GRIFFITH & GRIFFITH
[2015] FCCA 1811
•23 July 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GRIFFITH & GRIFFITH | [2015] FCCA 1811 |
| Catchwords: FAMILY LAW – Alteration of property interests – paid and unpaid legal costs – question of “add-backs” to property pool not of substantial value – section 75(2) considerations. |
| Legislation: Family Law Act 1975 |
| Beklar & Beklar [2013] FamCA 327 |
| Applicant: | MS GRIFFITH |
| Respondent: | MR GRIFFITH |
| File Number: | MLC 6392 of 2012 |
| Judgment of: | Judge McGuire |
| Hearing dates: | 18 & 19 June 2015 |
| Date of Last Submission: | 19 June 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 23 July 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Wraith |
| Solicitors for the Applicant: | Mills Oakley Lawyers Pty Ltd |
| Counsel for the Respondent: | Mr Hannan |
| Solicitors for the Respondent: | Rng Lawyers |
ORDERS
AWithin 60 days of the date of these orders, the husband shall:
Pay to the wife a lump sum of $309,505;
Transfer and/or vest all his right, title and interest in the following to the wife absolutely:
(i)The wife’s Tarago motor vehicle;
(ii)The balance proceeds of sale of the former matrimonial home of Property W, Victoria in the sum of $5,081 (with agreement noted between the parties that this amount is to be paid to the husband in respect of an outstanding costs order against the wife);
(iii)All personalty and chattels in the possession of or under the control of the wife as at the date of these orders;
(iv)The balances of any bank accounts or like investments in the name of or to the benefit of the wife as at the date of these orders; and
(v)The wife’s superannuation policy and entitlement.
Be solely responsible for and indemnify the wife in respect of the following:
(i) Any and all liabilities incurred by the husband since separation either in his name alone or in joint names;
(ii) Any or all liabilities attaching to the assets to be retained by the husband pursuant to the these orders including but not limited to:
A.The loan in respect of the Mercedes van; and
B.The husband’s credit card liability.
BThe wife shall contemporaneously with the payment referred to in order A(1) herein;
Transfer and/or vest all her right, title and interest in the following to the husband absolutely:
(i) The property situate at Property R in Victoria and registered in the joint names of the parties;
(ii) The Mercedes van motor vehicle in possession of the husband;
(iii) The (vehicle omitted) motor vehicle in the possession of the husband;
(iv) The excavator in the possession of the husband;
(v) All personalty and chattels in the possession of or under the control of the husband as at the date of these orders;
(vi) The balances of any bank accounts or like investments in the name of or to the benefit of the husband as at the date of these orders; and
(vii) The husband’s superannuation policy and entitlement.
Be solely responsible for and indemnify the husband in respect of the following:
(i) The wife’s outstanding legal costs liability in respect of the parties’ VCAT proceedings;
(ii) The wife’s credit card liability;
(iii) The wife’s loan liability to (omitted);
(iv) The wife’s loan liability to Ms C;
(v) Any and all liabilities attaching to any of the assets to be retained by the wife pursuant to these orders;
(vi) Any or all liabilities otherwise incurred by the wife since separation either in her name alone or in joint names.
CThere be liberty to the parties or either of them to apply should the payment to the wife in order A(1) hereof not be made on the due date.
AND THE COURT NOTES THAT:
DPursuant to Section 81 of the Family Law Act1975 the parties intend that these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
IT IS NOTED that publication of this judgment under the pseudonym Griffith & Griffith is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 6392 of 2012
| MS GRIFFITH |
Applicant
And
| MR GRIFFITH |
Respondent
REASONS FOR JUDGMENT
This is an application for alteration of property interests of the parties pursuant to s.79 of the Family Law Act 1975 (Cth) (“the Act”). The applicant is the wife. She seeks an order whereby she receives 75% of the property inclusive of the parties’ superannuation interest. Neither party seeks a splitting order in respect of superannuation.
The respondent husband proposes a 50/50 division of property inclusive of superannuation.
Specifically, the wife argues for a loading on her behalf on the basis of a 25% adjustment after consideration of the matters in s.75(2) of the Act and, in particular, the discrepancy in the earning capacities of the parties.
With some minor equivocation on the part of both parties in their Counsel’s final submissions, neither argues on a primary basis for any alteration on account of contributions.
The wife is 49 years of age. The husband is 47 years old.
The parties commenced cohabitation in (omitted) 1989. They married on (omitted) 1989. Separation occurred on 14 March 2012 and hence the relationship lasted over a period of some 23 years.
There are three children of the marriage being X born (omitted) 1991 (now aged 23 years), Y born (omitted) 1993 (now aged 21 years) and Z born (omitted) 1995 (now aged 19 years). X is an (occupation omitted) employed by the husband and now living with the husband. Y lives with the wife. She is a student. She has casual employment which brings her in approximately $100 per week. Z is on a (omitted) scholarship in the (country omitted).
The husband initially trained as a (occupation omitted) but early in the marriage obtained qualifications as a (occupation omitted). He worked in this occupation throughout the marriage and the parties operated his (omitted) business under a partnership which was dissolved in about June 2012. The husband continues in his occupation.
The wife is employed in an (occupation omitted) role with the (employer omitted) with an income on the evidence of approximately $43,000 to $50,000 per annum. She has had an admitted problem with alcohol which resulted in her hospitalisation in September 2013. The wife’s evidence is that those issues have been resolved. She worked as a (occupation omitted) from the parties’ home during the course of the marriage. The only other evidence of the wife’s employment was on a casual basis as a (occupation omitted) at a (employer omitted).
There is no evidence before me of either party having re-partnered.
In March 2013 the parties’ (omitted business) partnership trading under the name “(omitted)” was subject to a suit taken in the Victorian Civil and Administrative Tribunal (“VCAT”) with both the husband and wife as defendants. Each of the husband and wife separately engaged legal representation in the VCAT proceedings. That suit was resolved by consent with a payment to the plaintiff of $25,560.00. The husband incurred consequential legal fees of approximately $38,000.00. The wife incurred consequent and separate legal costs of approximately $40,000.00.
The former matrimonial home at Property W in Victoria was sold in October 2013. Proceeds of sale of $5,081.00 remain held in trust on behalf of the parties. The wife lived in that property from separation until the settlement of its sale in November 2013. She now lives in rental accommodation.
The parties purchased an investment property at Property R in Victoria in 2010. The husband has since taken residence in that property and remains living there with X. Each of the parties now seek to retain the Property R property as part of their entitlement from these proceedings. That property is unencumbered with the mortgage being satisfied from the proceeds of sale of the Property W property.
The parties agree that the VCAT settlement of $25,560.00 was paid by the husband on his credit card which has to date incurred an interest component of $2,254.00 which has been paid in instalments by the husband but with the capital amount still outstanding.
Pursuant to interim orders the wife has received $35,000.00 such to be categorised at Trial. The husband claims that the wife, in fact, has received monies totalling $45,081.00 since separation including monies from the partnership account in June and October 2012. He argues that these should be included in the property pool as a part of the wife’s entitlement. The wife argues that they be excluded from the pool by reason of being utilised as reasonable expenditure for her living expenses post-separation.
The evidence
The wife relied on her Trial affidavit sworn 10 April 2015 and a financial statement sworn on the same day. She adduced no further evidence.
The husband relied on his two affidavits affirmed 20 March 2015 and 1 May 2015 and his financial statement affirmed 20 March 2015. He adduced no further evidence.
Both parties were represented by Counsel at the Trial and each of the parties were subject to lengthy and intrusive cross-examination.
The issues
The major issues between the parties can be isolated as follows:
1. Should the wife receive an adjustment on account of the relevant s.75(2) factors and primarily on a discrepancy on earning capacity;
2. Which of the parties will retain the property at Property R or should it be sold;
3. Issues as to the categorisation of paid legal costs. The husband has paid his legal costs in respect of the VCAT proceedings. He says that he has done so from post separation earnings. The wife’s legal costs for the VCAT action remain unpaid in the sum of $40,000.00. The husband effectively argues that each of the parties should be responsible for their own legal costs and that they cancel each other out. The wife argues that her legal costs in the sum of $40,000.00 are a debt of the marriage and should be included therefore as a liability. Conversely, the wife argues that the husband’s paid legal cost should be disregarded in that he has paid them from the benefits he received from a matrimonial asset being his continued use and benefit of the (omitted) business. Similarly, the husband argues that wife’s paid legal costs in respect of these family law proceedings in the quantum of $18,458.00 should be added back to the pool as they have been paid from joint capital. The husband’s Counsel argues, however, that the husband’s paid legal costs of $31,779.00 (inclusive of payments to his former solicitors of $8,000.00) should not be added back to the pool as they were paid from post separation income. Not surprisingly, the wife’s solicitors argue that justice and equity demands that paid legal costs by both parties be added back to the pool. Again, Counsel for the wife argues that, although the husband’s legal costs have obviously been paid post separation, he has done so through the benefit he receives by retaining his (omitted) business being the successor of the former partnership. Counsel argues that the wife has not had a similar advantage.
4. The wife has obtained loans from friends and family post-separation totalling $12,200.00. She says that they should be included in the pool as a liability, and again, because she has acquired these monies for her necessary and reasonable expenses of living pending a final property settlement. The husband argues that these loans not be included in the pool as they constitute post-separation liabilities incurred by the wife and in circumstances where she has had ample funds to attend to her reasonable needs.
5. There is an issue as to categorisation and/or value of the wife’s jewellery. There is no formal valuation. There is no complete inventory. The husband opened his case by claiming the wife retained jewellery to the value of $50,000.00. In his final submission, however, the husband argues for jewellery in an amount of $7,700.00 to be included in the pool. His concession and retreat in this respect is based on admissions by the wife as to the value of jewellery sold. Similarly, there is a noted lack of valuation evidence in respect of furniture and contents (now conceded as nominal), the husband’s tools (now to be disregarded), a wine collection which the husband initially claimed as an “investment” but now disregards, and specific chattels being a pool table and two (omitted) machines which the wife says she has gifted to others. The husband now concedes that these items not specifically be included in the property pool (with the exception of jewellery) but his Counsel suggests in final submissions that they be considered perhaps under s.75(2)(o) of the Act as a form of set-off should the Court be persuaded by the wife’s argument for an adjustment under s.75(2) on account of discrepancy in earning capacity.
Relevant Law
Until a consideration by the High Court of the operation of s.79 of the Act in Stanford v Stanford,[1] Trial Judges had generally followed what was commonly described as the “four step process” as the preferred approach to altering the property interests of parties. The Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervenor)[2] set out that process as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s 79. That approach refers four inter-related steps. First the Court should make findings as to the indent and value of the property, liabilities and financial resources of the parties as at the date of the hearing. Secondly, the court should identify and assess the contributions of the parties within the meaning of ss 79(4)(a), (b) and (c) and determine the contribution based entitlements on the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and asses the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), (“the other factors”) including because of s79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contributions based entitlements of the parties established at step two. Fourthly the Court should consider the effect of those findings and determinations and resolve what order is just and equitable in all of the circumstances of the case.
[1] [2012] HCA 52
[2] \(2003) FLC 93-143 at [39].
With the exception of some small dispute as to whether the “fourth step” is actually a distinct conscious engagement by the Judge,[3] such was the accepted process for engagement of the evidence and consideration by Trial Judges. Following the High Court’s consideration in Stanford of the plurality of the Full Court (Bryant CJ and Thackray J) in Bevan & Bevan[4] commented:
Although the High Court did not disapprove the four step process, we accept it was not approved either. Given the way the matter was resolved, there was no requirement for a pronouncement either way. However, the High Court’s decision serves to refocus attention on the obligation not to make an order adjusting property interests unless it is just and equitable to do so.
This obligation was previously described in the High Court as the “overriding requirement”: Mallet v Mallet (1984) 156 CLR 605 at 647 per Dawson J. In the same case at 608, Gibbs CJ aptly described s 79 as conferring on a court “a very wide discretion to make such order as it thinks fit when it is satisfied that it is just and equitable that an order should be made …” (emphasis added).
[3] See FM Walters (as he then was) in OSF & OJK (2004) FLC 93-191
[4] [2013] FamCAFC 116 at [65-66]
The plurality in Bevan (supra) continued at [71-72]
Stanford will also serve as a reminder that the four step process “merely illuminates the path to the ultimate result”. Any future restatement of that process should incorporate acceptance of the fact that the power to make any order adjusting property interests is conditioned upon the court finding that it is just and equitable to make an order.
It follows that judges would be well advised to avoid what we consider to be arid discussion of the “stage in the process” at which “adjustments” are permissible. Such discussion tends to elevate the four step process to the status of a statutory edict, when in fact it is no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.
The majority in the High Court in Stanford emphasised:
…The requirements of s 79(2) and s 79(4) are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
The majority in Stanford then offered three fundamental propositions in the consideration process being:
i. To identify, according to ordinary common law and equitable principles, the existing legal and equitable interest in parties and property;
ii. Although the Court has a broad power and discretion in making orders in relation to property, it is not a power that is to be exercised according to an “unguided judicial discretion”. The discretion must be exercised in accordance with legal principles including with reference to the principles which apply in the Act itself. Whether it is then just and equitable to make an order is not to be answered by assuming that the parties’ rights to interest in marital property are or should be different than those that then exist or as the Court put it “the question presented by s.79 is whether those rights and interests should be altered.”
iii. A consideration of the various factors under s.79(4) of the Act including contributions does not conclusively determine whether a party has a right to the property of the parties divided between them. That is, the just and equitable requirement in s.79(2) must also be considered and applied separately and not be conflated with the statutory factors under s.79(4). The plurality in Stanford at [42] recognised that, in the vast majority of cases, the requirements of s.79(2) in it being just and equitable to alter the parties’ property interest is easily satisfied.
In the matter now before me there has been a relationship of some 23 years. The parties have jointly owned property. There have been various contributions to the acquisition and maintenance of that property both directly and indirectly. They have separated. Consequently, and although I must first identify the equitable and legal interests of the parties in their property, I am satisfied that this is a matter where those interests should be altered. It is then proper for me to identify and assess the contributions of the parties pursuant to ss.79(4)(a), (b) and (c) of the Act and to determine the parties’ contribution based entitlements. I then turn to identify and assess the relevant matters under ss.79(4)(d), (e), (f) and (g) including the matters set out under s.75(2) insofar as they are relevant and determine further adjustment between the parties as appropriate. Finally, I am to consider whether the proposed orders which flow from the above considerations are, in all the circumstances of this case, just and equitable.
THE PROPERTY POOL.
Treatment of the wife’s credit card liability ($37,709.00), her loans from (omitted) and her sister ($12,200.00) and advances to her since separation ($45,000.00).
The credit card and loan liabilities, which the wife claims as liabilities to be included in the property pool, total approximately $49,900.00. The advances by Court order were made on the basis of being categorised at Trial. The wife says that these advances should not be included in the pool as having been used on her reasonable living expenses since separation. She applies the same argument in urging the inclusion of the loans and the credit card liability. She justifies this position by arguing that the husband has had the ongoing benefit of the former partnership business since separation. The husband says that these liabilities should be disregarded in the property pool as being incurred by the wife post-separation.
The parties’ post-separation financial circumstances are set out above. I am comfortably satisfied that the husband has continued in a reasonably satisfactory financial situation. He has been able to make substantial expenditure on improvements to the home in which he lives. He has provided support for the adult children. He has met his legal costs set out above.
The wife’s position, in my view, has been inferior to that of the husband. She did not obtain actual employment until some 20 months following separation. In her financial statement she deposes to an income of $830.00 per week (although there was a suggestion of a slightly higher sum) with a shortfall after her expenditure of $737.00 each week. She has paid $450.00 a week in rent since November 2013. The husband has during that same period enjoyed mortgage/rent-free accommodation in the parties’ jointly owned property at Property R. I am satisfied that the wife, in so far that she is able, has contributed to the actual and extra-curricular financial support of the children. Whilst the wife’s evidence of spending “$30-$40 per week on alcohol” is perhaps incongruous with her being hospitalised because of alcoholism, there is no evidence before me of the wife living an extravagant lifestyle post-separation. The parties have been separated for some three years and three months. Taking all of these matters into account, the wife’s expenditure of some $94,900.00 during that time in addition to her income would not, in my view, seem unreasonable. Consequently, and when viewed against the husband’s financial position, I am satisfied that the wife’s expenditure on her credit card, the personal loans and the advances to her has been reasonably incurred in the support of herself and the children. As such, I propose to include those liabilities in the property pool. I do not intend to categorise the $45,000.00 advanced to the wife as “property in her hands” but am satisfied that it has been used on sensible expenditure. I take this position, however, noting that I must deal with the wife’s unpaid and paid legal costs below.
Similarly, I do not propose to include the two (omitted) machines and the pool table in the property pool. I have no valuation in evidence in respect of these items. The wife says that they were gifted to others in return for some benefits to her and the family. The husband’s Counsel in his final submission does not urge their inclusion in the pool although leaves it open for me to consider them under s.75(2)(o) of the Act.
Paid and unpaid legal costs.
Both parties have incurred legal costs post-separation. They each retained separate legal representation in respect of the VCAT proceedings. I accept that this was justified given their separation, intervention orders between them, and an admitted lack of communication. Each of the parties was separately named as a defendant in those proceedings. The husband incurred legal costs of $38,000.00 which have been paid. The wife incurred legal costs of $40,000.00 which remain unpaid.
In respect of these family law proceedings the husband has paid legal costs of $31,779.00. The wife has paid legal costs of $18,458.00.
The wife argues that her unpaid VCAT legal costs of $40,000.00 be included as a liability of the marriage. Although they were incurred post separation, she says that her circumstances have precluded her paying them. She says that in line with the decision in Stanford (supra), they are a debt existing as at the date of this trial and should be included in the property pool.
The wife argues, however, that the husband’s paid legal costs be disregarded in that he has paid them from the benefits of the business which he has retained since separation.
The husband urges that there be no “add backs” for legal costs paid. He says that they were incurred separately and post-separation. He says by implication that the wife has had a similar ability to meet her legal costs since separation as he has done. He argues simply that each party should be responsible for their own legal costs incurred post-separation and that this is a just and equitable way to treat those paid and unpaid legal costs. It follows on his argument that the wife’s outstanding legal costs of $40,000 in respect of the VCAT proceedings not be included in the pool.
The question of “add backs” was considered in Bevan (supra) following the confirmation by the High Court in Stanford (supra) that the starting point of the consideration is to establish the legal and equitable interests of the parties in property (including liabilities) as of the date of the Trial. Historically, Trial Judges in this jurisdiction have exercised discretion in making notional “add backs” where assets have been disposed of or diminished by one party following separation. Alternatively, such matters have been considered under s.75(2)(o) of the Act. In the matter now before me, each of the parties argued and conceded that it was open for me to consider such matters in the form of “add backs”. I note, in this respect that the property pool is not large relative to many matters that come before this Court and such issues can thereafter assume some importance in the make-up and distribution of the property pool.
In summary, I am asked to consider, firstly, whether the wife’s unpaid legal costs of $40,000.00 be included as a liability in the property pool and, secondly, whether there be “add backs” for the legal costs paid by each party which in the husband’s case amounts to almost $70,000.00 ($31,779.00 family law and $38,000.00 VCAT) whereas the wife has paid $18,458.00 (family law).
I am satisfied that the exercise I am asked to conduct is discretionary and one where I should consider the justice and equity of the orders I make within the parties’ circumstances since separation.
The husband says, and I accept, that he has paid his legal costs since separation from his earnings during that time. There is no evidence before me of him capitalising assets in order to pay legal costs. He has continued to operate the former partnership business. He says that he draws some $950.00 per week. I am satisfied that he has other benefits from his self-employed status with expenses paid through the business. He has lived more recently in the parties’ jointly owned property at Property R. That property is unencumbered. I accept that he has, since separation, generously met various education and extra-curricular activities for the three children of the parties. He paid child support to the wife during a relevant period of assessment. He met some outgoings on the former matrimonial home during the wife’s occupancy post-separation although not a mortgage commitment. In such financial circumstances he has been able to meet his legal costs in respect of the VCAT and family law proceedings as set out above.
The wife has been employed since November 2013. She earns around $43,000.00 - $50,000.00 per annum. There is evidence to suggest her income is subsidised by some casual work as a (occupation omitted) although perhaps not to the extent suggested by the husband. The child Y is a University student and lives with the wife. The wife subsidises Y’s living expenses. The wife also provided some financial assistance to the three children following separation. The wife now pays rent of $450.00 per week. She did, however, have occupancy of the former matrimonial home until November 2013 without a mortgage commitment.
Undoubtedly, the husband’s week-to-week financial position is superior to that of the wife on an income/expenditure basis. However, the wife also argues that the advances to her of some $45,000.00 not be included in the pool as an asset in her hands. She says that she has exhausted these monies by reasonable expenditure on day to day needs for herself and the children during the period since separation. Similarly, she argues that her credit card liability of $37,000.00 and the personal loans obtained by her ($12,000.00) be included in the pool as liabilities of the marriage on a similar basis being that they have been incurred by her to meet reasonable costs of living during the period since separation. In summary, therefore, the wife has had an income since November 2013 but a rental liability for the same period. For the previous 20 months she did not have a mortgage liability but had no regular income over and above her casual work as a (occupation omitted). During that period she has had the benefit of a further $57,000.00 together with the amount accrued on her credit card of $37,000.00 or a total of some $94,000.00.
It is clear that the Court has a wide discretion as to how it deals with the issue of legal costs.[5] Counsel for the husband helpfully referred me to a decision of Ryan J in Beklar & Beklar[6] where her Honour referred to a summary of the relevant principles set out by Boland J. Writing ex judicially. I consider these matters in respect of the factual platform above:
a)The treatment of funds used to pay legal costs remains ultimately a matter discretionary to the Trial Judge.
b)In determining how to exercise that discretion, regard should be had to the source of funds.
c)If the funds used existed at separation and are such that both parties can be seen as having an interest in them (on account, of contributions) then such funds should be added back as a notional asset of the party who has had the benefit of them.
d)If the funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be notionally added back as a notional asset; nor would any borrowing undertaken by a party post-separation for payment of fees be taken into account as a liability of the calculation of the net property of the parties.
e)Funds generated from assets or businesses from which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
f)Outstanding legal fees themselves are generally not taking into account as a liability.
g)If in the exercise of discretion it is determined that legal fees already paid should be taken into account as notional assets, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account. (Trends in the Full Court: Recent cases ninth Australian Family Lawyers Conference, Sabah 11-13 June 2005).
[5] NHC v RCH (2004) FLC 93-204
[6] Beklar & Beklar [2013] FamCA 327
In all of these circumstances I do not consider the parties overall financial circumstances as being significantly different in the period since separation. The husband has had his income. The wife has had $94,000.00 plus her income from November 2013. In my opinion, it would be unjust and inequitable, therefore, to include the wife’s outstanding legal fees of $40,000.00 as a liability of the marriage when seated against the husband’s payment of a similar amount (and a greater amount on his family law costs) during that same period. Consequently, in exercising my discretion, and given that the liability was occurred post-separation, I am not persuaded that it is proper to include the wife’s outstanding VCAT legal costs as a liability of the marriage. Similarly, in all of the circumstances, I do not think it appropriate to “add back” the parties’ paid family law legal costs. Again, those costs were incurred post-separation. They have not been paid from the crystallising of assets. The husband’s costs have been paid from the fruits of his labours as have the wife’s legal costs.
Husband’s credit card liability.
The parties’ VCAT suit was settled by a payment to the Plaintiff of $25,000.00. The husband met this judgment debt from his credit card. That credit card liability now stands at $25,560.00. There is evidence before me that the interest accrued has amounted to $2,254.00. The husband has met the majority of the interest payments evidenced by the current credit card liability. This is a contribution by him. The outstanding credit card liability is a liability of the marriage to be included in the property pool.
Wife’s jewellery.
The husband initially claimed an asset to be included in the property pool of $50,000.00 in respect of the wife’s jewellery. Again, there was no formal valuation or complete inventory. Properly, in my view, by the time of the final addresses, the husband sought the inclusion of only $7,000.00 pursuant to the wife’s admissions as to sale of items of jewellery. I intend to include this amount in the property pool. Otherwise items such as furniture and contents, the husband’s tools, and a wine collection will not be included. Again, I have been provided with no inventory and I have no valuations in respect of these items.
Conclusion as to property pool
Given the otherwise substantial agreement as to the property pool I find that pool, inclusive of superannuation, to be the following:
Assets:
Property R $415,000
Balance proceeds of sale of Property R property $5,081
Wife’s motor vehicle $28,000
Husband's (vehicle omitted) motor vehicle $38,000
Mercedes van $12,000
Excavator $15,000
Husband’s bank account $3,611
Wife’s jewellery $7,000
Wife’s superannuation $5,000
Husband’s superannuation $12,852
Total: $541,544
Liabilities:
Husband’s credit card (VCAT settlement) $25,560
Wife’s Credit Card $37,709
Wife’s loan from (omitted) $4,200
Wife’s loan from sister, Ms C $8,000
Mercedes van loan $14,701
Total: $90,170
Net property pool (inclusive of superannuation): $451,374
Contributions.
The parties generally agree that their contributions during this lengthy relationship were equal. The parties benefited by some contributions from the wife’s family early in the marriage but the wife’s Counsel, properly in my view, does not urge any adjustment given the flux of time and the various other contributions, directly and indirectly, by the parties during the relationship.
The relationship was in many ways a traditional one. The husband ran the business and was the primary income earner. The wife contributed financially but was primarily involved as parent and home maker.
The parties’ circumstances post-separation are set out above. They have both contributed to the children’s needs post-separation. Whereas the husband has had the benefit of the income from the business, I have noted the financial benefits received by the wife since separation which are now included as liabilities in the property pool. The husband has met the interest payments on his credit card in respect of the VCAT settlement in a sum of $2,254.00. However, given the total consideration of the contributions of the parties generally, by and on their behalf, I consider their contributions to be equal.
Property at Property R
The parties are the joint registered proprietors of this property which was initially an investment rental property purchased by them. It is now unencumbered with its mortgage liability satisfied from the proceeds of sale from the former matrimonial home in November 2013. It has an agreed value. The husband and the parties’ son X have been living in the property for some time. The husband effectively operates his business from that property and this is where he stores the excavator and the tools and equipment of his trade.
Each of the parties argues that they should be enabled by these orders to retain that property. Each gave evidence as to their individual borrowing capacity although perhaps gauged on the more optimistic views of their cases before this Court.
A further option for the Court in such a dispute is to order the sale of the property. However, on consideration, I will not make this order given that it would be likely to cause a financial impost on them by reason of the cost of sale and further diminish the value of what is not a significant pool.
The husband argues that he and X have been in occupation of the home. The implication is that he took up residence here by reason of the wife remaining in the former matrimonial home for some 20 months following separation and without a consequent mortgage obligation. He says that he and X are settled in the property and that they operate the business from that property with X being apprenticed to the husband.
The wife’s argument is that the husband will be more able to re-establish himself financially following separation and that he would be more able to absorb the costs of purchase, including stamp duty, of an alternative residence than would the wife.
Whoever retains that property will, of course, be obliged to make a relatively substantial cash adjustment on the other party and on the assumption that both parties wish to avoid rental accommodation, that other party will incur stamp duty and purchase costs.
After consideration of the parties’ arguments and their particular circumstances, I prefer that the husband retain the property at Property R. I accept his argument as to the circumstances of him moving to that home in favour of the wife retaining the use of former matrimonial home. I will, however, take into consideration under s.75(2)(o) of the Act the relative costs of these parties in re-establishing themselves following my orders and including the costs of obtaining alternative accommodation.
Section 75(2) factors
The net property pool here is not substantial. I have included liabilities in that pool which would be the responsibility of the wife. My findings above will also oblige the wife in the costs of purchase of a home although she will however receive a cash adjustment by the husband.
Nevertheless, it is inevitable that both parties will be left to service a loan but that the wife will have the additional costs of stamp duty and other purchase costs.
Although both parties have an income, I am satisfied that the husband’s income and income capacity is superior to that of the wife. Although he was at pains in his evidence to emphasise a downturn in the (omitted) industry, he conceded that he is reasonably confident as to obtaining further (omitted) contracts through new relationships with (employer omitted). The husband’s income must be viewed within the context of the benefits that come to him from being self-employed. Certainty, and historically, the husband’s income allowed these parties to enjoy a very comfortable lifestyle during their marriage including the purchase of expensive motor vehicles and the enjoyment of regular holidays. The authorities have made it clear that the retention of such an income capacity following separation is one of the more beneficial “assets” that can be retained by a party following separation and assumes greater significance where a property pool to be divided is not of relatively high value. That is, and although I am not to engage in an exercise of “social engineering” any percentage adjustment on account of s.75(2) factors should take into account the value and extent of the property pool to be distributed.[7]
[7] Clausen & Clausen (1995) FLC 92-595.
Both parties are in good health and able to continue in their employment. Both admit continuing obligations in respect of their adult children. There is no evidence that either party benefits from or has an obligation in respect of cohabitation with another person.
Taking all of these matters into account, but with emphasis on disparity in income earning capacity, the wife’s particular re-establishment costs, and the extent of the property pool, I am satisfied that an adjustment in the wife’s favour of 17.5% is appropriate and just and equitable.
Conclusion and Orders.
I propose, therefore, to alter the property interest of these parties with the wife receiving 67.5% and the husband to receive 32.5%. I will simply treat the parties’ superannuation entitlements as “assets” given their minimal values and noting no argument from Counsel to the contrary.
The husband will retain the following assets and liabilities:
Assets:
Property R $415,000
Husband's (omitted) motor vehicle $38,000
Mercedes van $12,000
Excavator $15,000
Husband’s bank account $3,611
Husband’s superannuation $12,852
Total: $496,463
Liabilities:
Husband’s credit card (VCAT settlement) $25,560
Mercedes van loan $14,701
Total: $40,261
Net property retained by the husband: $456,202
I have found the net property pool to be $451,374.00 in value. The husband has an entitlement of 32.5% or $146,697.00. Consequently, I calculate a cash adjustment from the husband to the wife in order to effect these orders of $309,505.00.
Pursuant to my orders the wife is entitled to 67.5% of the net property pool. That gives her an entitlement in dollar terms of $304,677.00. She will retain the following:
Assets:
Cash adjustment from husband $309,505
Wife’s jewellery $7,000
Balance proceeds of sale of Property W property $5,081
Wife’s motor vehicle $28,000
Wife’s superannuation $5,000
Total: $354,586
Liabilities:
Wife’s Credit Card $37,709
Wife’s loan from (omitted) $4,200
Wife’s loan from sister- Ms C $8,000
Total: $49,909
Net property retained by the wife: $304,677
I note that there is an agreement between the parties that the sum of $5,081.00 to be retained by the wife will be actually paid to the husband in satisfaction of a previous cost order made on the wife and my orders will note this.
On the evidence before me I do not expect any difficulties by the husband in having security so as to allow him to obtain a loan for the cash adjustment to the wife. However, out of an abundance of caution, I will give the parties or either of them liberty to apply in respect of the sale of the property at Property R, should the husband not be in a position to obtain those properties and make the payment upon the wife.
Taking into account the parties’ current circumstances and the history of this relationship, I am satisfied that orders in the above terms will be just and equitable.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 23 July 2015
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Family Law
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Equity & Trusts
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