H and A
[2008] FCWA 2
•15 JANUARY 2008
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
LOCATION: [REGIONAL CENTRE]
CITATION: H and A [2008] FCWA 2
CORAM: CRISFORD J
HEARD: 26 NOVEMBER 2007
DELIVERED : 15 JANUARY 2008
FILE NO/S: PT 3195 of 2006
BETWEEN: H
Applicant/Husband
AND
A
Respondent /Wife
Catchwords:
Property settlement - valuation of land - increase in value since separation - comparative sales method
Property settlement - contributions - marriage of 22 years and 31 year age difference - s 75(2) adjustment
Legislation:
Family Law Act 1975, s 75(2), s 79
Category: Not Reportable
Representation:
Counsel:
Applicant: Mr M Segler
Respondent: Ms S Chelvanayagam
Solicitors:
Applicant: Mr M Segler
Respondent: George Giudice Law Chambers
Case(s) referred to in judgment(s):
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93‑143
Omacini and Omacini (2005) FLC 93-218
Phillips and Phillips (2002) FLC 93-104
Pierce v Pierce (1999) FLC 92-844
Rosati v Rosati (1998) FLC 92-804
Way and Way (1996) FLC 92-702
1[Mr H], now 81 years, has asked the Court to make orders dividing the property acquired during his 22 year marriage to [Ms A], now aged 50 years.
2The major asset, a 5 acre property in [the regional centre], has increased substantially in value since May 2004 when [the wife] left [the husband] and their two sons. The boys were then aged 18 and 16 years. The parties’ daughter had already left home.
Orders sought at trial
3[The husband] says the assets should be divided 80% in his favour. He wishes to retain the property where he has remained since separation.
4[The wife] says that the parties’ property should be divided between them equally.
5There is a dispute over the value of the property. [The husband] says that his valuer’s evidence is to be preferred. [The wife] says it is difficult to ascertain a true value based on the valuation evidence and that the property should therefore be sold in order to determine exactly what its market value is.
Approach to property settlement
6The approach to be taken in relation to an application for property settlement pursuant to s 79 of the Family Law Act 1975 is a four step process (Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93‑143). Those steps are:
•to make findings as to the identity and value of the assets and liabilities of the parties;
•to identify and assess the contributions made by the parties to those assets;
•to identify and assess the s 75(2) factors (which are primarily prospective factors); and
•consider whether the proposed orders are just and equitable.
Pool of assets
7The identity of the pool of assets is not in dispute. It comprises the property on which the former matrimonial home is situated at [the address in the suburb] and [the wife]’s superannuation entitlement. The value of the latter is not in dispute. Valuation evidence was called by each party in regard to [the former matrimonial home].
(i)Value of [the matrimonial home]
8[Mr K], licensed valuer, had provided a sworn valuation for [the husband] on 19 July 2004 a few months after the parties separated. He then ascertained the market value of the property to be $172,500. There is no challenge to that valuation. He updated this valuation on 26 October 2007. He then attributed a value of $495,000 to it.
9That valuation was provided to [the wife]’s counsel late on 23 November 2007, the Friday prior to the commencement of the trial on Monday, 26 November 2007.
10[Mr E], also a licensed valuer had provided a sworn valuation to [the wife] on 2 October 2007. He valued the property at $650,000.
11On the day of the trial the two valuer’s conferred. They remained $40,000 apart in their values.
12Each was prepared to vary his valuation. [Mr K] was prepared to agree $535,000 and [Mr E] $575,000. Each was prepared to say this reflected possible market variations in the appropriate price that might be obtained for the property. However, neither was prepared to either reduce or raise his varied amount.
13 [Mr K] had trained as a valuer in 1999. He was licensed in 2002 and had practiced extensively in the [local] area since that time. He said the principle method of valuation he adopted for the property was by reference to sales of a comparable nature, where available. He also had regard to anecdotal evidence within the broader [regional] area.
14 [Mr K] considered a number of recent sales. He said there were seven sales broadly comparative in that each of them had potential for subdivision. However, only two were relevant having regard to the size of the land holding. [The matrimonial home] is 1.6728 hectares.
15 [Mr K] referred to [next door to the matrimonial home], an adjourning property which he said sold in June 2006 for what he said represented $27.50 per square metre for unimproved land. This property is 1.3431 hectares. He also referred to [another property] which sold in May 2007. This property is 1.0194 hectares and the unimproved land value was $50.00 per square metre. This latter property he considered superior to [the matrimonial home].
16He preferred to use more recent sales albeit out of the relevant area on the basis that overall there had been a substantial change in the market since the middle of 2006. In evidence he said the present market was oversupplied and static. He said values had halved. He did not consider the sale of [the property adjacent to the matrimonial home] to be conclusive or particularly helpful. He suggested that it might possibly be an anomaly.
17 [Mr E] commenced as a licensed real estate and business agent in 1964. He had been a licensed valuer since 1980 and a licensed auctioneer for 30 years.
18He deposes to having based his valuation on his considerable experience in property values within the mid west area which includes [ the local area]. He provided reasons for his valuation in the body of his report. He refers to recent sales of similar land holdings from which englobo values can be compared and determined.
19 [Mr E] focused very much on the sale of the adjoining property at [the matrimonial home], on 25 May 2006. He said that although it was now some time in the past it had more relevance than sales in completely different and unrelated areas, some of which were a substantial distance from the centre of town or without the same services. He said the sale at [the property adjoining the matrimonial home] was the benchmark for a lower category area.
20He said the present market direction was strong and upward, although present market activity had slowed a little after the increased activity experienced in the past 12 - 24 months. He identified one recent sale that had secured a price over the present rather slow market.
21The greatest point of departure centred around the use to be made of the sales evidence considered.
22It was clear that both valuers had knowledge of the [local] real estate market. Each had a slightly different approach but both were able to provide reasons for adopting the value they did. Each was able to acknowledge there was likely to be possible variations in the values adopted but neither could agree on one particular price.
23Each adopted a broad comparative sales approach. In doing so each had to rely on his own skill and judgment in assessing the utility of particular transactions in the market. Obviously comparable sales do not always reveal precise parallels and no two parcels of land are identical in all respects.
24The Full Court of the Family Court has often been required to discuss the principals of valuation. In Phillips and Phillips (2002) FLC 93-104 at 88,982 Finn, Kay and O’Ryan JJ stated:
“43. In proceedings pursuant to s 79 of the Act the first step is to identify and value the financial circumstances of the parties being property, liabilities and financial resources. In undertaking this task the Court is frequently confronted with issues of identification and valuation of assets. In Lenehan and Lenehan (1987) FLC 91-814 the Full Court said at p 76,142:
“A trial Judge, as part of his ultimate responsibility under sec 79 or otherwise, is normally required to determine a number of issues. Some of those issues may properly attract the evidence of expert witnesses. In appropriate circumstances their opinions are admissible to assist in the determination of such an issue. It is the responsibility of the trial Judge to take into account the opinions of such witnesses; however the ultimate duty of the Judge is to determine the issue on the whole of the material before him including such opinions. The expert evidence is called to enable the Judge to form his own independent judgment on the matter by the application of the appropriate principles.”
44. In The Commonwealth v Milledge (1953) 90 CLR 157 the High Court at pp 161-162 said that the correct approach to be applied to the resolution of a valuation dispute should be a common sense endeavour after consideration of all material to fix a value satisfactory to the mind of the Court as representing the value.
45. As to “appropriate principles” there is no fixed rule as to the proper method of valuation and the preferred methodology depends upon the facts of the case: Mallet v Mallet(1984) FLC 91-507 at p 79,121 per Mason J and Georgeson and Georgeson (1995) FLC 92-618 at p 82,218. However, the Court cannot adopt a valuation methodology that is fundamentally flawed and not applicable to the facts of the case: Elsey v Elsey(1997) FLC 92-727.
46.If there is a dispute as to the value of an asset and the Court prefers one expert to another, then reasons for the preference should be stated: Gamer and Gamer (1988) FLC 91-932 at p 76,746-76,747. Where there is a discrepancy between two or more values it is not open to the Court merely to adopt a mean or average figure between the rival opinions: Lenehan and Lenehan (supra) at 76,142. However, this does not mean that, when faced with two competing valuations, the Court is bound to accept one or the other. The Court is able to form its own separate view as to the value by the proper application of established principles of valuation. In Borriello and Borriello (1989) FLC 92-049 the Full Court, referring to the decision of the High Court in The Commonwealth v Milledge (supra), said at p 77,558:
“It is, we think, apparent that the High Court was not laying down a principle that the trial Judge was obliged to accept any particular valuer, but rather that it was necessary for him to satisfy himself by means of the application of proper principles, that he had arrived at the value of the property on the relevant date. If that value happens to be different to the values ascribed to the relevant property by the valuers called in evidence, this in itself does not affect the validity of the judge's finding, provided that he has applied proper principles.”
47. However, in Borriello the Full Court also said at p 77,559:
“We are not however to be taken as saying that we necessarily agree with the conclusion of the Full Court that the fact that the trial Judge in Lenehan's case had taken the midpoint between the two valuations necessarily vitiated his decision. We can envisage situations where a trial Judge may be left in the position of considering that the two competing valuations represent a range and genuinely considering that the true valuation lies at or about the midpoint. Valuation is rarely such an exact science that in such circumstances a Judge could realistically conclude that the correct valuation was, for example, 55% rather than 50% less than the gap between the two valuations. In such a case it would be perfectly proper for the trial Judge to adopt a midpoint valuation. We think that a Judge, faced with a gap between two or more valuations, where the Judge considers that on the probabilities the higher or lower valuation as the case may be should be lowered or increased by some percentage to arrive at the true value, is perfectly at liberty to so adjust it as he sees fit. As we see it the vice complained of in both Milledge's case and perceived by the Full Court in Lenehan's case was the use of means and averages without the application of proper principles.''
48. If there is a disparity in the evidence, such that it is too difficult and complex for the Court to accept a valuation or come to a separate conclusion as to value on the application of proper principles and methodology, it may be a more proper solution for the Court to consider a sale of the property. In Little and Little (1990) FLC 92-147 the Full Court said at p 78,020:
“Whilst a trial judge should determine a disputed issue of valuation where the evidence enables him to do so, we do not accept that there is an obligation cast upon him to determine such a disputed issue irrespective of the state of the evidence. It may be such that a determination is not possible. In such a case, as in a case where there is a very considerable disparity in the valuation evidence and other evidence indicates that the actual ascertainment of the true value is difficult and complex, the proper solution as between the parties may be to order a sale.”
49. In Smith and Smith (1991) FLC 92-261 the Full Court said at p 78,759:
“... where the state of the evidence makes the process of valuation hazardous or uncertain, or where there are wide differences between legitimate valuations because of a volatile market or peculiarities relating to the specific property or otherwise, the ascertainment of value by judicial process may become too uncertain and the preferable course is to order the sale of the property so that its real value can be revealed by market forces.
...
The fact that each of the parties seeks a transfer of that property and neither seeks a sale is not in itself a reason for not adopting that approach: indeed it may emphasize the desirability of doing so in order to avoid the lottery effect which may be involved in choosing between one party and the other.”
25I am of the view that I can attribute a value to the property based on the evidence. I am of the view the valuation of [Mr E], as revised, is to be preferred. I say this because:
•although his main sales comparison was somewhat dated it was more suburb specific. Both valuers agreed that the subject suburb had its own peculiarities, both negative and positive. [Mr E] was able to use the more suburb specific property and take into account a slowing of market activity. [Mr K] did not disagree with [Mr E]’s calculations in relation to the [property adjoining the matrimonial home] but was dissatisfied with the use of a single sale.
•whilst he referred predominately to [the property adjoing the matrimonial home], he also referred to [another suburb] which showed a recent sale ahead of the present market in a suburb close to the subject property. If used as a direct comparison with the subject property it would support an even higher value than he had opined. He said this particular sale showed that the market, despite a slowing in activity, was still very “present”. He was not seriously challenged on this.
•he was able to accept there was a slowing in activity although actual market values had not dropped substantially. [Mr K] reported a “significant increase in underlying land values and improved property values generally throughout the area.” He said listings exceeded sales. In his oral evidence he then said values had halved. I was not satisfied the latter statement necessarily related to properties of the size and nature of [the matrimonial home].
• [Mr K]’s comparable sales were more recent but they were in very different suburbs and I was not satisfied it was easy to factor in that particular difference and provide an accurate comparison.
•some of [Mr K]’s comparative sales were very credibly countered by [Mr E] who impressed as having a greater practical and recent working knowledge of the individual properties. For example, he was able to critically compare the property at [another suburb] (incorrectly described as [a wrong number] by [Mr K]) with the subject property. Taking into account its smaller size and the fact that it was somewhat superior its unimproved capital value related strongly to the subject property.
•accept that the reduction in his original valuation reflected a concession in the relation to the possible present slowing of market activity.
26As mentioned there are some deficiencies in relation to both values in that there is a lack of very many relevant recent comparable sales and there appears to be some uncertainty in the marketplace. Be that as it may I am satisfied that the value attributed to the land by [Mr E] is an appropriate present reflection of the worth of [the matrimonial home], to a willing but not anxious purchaser with adequate information about the land and present sales conditions.
27On this basis I find the value of the property to be $575,000.
(ii)Addbacks
28[The wife] has not paid any legal fees to date. [The husband] has paid legal fees of around $29,500. He has borrowed all of that money from his brother.
29At separation [the husband] had $16,261 in a bank account. These funds were the proceeds of sale of a block of land in his name in [another state]. The land had been acquired during the course of the marriage. He has had the sole use of that money. There is no direct evidence as to how the money was used. At the time [the husband] had retired from full time work and was in receipt of a pension. However, until 2006 he worked 3 hours each week day as a school bus driver.
30[The wife]’s counsel did not seek to have this amount added back into the pool of assets but rather asked the Court take it into account in a general sense. I intend to take that course.
(iii)Liabilities
31[The husband] has a loan to his brother for legal fees. [The wife] will have an outstanding debt in relation to her fees. Her fees are considerably less that [the husband]’s but they will need to be paid after the trial. She says they are presently $19,000 but this does not include the cost of trial. [The wife] has a credit card debt of approximately $8,000.
32The debts have been incurred after the parties separated. I do not intend to include them as liabilities but will take them into account in a general sense, aware that each will have to pay those amounts.
33I find the pool of assets to be:-
| Assets | Ownership | Value |
| [the matrimonial home] | joint | $ 575,000 |
| Superannuation interest (Commonwealth) | wife | 12,657 |
| Total assets | 587,657 |
Contributions
(i)Initial contributions
34[The husband] says he should be given substantial credit for his overwhelming initial contributions. The parties married [overseas] on 29 August 1982. [The wife] was 25 years of age and [the husband] was 56 years of age. [The wife] had no assets of significance.
35[The husband] was well established in the workforce. He worked in the [North -west] with [a large company]. He had been previously married.
36[The husband] had a half interest in a home, then valued at $11,000. He also had superannuation with [the company]. He had commenced work with [the company] in 1972. No value was attributed to the superannuation at the date of cohabitation. When [the husband] was 66, in 1992 he was made redundant by [the company] and received a payment of $58,000. He also then received his superannuation entitlement of approximately $70,000.
37Ultimately, a considerable amount of his superannuation entitlement and redundancy payment went towards the acquisition of the land at [the address of the matrimonial home] and the cost of construction of a home on that land. The cost of the land was $38,000 and construction of the home cost $125,000. Some of the superannuation and redundancy had earlier been used to purchase another house which, for some reason or other and not made entirely clear to the Court, was sold at a loss. The parties thereafter resided in [the matrimonial home].
38It is clear that funds that had been accumulated by [the husband] at the date the parties married were applied to the [the matrimonial home] property which is now the major asset.
(ii)Contributions during cohabitation.
39The parties agree that the contributions made by each of them during the course of the relationship were equal. My assessment of the evidence suggests that this is an appropriate position for each to take.
(iii)Post separation contributions.
40[The husband] posited that the asset pool and its value be struck at the date of separation rather than the date of trial. The date of trial is ordinarily chosen, but in some cases it is appropriate for another date to be selected (Omacini and Omacini (2005) FLC 93-218 at [17]). I do not consider the present case to be one such case.
41The main, if not only, reason the home has increased in value since separation is due to market forces rather than any particular contribution made by either party. This is not to say that each party has not made some contribution.
42[The husband] has had the benefit of residing, rent free in the home and [the wife] has had to obtain other accommodation. Their sons have also lived in the home. [Mr E] assessed the unfurnished rental value at $300 a week. [The wife] currently makes a contribution towards her board of $100 a week.
43[The husband] has been responsible for the rates and taxes which average $24 a week. He is also paying $8 a week for building and contents insurance.
44The two boys had ceased their schooling at separation and were no longer totally dependant. One boy presently gives [the husband] $50 a week. [The husband] uses this for petrol and takes his son to and from work. [The wife] says she has provided the boys with money from time to time.
45[The wife] deposes to being very upset about the condition of the garden. She says it has deteriorated significantly. In November 2005 she paid $100 for a gardener to attend at the home and tend to the garden. This issue of neglect was initially raised by [the wife] in June 2005 about a year after the parties separated.
46[Mr K] in his most recent report said the internal presentation of the home was fair to poor. The residence required internal painting to walls and ceilings and the carpet floor coverings requirement replacement. The internal and external presentation could be improved following cleaning and general maintenance as well as the establishment of lawns and gardens. There was no evidence that this would increase the value.
47I accept at the date of separation [the wife] had maintained, at least the gardens, to a high standard.
48There is little doubt that the increase in value from $172,500 in July 2004 to over $500,000 in late 2007 is due to a buoyant market and not as a result of the endeavours of either party.
Assessment on contributions
49Both parties made submissions concerning the weight to be given to the financial contributions initially injected into the relationship by [the husband]. [the wife]in particular argues that her contributions during the course of the marriage have eroded [the husband]’s initial contribution.
50In Pierce v Pierce (1999) FLC 92-844 the Full Court of the Family Court (Ellis, Baker and O’Ryan JJ) explained the significance of initial contributions and their “erosion” in a way which makes clear that substantial initial contributions may be eroded by ongoing contributions, not all of which can be satisfied in full out of the available pool. As the Full Court has also made clear, the initial contribution may be “eroded” by later contributions made by the other party even though those later contributions do not necessarily at any particular point outstrip those of the party that made the initial contribution (Way and Way (1996) FLC 92-702).
51As the Full Court said in Pierce v Pierce (supra) at [28]:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife.”
52The Full Court went on to say in Pierce “in considering the weight to be attached to the initial contribution….. regard must be had to the use made by the parties of that contribution.” In the present case, [the husband]’s initial contribution has been put to good use. It was the “springboard” from which the parties were able to purchase the current most significant asset. The current property is of substantially greater value than it was initially (Rosati v Rosati (1998) FLC 92-804). I take into account this was a long relationship, there were three children and both parties worked and, I am satisfied, contributed their earnings to a joint pool. In these circumstances, I consider that some weight must be given to the initial contribution made by [the husband]. That initial contribution has enabled the parties to effectively achieve their present financial position.
53Both parties agree that the contribution during the marriage up until separation was equal.
54Since separation [the wife] has allowed [the husband] the uninterrupted and exclusive use of the home. I accept at separation the two boys, at least the younger, were partially dependent for a short time. One had an apprenticeship and one had just commenced work. There is nothing to suggest that there was any money outstanding on the mortgage at the date of separation.
55[The wife] has been required to pay board. [The husband] and the children have had the benefit of exclusive occupation of the home. In addition the increase of value in the property is as a result of market forces and not from any specific improvements done by either party.
56In all the circumstances, I assess the contributions to be 57.5% in [the husband]’s favour. This imbalance is a reflection of the initial contributions made by [the husband] which I find to be a substantial factor here, despite the length of the marriage and his sole use of the home since separation.
Section 75(2) primarily prospective factors
57[The husband] turned 81 on 31 December 2007. He deposes to not enjoying good health. He suffers from a hearing deficiency, respiratory ailment relating to his exposure to asbestos whilst previous employed, Pagetts disease related to a bone deficiency in his left leg, residual prostate problems, cataracts in both eyes and depression for which he has been prescribed antidepressants.
58He is an aged pensioner. There is no expectation he will work again. He has debts to his family which he says need to be paid.
59The superannuation, redundancy and life insurance he previously had was used to acquire the former matrimonial home. He now relies upon government benefits. He wishes to retain the home. However, given his age and physical condition I find he is likely to need assistance to maintain it and the land holding if it is not sold.
60Since separation [the husband] has been in a position to holiday on a yearly basis [overseas]. He has had the benefit of over $16,000 from the proceeds of sale of another property.
61[The wife] is currently 50 year of age. She deposes to suffering back pain, neck pain, shoulder pain with the right shoulder pain being more pronounced. She also suffers from migraines. She says she has suffered significant depression for a considerable period of time although she takes no medication for this. She has permanent casual employment as a seasonal [worker]. The [industry] operates from 15 November each year until 30 June the following year. During that period she works long hours. She says the work causes her arm and shoulder pain. She has no other skills for employment but there is no evidence that she cannot continue to work into the future doing this seasonal work. She deposes to having previously done “part time hospitality work”.
62When she separated she commenced living with her current de facto partner, [Mr B] he is aged 46 years and who also works in the [industry].
63[The wife]has a superannuation entitlement acquired as a result of her work [in the industry]. Although presently modest it will increase in value.
64Both parties will have legal fees to pay. [The wife]has a credit card debt. In all the circumstances I intend to make an adjustment of 2.5% in [the husband]’s favour.
Are the orders just and equitable
65On the basis of the assessment of contributions and the primarily prospective factors, on the basis that [the husband] wishes to retain the property if it is at all possible, he will have to pay [the wife] $222,406. It is likely the source of any borrowings will be from his brother. There was no independent evidence of the brother in relation to the possibility of this occurring. If it is not possible it is likely the property will need to be sold and that amount paid from the proceeds of sale. [The wife] will, in addition, keep her superannuation entitlement of $12,657.
66I intend to give [the husband] the opportunity of retaining the home. If he is not able to pay [the wife] within 60 days then the property will be placed on the market. Given the somewhat unsatisfactory state of the evidence in relation to his ability to obtain funds to pay [the wife] there will be liberty to apply in relation to the implementation of any sale of the property if it becomes necessary.
67[The husband] will retain the home if he can or otherwise it will be sold. If it is sold he will have some funds to rehouse.
68In all the circumstances I am of the view the orders I intend to make are just and equitable.
Orders
69Subject to any submissions by counsel the orders I intend to make are:
1.Within 60 days from the date hereof, the applicant do pay to the respondent the sum of $ 222,406 and contemporaneously with such payment the respondent transfer to the applicant all her right, title and interest in the property situate at and known as [the matrimonial home].
2.In default of payment of the sum set out in order 1 the applicant forthwith take all necessary steps to multi list the property for sale with all real estate agents in [the local area] at a reserve price of no less than $575,000, such price not to be reduced without the consent of the parties or an order of the Court.
3.After sale the proceeds shall be distributed by the settlement agent acting for the parties as follows and in the following order of priority;
(i)firstly in payment of standard adjustment of all taxes and rates (with the husband to be responsible for the payment of all such rates and taxes until the date of settlement);
(ii)secondly in payment of the sales commission fee to the estate agent;
(iii)thirdly in payment of all standard fees of the settlement agent including any advertising fees and sundries;
(iv)fourthly in payment to the respondent of a sum representing 40% of the parties assets calculated as the net proceeds of sale of the property after deduction of order 3(i) – (iii) hereof and the respondents superannuation; and
(v)fifthly in payment to the applicant of the balance.
4.All the right, title and interest of the applicant in the furnishings, chattels, motor vehicle and superannuation interests in the possession of the respondent do vest in the respondent absolutely.
5.All the right, title and interest of the respondent in the furnishings, chattels and motor vehicle in the possession of the applicant do vest in the applicant absolutely.
6.There be liberty to apply in relation to the implementation of the sale of the property as set out in paragraph 2 hereof.
I certify that the preceding [69] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
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