HARRISON & HARRISON

[2006] FamCA 1437

FAMILY COURT OF AUSTRALIA

HARRISON & HARRISON [2006] FamCA 1437

APPEAL – From decision of Federal Magistrate – Husband appealed against orders dividing property 60% to the wife – Federal Magistrate found the contributions of the parties to be equal and gave the wife a 10% loading for her future needs – Appeal allowed – Incorrect calculation of the asset pool – Finding of equal contribution not really open – Slightly greater capital contribution made by husband during course of marriage and greater post-separation contribution – 55% to the husband for contributions appropriate – Wife’s income earning capacity lower than that of husband – 5% adjustment in her favour appropriate – A 50-50 division of the recalculated property pool is just and equitable in the circumstances.

Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981 (Cth)

APPELLANT: HARRISON

RESPONDENT: HARRISON

FILE NUMBER: MLM 7984 of 2005

APPEAL NUMBER: SA 52 of 2006

DATE DELIVERED: 19 DECEMBER 2006

PLACE DELIVERED: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE KAY

HEARING DATE: 19 DECEMBER 2006

LOWER COURT JURISDICTION: Federal Magistrates Court

LOWER COURT JUDGMENT DATE: 22 JUNE 2006

LOWER COURT MNC: [2006] FMCAfam 379

REPRESENTATION

COUNSEL FOR THE APPELLANT: MS JOHNSON

SOLICITORS FOR THE APPELLANT: MADDENS LAWYERS

COUNSEL FOR THE RESPONDENT: MS BEN SIMON

SOLICITORS FOR THE RESPONDENT: CLARKE & BARWOOD

Orders

1. That the appeal be allowed.

2. That Order 1 of the orders made by Federal Magistrate Hughes on 22 June 2006 be varied by discharging paragraphs (c) and (d) thereof and in lieu thereof substituting

   (c)thirdly, the sum of $94,000 to be paid to the wife, plus or minus one half of the sum by which the proceeds of sale after payment of the sums referred to in paragraph (a) and (b) above are greater or less than the sum of $242,000;  and

   (d)the balance is to be paid to the husband.

3. That the wife indemnify the husband against all liability in respect of the debt owed by the parties or either of them to the wife’s father in the sum of $19,000.

4. That the Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.

5. That the Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SA 52 of 2006
File Number: MLM 7984 of 2005

HARRISON

Appellant

And

HARRISON

Respondent

REASONS FOR JUDGMENT

1. This is an appeal against property orders that were made by Hughes FM in Warrnambool on 22 June 2006. I am exercising power pursuant to s 94AAA(3) of the Family Law Act1975 (Cth), the Chief Justice having considered it appropriate that the powers of the Full Court be exercised by a single judge. 

2. The orders that were eventually pronounced by the Federal Magistrate provided that the wife was to receive 60 per cent of net proceeds of sale of the former jointly‑owned home less the sum of $26,000.  It will become apparent shortly how that sum was calculated. 

Background

1. The parties commenced their relationship in late 1992 or early 1993.  They married in January 2000 and separated on their anniversary in 2005.  They were thus together for 12 or 13 years.  There are no children of their marriage, although the wife had two children from a previous relationship, one of whom lived with the parties for ten years and the other for three years.  The husband also had children from a previous relationship, but they did not feature very much in the life of the parties when they were together.

2. At the commencement of the relationship the wife owned a home at N.  It had a small mortgage of some $13,000 on it and the mortgage payments were about $45 a week.  The parties lived in that home for a period of four to five years, then they borrowed to purchase a home at D Street, T.  The loan for the D Street property was partially secured over the N property, which was then rented out for $125 per week.  The N property was sold in December 2002 for $80,000.  It is not clear what, if any, part of the original mortgage on the N home was still outstanding at that time. 

3. The proceeds of the N property went towards discharging the mortgage over it and the D Street property. 

4. Prior to the sale of the N property the parties purchased some land at M B Road, borrowing moneys from the Commonwealth Bank, save for a small deposit.  The parties then built a home on the M B Road property with the benefit of borrowed moneys from the bank plus a loan from the wife's father of $19,000. 

5. During the course of construction of the home the parties lived for six months rent-free at the wife's father's home. 

6. The D Street property was sold in 2003 for $152,000, being acquired six years earlier for $95,000, and the proceeds of that went towards the mortgage on the M B Road property.  At the time of the trial there was owing on the M B Road property a sum of about $250,000. 

7. The other interesting aspect in terms of external contribution is that at the commencement of the relationship the husband had a life tenancy in some farming land for which he was receiving an annual rent of about $5000.  The tenant at some stage during the course of the parties' relationship went bankrupt; it is not clear how much loss of income that generated, but some five years prior to separation another tenant was found at an annual rent of $8800. 

8. The moneys that were generated by the life tenancy found their way into the consolidated income of the household, and that was an external contribution over and above the moneys that were earned by the parties in their various work during the course of the relationship.  Additionally, the husband inherited some moneys.  In 1999 he received $21,000 from the estate of his late father.  That money was spent in the establishment of a transport company, F Pty Ltd, which has been the mainstay of the income of the husband for the period leading up to the trial and since that time. 

9. The husband further sold some land or received some payments from his brothers in relation to other inherited property which totalled $86,250, that was received somewhere in about 2001 or 2002 and used towards the reduction of the parties' debt.  So the external moneys brought in by the husband in relation to the estate total about $110,000, plus there was the annual rental from his life tenancy.

10. On the wife's side, as I have indicated, she had the N property where the parties lived for several years and it ultimately generated about $80,000.  Her father made available to the parties some moneys on an interest-free basis of $19,000 and he provided his house for them to live in for a period of about six months.  Nothing else is unusual about the contributions of each of the parties. 

11. The husband had tried at trial to minimise the wife's moneys earned from working and minimise the effort that she put in.  That fell on non-receptive ears, it would appear.  Indeed the findings that were made by the trial judge would indicate that the wife had worked industriously and appropriately throughout the course of the relationship and had worked extensively, albeit in a number of different jobs, many of them described as being of hard manual labouring type. 

Trial outcome

1. The ultimate finding of the Federal Magistrate was that during the relationship each party made contributions by way of income, each party made additional significant contributions, the wife had contributed through her raising of some livestock, the wife's children had lived with the parties for some period of time and the husband had contributed to their support, and she then reached a conclusion that all the contributions should be seen by the parties as largely equal, including post-separation contribution.  The husband had sought to argue that he should be given significant credit for post-separation contribution over a period of some 18 months, in that he had to service the debts of the parties, and in particular the mortgage which he was servicing at a rate of some $440 per week. 

2. The trial judge gave the husband no credit for this, on the basis, firstly, that he remained in occupation of the matrimonial home to the exclusion of the wife, who had to rent elsewhere, albeit for only $70 a week; that he had effectively locked the wife off the property, not enabling her access to the livelihood that she had previously enjoyed in terms of managing stock on the property; nor had he compensated her in any way in relation to the business, which he continued to operate during the course of the separation and indeed prior to the separation, in which she had worked and received no remuneration.  In those circumstances the trial judge determined that it was inappropriate to make any further adjustment of post-separation contribution, thus leaving the contribution finding up to the date of trial as being one of equality.

3. The final aspect of the judgment, subject to the mechanical issues, was that the trial judge then turned her mind to whether there should be any further adjustment made for what she described as s 75(2) factors and focused upon two particular issues, saying that the major factors were set out in subparagraphs (a) and (b) of s 75(2), namely the age and state of health of each of the parties and the income, property and financial resources of each of them and physical and mental capacity for each of them for appropriate gainful employment. 

4. The trial judge found that the husband was in good health, aged 46.  The wife was aged 39 with some major health issues, being cancer of the cervix in 2003, cancer of the vulva in 2005, each requiring some surgery, a hysterectomy in 2004 and some depression that had been diagnosed in September 2005 and treated by her general practitioner.  The trial judge's conclusion of the medical evidence, which was an affidavit by the wife's treating gynaecologist and her treating general practitioner, was that:

   It is difficult to assess the impact of the wife's illness on her income-earning capacity.  It is clear, however, that she has had cancer.  There is some reason, on the evidence, particularly of Dr Uren [the gynaecologist] to think that there might be some recurrence in the future.  It is not possible on the evidence to put it any higher than that.  The wife is a resourceful person who has found work of a casual and part-time nature over many years in the past.  However, it is reasonable to assume that she is unlikely to continue to work in heavy labouring jobs that she has had in the past, at least for the very many years in the future.  Such work must be limited and must be curtailed to some extent by virtue of the fact that she has undergone at least three operations in the last few years. 

5. The Federal Magistrate then noted that the wife had very limited capacity to work in administrative or clerical work as she was not computer-literate and that she had a significantly lower income-earning capacity than the husband, who, she said, had "an active and very healthy business from which he will continue to derive a reasonable living" and that he also had the life interest in the property at T, which was a significant financial resource and income for the rest of his life, regardless of whatever else happens in terms of his income-earning capacity.

6. They were the factors that the Federal Magistrate concluded ought lead to an further adjustment in favour of the wife and she concluded that that should amount to 10 per cent of the available pool of assets, as she identified and to which I will return shortly, giving the wife a 60 per cent share.  She then made orders which saw the wife receive in fact more than 60 per cent, but that is because of an error in the mechanical nature of the orders that was made. 

The appeal

1. Turning to the first of the matters that concerns me in the appeal, there is a challenge to the finding by the Federal Magistrate that the pool of assets was $233,500.  The Federal Magistrate had identified the pool of assets to include the property at M B Road, N, said to be worth $505,000 with a mortgage of $260,000 in round figures.  Additional property consisted of livestock of $20,000 and plant and equipment of $6000. 

2. It was agreed that the husband was the owner of a company through which he conducted his trucking business, F Pty Ltd.  The Federal Magistrate noted that it generated gross income of $220,000 to $240,000 per annum.  The Federal Magistrate also noted that it owned a prime mover trailer and tippers which were subject to finance and which had no net equity. 

3. She found the husband had a life interest in a property at T which she treated as a financial resource.  She otherwise ignored - by agreement, it would appear - motor vehicles, chattels and some minimal superannuation.  So really there were three assets identified that had value:  the property at N, the livestock and the plant and equipment associated with it. 

4. The Federal Magistrate identified as liabilities a sum of $37,500, which she identified as being

   ·     a Commonwealth MasterCard debt relating to the business, said, mistakenly, in the judgment to be worth $8,500, but that appears to be a typographical error and should have read $18,500, and

   ·     a debt to the wife's father for moneys he had advanced in the acquisition of the properties of $19,000. 

5. She said that when one did the mathematics of a net equity in the home of $245,000 plus the stock and the plant at $26,000, less the liabilities of $37,500, it left $233,500. 

6. The arithmetic is correct but there is a challenge to the size of the pool; that challenge comes from a passage in the opening remarks of counsel which appear at pages 13 and 14 of the transcript.  There was no agreed statement of assets handed up apparently, but counsel for the husband opened, after the matter had been stood down for some time for discussion.  Having identified the M B Road property and the cattle, there is some discussion about some cattle that had been sold off by the wife during the post-separation period, there was then discussion about the plant and equipment, then the following passages occur:

   MS JOHNSON:  Yes, and there are $6000 worth of plant and equipment which would be associated with the partnership, which still remains on the property.  That gives a total - and I'll have to change that because I've had the change the house figure - it's roughly $534,000, your Honour, for the gross.  In terms of [F] Pty Ltd, that company is seen as having a nil value.  So there's quite significant debts that has and the husband will service those.  They're the debts on the trailer and on the truck.

   HER HONOUR:   So it's agreed that [F Pty Ltd] has a nil value, is it?

   MS JOHNSON:   Yes, save and except ‑ ‑ ‑

   MR DUFFY:   Yes.  There was a report done that said that .

   MS JOHNSON:   It's agreed that one of the debts to be taken into account is a business Visa, which at the date of separation was $20,053; a tax debt of $7560; an overdraft of $18,686; and a Commonwealth personal Visa of $2450.  These are all debts that the husband has currently been servicing.  So they total $311,631.  So the pool is I think - the net pool, $223,085. I might be slightly out, a few hundred.

   HER HONOUR:   I think it is just slightly out.  I've got a calculator here, I'll just do this.  I'm missing something.  The Visa debt is 2053, the tax liability is 7660, the overdraft 18,686 and the Commonwealth Visa 2450?

   MS JOHNSON:   I'll just run through them.  At separation the loan was 262,882, the business Visa 20,053, the tax debt 7560, the overdraft $18,686 and the Commonwealth personal Visa $2450.

   HER HONOUR:   Which was the first one you said, before you said the Visa?  I've got the Visa, the tax debts, the overdraft and the Commonwealth Visa.  What was the one before that? 

   MS JOHNSON:   The housing loan.  The $262,882 was the housing loan.

   HER HONOUR:   Okay.  That's 311,631.  The first lot adds up to 534,116, that's 311 ‑ ‑ ‑

   MR DUFFY:   Your Honour, there's also the sum of 19,000 which is owed to the wife's father.

   HER HONOUR:   How much?

   MR DUFFY:   19,000.  It was the cost of the stage 1 construction of the former matrimonial home.

   HER HONOUR:   Is that agreed?

   MR DUFFY:   It should be.

   MS JOHNSON:   My client's position on that is that there's about $10,000 due, but the rest was paid back.

   So that is the discussion about the debts of the parties. 

7. In the course of cross‑examination there is some concession by the husband that that which Ms Johnson has described as the Visa card but which is in fact the MasterCard was down to $18,500 as at the date of trial.  The other matters do not appear to have been the subject either of any cross-examination or of further reference in the course of the final addresses of counsel.  So the first of the grounds of appeal, in terms of the manner in which I propose to deal with them, is that there is a clear error identified by the appellant.  Accordingly the mathematics in relation to the pool is incorrect because the debts far exceeded those for which the Federal Magistrate had made an allowance. 

8. According to my calculations, the liabilities of the parties, after allowing for the concession in relation to the MasterCard debt, over and above the mortgage, there being no apparent dispute before the trial judge that they were in existence, include

   ·     MasterCard at $18,500,

   ·     a tax debt of $7560,

   ·     an overdraft account of $18,686,

   ·     a Visa account of $2450 and

   ·     the parent's debt of $19,000,

making total of $66,196 over and above the mortgage. 

1. The trial judge had allowed only $37,500, so the pool of assets was out by about $30,000. 

2. According to my calculations, the net pool of assets should have been around $202,000, being the house at $505,000, the cattle and associated equipment $26,000 in assets, a gross value of $531,000, less the mortgage and less the debts that I have just identified. 

3. The second attack on the judgment relates to the finding that contributions should be treated as equal.  The Court is empowered under s 79 to adjust the interests of parties in property and in so doing it may take into account the matters set out in s 79(4) of which (a), (b) and (c) are the relevant matters in assessing contribution, they being:

   (a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them;

   (b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them; and

   (c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage.

Discussion and outcome

1. Given that both parties worked during the course of the marriage and given there were no children of the marriage per se and given the division of labour in the house was not particularly identified as being a relevant and material matter for the trial judge to give consideration, from the time of the commencement of the relationship until the trial it seems clear that a finding of equal contribution was not really a finding that was open to the trial judge. 

1. We are talking in fairly small areas of difference of opinion here - as will be seen from my assessment of the matter - because it is clear that there was a greater capital contribution on behalf of the husband from external sources during the course of the marriage, although it is not of very great significance, probably a maximum of about $30,000, as well as income coming from his life tenancy; but that was offset by the use of the wife's property during the first four or five years of the marriage to house the parties, the indirect contribution made on behalf of the wife by her father to house the parties for another six months during the course of the marriage and the continued use of the wife's property, which is referred to by the Federal Magistrate as "seed capital", namely as security for the debts of the parties which enabled them to acquire the second and perhaps the third piece of real estate that they acquired. 

2. But even so, the husband was left to service the debts of the parties post-separation and, albeit that he had use and occupation of the home and maintained the income-producing assets of the parties, namely his trucks, it still seems to be that there was an imbalance in favour of the husband which should have been reflected in the finding of contributions.  It was urged upon me that that should be a 60-40 finding in favour of the husband.  I would not reach that conclusion myself.  That gives him the first 20 per cent of this rather modest pool of assets and it is a disproportionate outcome emphasis upon his capital as compared to hers. 

3. Whilst there is some room for flexibility in the exercise, I will do my own assessment, as I have been asked to by the parties, in the circumstances.  I would have thought 55-45 in favour of the husband was an appropriate assessment to give recognition to the fact that his contributions were worth more than hers; although, over the period of whatever the external income matters were, they needed to be ameliorated by the effort that each of the parties was putting into their joint relationship. 

4. That being so, then one needs to turn to the relevant s 75(2) issues.  They were identified, in my view, correctly by the Federal Magistrate, namely that there is an inequality in future earning capacity of the parties. 

5. The husband retains his ability to earn money from his personal exertion in the trucking business.  It has produced for the family over the last few years an income, which is unclear on the evidence but something in the vicinity of at least $40,000 after expenses have been met.  It is unclear because the corporate entity is used as a sort of bank for the financing of much of the personal expenditure of the husband and the accountant was not called to give evidence and it is not clear precisely what is the real profitability of the enterprise, but it has been functioning now for some five or six years.  It was open to the Federal Magistrate to make findings that the business represented a stronger future for the husband than the wife has, she having worked in various jobs that are labour-intensive but would earn her very low income indeed. 

6. Whilst the emphasis on what was said by the trial judge to be a significantly lower income earning capacity than the husband might be an exaggeration of the proposition, given that the husband's income earning capacity is fairly modest indeed, it must be said that the wife's income earning capacity is much more modest than the husband.  He has the back-up, albeit that it is a fairly modest one, of the income that will come from his life tenancy in the T property. 

7. Those were features identified by the Federal Magistrate as being appropriate to make an adjustment under s 75(2) and I would agree with her that the adjustment is appropriate in the circumstances; albeit again, I would think, a more modest one than the Federal Magistrate made.  The issue of the wife's state of health is such that the evidence does not allow any conclusions to be drawn as to how it may impact upon her in the future.  Her depression will hopefully recede as a result of the conclusion of these no doubt very strenuous proceedings. 

8. In the circumstances it seems to me an appropriate outcome was that the pool of assets, which I have identified as having a net value of approximately $202,000 should be equally divided between the parties.  To achieve that equal division, that would mean that the wife would receive assets to the value of $101,000, of which she has already received $26,000 by way of the cattle and the plant, being a further $75,000 to come to the wife from the proceeds of sale of the house, plus $19,000 so that she can be responsible for the debt to her father. 

9. The amount which the house will bring has an uncertain value as it has to be sold and it seems only fair and appropriate in the circumstances that the orders reflect the flexibility so that each party maintains the ratio of half of the value of the pool.  To achieve that exercise, I would make an order to the effect that the wife receive $75,000 plus or minus one half of the amount by which the net proceeds of sale vary from $242,000, that is, the proceeds after discharge of the mortgage and any proceeds relating to the sale.  The husband to be responsible of course for meeting the mortgage repayments as and when they fall due until the sale and the other outgoings, he remaining in occupation of the property. 

10. In the matter of Harrison, I make the following orders:

    (1)That appeal be allowed.

    (2)That order 1 of the orders made by Hughes FM on 22 June 2006 be varied by discharging paragraphs (c) and (d) thereof and in lieu thereof substituting (c).

    (3)That the sum of $94,000 to be paid to the wife, plus or minus one half of the sum by which the proceeds of sale, after payment of the sums referred to in paragraphs (a) and (b) above(sic) are greater or less than the sum of $242,000; and (d) the balance, is to be paid to the husband.

    (4)That the wife indemnify the husband against all liability in respect of the debt owed by the parties or either of them to the wife's father in the sum of $19,000. 

Costs appeal

1. One of the grounds of appeal deals with the refusal of the Federal Magistrate to exercise her discretion in failing to order the wife to pay the husband's costs.  There do not appear to me to be any grounds upon which it would be appropriate for the Federal Magistrate to make any such order, other than perhaps of costs of an adjournment that was sought and obtained so that the wife could lead some medical evidence, which ultimately went nowhere.  

2. In the circumstances it seems to me that the appeal in relation to the failure to make a costs order does not succeed. 

3. As to the costs of the appeal itself, it seems appropriate to me that each party should be given a certificate, the matter having been partially decided on a question of law, namely the miscarriage of the exercise of discretion.

4. There will be the usual orders as to costs certificates.

I certify that the preceding forty five (45) paragraphs are a true copy of the reasons for judgment of this Honourable Full Court

Associate: 

Date:  17 January 2007