HABERMAS & GOMEZ

[2018] FamCA 218

FAMILY COURT OF AUSTRALIA

HABERMAS & GOMEZ [2018] FamCA 218

FAMILY LAW – PROPERTY – where the matter was undefended – where the respondent has consistently failed to participate in the proceedings – de facto relationship of 13 years – where the respondent made a greater initial contribution – where the respondent is the legal owner of the real property – where both the applicant and the respondent have contributed to the mortgage payments and to living expenses ̶ orders made for a 60/40 division in the respondent’s favour – where the respondent will likely have to sell one or more properties registered in his name to meet his obligations under the orders – where there are capital gains tax implications that have been taken into account

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Bevan & Bevan (2013) 49 Fam LR 387
Stanford & Stanford (2012) 247 CLR 108

APPLICANT: Mr Habermas

RESPONDENT: Mr Gomez

FILE NUMBER: MLC 3669 of 2015

DATE DELIVERED: 20 March 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 13 December 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Barbayannis

SOLICITOR FOR THE APPLICANT: Pearsons Lawyers

THE RESPONDENT: No Appearance

Orders

1. Within 90 days of the date of these Orders (“the Date”) the respondent pay, or cause to be paid, the sum of $431,407 to the applicant (“the Payment”).

2. Contemporaneously with the Payment the applicant provide to the respondent a withdrawal of any caveat lodged by him or on his behalf against the following properties:

   (a)B Street, Suburb C in the State of Victoria (“the B Street property”); and

   (b)D Street, Suburb E in the State of Victoria (“the D Street property”).

3. Within 28 days of the date of these Orders the respondent pay, or cause to be paid, the sum of $7,400 to the applicant in payment of the costs the respondent was ordered to pay to the applicant on 7 December 2016.

4. If the whole of the Payment has not been made by the Date then the respondent immediately do all acts and things required to transfer all of his right, title and interest in the D Street property to the applicant to be held on trust for sale and the D Street property be forthwith sold altogether out of Court. 

5. For the purposes of the sale of the D Street property the applicant have the sole conduct of the said sale, including but not limited to:

   (a)       nominating and providing instructions to a real estate agent;
   (b)       executing the sale authority;
   (c)       providing notice to any tenants;
   (d)       negotiating the terms of the sale; and
   (e)       executing the contract of sale.

6. The proceeds from the sale of the D Street property be applied as follows:

   (a)firstly, to pay all costs, commission and expenses of the sale;

   (b)secondly, to discharge the mortgage and any other encumbrance affecting the property; and

   (c)thirdly, as follows:

   (i)the sum of $336,000 to the applicant;

   (ii)a sum equal to 40 per cent of the sale price of the D Street property minus the calculated capital gains tax in accordance with paragraph 7(a) herein to the applicant; and

   (iii)the balance thereof to the respondent.

7. For the purpose of the payment of any capital gains tax arising from the sale of the D Street property:

   (a)immediately following a Contract of Sale being signed for the sale of the D Street property, the applicant engage a certified practicing accountant to prepare an estimate of the capital gains tax payable by the respondent with any costs associated with obtaining the advice to be treated as a cost of sale for the purposes of paragraph 6(a) herein; and

   (b)a sum equivalent to the estimated capital gains tax be held in an interest bearing account in the name of the applicant pending assessment by the Australian Taxation Office of the capital gains tax payable by the respondent;

   (c)upon receipt from the respondent of the said assessment of capital gains tax the applicant forward the monies held in that account to the Australian Taxation Office on behalf of the respondent;

   (d)the applicant to pay any balance remaining in the said account after payment of the capital gains tax pursuant to paragraph 7(c) to the respondent. 

8. In the event there is a shortfall in the payment to be made to the applicant pursuant to paragraph 6(c)(i) herein, the B Street property be forthwith sold and the proceeds of sale be applied as follows:

   (a)first, to pay all costs, commission and expenses of the sale;

   (b)secondly to discharge the mortgage and any other encumbrance affecting the property;

   (c)thirdly, to the applicant, so much of the sum referred to in paragraph 6(c)(i) hereof as is then outstanding together with interest thereon in accordance with the Family Law Rules 2004 (Cth) calculated from 90 days of the making of these Orders, such sum to be either decreased or increased by a sum equal to 40 per cent of the difference between the sale price and the figure of $920,000 placed on the property by the single expert valuer; and

   (d)finally, the balance thereof to the respondent.

9. In the event that the respondent fails to pay the costs referred to in paragraph 3 herein to the applicant by the Date, the said costs be paid to the applicant from the funds that are to be paid to the respondent at the settlement of the sale of either the D Street or B Street properties, whichever first occurs.

10. Pursuant to section 106A of the Family Law Act 1975 (Cth) a Registrar of this Honourable Court be empowered to sign all documents necessary to give effect to these Orders on behalf of a defaulting party.

11. Unless otherwise specified in these Orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:

    (a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at this date; 

    (b)each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other;

    (c)all insurance policies to become the sole property of the beneficiary named therein;

    (d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and

    (e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.

12. All extant applications be otherwise dismissed and removed from the list of cases awaiting hearing.

    IT IS DIRECTED THAT

13. All documents produced to the Court pursuant to subpoena and exhibits relied upon by the parties be returned by the subpoena clerk of the Family Court of Australia, Melbourne Registry, to the person or organisation who produced same after the expiration of thirty (30) days from the date of these orders, or otherwise upon the conclusion of any appeal.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Habermas & Gomez has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 3669  of 2015

Mr Habermas

Applicant

And

Mr Gomez

Respondent

REASONS FOR JUDGMENT

1. The parties in this case commenced cohabitation in June 2000 and separated in May 2013.

2. The applicant was born in 1972 and is 45 years of age. The respondent, who is in receipt of a disability pension, was born in 1962 and is 55 years of age.

3. The applicant commenced property proceedings on 29 April 2015. The matter was listed for a case assessment conference before Registrar Moser on 13 July 2015 and on that date orders were made that the respondent file his material in response to the applicant’s application by 3 August 2015, that financial discovery be completed by 28 August 2015 and that the parties attend a conciliation conference on 21 October 2015. If they could not reach agreement as to the value of their real estate, property valuations were to be obtained 28 days prior to the conciliation conference. The respondent was legally represented at that case assessment conference.

4. When the respondent failed to comply with the orders made by Registrar Moser on 13 July 2015 the conciliation conference date was vacated and the matter was listed for hearing in the Registrar’s Duty List on 11 September 2015. The applicant deposes that before that hearing, his solicitor received a telephone call from someone at F Legal Centre requesting an adjournment of the matter. By letter to F Legal Centre dated 9 September 2015 the applicant’s solicitor on the applicant’s instructions refused the respondent’s request for an adjournment and advised that he would be appearing on that date and would be seeking an order for costs on a solicitor/client basis due to the respondent’s failure to file documents in accordance with the orders made 13 July 2015.

5. Although the applicant deposed that the respondent attended the hearing on 11 September 2015 the orders note that there was no appearance by or on behalf of the respondent on that date. Further orders were made by Registrar Moser adjourning the matter to the Judicial Duty List on 5 November 2015, that both parties appear and/or be represented on that date and that the respondent file and serve his answering material by 4.00 pm on 15 October 2015. The applicant was given liberty to apply to seek leave to proceed with his application filed 29 April 2015 on an undefended basis in the event the respondent did not comply with the orders made on this date.

6. On 20 October 2015 the respondent filed his Response to the applicant’s Initiating Application, a Financial Statement and a Notice of Address for Service which gave his contact address as B Street, Suburb C in the State of Victoria (“the B Street property”).  

7. The date fixed for hearing in the Judicial Duty List was vacated and the matter was listed for a directions hearing on 5 November 2015 as indicated would be done should the respondent comply with the September orders.  The respondent appeared in person on that date and orders were made providing for an exchange of documents by 4 December 2015, that both the applicant and the respondent file affidavits setting out the facts upon which they relied in support of their respective cases and that they attend a conciliation conference on 24 March 2016.

8. On 2 December 2015 the applicant’s solicitors forwarded the applicant’s discoverable documents to F Legal Service and were advised by letter dated 5 January 2016 that the legal service was not representing the respondent. The applicant deposes that when his solicitor telephoned the respondent on 19 January 2016 the respondent advised him that he was engaging a solicitor to act on his behalf. In March 2016 the applicant’s solicitors again wrote to the respondent advising him that if he did not reply to their letter they would seek to proceed with the matter on an undefended basis.

9. The applicant deposes that the respondent left a voicemail message for his solicitor on 2 March 2016 and that his solicitor forwarded a further letter to the respondent regarding his failure to comply with the orders with respect to the filing of documents and discovery or to engage in the proceedings.

10. The applicant says that he attended the conciliation conference on 24 March 2016 even though the respondent had not complied with the order made on 13 November 2015 requiring him to file an affidavit with respect to discovery. The respondent did not attend the conciliation conference however when the Registrar contacted him by telephone, he advised that the day before the conference he had engaged G Lawyers to act on his behalf. The respondent was given a further opportunity to comply with the orders and the matter was listed for hearing in the Judicial Duty List on 8 June 2016 for a “possible undefended hearing”, that hearing date to be vacated and the parties to attend a conciliation conference if the respondent complied. The Judicial Duty List hearing was vacated.

11. The applicant attended a further conciliation conference on 15 September 2016. The respondent was represented on that date but did not attend, asserting that his failure to appear was due to ill health. On that date Registrar Rose adjourned the matter for hearing in the Judicial Duty List on 9 November 2016, she fixed the applicant’s costs of that day in the sum of $1,800 and reserved the question of the payment of those costs together with the reserved costs of 24 March 2016 in the sum of $2,460. The Registrar further ordered that within 28 days the respondent file and serve any affidavits setting out in detail his medical condition and the reasons for his non-attendance on 24 March 2016 and 15 September 2016 and the reason for the late notice to the applicant of his medical condition on 15 September 2016. On 6 October 2016 G Lawyers filed a Notice of Ceasing to Act.

12. On 23 November 2016 the applicant’s solicitors received an email from Susan Snyder serving them with the respondent’s Amended Response and his Affidavit filed 23 November 2016.  On 6 December 2016 the matter was listed for hearing in the Judicial Duty List and orders were made by consent that the respondent pay the applicant’s costs of 24 March 2016, 15 September 2016 and 9 November 2016 fixed in the sum of $7,400 to be payable at the conclusion of the proceedings in addition to the applicant’s property settlement. It was further ordered that all extant interim applications be dismissed and the matter be placed in the list of cases awaiting allocation to a judicial docket. Ms Susan Snyder appeared on the respondent’s behalf on that date.    

13. The matter was listed for a Trial Management Hearing before Cronin J on 2 October 2017. Ms Snyder appeared at the hearing that day and advised the Court that she had tried to communicate with the respondent on a number of occasions but that he had failed to respond. Cronin J granted her leave to withdraw and made orders listing the matter for final hearing before me as a two day matter commencing on 13 December 2017. He also made orders with respect to the filing of trial affidavits in anticipation of that final hearing and ordered that service of a copy of his order be deemed effected by prepaid post addressed to the respondent at B Street, Suburb C by the solicitors for the applicant. I am satisfied that on 5 October 2017 the applicant’s solicitor forwarded a sealed copy of his Honour’s orders made 2 October 2017 to the respondent.

14. The applicant was to file and serve his affidavits of evidence in chief by 17 November 2017 and the respondent was to file his documents by 1 December 2017. On 17 November 2017 the applicant filed an Amended Initiating Application, his Affidavit of evidence in chief and a Financial Statement which I am satisfied were served upon the respondent by post the same day.

15. The respondent did not comply with Cronin J’s order requiring him to file and serve his trial material by 4.00 pm on 1 December 2017 and did not appear at the hearing before me. I am satisfied that the respondent was served with a sealed copy of his Honour’s orders and was aware of the final hearing and the orders requiring him to file his trial material by 1 December 2017.

16. Rule 11.02(c) of the Family Law Rules 2004 (Cth) (“the Rules”) provides, inter alia, that if a party does not comply with the Rules, the Regulations or a procedural order, the Court may determine the matter as if it were undefended. It is on this basis that the applicant seeks to have the matter proceed undefended. The main purpose of the Rules is to “...ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case” (r 1.04). The Court must apply the Rules to promote that purpose and actively managing each case includes ensuring that the parties and their lawyers comply with the Rules, any practice directions and procedural orders. It is in these circumstances I was satisfied that I should permit the applicant to proceed with his case for final property orders on an undefended basis.

17. The respondent has failed to comply not only with the orders for the filing of documents in anticipation of the trial but has failed to comply with previous orders on a number of occasions during the course of the proceedings. I am satisfied that the respondent has failed to participate in the proceedings in a meaningful manner despite being given numerous opportunities to do so. In all of the circumstances, I am satisfied that the applicant should be able to have his application heard and determined and that justice requires that he be given that opportunity.

The Orders Sought By The Applicant

1. In his Amended Initiating Application filed 17 November 2017 the applicant sought orders that the respondent pay him $440,000 within 90 days of the making of the orders and that he retain his interest in the property at H Street, Suburb J in the State of Victoria (“the Suburb J property”), his motor vehicle, his personal bank account and belongings and his superannuation entitlements.  He also sought an order that the respondent retain his interest in the B Street property, D Street, Suburb E in the State of Victoria (“the D Street property”), his motor vehicle, personal bank accounts and belongings and his superannuation entitlements.

2. In that application he also sought an order that in the event that the respondent did not make the payment he sought within the time specified by the orders, that within seven days the respondent sign all documents and do all things necessary to transfer his interest in the D Street property to him on trust for sale. The applicant sought orders permitting him to sell the D Street property, that the proceeds of sale be applied to pay the costs, commission and expenses of the sale, to discharge the mortgage and any other encumbrance over the property, so much of the payment outstanding to the applicant together with any interest thereon calculated at 10 per centum per annum, adjusted monthly to the applicant and that the balance thereafter to be paid to the respondent. The applicant sought a similar order with respect to the B Street property in the event that the proceeds of the D Street property were not sufficient to satisfy his entitlements. The applicant also sought orders with respect to the payment of reserved costs and an order pursuant to s 106A of the Family Law Act 1975 (Cth) (“the Act”) for the purposes of giving effect to the Court’s orders.

3. In the Case Outline filed on the applicant’s behalf on 11 December 2017, the applicant sought orders in similar terms. However, during the course of the hearing, it became clear that there were issues with respect to capital gains tax (“CGT”) being incurred upon the sale of the D Street property for enforcement purposes, which had not been addressed in the proposed orders and which would potentially have caused a significant injustice to the respondent if not addressed.

4. On that basis, having indicated to counsel for the applicant that in circumstances where it was unlikely that there was any source of funding the payment to the applicant, other than by way of a sale of at least one if not both of the properties in the respondent’s name, I would need to take into account any CGT that might be incurred as a consequence of the sale of the D Street property and invited counsel to provide a minute of orders addressing the issue. I note that this did not alter the basic premise of the applicant’s case or the amount he sought by way of property settlement, other than by adjusting his entitlements to take into account the likely imposition of CGT upon the sale of the D Street property.

The Evidence

1. The applicant relied upon his Affidavit and Financial Statement filed 17 November 2017. Counsel for the applicant also referred me to parts of the affidavits filed by the respondent on 27 April 2016 and 23 November 2016 some of which he said was consistent with his client’s evidence. In fairness to the respondent, he also referred me to parts of the respondent’s evidence not consistent with the applicant’s evidence. Counsel for the applicant also submitted that even if the Court were to prefer the respondent’s evidence, that evidence was in any event consistent with the orders sought by his client. I will refer further to the respondent’s evidence and why I prefer the applicant’s evidence in the course of these reasons.  

2. The applicant deposes that he and the respondent commenced cohabitation in June 2000. The respondent in his Affidavit filed 27 April 2016 (“first affidavit”) deposed that he met the applicant in late 2000 and that he moved into his flat at K Street, Suburb L (“the K Street property”), as a flatmate, in or about May 2001.  However in his Affidavit filed 21 November 2016 (“second affidavit”), he deposed that cohabitation commenced in late 2000. He further deposed in his first affidavit that the relationship “soured” culminating in the applicant moving out in 2013 and in his second affidavit that he and the applicant separated under the one roof in 2012 and that the applicant moved out of the property in which they were living, the B Street property, in May 2013. The applicant for his part deposed that separation occurred in May 2013 but said nothing about the parties living separately and apart under the one roof prior to him vacating the B Street property.  Even on his own case the respondent acknowledges a de facto relationship of some 12 years or thereabouts. I am satisfied on the balance of probabilities that the parties commenced cohabitation in mid-2000 and separated in May 2013, a relationship of some 13 years.

3. Whilst not much may have turned on which of the parties’ evidence in relation to the dates upon which they commenced cohabitation and when they separated is accepted, I have reservations about the reliability of the respondent’s evidence generally given the inconsistencies between his two affidavits. There is also other evidence which corroborates the applicant’s evidence about some of the matters where the parties are otherwise in dispute, which I will refer to in more detail during these reasons, which lead me to conclude that the applicant’s evidence is generally more reliable and that where there is a dispute between their evidence, unless otherwise discussed, I prefer the evidence of the applicant. I am also mindful of the fact that these proceedings are undefended and had the respondent wished to dispute the applicant’s evidence, he could have participated in the hearing and challenged the applicant’s evidence. He has not done so.

4. It is the applicant’s case that the K Street property where they commenced cohabitation was at that time valued at approximately $200,000. Although it was his evidence that the property was encumbered he said he did not know how much the respondent owed on the mortgage at the commencement of cohabitation. The respondent for his part deposed in his first affidavit that the K Street property was at that time valued at approximately $200,000 and subject to a mortgage of approximately $130,000. However, in his second affidavit he deposed that the property was worth approximately $220,000 and was subject to a mortgage of approximately $60,000 giving him equity of approximately $160,000.  

5. The applicant further deposed that at or about the time he and the respondent commenced cohabitation, the respondent had purchased the D Street property. The respondent for his part deposed in his first affidavit that he had purchased the D Street property as an investment property in June 2000, just before he met the applicant and settled the purchase in or about August 2000, after he had met the applicant. He also deposed in that affidavit that he paid $180,000 for the D Street property, that he originally had a mortgage of $130,000 and that he used $50,000 equity he had in the K Street property to complete the purchase. In his second affidavit, he deposed that he purchased the D Street property in early 2000 and settled the purchase in July 2000. It was his evidence that at the time he and the applicant commenced cohabitation the mortgage was approximately $140,000 and that he had equity of about $60,000 in the property at the commencement of cohabitation. 

6. The applicant’s case is that the D Street property was acquired for $180,000 and that they did not apply any of their own funds to the acquisition of the property, as there was a collateralised mortgage secured over both the K Street property and the D Street property. Even if the respondent was correct about there being a mortgage of $130,000 the equity would, based upon the purchase price of $180,000, be $50,000 and not $60,000 and if the correct figure for the mortgage were $140,000 that equity would only be $40,000.  

7. The respondent annexed a copy of the Certificate of Title and the mortgage for the D Street property to his first affidavit. According to the Certificate of Title the transfer was registered on 3 August 2000 however the mortgage does not include details as to the amount the respondent borrowed. This property was a rental property and the rental payments were applied to the mortgage throughout the relationship.

8. Given that even if the Court preferred the respondent’s evidence as to the commencement of the relationship, which is not the case, the D Street property had recently been purchased for $180,000 and there is no evidence to support the respondent’s assertion as to the increase in its value. I am satisfied on the balance of probabilities on the evidence I do have that even if there was as alleged by the respondent a mortgage of $130,000, at best his equity based upon his evidence would be either $40,000 or $50,000 not $60,000 as the respondent asserts.

9. The respondent further deposes that at the commencement of cohabitation he owned a car, some furniture and had unspecified superannuation entitlements.

10. The applicant for his part deposed that at the commencement of cohabitation he owned a motor vehicle which he said was valued at approximately $11,000 and had superannuation entitlements of $35,000. The respondent conceded that the applicant owned a motor vehicle but deposed that he had not seen any documentation with respect to the applicant’s superannuation entitlements. 

11. The applicant’s evidence is that the respondent sold the K Street property in October 2002 and that in late 2003 he and the respondent, albeit it was registered in the respondent’s name, then purchased the apartment in B Street, where the respondent still lives, moving in January 2004. The respondent for his part deposed in his first affidavit that he sold the K Street property in late 2003 and purchased the B Street property in or about October 2003. However, in his second affidavit he deposed that he sold the K Street property in October 2002 and purchased the B Street property in late 2003.  According to the Certificate of Title annexed to the respondent’s first affidavit the transfer was lodged for registration on 3 April 2004 which is consistent with a sale in either late 2003 or early 2004. The respondent also deposed that he sold the K Street property for $330,000, that there was a small amount owing on the mortgage at that time, that he paid $412,000 for the B Street property and that the difference between the proceeds of sale of the K Street property and the purchase price of the B Street property together with stamp duty was $120,000. As submitted by counsel for the applicant the documents annexed by the respondent to his affidavit do not provide any clarity as to the mortgage balance at that time.

12. The applicant’s case is that he paid $1,000 per month towards the B Street mortgage and paid bills and expenses. Although the respondent deposed in both his affidavits that he and the applicant had kept their finances separate it was not until he filed his second affidavit that he deposed that the $1,000 per month paid by the applicant had been rent and that he otherwise paid the mortgage and all of the other expenses associated with the property.

13. As with other aspects of the respondent’s evidence there were inconsistencies between his first and second affidavit.

14. Counsel for the applicant submitted that as the respondent had not provided full and frank disclosure in relation to his financial affairs, the applicant had caused a subpoena to be issued to the ANZ Bank for the production of the respondent’s bank records from 1 May 2013 to the date of that subpoena which was issued on 22 April 2016. The documents were produced shortly thereafter.

15. These records produced by the ANZ Bank included bank statements for a mortgage offset account, a home loan account and a residential investment loan in the respondent’s name all of which were established in July 2009. The home loan balance as at 20 August 2013, a matter of months after separation was $256,743. The balance in March 2016 when the documents were produced was $242,367. The mortgage offset account had a credit balance of $16,818 at separation in May 2013. The Residential Investment Loan Account had a balance at separation of $6,000 and was closed with a nil balance in January 2014.

16. The loan applications and disbursement authorities for the two loans were also in evidence before me. I am satisfied based upon those documents that the respondent applied for a home loan of $270,000 account number …84 and that those funds were advanced on 14 August 2009, and a residential investment loan of $245,000 account number …05 which was advanced on 14 August 2009 and as previously referred to, closed with a nil balance in early 2014.  

17. Counsel for the applicant also referred me to a further ANZ loan application in the respondent’s name for account number …76 for $100,000 and the disbursement authority evidencing the advance of $99,562.25 on 14 August 2009. Counsel submitted that as no documents were produced by the ANZ Bank in relation to this loan, the Court could infer that it had been discharged prior to 1 May 2013 the date referred to in the subpoena addressed to the ANZ Bank.

Legal Principles

1. Notwithstanding that these proceedings are undefended, the Court must be satisfied that it is just and equitable to make orders adjusting the parties’ legal and equitable interests in property. As the High Court observed in Stanford & Stanford (2012) 247 CLR 108, there are many cases in which that requirement is readily satisfied. In my view, this is such a case. The parties lived together for approximately 13 years. Whilst living together, they made financial arrangements, including what I am satisfied were contributions made by the applicant to the repayment of the mortgage over property in the respondent’s name, and which included the common use of property from which the applicant is now excluded.

2. In those circumstances, I am satisfied that the arrangements the parties made during that relationship are no longer appropriate and that justice and equity requires some recognition of the applicant’s contributions during the relationship. I am satisfied that it is in this case just and equitable to make orders pursuant to s 79 of the Act adjusting the parties legal and equitable interests in property. Being so satisfied, the Court must identify those interests and make such orders as it considers proper, having regard to the matters in ss 79(4) of the Act. As the Full Court said in Bevan & Bevan (2013) 49 Fam LR 387 at paragraph 86, the just and equitable requirement is not a threshold issue, rather it is a requirement which permeates the process of determining what orders the Court should make.

Discussion

1. The applicant’s case is that the asset pool is as follows:

Assets	Legal Owner	Applicant’s Value
B Street, Suburb C	Respondent	$920,000
D Street, Suburb E	Respondent	$480,000
H Street, Suburb J	Applicant	$420,000
Liabilities
Cross Collateralised Mortgage secured over B Street and D Street	Respondent	$243,483
Mortgage Secured over Suburb J	Respondent	$368,000
TOTAL NET ASSETS	$1,208,517
SUPERANNUATION
Superannuation	Respondent	$108,814
Superannuation	Applicant	$139,000
TOTAL WITH SUPERANNUATION	$1,456,331

1. The real properties were valued by agreement at a time when the respondent was legally represented and participating in the proceedings. The applicant relied upon those valuations. Although the applicant did include the parties’ motor vehicles, they have not been valued, are of limited value and of relatively similar value and in those circumstances I propose to exclude them from the pool for the purposes of making orders adjusting the parties interests in property. This leaves a pool, excluding superannuation of $1,208,517.

2. Both the applicant and the respondent were engaged in employment when they commenced cohabitation. The applicant deposes that in or about 2009 the respondent stopped working and was in receipt of a disability pension.  It is his evidence that he continued to contribute to the mortgage and paid most of the bills. Although the respondent in his first affidavit deposed that he ceased employment in 2009, it was his evidence that he continued to service the majority of the mortgage and shared the household bills with the applicant out of the rent he received from the D Street property and his disability benefits. However, in his second affidavit, the respondent deposed that he ceased employment in 2005, that he supported himself on the rental income from the D Street property and was in receipt of disability benefits and that although the applicant continued to pay him $250 a week, he otherwise made only a minimal contribution to the household bills. For the reasons previously discussed, I prefer the applicant’s evidence and I am satisfied that, albeit the applicant had the benefit of living initially in the K Street property and thereafter in the B Street property, the payments he made were his contributions to the mortgage rather than rent as the respondent asserted in his second affidavit.

3. I accept as submitted by counsel for the applicant that the applicant and the respondent were in a committed relationship and irrespective of the properties having been registered in the respondent’s name, by their joint endeavour they significantly reduced the mortgages secured over those properties. I also accept that the applicant, whilst continuing to contribute to the mortgage payments after the respondent ceased employment, paid most of the bills. I am supported in this view by the bank records in evidence before me which suggest that the mortgage payments exceeded the rental income the respondent received in circumstances where I am satisfied the respondent’s only other source of income was his disability benefit.  

4. Notwithstanding that I am satisfied that the applicant contributed to the mortgage and the household expenses as acknowledged by counsel for the applicant, the respondent’s initial contributions exceed those of the applicant. Whereas the applicant says he owned a motor vehicle which he says was worth approximately $11,000 and had superannuation entitlements of approximately $35,000, the applicant had equity in property of, on his case, between $200,000 and $220,000, a car, furniture and chattels and unspecified superannuation entitlements. Counsel for the applicant however also submitted that the Court should have regard to the fact that the present asset pool includes the applicant’s interest in the Suburb J property, which he acquired after separation and it follows to which the respondent has made no contribution. The respondent has also had the benefit of living in the B Street property.

5. The applicant proposed that the parties retain their respective superannuation entitlements. Whilst the respondent’s superannuation entitlements are less than those of the applicant, it is also the case that the applicant has continued in employment and made further contributions to his superannuation since separation, whereas the respondent has not been in employment since at least 2009 and prior to separation. I am satisfied that in all of the circumstances it is just and equitable that the parties retain their respective superannuation entitlements.   

6. Counsel for the applicant submitted that an appropriate division of the available property, excluding superannuation, based upon the respective contributions of the parties would be a 55/45 split in the respondent’s favour. On this basis, the respondent’s entitlement would be $664,684 and the applicant would receive $543,833, a differential of $120,851. I am satisfied that in the context of all of the parties contributions in a relationship of some 13 years, this adequately takes into account the respondent’s initial contributions.

7. Counsel for the applicant also submitted that there should be a further adjustment of 5 per centum of the pool in the respondent’s favour, having regard to the s 75(2) factors. As previously referred to, the applicant is in full time employment earning he says $1,457 per week gross. He pays tax of $297 per week leaving him with $1,160 per week net from which he pays superannuation of $126 per week and mortgage payments of $453 per week.

8. The respondent for his part is currently in receipt of rental income and disability benefits. However, it is also the case that based upon the orders the applicant seeks, there being no other source of funds identified, the respondent will more likely than not have to sell one or other or both of the properties registered in his name. The likely outcome being that he will no longer have the benefit of rental income from the D Street property either because it has been sold or alternatively because the respondent is occupying the D Street property, having sold B Street in order to meet the applicant’s entitlements pursuant to the orders. The sale of the D Street property would be likely to trigger CGT which would ultimately impact upon the property to be divided between the parties.

9. Based upon the proposed adjustment of 60/40 in the respondent’s favour, his entitlement out of the pool of $1,208,517 would be $725,110. The applicant would be entitled to the balance of that pool in the sum of $483,407, a differential of $241,703.  The applicant already has his equity of $52,000 in the Suburb J property and on the basis of a 60/40 split, the respondent will have to pay him $431,407.   

10. I am satisfied that the 60/40 adjustment, excluding the parties’ respective superannuation entitlements is a proper adjustment of the parties’ property interests and the applicant and the respondent each retaining their superannuation entitlements will result in a just and equitable outcome.

11. In circumstances where it appears almost inevitable that the respondent will have to sell at least one of his properties in order to satisfy the obligation imposed upon him by these orders, and in circumstances where the applicant seeks an order in the event that the respondent does not make the payment he is required to make that firstly the D Street property be sold and in the event of any shortfall the B Street property be sold, I asked counsel for the applicant to provide me with a minute of draft orders that would take into account any CGT that might arise upon the sale of the D Street property. As it is not possible to calculate the CGT with any certainty, that property must be dealt with separately and the payment to the applicant in those circumstances must be based upon a percentage division of that property upon sale, in the event that occurs. I am also of the view that the minute of draft orders proposed by the applicant in so far as it relates to the payment of CGT is not practical in circumstances where it is the respondent who will need to lodge his tax returns in order for the CGT to be assessed. In my view, a more practical solution is for monies to be set aside to meet the CGT based upon the estimate prepared by an accountant engaged by the applicant and payment to be made to the ATO on behalf of the respondent upon receipt of the assessment.

1. The mechanics of the orders in this case are somewhat complicated by the fact that there would appear to be no other source of funds from which the respondent can meet the applicant’s entitlements pursuant to these orders other than by way of a sale of one of the properties in his name and in circumstances where it is unclear what the mortgagee will require by way of repayment in the event of the sale of the D Street property. One possibility being that if the ANZ Bank were to require the discharge of the mortgage upon settlement of the sale of the D Street property it is unlikely that the proceeds would, after provision is made for CGT, be sufficient to meet the applicant’s entitlements. In those circumstances it is necessary for the orders to make provision for the sale of the B Street property.

2. Although the valuations of the properties upon which the applicant relied were joint valuations, it is also the case that they were prepared some time ago. I am of the view that if either of the properties in question are sold it would not be just and equitable for one party to bear either the risk of a sale or be entitled to all of the benefits of a sale in the event that the property sells for more or less than the valuations upon which the applicant based his case. Although the minute of orders prepared by counsel for the applicant was based upon a percentage division of the proceeds of sale of the D Street property, that was not the case with the order in relation to the B Street property, which did not take into account any difference between the sale price and the valuation for the purposes of these proceedings. It is on that basis that I propose that the orders the Court makes provide for the possibility of the B Street property selling for more or less than the valuation placed upon it by the single expert valuer.  

3. It is also the case that the minute of orders provided by counsel calculates the payment to the applicant taking into account the collateralised mortgage secured over the B Street property and the D Street property but also provides for the payment of a percentage after that mortgage is discharged. The effect of that is that the mortgage is accounted for twice thereby reducing the applicant’s entitlements. In my view, the orders should make provision for the payment without allowing for the deduction of the mortgage with the balance to be paid on a percentage basis after discharge of that mortgage.

4. The applicant in his application seeks an order pursuant to s 106A of the Act for the Registrar to be empowered to sign documents in lieu of a defaulting party. In circumstances where the respondent has not fully participated in these proceedings and failed to comply with orders made by the Court, I propose to make an order pursuant to s 106A of the Act. However I propose that the order be directed to the respondent.

5. Finally I note that on 7 December 2016 the respondent consented to an order that he pay the applicant’s costs fixed in the sum of $7,400. Those costs were to be paid at the conclusion of these proceedings. The applicant seeks an order for payment of those costs as part of the orders made for property settlement and I propose to accede to that application.   

I certify that the preceding fifty seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 20 March 2018.

Associate

Date:  20 March 2018