully as follows:
What his Honour had to assess by way of contribution was 18 years where each party provided their labours towards the acquisition, conservation and improvement of assets, and towards the welfare of the marriage generally. Additionally, late in the marriage, the wife received a large capital sum arising out of a motor car accident. In my view whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it. The Judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital. A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.
Placing the assets derived from the wife’s inheritance in a separate pool in the case before me is particularly problematic because it risks the court overlooking and failing to give weight to the fact that the husband received an inheritance of $176,000.00 from his father’s estate about eight years before separation. The attempts by the wife’s counsel to justify his proposition that this inheritance should count for nothing are troubling.
In my view the appropriate course is to assess contributions to one pool of assets.
Neither party suggested that the wife’s superannuation should be put into a separate pool, and I agree that it should be included in the single pool. No splitting order was sought, it represents less than 10% of the pool and the wife’s post-separation contributions to it can be taken into account in a global assessment of contributions.
Initial contributions
Neither party had any significant assets at the commencement of cohabitation. The husband had purchased “(omitted)”, part of his father’s property, about a year before but it was common ground that he had a very small equity in it and that the finance provided by his father was paid off during the marriage.
Contributions during the marriage
It was common ground that the parties’ contributions by way of their own efforts should be assessed as equal. They each worked on (omitted) and later Property A in differing roles according to their aptitudes and interests, they each worked in some paid employment, the wife throughout and the husband early in the marriage and they brought up two children, again each contributing according to their aptitudes and interests.
In 2005 the husband inherited $176,000.00 from his father’s estate. He used about $30,000.00 to purchase superphosphate, manure, lime and pasture seed for Property A and $30,000.00 to purchase a Mitsubishi (omitted) truck and he invested $102,000.00 with (omitted).
The (omitted) investment was recommended by a financial advisor whom the parties regarded as a friend, and the wife, who was the parties’ bookkeeper, agreed that she drew the cheque. She said in her affidavit and in the witness box that she did not agree with the investment but she provided no detail of any conversations she had with the husband about it and no detail about why she considered it an imprudent investment.
In 2012 (omitted) went into liquidation and the husband’s investment was lost.[12]
[12] The husband did subsequently receive about $4,000.00 from the liquidator but exactly when and exactly what happened to it I do not know and it does not alter the fact that the investment has in broad general terms been lost
In 2011 (the exact month not given but it was before mid-year) the wife inherited $700,000.00 from her mother’s estate. She bought two vehicles for $57,000.00 in total and gave $30,000.00 to her daughter. She did not tell the husband about the size of the inheritance and preserved the balance of the funds which were in the form of cash and a share portfolio.
Post separation matters
After separation the wife used $550,000.00 of her inheritance to purchase Property B. She must have had some costs associated with the purchase but did not say what they were.
The wife has continued to preserve the share portfolio which has risen in value because of a rise in the stock market.
At separation the wife had superannuation worth $45,000.00. Her superannuation is now worth $74,190.00, an increase of nearly $30,000.00. The wife’s employer must have made Superannuation Guarantee Levy contributions since separation but growth in the fund due to market forces must also have been at play.
The wife received two amounts after separation from a deceased uncle totalling $15,800.00. She did not say when she first became entitled to this money and perhaps because it was small amount in comparison to the size of the pool, her counsel did not refer to it as something having particular relevance to the assessment of contributions.
Conclusion about contributions
The wife’s counsel submitted that contributions during the marriage should be assessed as equal and that the wife should be assessed to have contributed 100% to the assets derived from her inheritance which are worth $673,018.00.
I am not going to assess contributions on this basis but I still need to consider the wife’s counsel’s forceful argument that the husband’s inheritance of $176,000.00 should count for nothing, which is the effect of a submission that contributions during the marriage should be assessed as equal.
I frankly do not understand how he can make that submission when $70,000.00 of this inheritance went to purchase a motor vehicle which is still in the pool and superphosphate and other items to improve and preserve Property A but it is also not open to me to ignore the other $100,000.00 simply because it has been lost.
The effect of this, as was pointed out to the wife’s counsel during closing submissions, is to sheet home entirely to the husband a loss which resulted from a decision made by the parties during the marriage about how money should be invested, and this is not a valid approach. The money was not lost because the husband was reckless or even imprudent, and the submission by the wife’s counsel that a financial contribution counts for nothing if it does not produce a positive gain in terms of the asset pool is simply wrong.
In Browne v Green[13] a case in which the husband lost $4m from an investment during the course of the marriage, the Full Court said as follows:
We would say, at the outset of our discussion of her Honour's assessment of the parties' contributions, that we agree with her conclusion that contributions by a party do not necessarily have to produce a positive result for that party's contributions which fall within [paras 79 (4) (a) and (b) of the Family Law Act 1975] to be taken into account”. In our view, there is so little doubt about this conclusion, that we do not need to undertake any analysis of the wording of paras 79(4) (a) and (b). See In the Marriage of Shaw (1989) 12 Fam LR 806 at 821-3; FLC 92-010 at 77,291-3 and In the Marriage of Merriman (1993) 17 Fam LR 22 at 25; FLC 92-422; at 80,348.
[13] Browne & Green (1999) 25 Fam LR 482; see also Kowaliw & Kowaliw (1981) FLC 91-091
So in the face of a submission by the wife about contributions which I consider unreasonable and no properly reasoned submission by the husband at all about contributions, I must make an assessment of contributions.
Contributions were clearly not equal. The parties’ inheritances came in solely as a result of family connections and the wife’s inheritance from her mother’s estate was about 75% greater than the husband’s inheritance from his father’s estate. Another way of looking at it is that the wife brought in $530,000.00 unmatched by the husband, a significant amount when the pool is $1.5m.
I also take into account that the husband’s inheritance was received 8 years before the marriage ended and the wife’s 18 months before but note that the effect of this is blunted by the fact that the (omitted) investment of $100,000.00 still existed untouched a year or so before separation when it was lost because (omitted) went into liquidation.
The wife also brought in $15,000.00 which she inherited from an uncle and she has continued to contribute to her superannuation since separation and it has increased in value.
I cannot determine this matter arithmetically; I somehow have to make an intuitive leap and after weighing and balancing all of the contributions of the parties arrive at an appropriate percentage for contributions.
The parties had a very long marriage and throughout it they each made contributions as income earner, homemaker and parent and preserver of the rural lifestyle property they purchased by agreement very early in the marriage.
The wife’s inheritance from her mother considerably exceeded the husband’s inheritance from his father in value, and weighing and balancing all contributions, I consider that an appropriate assessment of contributions is 60% by the wife and 40% by the husband. It entitles the wife to $905,872.20 and the husband to $603,914.80 and creates a differential of $301,957.40 between their entitlements.
S. 79(4) (d) (e) (f) and (g) matters
I am required to consider the matters in s. 79(4) (d) (e) (f) and (g) of the Family Law Act 1975. Subsection (e) is relevant; it requires the court to have regard to the matters in s. 75(2) of the Act. However in the context of this case subsection (d) is also relevant because if the husband has to sell Property A his income will decline. He will not receive the income from the (omitted) contract or from (employment omitted).
S. 75(2) matters
The wife is 67. She is a (occupation omitted) at (employer omitted) and has been in this position for 15 years. Her income is $48,620.00. She also receives share dividends which she estimated in her financial statement to be about $6,708.00 per annum. Her total income is $55,328.00 per annum.
The wife is accruing superannuation with (omitted) Superannuation.
In her financial statement the wife said that she was also a partner in the Granger Partnership but as was established at trial, that this partnership was wound up at the end of the 2015 financial year.
The wife is able to live comfortably within her income. In her financial statement she included the entire balance of her credit card as a weekly expense but if this is taken out the wife has income of $1,064.00 per week and expenses of $664.09. [14]
[14] My addition of the amounts in Part G less the credit card balance. There are some arithmetical errors in the wife’s financial statement including the addition at the bottom of page 5
At the time of trial the wife owed legal fees of about $12,000.00 but she has cash at bank which would allow her to pay that amount.
The wife did not indicate when she intended to retire or suggest that she had health problems which might force her to retire. I take into account however that she is past normal retirement age and she could not be criticised for choosing to retire at any point hereon.
The wife has not re-partnered.
Pursuant to my contribution finding the wife is entitled to $905,872.20. If she retains Property B, two unencumbered motor vehicles, her share portfolio, her savings and her superannuation she has assets to the value of $790,308.00 and would be entitled to a payment of $115,564.00 from the husband if he retained the remaining assets.
Put another way, were the wife to retire she would have an unencumbered home, two unencumbered motor vehicles and cash and shares of $335,372.00 (counting the superannuation as cash). I was not told whether the wife might be entitled to a pension but I consider that I can take judicial notice of the fact that she would be entitled to a part pension with assets of this amount.
This would clearly provide the wife with a standard of living that was in all the circumstances reasonable.
The husband is 70. Currently he receives a part age pension of $280.00 per week and according to his most recent financial statement also receives $409.00 per week from the (business omitted) contract, $100.00 per week from the (employment omitted), $338.00 per week from what he described as the partnership but given that the partnership has been wound up is better described as agricultural activities on the land, and $67.00 per week contract income.
This equates to $62,088.00 per annum but this is misleading. The husband said that he had outgoings in the form of “rates, costs of sales and other operating expenses” of $593.00 per week (or $953.00 per week depending on whether the figure at 22 or 33 of his financial statement is the transcription error) leaving him with either $601.00 or $241.00 per week to live on.
I consider that the lower figure is more likely to be correct given that the evidence suggests that Property A has never been a profitable enterprise.
However the husband is able to live reasonably well on Property A. He does not have a mortgage; he kills lambs for food and he grows fruit and vegetables. The only debt he declared was $1,000.00 he owed for rates and electricity so he seems to be managing. He did not complain about his standard of living on Property A.
On my findings about contributions the husband will have to pay the wife $115,564.00. His counsel hinted at the possibility that he might be able to obtain funds from somewhere to pay money to the wife but the husband chose not to provide any information on the topic. He has no capacity to pay a mortgage and it was not suggested that Property A could be subdivided and therefore it is reasonable to suppose that any money advanced to him would be on the basis that it would be recovered with interest from his estate.
The husband owes $5,000.00 to a former solicitor for unpaid legal fees. He did not say how he intended to pay that. He also said that he owed $1,000.00 for rates and electricity.
There was an argument during cross-examination about the husband’s state of health. At trial he wished to present himself as fit and healthy and well able to continue to manage Property A. The wife sought to establish that the husband had health issues which meant that he might not realistically be able to remain on Property A in the future.
There was no evidence which established either proposition one way or the other.
While the husband retains Property A, he has a reasonable standard of living. He does not have capital available to him as the wife does but he is living in the place he loves doing the things he enjoys and he did not suggest that he had any need of capital to maintain or improve Property A.
If Property A has to be sold because the husband cannot raise the money to pay the wife or if he cannot continue to live on the property because his health deteriorates, he will receive a cash sum from the sale of Property A and if he chooses to sell them the plant and equipment and stock. He may obtain sufficient funds from the sales to purchase a modest home in town but his only income will then be the aged pension and it is unclear whether he would have any cash left over if he chose to purchase a home.
Although there is an element of speculation in some of this, I consider it unarguable that the husband’s circumstances if Property A is sold will be inferior to the wife’s.
Whether there should be an adjustment in the husband’s favour for s. 75(2) matters
The husband’s counsel urged me to make whatever s. 75(2) adjustment I needed to make in order to ensure the husband was able to keep Property A without being required to make a payment to the wife but I cannot make an adjustment in his favour for that reason. That might be justified if the payment he would otherwise have to make was small, in the order of a few thousand dollars for example, but I cannot justify depriving the wife of $115,000.00 just to put beyond doubt that the husband will be able to retain Property A.
I also cannot make an adjustment in the husband’s favour just because the wife has more assets than he does. That is the result of her fortunate receipt of an inheritance of $700,000.00. It is not the court’s role to try to equalise the parties’ situations or engage in social engineering, and the wife is not so well off and the husband so poor that a disparity in the value of their assets justifies a s. 75(2) adjustment.
A relevant difference between the parties is that the wife is working and accruing superannuation and the husband has no capacity to engage in paid employment but even that is not relevant if the husband retains Property A and the extra sources of income it provides him. It only becomes relevant if Property A has to be sold.
However any adjustment in the husband’s favour for this issue would be a very modest one because the wife is now 67, and the husband refused to concede that Property A might have to be sold and in all the circumstances of the case, I do not intend to make an s. 75(2) adjustment in the husband’s favour.
I intend to divide the assets in line with the assessment of contributions and the overall outcome is that the wife will receive:
Savings
$22,600.00
Property B
$550,000.00
Shares
$123,018.00
Motor Vehicles
$20,500.00
Superannuation
$74,190.00
Payment from husband
$115,564.20
Total
$905,872.20
The husband will receive:
Property A
$595,000.00
Plant & Equipment on Property A
$31,600.00
Livestock on Property A
$75,000.00
Savings
$17, 879.00
Less payment to wife
$115,564.20
Total
$603,914.80
I am satisfied that this outcome is just and equitable.
Orders
I intend to give the husband 90 days to pay the wife the amount of $115,564.20. During submissions there was discussion about giving him longer, perhaps 6 months, because the wife has no pressing need for capital, but if he is not able to organise a payment in 3 months, it is not likely he will be able to do so and the wife is entitled to the matter being finalised sooner rather than later.
I have made a standard set of sale orders which I acknowledge may prove inadequate if Property A is hard to sell. If that is the case then the parties will need to file an application in a case seeking machinery orders.
If Property A has to be sold then the plant, equipment and cattle will also have to be disposed of. I have mulled over whether I should order that they are sold and the proceeds divided or whether I should leave them with the husband.
If I leave them with the husband he will get the benefit of any increase in the number of stock but he will also bear the loss if any items have depreciated in value or simply sell for less than the value ascribed to them in the balance sheet and he will have to bear the selling costs.
The parties have been separated for nearly five years and the husband has been in charge of the plant, equipment and stock during that period and I consider on balance that the appropriate order is that he retain these items if Property A is sold and do with them what he will.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding one hundred and forty two (142) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 12 January 2018
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Equity & Trusts
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