HAWKE & KEMP
[2015] FamCA 524
•6 July 2015
FAMILY COURT OF AUSTRALIA
| HAWKE & KEMP | [2015] FamCA 524 |
| FAMILY LAW – PROPERTY SETTLEMENT – De Facto Relationship – Where, on the balance of probabilities, the parties were in a de facto relationship for a period of 10 years – Where a just and equitable result requires alteration of the parties’ property interests – Where the applicant’s superior capital contribution at the commencement of the parties’ relationship should be accorded appropriate weight – Where the applicant made other significant direct capital contributions – Where the respondent agreed he made no recognisable contribution to the applicant’s superannuation interest – Where some recognition must be given to the parties’ personal exertions for mutual benefit throughout their relationship – Respondent entitled to 20 per cent of the parties’ net assets and Applicant entitled to 80 per cent – Where the disparate financial circumstances of the parties and the capacity of the applicant to improve her financial position justify an adjustment of 5 per cent in favour of the Respondent, calculated on the aggregate value of the parties’ net assets and the real, not notional, capitalised value of the applicant’s superannuation interest |
| Family Law Act 1975 (Cth), ss 4AA, 44, 90SF, 90SM, 106A, |
| Beneke v Beneke (1996) FLC 92-698 Pierce v Pierce (1999) FLC 92-844 Stanfordv Stanford (2012) 247 CLR 108 |
| APPLICANT: | Ms Hawke |
| RESPONDENT: | Mr Kemp |
| FILE NUMBER: | NCC 3033 | of 2013 |
| DATE DELIVERED: | 6 July 2015 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 22 & 23 June 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bates |
| SOLICITOR FOR THE APPLICANT: | Kinnear & Company |
| COUNSEL FOR THE RESPONDENT: | Mr Bateman |
| SOLICITOR FOR THE RESPONDENT: | Legal Minds |
Orders
The parties shall forthwith do all such acts and things and sign all such documents as may be necessary to authorise and direct the applicant’s solicitors to disburse to the parties in equal shares the monies held on trust or in escrow by those solicitors for the parties.
The applicant shall pay to the respondent by way of property settlement pursuant to Part VIIIAB of the Family Law Act the sum of $204,654 within three months of the date of these orders.
In default of compliance with Order 2 hereof, the applicant shall forthwith do all such acts and things and sign all such documents as may be necessary to list for sale by public auction the following parcels of real property:
(a)The property commonly known as B Street, C Town, NSW;
(b)The property commonly known as D Street, C Town, NSW; and
(c)The property commonly known as E Street, C Town, NSW.
For the purposes of implementation of Order 3 hereof:
(a)
The properties shall be listed by the applicant for auction sales within
6 weeks of the date of the applicant’s default under Order 2 hereof;
(b)The real estate agent and/or auctioneer shall be the real estate agent and/or auctioneer chosen by the applicant;
(c)The solicitor acting on the sales shall be the solicitor chosen by the applicant;
(d)In the event any property is not sold by auction, or through private negotiation within a further 7 days, then any unsold property shall be submitted to successive auctions within further 6 week periods until sold, otherwise on the same terms and conditions as applied to the first auction; and
(e)The applicant is restrained from charging, mortgaging, or otherwise encumbering any of the properties, other than for the purpose of raising finance to enable her compliance with Order 2 hereof.
Upon completion of the sales pursuant to Orders 3 and 4 hereof, the applicant shall do all such things reasonably necessary to ensure that her solicitor disburses the proceeds of sale as follows:
(a)First, to pay all costs, commissions, and expenses of the sales and to pay any Council and water rates outstanding in respect of the properties;
(b)Secondly, to pay to the respondent the sum of $204,654, together with any interest accrued thereon in accordance with the Family Law Rules from the due date for compliance with Order 2 hereof; and
(c)Thirdly, to pay the balance then remaining to the applicant.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder, investment accounts are deemed in the possession of the named investor, and superannuation entitlements are deemed in the possession of the superannuant; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession, and any debts in their respective sole names, including any individual liability for capital gains tax arising out of the sale of any real property pursuant to these orders.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders, the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
Costs are reserved for 28 days.
Any and all other outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hawk & Kemp has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC3033 of 2013
| Ms Hawke |
Applicant
And
| Mr Kemp |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This dispute between former de facto partners concerns the adjustment of their property interests and the payment by one to the other of maintenance under Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”).
There was no dispute about the existence of jurisdiction. The relationship existed in NSW, ended after 1 March 2009, and was of sufficient duration to attract jurisdiction under the relevant provisions of the Act.
The contest over property involved consideration of whether their respective contributions warranted any adjustment of their property interests at all and, if so, the nature of any consequent property settlement orders to be made. Underlying that contest was a dispute over the time at which their de facto relationship actually began.
The contest over the payment of maintenance was not merely confined to analysis of their respective financial circumstances. The Act requires a party to a de facto relationship to apply for maintenance within two years of the end of the relationship, unless leave is granted to extend time (ss 44(5), 44(6)). It was common ground the respondent needed leave to prosecute his maintenance application, the grant of which was opposed. In addition, the respondent married another person shortly after the parties’ de facto relationship ended, raising a substantive issue about entitlement.
The evidence
The applicant relied upon only her affidavit and financial statement, both of which were filed on 11 June 2015.
The respondent relied upon:
(a)His affidavit filed on 29 May 2015;
(b)His financial statement filed on 12 May 2015;
(c)The affidavit of his wife, Ms Kemp, filed on 19 May 2015;
(d)The affidavit of his son, Mr F Kemp, filed on 19 May 2015;
(e)The affidavit of a real estate agent, Mr G, filed on 18 May 2015;
(f)The affidavit of a friend, Ms H, filed on 15 May 2015; and
(g)The affidavit of a friend, Mr I, filed on 15 May 2015.
The de facto relationship
The applicant contended the parties’ de facto relationship began in January 2006, when she moved from Newcastle to live permanently with the respondent in C Town.
Conversely, the respondent contended their relationship began in 2002, notwithstanding they retained separate primary residences until January 2006.
The Act prescribes, relevantly, that the parties were in a de facto relationship while they were a “couple living together on a genuine domestic basis”, with due regard to all the circumstances of their relationship (s 4AA(1)). Such “circumstances” of their relationship “may” include features identified by the Act (s 4AA(2)). While those features guide the Court’s conclusion, none are either individually or collectively determinative (ss 4AA(3), 4AA(4)).
The applicant contended the parties did not “live together” as “a couple” prior to January 2006, save for their prior period of cohabitation during 2003, but that submission placed undeserved weight on the parties’ maintenance of separate homes during 2002, 2004, and 2005.
The bulk of the evidence formed a composite picture of the parties being in a de facto relationship from 2002. Even though the parties purported to have different opinions about the duration of their de facto relationship, most of the underlying evidence was entirely uncontroversial. The applicant conceded the characterisation of the parties’ relationship must be determined objectively rather than subjectively, so the relative lack of factual discrepancy should make that determination more straightforward.
There was some minor debate about when the parties introduced sexual intimacy to their relationship, but it was certainly no later than July 2002.[1] Thereafter, the parties were monogamous. There was no suggestion otherwise. Neither had any other domestic, sexual, or romantic relationship until after they finally separated in 2012.
[1] Applicant’s affidavit, paras 26, 37; Respondent’s affidavit, para 19
The applicant referred to the respondent as her “partner”. I accept she did so from as early as 2002,[2] even though the applicant only conceded she did so “after a few years”.[3] By November 2002, the parties engaged to marry and they held a party to celebrate the occasion.[4] The applicant admitted in cross-examination she bought the respondent a wedding ring.
[2] Affidavit of Ms H, para 7
[3] Applicant’s affidavit, para 41
[4] Applicant’s affidavit, para 38; Respondent’s affidavit, para 26
In 2002, the applicant lived in Newcastle and the respondent lived near C Town, but from mid-2002 the parties began spending most weekends together. The respondent generally travelled to Newcastle most weekends, but the applicant occasionally travelled to the respondent’s home.[5] The existence of that arrangement was strongly corroborated by both Mr Kemp and Ms H.
[5] Applicant’s affidavit, paras 31, 44; Respondent’s affidavit, paras 20-22
In late 2002, the parties jointly acquired an interest in two parcels of real property in the Region J; at K Town and L Town. They both contributed capital to the cost of the acquisitions and they each received shares of the sale proceeds, though their contributions and shares of the proceeds were unequal.[6] Such inequality was consistent with the parties’ intention for such transactions to benefit them mutually as domestic partners. If they were merely partners in commercial joint ventures, as the applicant sought to imply, it is much more likely their contributions and receipts would have been equal, or at least correspondingly proportionate.
[6] Applicant’s affidavit, paras 73, 74, 76, 77, 78, 98; Respondent’s affidavit, paras 27-30
The applicant was employed. She applied for and was granted six months of long service leave and so, in early 2003, she moved to live with the respondent in C Town.[7] Contemporaneously, the respondent sold his former home known as “Property M” and another home at Suburb N, in or near C Town, was obtained in its place.
[7] Applicant’s affidavit, paras 21, 45
The Suburb N property was acquired by the parties jointly. They each acquired legal title in the property as joint tenants. Proceeds from the sale of the parties’ property at K Town were applied to the purchase.[8] The respondent borrowed the residue funds to facilitate the purchase, but the applicant guaranteed the loan, and they each mortgaged the property to the bank as security for the loan.[9] The parties occupied the Suburb N property as their home when its purchase was complete.
[8] Applicant’s affidavit, paras 76-78
[9] Applicant’s affidavit, paras 86, 87; Respondent’s affidavit, para 33
The applicant agreed in cross-examination she understood the implications of ownership by “joint tenancy”, and in particular, the operation of the doctrine of survivorship, by which sole legal title to the property vests in the surviving joint tenant. It would have been quite extraordinary for her to acquire joint ownership of the Suburb N property in that fashion unless she was fully committed to her domestic relationship with the respondent. Even if she did not initially intend to participate in the purchase and only eventually did so reluctantly, as she asserted,[10] she still did so voluntarily.
[10] Applicant’s affidavit, para 89
The respondent said in cross-examination that the Suburb N property was intended to be the parties’ home, not merely a property acquired for his own benefit. I accept his evidence. The respondent renovated the property thoroughly, helped by the applicant, and it was filled with new furniture for them.[11]
[11] Applicant’s affidavit, para 46; Respondent’s affidavit, para 37
When the applicant’s long service leave was due to expire in mid-2003, she successfully extended her leave for another six months and continued to cohabit with the respondent at Suburb N until the end of 2003.
While the parties lived together in C Town during 2003 they jointly acquired the freehold title to commercial premises and ran a retail shop known as “O Pty Ltd”. The trading name was registered to the respondent and he held the bank account, but the parties each contributed capital to its acquisition. The applicant said in cross-examination she kept and spent the income from the business, even though the business income was declared by the respondent for taxation purposes. The applicant retained the net proceeds realised on the subsequent sale of the property.[12] The applicant was principally responsible for conducting the business during trading hours, while the respondent pursued his carpentry business, but that responsibility passed to the respondent when the applicant returned to Newcastle at the end of 2003. The business was not shut and the premises were not leased until 2004. The property was eventually sold in 2007.
[12] Applicant’s affidavit, paras 79-84, 119; Respondent’s affidavit, para 35; Exhibit A1
The applicant’s evidence that she returned to live in Newcastle at the end of 2003 because she wanted to get back to her own home and family is unconvincing,[13] even though she was not directly challenged about such evidence. That may have been partly her motivation, but it was not the most likely reason. She was obliged to return to live at her home in Newcastle to resume work from the beginning of 2004, following expiration of her long service leave. It was impossible for her to commute from C Town to work in the Newcastle region on a daily basis. The distance was too great. The applicant told the parties’ friend, Ms H, it was her intention to try and secure an employment transfer to C Town.[14] The applicant later successfully obtained the transfer, so she moved back to live with the respondent at Suburb N in readiness to start her new job at C Town at the beginning of 2006.[15]
[13] Applicant’s affidavit, para 47
[14] Affidavit of Ms H, para 10
[15] Applicant’s affidavit, paras 13-14, 54
Despite the applicant’s return to Newcastle at the end of 2003, the parties’ relationship remained strong. They maintained the joint bank account they had earlier established,[16] the applicant began purchasing real estate in and around C Town from early 2004,[17] and they continued to spend as much time with one another as they could. They spent weekends and holidays together, including with the applicant’s family and with their friends.[18] When they were together at either one’s home they jointly attended to domestic chores and activities.[19]
[16] Applicant’s affidavit, para 76; Respondent’s affidavit, paras 22, 28
[17] Applicant’s affidavit, para 91
[18] Applicant’s affidavit, para 44; Respondent’s affidavit, paras 40, 41, 45
[19] Respondent’s affidavit, para 39
The applicant admitted the parties were in a de facto relationship from the time they resumed cohabitation in January 2006 at C Town.
They lived together in C Town until July 2012, when the applicant returned to live in the Newcastle district. It is common ground the de facto relationship ended at that time.
While the applicant undoubtedly invested in real estate individually while the de facto relationship subsisted, other aspects of the parties’ financial affairs were intermingled to a significant degree. They had a joint bank account from 2002, they jointly acquired proprietary interest in four real properties before 2006, they each contributed to the conduct of the retail business in C Town in 2003 and 2004, and they jointly purchased a fifth property in 2006.
The parties did not inhabit the same home during 2002, 2004, and 2005, but during that time they spent nearly every weekend and every school holiday period together. Occupation of a common household by partners is a familiar feature, but not an essential characteristic, of a de facto relationship. If it were otherwise, it would be impossible for people separated by work commitments (like overseas members of the armed services, travelling sales persons, and miners on fly-in and fly-out contracts) or other compelling circumstances (like prisoners) to be in de facto relationships. That could not be correct. In all probability, it was the applicant’s work commitments in the Newcastle region and the respondent’s work commitments as a tradesman in and around C Town that prevented their occupation of a common household during 2004 and 2005.
The preponderance of evidence comfortably proved the fidelity of the parties’ relationship, their commitment to a shared life, and the public recognition of their domestic partnership. On the balance of probabilities, they were in a de facto relationship for a period of 10 years from July 2002 until July 2012.
Even if the parties did not live in a de facto relationship until January 2006, their prior contributions would be relevant to the disposition of the case anyway (see Beneke v Beneke (1996) FLC 92-698 at 83,361).
Legal principles
Orders under the Act altering the property interests of parties may only be made if the Court is first satisfied it is just and equitable to make such orders. It is necessary to begin that inquiry by identifying the existing legal and equitable property interests of the parties. It must not be assumed the parties’ rights to or interests in property are or should be different from those that then exist, or that a party has the right to have the parties’ property divided by reference to the statutory considerations (see Stanfordv Stanford (2012) 247 CLR 108 at [37]-[40], [50]).
Although the High Court was dealing in Stanford with an application between spouses for property settlement pursuant to Part VIII of the Act, the principles apply equally to applications between de facto partners pursuant to Part VIIIAB of the Act.
It is permissible for the factors prescribed by s 90SM(4) (the counterpart to s 79(4)) to inform the inquiry under s 90SM(3) (the counterpart to s 79(2)) of the Act about the justice and equity of making property settlement orders (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 90SM(4) of the Act. The court must necessarily identify and assess the parties’ contributions within the meaning of ss 90SM(4)(a)-(c) and then take account of the relevant matters referred to in ss 90SM(4)(d)-(g) and 90SF(3) of the Act.
Existing property interests
The parties tendered as an exhibit a balance sheet, which set out the extent of their property interests and the applicant’s superannuation interests. There was no dispute about the values of those interests. That exhibit is the template for the following findings about the parties’ existing interests.
The applicant’s property interests currently comprise:
Assets
Value
Total
50 per cent net proceeds in trust account (item 1)
19,734
Interim property settlement (item 2)
50,000
Timeshare (item 3)
5,000
P Street, C Town (item 4)
320,000
Q Street, C Town (item 5)
265,000
D Street, C Town (item 6)
280,000
R Street, C Town (item 7)
358,000
E Street, C Town (item 8)
125,000
B Street, C Town (item 9)
200,000
Mutual Bank acc (item 10)
7,769
Westpac accs (items 11-13)
7,007
Sedan (item 14)
12,000
Utility (item 15)
6,000
Jewellery (item 33)
3,000
Sub-total
1,658,510
1,658,510
Liabilities
Debts to ATO (items 35-36)
9,865
Westpac investment loans (items 37-42)
889,240
Credit card debts (items 44-47)
21,085
Sub-total
920,190
920,190
Net assets
738,320
In addition to her assets, the applicant held two superannuation interests – one with First State Super and the other with State Super.
The former superannuation interest crystallised as property only last month and the cash was used by the applicant.[20]
[20] Applicant’s affidavit, para 151
The latter is a superannuation interest in the payment phase, providing the applicant with an allocated pension once she retired on medical grounds in early 2008. She receives $824 per week,[21] albeit perhaps paid fortnightly.[22] The parties agreed the current capitalised value of that pension is $705,880,[23] but that figure is apt to mislead. The applicant cannot commute the pension until a time proximate to her 60th birthday, some four years hence, and the current commuted value of the pension actually only approximates $500,000. Its commutation value some 18 months ago was about $489,000.[24]
[21] Applicant’s financial statement, para 10
[22] Applicant’s affidavit, para 62
[23] Exhibit A, item 60
[24] Applicant’s affidavit, para 203, Annex E
The respondent has no superannuation.
The respondent’s property interests currently comprise:
Assets
Value
Total
50 per cent net proceeds in trust account (item 1)
19,734
Interim property settlement (item 16)
50,000
Bank accounts (items 17-18)
24
4wd (item 19)
4,000
Truck and crane (item 20)
7,250
Tractor (item 21)
3,500
5 wheel cruiser (item 22)
4,000
Trailer (item 23)
1,500
Other items of personalty (items 24-32)
23,600
Jewellery (item 34)
2,500
Sub-total
116,108
116,108
Liabilities
Credit card debts (items 49-55)
100,800
Religious Group 1. (item 56)
5,000
S Removals (item 57)
2,750
Telstra (item 58)
990
Sub-total
109,540
109,540
Net assets
6,568
Section 90sm(3)
In 2002, when the parties began their de facto relationship, their financial circumstances were materially different.
The applicant owned two parcels of encumbered real property, an old car, some cash, some personal effects, and her accrued superannuation interest. There was no admissible evidence as to the value of that property, but having regard to the probable net equity, her real property probably had a net value of well over $200,000.[25] Nor was there any evidence about the value of the applicant’s superannuation interest at that time, but given she had been accumulating superannuation since 1983,[26] that interest was also probably quite valuable. Although the applicant did not admit it in her affidavit,[27] she then had a debt of about $9,600 to the St George Bank, which funds she borrowed to fund her participation in an investment course named “Investment Mastery”.
[25] Applicant’s affidavit, paras 70, 71, 118
[26] Applicant’s affidavit, para 70.5
[27] Applicant’s affidavit, para 71
By comparison, the respondent owned the Property M property, which was encumbered by mortgage. The applicant believed the respondent only had net equity of about $25,000 in that property,[28] but the respondent said in cross-examination he thought it was “slightly more”. The applicant asserted that was the respondent’s only asset. The respondent did not depose to ownership of any other assets,[29] but since he was a self-employed carpenter who drove to Newcastle nearly every weekend to stay with the applicant, it is probable he had at least tools of trade and a motor vehicle.
[28] Applicant’s affidavit, para 68
[29] Respondent’s affidavit, para 16
When the parties began their relationship the respondent lavished the applicant with attention. He spent beyond his means to impress her with dinners, holidays, and furnishings for their new home at Suburb N. The applicant was conscious of his extravagance.[30] She made express mention of the respondent’s generosity to their friend Ms H.[31] Some of the respondent’s current credit card debt is attributable to such expenditure,[32] for which debt he will retain liability after these proceedings.
[30] Applicant’s affidavit, para 52
[31] Affidavit of Ms H, paras 4, 5, 6, 10, 11, 19, 21, 23
[32] Affidavit of Ms H, para 36
The applicant’s current financial position is now better than it was in 2002. She has more net equity in her property and her superannuation interest is much more valuable than it was. The respondent’s financial position, though, is worse than it was in 2002. He has less valuable property now than he did then.
The parties’ retention of their own property, superannuation, and liabilities is not a just and equitable outcome after a de facto relationship of 10 years duration, during which both parties worked hard for their mutual advancement. Given their combined efforts, a just result requires alteration of their property interests.
Although the applicant ultimately submitted to the contrary, she did not come to that view until literally the final moments of the trial in June 2015. It was the applicant, not the respondent, who commenced these proceedings in November 2013 seeking a property settlement. Even when she amended her claim in February 2014, she still sought a property settlement. Although she only sought property adjustment orders in respect of the net sale proceeds of a single parcel of real property, the ownership of two dogs, and the ownership of a carpentry tool, her application was for adjustment of their property interests nonetheless. She was not content for the parties to retain their existing individual property interests. That remained her proposal until the final submissions of the trial, at which point she contended it would not be just and equitable to have any property settlement.
During the course of the proceedings, the applicant agreed with the respondent that it would be just and equitable for him to retain the totality of the net proceeds of the sale of the same parcel of property. She was then prepared to relinquish her legal entitlement to one-half of the net proceeds.[33] The evidence adduced at trial did not explain why the dispute was not resolved by the parties’ consensus to that effect in 2012.
[33] Applicant’s affidavit, para 160
At that point in time, the net proceeds of sale amounted to about $139,000,[34] but there is no such balance now. The parties each received $50,000 from those funds by way of interim property settlement in April 2014, leaving a balance of only approximately $39,000 for distribution between them now.[35]
[34] Applicant’s affidavit, paras 137-142
[35] Applicant’s affidavit, paras 147-148
Despite the applicant’s former acknowledgment about the fairness of the respondent’s retention of the entire sum of $139,000, she now insists on exerting her legal entitlement to one-half of that amount. All the while, these proceedings have cost the respondent about $150,000, and the applicant about $110,000, in legal fees.[36]
[36] Exhibits A2 and R5
Sections 90sm(4) and 90sf(3)
Having concluded it would be just and equitable to adjust the parties’ property interests, it is necessary to now consider their respective contributions, recognised under s 90SM(4)(a)-(c) of the Act, and the factors prescribed by ss 90SM(4)(d)-(g) and 90SF(3) of the Act.
The applicant’s superior capital contribution at the commencement of the parties’ relationship in 2002 has already been addressed. That is a contribution which should be accorded appropriate weight (see Pierce v Pierce (1999) FLC 92-844 at [23]-[30], [40]).
The parties each undertook paid work. The applicant was employed until her medical retirement in January 2008 and the respondent was self-employed as a tradesman for the duration of the relationship, but it is difficult to draw any comparison between the parties’ incomes.
The only evidence as to the applicant’s past income is her assertion in a personal financial checklist that her gross annual salary prior to 2008 was $75,000.[37] After her medical retirement in early 2008, her allocated pension amounted to about $40,000 per annum.[38] She received rent from her investment properties, but in cross-examination she conceded all of the properties were negatively geared, so the outgoings exceeded the rent. The loss was a tax deduction, but the loss reduced her other income all the same.
[37] Exhibit R2
[38] Applicant’s financial statement, para 10
A series of the respondent’s tax returns were tendered.[39] They disclose that up until 2010 his taxable income averaged about $30,000 per annum, which is impossible to reconcile with the applicant’s belief in 2008 that his gross annual income was $70,000.[40] After 2010, the respondent’s income fluctuated wildly. In 2011 it was $66,000, but in 2012 it was only $16,000. The respondent suffered injury in February 2013 and then ceased work.
[39] Exhibit A1
[40] Exhibit R2
From 2004, the applicant engaged the respondent to undertake renovation work on the investment properties she purchased in and around C Town. They entered into a commercial arrangement under which the applicant paid the respondent for the work he did on her behalf. There was a lively debate about whether the rate of $35 per hour charged by the respondent to the applicant was his normal commercial rate or a discounted rate on his ordinary rate of $45 per hour,[41] but the dispute was arid because it really made no material difference. They struck a bargain with which they were both content. If the respondent was commercially paid for the work he did, such work was not a contribution which attracts recognition under s 90SM(4)(a)-(c) of the Act. Rather, the relevant contribution was his use of the income he thereby derived which circulated back into the parties’ domestic economy for their mutual advancement.
[41] Affidavit of Mr Kemp, para 14-15, 21; Affidavit of Ms H, para 28
Despite some apparent reluctance on the part of the applicant to accept it, the respondent used the entirety of his income for the benefit of them both, just as she did with her income. The respondent deposed to that fact and he was not seriously challenged about it.[42] Even if he had not given such direct evidence, in the absence of any contrary evidence from the applicant (and there was none), it may be properly inferred that money received by a party during cohabitation was used by that party for the benefit of the family unit (see Marriage of Parshen (1996) 21 Fam LR 199 at 205). The only evidence given by the applicant on that issue was that she knew the respondent used his income in certain domestic ways,[43] but she was otherwise unaware how he spent the money in his possession.[44] None of her evidence amounted to proof that the respondent did not expend his income and capital within their domestic economy.
[42] Respondent’s affidavit, para 50
[43] Applicant’s affidavit, paras 52, 176, 177
[44] Applicant’s affidavit, paras 77, 98
The parties jointly contributed to the conduct of the retail shop in C Town. The applicant was mainly responsible for its operation until she moved back to Newcastle in late 2003, after which time the respondent took over sole responsibility for it until the business ceased in 2004 and the premises were then leased to a third party.
The applicant deposed to her homemaking contributions,[45] but I accept the respondent also contributed significantly in that manner. For a period of months during which the applicant recuperated from her accident in 2006, the respondent assumed principal responsibility for all domestic work.[46]
[45] Applicant’s affidavit, para 190
[46] Respondent’s affidavit, para 54
The applicant assisted the respondent in the conduct of his carpentry business, apparently between 2007 and 2011, by attending to his bookwork.[47]
[47] Applicant’s affidavit, paras 191-194
In the later years of the parties’ relationship, and even post-separation, their assets were enhanced and their debts were diminished by the applicant’s contribution of capital sums she received from various sources. They included:
(a)A superannuation payout of about $38,000 following her retirement in 2008;[48]
(b)Personal injury damages in the sum of about $198,000 in 2010, to compensate the losses she sustained in the motor vehicle accident in 2006;[49]
(c)An inheritance in the sum of $20,000 in 2010;[50] and
(d)A gift in the sum of $25,000 in 2013.[51]
[48] Applicant’s affidavit, para 121
[49] Applicant’s affidavit, para 124
[50] Applicant’s affidavit, para 129
[51] Applicant’s affidavit, para 146
After the applicant secured an employment transfer and she returned to live with the respondent in C Town in 2006, the parties sold their home at Suburb N and then jointly acquired another home in C Town (“the home”). That transaction occurred in September 2006. The proceeds from the sale of the Suburb N property were contributed to the purchase of the home.[52] Following their separation in 2012, the home was sold. The net proceeds of sale approximated $139,000 and were deposited to a solicitor’s bank account pending resolution of the parties’ affairs. In April 2014, interim property settlement orders were consensually made for each party to receive $50,000 from those funds.[53]
[52] Applicant’s affidavit, paras 108-110; Respondent’s affidavit, para 52
[53] Applicant’s affidavit, paras 137-142, 147-148; Respondent’s affidavit, para 55
Although the applicant ultimately sought that the parties retain their own proprietary interests without any adjustment, in the event it was concluded a property settlement should follow, her fall-back position was that the parties’ contributions to property and superannuation should be considered separately. The respondent initially opposed, but then agreed with, that proposition. He acknowledged he was unable to mount any argument to dissuade the Court from the orthodox methodology of assessing the parties’ contributions to property and superannuation separately (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429).
As to the applicant’s superannuation interests, she began accumulation of them in 1983,[54] over 30 years ago.
[54] Applicant’s affidavit, para 70.5
The respondent made no direct or indirect contributions to the applicant’s superannuation interests before 2002 or after the parties’ separation in 2012.
Between 2002 and 2006, the parties only spent time together on weekends and during holidays, when neither of them were working. The respondent made no contribution, direct or indirect, to the applicant’s superannuation in that period.
Even when the parties lived together in 2003, the applicant was on long service leave and did not work. She operated the retail business in C Town. The respondent deposed the applicant was worried about the need to still make contributions to her superannuation interest during that period. He alleged he made a direct financial contribution by paying money into her superannuation fund,[55] but that was not proven. An alleged payment of $1,800, about which the applicant was cross-examined, was made from the parties’ joint account with the ANZ Bank into the applicant’s Credit Union account. The applicant confirmed it was her handwriting on the cheque butt. There was no evidence at all that those funds, which originated from a joint account anyway, ever reached the applicant’s superannuation fund.
[55] Respondent’s affidavit, para 51
The applicant was employed in C Town during 2006 and 2007, though she was involved in an accident in 2006 which prevented her from working for a period of months. Although the respondent implied she never returned to work at all,[56] the applicant deposed she returned to work in 2007 but was then medically retired in January 2008.[57] During 2006 and 2007, superannuation contributions were only made by the applicant during the period she was paid a wage. It was not contended by the respondent that he made any direct or indirect contribution to the applicant’s superannuation interest during that confined period.
[56] Respondent’s affidavit, para 53
[57] Applicant’s affidavit, para 18
The applicant did not contribute to her superannuation interest after it moved into the payment phase following her retirement in January 2008.[58] Nor did the respondent.
[58] Applicant’s affidavit, paras 61, 62, 121
Accordingly, the applicant submitted the respondent made no recognisable contribution to her superannuation and he eventually agreed.
Attention therefore focussed on the parties’ respective contributions to their assets. The applicant contended her substantially superior contributions warranted entitlement to 80 per cent of the parties’ property. The respondent conceded the applicant’s overall contributions were superior, but he contended for his entitlement to 35 per cent instead of only 20 per cent of the property.
The respondent’s contribution-based entitlement is assessed at 20 per cent, which conclusion is reached by the synthesis of the following considerations:
(a)The applicant’s considerably greater initial contribution of capital at the commencement of their relationship in 2002;
(b)The parties’ equivalent effort throughout the relationship, manifest in their work to earn money for financial advancement and their performance of domestic work, for their mutual benefit; and
(c)The significant direct capital contributions the applicant made, amounting to some $281,000, in the years between 2008 and 2013.
The applicant’s overall capital contributions could possibly equate to the value of her entire current property interests, but such simplistic analysis should not thereby result in her retention of her property. Such reasoning would ignore a decade of very hard work by both parties. Parties’ contributions are not measured merely by the resultant effect. Very great effort may produce little result while very little effort may produce a great result, so justice dictates that unproductive effort may still be recognised as contribution under the Act (see Browne v Green (1999) FLC 92-873 at [39]; W & W [2000] FamCA 1302 at [119]-[125]). Contributions made by a party need not correlate directly to assets which exist at the time of consideration by the Court. Property settlement orders must be made which are just and equitable by reference to all contributions made by the parties (see Farmer v Bramley (2000) FLC 93-060 at [56]-[57], [65]-[66], [69]).
Some recognition must be given to the parties’ personal exertions for mutual benefit throughout their relationship. Each party attracts 20 per cent for those efforts and the applicant’s substantial capital contributions account for the remaining 60 per cent.
The applicant submitted that there should be no adjustment to those percentage apportionments on account of the factors prescribed by ss 90SM(4)(d)-(g) and 90SF(3) of the Act, but I accept the respondent’s submission that there should.
The respondent is nine years older than the applicant – he is 65 and she is 56 – but neither is capable of any further gainful employment.
The respondent has suffered physical injuries over past years, which the applicant knows he stoically endured to prolong his working life.[59] However, in February 2013, he suffered personal injury in an accident which precludes him from working in any more than a light capacity. He now receives a disability support pension and does some light work two days each week for a religious organisation. The pension and the wage provide him with combined weekly income of $727.[60]
[59] Applicant’s affidavit, para 19
[60] Respondent’s affidavit, paras 4, 6-7, 17, 64, 66-67
The respondent shares his income with his wife. She exhausted her assets shortly after their marriage and she lost entitlement to her overseas pension.[61] Of course, following the termination of the parties’ relationship, it was the respondent’s decision to marry and assume co-dependency with his wife. Their joint financial predicament is relevant (s 90SF(3)(m)), but the applicant ought not be saddled with any additional financial burden because of the respondent’s decision to afterwards take on his wife as a dependent (s 90SF(3)(r)).
[61] Respondent’s financial statement, para 17; Affidavit of Mrs Kemp, paras 10-11, 23, 26
The applicant must understand the respondent’s frustration with injury that impinges upon capacity for full-time paid work. Her accident in 2006 caused her medical retirement in 2008, by reason of which her weekly income was diminished. She now receives an allocated pension of $824 per week. Fortunately, she has no dependents.
However, unlike the respondent’s situation, the applicant’s financial circumstances are capable of amelioration. She is a dedicated investor in real estate, in which pursuit she has demonstrated her acumen over many years. The six properties she currently owns are all either rented or capable of rental. She negatively gears her property investments, but that need not be the case. She could sell some property and use the net proceeds to extinguish debt. The rental income she would then receive from fewer properties would supplement her income stream, because the rental income could then exceed the expense associated with maintenance of so many encumbered properties.
Although the respondent was paid by the applicant for the building work he completed upon her investment properties, his readiness and willingness to perform such work for the applicant helped her renovation, improvement, and re-sale of properties and then re-investment of sale proceeds in more property. The applicant could have used other tradesmen for such renovations, but the respondent was always readily available for her use, she was satisfied with the standard of his work, she experienced no arguments over defect rectification, and she was satisfied with his charge-out rate. Although she still owns six real properties in C Town, she owned and sold five other real properties in C Town between May 2004 and September 2014 on which the respondent performed building work.[62] Such considerations are relevant to any adjustment (s 90SF(3)(j)).
[62] Applicant’s affidavit, paras 91, 94, 96, 113, 114, 116, 120, 122, 130, 144, 149
If the applicant was to retain 80 per cent of the parties’ property interests and the whole of her superannuation, she would have assets with a net value of about $600,000 and superannuation that she could commute four years hence to acquire another $500,000 in cash. If she decides against commutation, which is her current inclination,[63] she would retain her income stream by way of pension, amounting to some $40,000 per annum, for the remainder of her life.
[63] Applicant’s affidavit, para 203
By comparison, the respondent’s receipt of 20 per cent of the parties’ property would leave him holding property with a net value of about $150,000. He would continue to share his meagre income of $727 per week, which would drop back to only the disability support pension of $467 per week when he becomes too old or infirm to continue working two days per week for the religious organisation.
The respondent referred to Hurst & Weber [2009] FamCAFC 137 and submitted that the parties’ respective legal costs should affect any discretionary adjustment, but I do not accept that proposition. The Full Court in that case recognised (at [31]-[37]) that there should simply be common treatment of the parties’ legal fees related to the litigation and, while such fees are not ordinarily counted as a liability so as to affect the mathematical calculation of the assets available for distribution on the property settlement, they can be taken into account as part of the discretionary exercise. Relevantly for present purposes, the parties each have outstanding legal costs of considerable magnitude. The debts do not feature as items on the balance sheet.[64] The parties individually chose to incur costs of the magnitude they did. The respondent should not accrue extra advantage because he chose to incur legal fees of approximately $40,000 more than the applicant.
[64] Exhibit A
The respondent submitted for an adjustment of 10 per cent, calculated on the composite value of the parties’ net assets and the applicant’s superannuation interest. The applicant contended that, if an adjustment was to be made, it should be confined to only 2.5 per cent.
The disparate financial circumstances of the parties and the capacity of the applicant to improve her financial position with relative ease justify an adjustment of 5 per cent in favour of the respondent. He would be unjustifiably condemned to comparative penury without it.
It must be acknowledged the process of property settlement is not a source of social engineering or a means of evening up the financial positions of the parties to a marriage (see Marriage of Kennon (1997) 22 Fam LR 1 at 35). However, while the mere existence of disparity of wealth ought not of itself justify a property settlement in favour of one party at the expense of the other, it may often, in the overall circumstances of the case, justify further adjustment beyond that assessed on contributions alone, so the final order is just and equitable (see Dickson & Dickson (1999) FLC 92-843 at [47]).
The adjustment in favour of the respondent should be calculated on the aggregate value of the parties’ net assets and the real, not notional, capitalised value of the applicant’s superannuation interest. The real value of the superannuation is about $500,000. The difference between that value and its notional value of $705,880 has already been the subject of discussion, which need not be repeated.
As has been pointed out by the Full Court (see Marriage of Clauson (1995) 18 Fam LR 693 at 710), when considering any adjustment warranted by factors under s 75(2) of the Act, it is the real impact of the adjustment in money terms which is ultimately the critical issue. The same applies to s 90SF(3) of the Act in respect of de facto partners.
The adjustment of 5 per cent, calculated in the manner intended, amounts to $62,244 (62,244 = 5 per cent x (738,320 + 6,568 + 500,000)). That amount paid by way of lump sum will be a considerable boon for the respondent, but not an unreasonable burden upon the applicant. It represents about only 18 months of her current pension income, the payment of which she is comfortably able to accommodate by sale of available assets. Viewed from a different perspective, it is only about half the amount she spent on legal fees.
Property settlement orders
The respondent’s entitlement therefore amounts to $211,222. That figure represents 20 per cent of the parties’ net assets (20 per cent x (738,320 + 6,568) = 148,978), together with the adjustment of $62,244.
Given the respondent already retains assets with a net value of $6,568, the payment due to him by the applicant should actually be $204,654.
The applicant will therefore retain assets with a net value of $533,666 (533,666 = 738,320 – 204,654), together with the whole of her superannuation interest, which she may choose to either continue receiving as an income stream for the remainder of her life or to commute and receive a capitalised lump sum.
The only conceivable way in which the applicant can pay $204,654 to the respondent is by liquidating one or more of her real properties. Her real properties have a collective agreed value of $1,548,000, but are encumbered by mortgages securing combined debt of $889,240.
There is uncontested evidence that the applicant voluntarily listed two of her six properties for sale within the last few weeks.[65] Those two properties have a combined gross value of $480,000.[66] While it is unknown how much debt they currently individually secure, the loans procured by the applicant to enable their purchase collectively amounted to $282,000.[67]
[65] Affidavit of Mr G, para 11
[66] Exhibit A (items 6 and 9)
[67] Applicant’s affidavit, paras 111, 123
The orders require the applicant to pay to the respondent the sum of $204,654, in default of which three properties (including the two properties already listed for sale) must be sold and the sale proceeds applied to payment of the respondent. The applicant is allowed three months within which to arrange her affairs to make such payment, otherwise the default provisions will operate. The net equity held by the applicant in the two properties already listed for sale is probably insufficient to meet the entirety of the payment due to the respondent (once the commissions and expenses of the sales are deducted) so the default provisions require the sale of three properties, not just those two. The third property chosen is the least valuable of all the properties.
The orders require the parties to direct the applicant’s solicitor to pay to them equal shares of the residue funds held on trust from the sale of their home.
Otherwise, the parties shall retain their own assets and sole responsibility for payment of their own debts. The applicant will retain her own superannuation interest.
The applicant abandoned her application for any order compelling the respondent to surrender any pet dogs or other items of personal property to her.
Such orders are just and equitable.
Maintenance
Until final submissions, the respondent maintained a claim against the applicant for maintenance in the sum of $500 per week, at which point he abandoned both the substantive application and the ancillary oral application for leave under s 44 of the Act to prosecute it.
The respondent conceded the maintenance application was overwhelmed by several aspects of the evidence: first, his marriage to Ms Kemp within about 10 weeks of the termination of his de facto relationship with the applicant; second, his prior abandonment of an interim application for maintenance, manifest in his consent to interim property settlement orders in April 2014 and the consequent dismissal of his anterior interim application; and third, the concession of his inability to prove the applicant had any financial capacity to pay maintenance to him on a periodic basis.
I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 6 July 2015
Associate:
Date: 6 July 2015
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