Herman and Nubis

FAMILY COURT OF AUSTRALIA

HERMAN & NUBIS

[2008] FamCA 1060

FAMILY LAW – PROPERTY SETTLEMENT – short period cohabitation – findings in relation to the initial financial contributions of the parties – weight to be given to all contributions – just and equitable orders

Family Law Act 1975 (Cth)

Norbis v Norbis (1986) FLC 91-712
Preece and Preece (1981) FLC 91-048
Elsey and Elsey (1997) FLC 92-797

APPLICANT:

Mr Herman

RESPONDENT:

Ms Nubis

FILE NUMBER:

NCC

2514

2007

DATE DELIVERED:

7 November 2008

PLACE DELIVERED:

Newcastle

PLACE HEARD:

Newcastle

JUDGMENT OF:

The Hon. Justice Rose

HEARING DATE:

4, 5 & 6 November 2008

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

J Pierpoint

COUNSEL FOR THE RESPONDENT:	W Tregilgas
SOLICITOR FOR THE RESPONDENT:	Spicer Merrick & Associates

Orders

That the wife sign all documents and do all things necessary to transfer to the husband the whole of her twenty-five per cent interest in the title to Property G in the State of New South Wales subject to the existing mortgage on or before 5.00 pm 21 November 2009.
That the husband promptly pay all rates, taxes, mortgage instalments and other outgoings attributable to the parties’ joint interest in Property G and he shall indemnify the wife in respect of all claims and demands that may be made upon her in relation thereto.
That the wife pay to the husband the sum of $313,682.00 on or before 5.00pm 9 March 2009.
That the husband forthwith assign to the wife, for her benefit, the outstanding loan of $8,000.00 made to T Company.
That upon the wife complying with Order 3 the husband shall do all things necessary to forthwith transfer to the wife the whole of his interest in the title to Properties H1 and H2 in the State of New South Wales (“the H Units”) subject to any secured and/or unsecured indebtedness in relation thereto.
That the wife shall forthwith have exclusive occupancy of the H Units.
That the wife shall promptly pay all rates, taxes and any other outgoings and indebtedness of the parties in relation to the H Units and she shall indemnify the husband in relation to all claims and demands that may be made upon him in relation thereto.
That the husband is declared the sole beneficial owner of all real estate and items of personalty including but not limited to superannuation entitlements in his name, possession, power or control subject to the orders made this day.
That the wife is declared the sole beneficial owner of all real estate and items of personalty including but not limited to superannuation entitlements in her name, possession, power or control subject to the orders made this day.
That all documents produced on subpoena may be returned to the person who produced the same.
That the proceedings be removed from the Active Pending Cases List.

IT IS NOTED that publication of this judgment under the pseudonym Herman & Nubis is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC2514 of 2007

MR HERMAN

Applicant

And

MS NUBIS

Respondent

REASONS FOR JUDGMENT

Introduction

In these proceedings each of the parties sought orders for property settlement.
The orders sought by the husband are in accordance with Exhibit 5.
The orders sought by the wife are set out in her Amended Response filed 8 August 2008.
The period of cohabitation between the parties was short.
The parties cohabited for a period of approximately 3 ¾ years which commenced on 5 June 2003 and concluded on their separation in March 2007. They have lived separate and apart from each other since that time.
The parties married in September 2004.
So far as I am aware a decree of dissolution of the marriage has not been made, absent any information to the contrary.
The husband cohabits with Ms TC on the northern coast of New South Wales.
The wife currently lives in premises owned by her with her son and his girlfriend but lives for part of the week with her male friend Mr PP.
These proceedings were conducted without any issue being raised as to the relevance of contributions that the parties are alleged to have made in relation to real estate prior to the commencement of their cohabitation. Arguably, such contributions were irrelevant. Nonetheless, as I have already stated, the point was not taken on behalf of either of the parties, and as a result that did not become an issue for determination.
Fortunately, the parties were able to agree on a schedule of their net property, including superannuation entitlements as at the date of commencement of cohabitation. The schedule or balance sheet of that net property became Exhibit 1.

Historical background

The brief historical background to these proceedings, other than the matters to which I have referred are as follows.
Prior to cohabitation commencing the husband was the sole registered proprietor of Property A. Property A was subject to a mortgage.
The husband was also the registered proprietor, together with his daughter, of Property B. Property B was subsequently subdivided.
The wife for her part had received two amounts of $400,000.00 and $442,000.00 respectively by way of property settlement in relation to her prior marriage.
The funds received by the wife from her prior property settlement were utilised by her to purchase the following properties:
(a)Property C
(b)Property D and a home unit, Property E, both purchased during 2002.
In 2002 the wife acquired the interest held by the husband in Property D to the effect that during October 2002 the wife became the sole registered proprietor of that property.
In September 2003 the wife became the registered proprietor of Property F
In 2005 the husband and wife acquired a 25% interest each, together with the husband's daughter who acquired the remaining 50% in Property G.
In 2005, the parties jointly acquired a factory unit being Property H1.
Subsequently in 2005 the parties also jointly acquired the adjoining property being Property H2.
In 2006 the husband purchased Property I.
In or about 2005 or 2006 the wife purchased Property J.

Relevant legal principles

The relevant legal principles for determination of the exercise of the discretionary power to make orders for property settlement as set out in s.79 have been well established over many years. Those principles require determination with relevant findings of fact in relation to what is often referred to as the following four steps:
(a)The property of the parties at the time of the hearing.
(b)The contributions of the parties including financial and non financial contributions and contribution to the welfare of the family in the role of homemaker.
(c)Relevant matters pursuant to s.75(2).
(d)Consideration of orders that are determined to be just and equitable.

Property of the parties

The agreed current net property of the parties is set out in Exhibit 2 which is as follows:
“Husband and Wife - real estate:
[Property H2] (agreed)  $200,000.00
[Property H1] (agreed)  $200,000.00
50% interest in [Property G] (agreed)  $90,500.00
Less:
Mortgage thereon  $93,146.00
  -$2,646.00
  $397,354.00
Husband - real estate:
[Property I] (agreed)  $187,000.00
Less:
Mortgage  $130,000.00     $57,000.00
Nissan Navarra, say   $11,350.00
[S Company]  $15,000.00
Box trailer sold by husband  $100.00
  $83,450.00
Husband:
Loan to daughter  $2,500.00
Loan to [T Company]  $8,000.00       10,500.00
Add backs:
Net proceeds of sale of [Property K] - March 2008    $15,429.00
Less:
Loan from his sister  $5,000.00       10,429.00
Superannuation:
Husband
AXA   $69,253.00
Colonial First State  $41,851.00
First State Super  $48,155.00
State Super  $18,303.00
Total  $177,562.00
  $281,941.00
Wife - real estate:
[Property C] (agreed)  $540,000.00
Less:
Mortgage to Suncorp Metway  $60,364.00    $479,636.00
[Property D] (agreed)  $227,500.00
Less:
Mortgage thereon to Suncorp Metway  $329,703.00 -$102,203.00
[Property F] (agreed)  $520,000.00
Less:
Mortgage thereon to Suncorp Metway  $375,500.00    $144,500.00
[Property J] (agreed)  $167,000.00
Less:
Mortgage thereon  $99,989.00     $67,011.00
Hyundai Tiburon  $14,300.00
[…] Caravan  $25,000.00
[U Company] Pty Limited  $1,100.00
Household contents  $2,000.00     $42,400.00
Add backs:
Net proceeds of sale of [Property K] - March 2008    $15,429.00
Less:
Loan from [Mr PP]  $5,000.00       10,429.00
Superannuation
Wife
Local Government  $18,000.00
Total  $659,773.00
  $1,339,068.00
Note:
1.Husband asserts that the wife has increased the mortgages on the various properties of the wife since the date of separation by approximately $37,000.00
2.Husband asserts wife owes husband $770.00 (one half thereof) relative to the winding up of the corporate entities.
3.Husband asserts wife owes husband one half of:
Auction fees     $1,700.00
Legal fees        $1,000.00
relative to the sale of [K Property].”

Contributions

Given the short period of cohabitation between the parties it was particularly important for detailed evidence to be given so that findings could be made as to the initial financial contributions that each of the parties made at the commencement of cohabitation.
I have referred to Exhibit 1 in the proceedings.
Exhibit 1 reveals that at the commencement of cohabitation the husband’s net property amounted to $734,233.00 and the wife’s net property amounted to $1,067,645.00.
An issue arose in relation to a further asset that the wife claimed she had at the time of cohabitation, namely an outstanding series of loans amounting to $45,000.00 which she claimed were loans she had made to the husband prior to the commencement of cohabitation which remained unpaid.
The evidence adduced by the wife in relation to that issue is that during the period 1999 to 2003 the wife made loans to the husband totalling $58,228.70 as set out in paragraph 21 of her Affidavit sworn 29 April 2008.
During the course of his helpful submissions, counsel for the wife conceded that the total of those loans could not be substantiated for the purpose of the alleged outstanding loan of $45,000.00 or that some of the alleged loans were in fact loans. The claim was reduced to $45,000.00.
In my view, some of the “loans” clearly were not loans. The most significant amount being a total of $14,600 provided by the wife to purchase her joint interest with the husband in a Ford motor vehicle. On the one hand the wife alleged that the sums provided by her for that purpose were “loans” yet on the other hand there was indisputable evidence that the money was spent by her to acquire an asset represented by her half-interest in the Ford motor vehicle.
In addition, the wife agreed that the husband had paid her amounts totalling $8,958.00 as set out in Exhibit 12. That total amount reflected payments of $6,544.00; $785.00; $330.00; $320.00; $215.00; $94.00; $250.00; $20.00 and $400.44.
It was put to the wife that the husband had made a series of payments for her benefit. The wife’s responses were that she either did not know, or could not remember, or needed to refer to “paperwork”.
The wife’s evidence and that of the husband was that a ledger had been written up, principally by the wife, during the relevant period (that is prior to commencement of cohabitation) for the purpose of recording amounts of money which each had provided to the other and in respect of which repayments had been made, albeit that the wife claimed that some payments had not been paid. Yet, the ledger was not produced by the wife despite being a primary record and no evidence was given by her to explain its absence.
Therefore, I am not satisfied on the balance of probabilities that the husband owed the wife $45,000.00 at the commencement of cohabitation.
It was not submitted that I make a finding of an alternative lesser amount. I am not satisfied in any event that a finding can be made for any lesser amount for the same reasons previously given by me, namely:
(a)the significant unreliability in the wife’s affidavit evidence which included alleged loans of $14,600.00 which in fact was money utilised by the wife to acquire an asset represented by her joint interest in the Ford motor vehicle;
(b)the failure to account for the amounts of money which the husband had paid to the wife as set out in Exhibit 12;
(c)the wife’s consistent alleged lack of memory about payments made by the husband to her; and
(d)the failure to produce the all important ledger for the purpose of corroborating the wife’s claim.
A further issue arises in relation to Exhibit 1 as to whether the husband had an indebtedness secured by the mortgage on the Property B.
I accept the husband’s evidence that such mortgage was the security for the exclusive indebtedness of his daughter of $100,000.00 corroborated in part by Exhibit 6.
Consequently, I find that the property of the parties at the commencement of their cohabitation is in accordance with Exhibit 1 without any amendment to reflect the wife’s contention of $45,000.00 alleged to have been owed to her by the husband, or any indebtedness of the husband as opposed to that of his daughter secured by the mortgage over Property B.
The result is that at the commencement of the parties’ cohabitation the net property of the husband was $734,233.00 and that of the wife was $1,067,545.00.
The combined net property of the parties was $1,801,778.00. Therefore, the wife’s net property amounted to 59% thereof and the husband’s net property the remaining 41%.
I will take the “global” approach rather than the net asset by asset approach in relation to consideration and assessment of the parties’ contributions having regard to the alternatives that are open to a trial judge in accordance with the judgment of the High Court in Norbis v Norbis.[1] Indeed, no contrary submissions were made.
[1] Norbis v Norbis (1986) FLC 91-712
I make the following findings in relation to the financial and non-financial contributions of each of the parties, including the contribution made in the role of homemaker.
As counsel for the wife correctly submitted, an issue of credit arises due to the conflicting evidence of the parties in relation to a number of matters, but especially with regard to the competing contentions of work that each claimed to have performed in the maintenance and improvement of real estate.
So far as credit is concerned, I have concluded that the husband is the more impressive witness than the wife.
The husband, when challenged in cross-examination, spontaneously provided details of work done, trades assistance provided, and a detailed description of work carried out by the wife.
The wife’s explanation of work done by her having regard to the nature of the work in question was unconvincing.
Accordingly, I prefer the evidence of the husband to that of the wife where they conflict.
I emphasise this is not a question of honesty but rather one of perception which each of the parties held in relation to the extent of their work.

The husband

The contributions of the husband were as follows.
The husband joined in with the wife in the acquisition of real estate and its financing.
The husband earned income as a self-employed handyman in carrying out a handyman business and applied his income from all sources to meeting living expenses and liabilities of the parties.
The husband sold the following properties and applied the net proceeds in meeting liabilities and the acquisition of further property:
(a)Property B.
(b)Property A.
I accept that the husband carried out the work and improvements alleged by him in relation to Property F, Property H1 and Property H2 as alleged in his primary affidavit.
I also accept that the husband met the expenses from his own financial resources in relation to each of the properties referred to in the previous paragraph.
The husband made a homemaker contribution by carrying out some domestic work and further maintenance of the properties occupied by the parties.

The wife

The wife joined in with the husband in the acquisition of real estate and its financing.
The wife earned income in the fitness industry as an instructor either in her own right or by use of the two companies of which the parties were the sole shareholders, namely U Company Pty Ltd and V Company Pty Ltd both of which have since been deregistered.
The wife’s income from all sources was applied by her towards living expenses and liabilities.
The wife carried out work in relation to maintenance and improvement of property.
The wife also made a contribution in the role of homemaker by performance of a variety of domestic work.

Assessment of contributions

I have assessed the respective contributions of the parties, excluding their initial financial contributions to which I have earlier referred, such that a further 4% over and above equality will be attributed to the contributions of the husband compared to those of the wife for the following reasons.
I have given considerable weight to the nature and extent of the husband’s work in carrying out substantial improvements to Property F, Property H1 and Property H2.
Whilst the wife also carried out work in relation to those properties, I have concluded that her work was assisting the husband and that he personally carried out the range of substantial work described in his affidavit.
In addition, the husband made financial contributions by use of his funds to meet expenses and liabilities described in his affidavit, as opposed to merely drawing on a line of credit which was the principal source of the wife’s funding having regard to her meagre available income.
Considerable evidence and time was devoted to expenses met by the parties during the period of cohabitation.
The husband’s available income although modest, was superior to that of the wife when comparing her lower available income such as it was, as disclosed in her income tax returns and those of the companies.
However, in focusing on the nature of expenses and whether or not they were met by the husband or the wife an important matter appeared to have been overlooked by the parties. That is, the financial dealings, particularly those of the wife and her ability to meet expenses, were predominantly based upon drawings on finance facilities which included a line of credit.
There is no evidence of substance pointed to in submissions which demonstrate that the indebtedness with interest was substantially exceeded or even offset by capital gain. The foundation for much of the financial dealings in relation to property, liabilities and a range of expenses by the parties, especially those of the wife, was based upon an ever mounting sea of debt.
Consequently, I do not give any weight to the range of expenditure met by the wife given that its source was principally increased debt represented by both principal and interest.
I assess the parties’ contributions in the role of homemaker as being equal. The wife carried out the internal domestic work assisted by the husband and the roles were reversed in relation to maintenance of their residences.

Relevant matters pursuant to s.75(2)

So far as relevant matters pursuant to s.75(2) are concerned, those matters did not occupy a significant portion of the hearing. Indeed, on behalf of the husband no matters were alluded to by the husband’s solicitor in the course of her submissions, and her submission was that no adjustment should be made in favour of the husband having regard to the provisions of s.75(2).
In relation to the wife, it was submitted that the following matters were relevant:
(a)That each of the parties had an ongoing earning capacity.
(b)The husband was currently earning or had been earning $500.00 per week gross with some evidence that such earnings had increased or were likely to increase in the immediate future.
No submission was made by contrast to the wife’s income or her capacity to earn income.
In addition, submissions were made that further relevant matters included the wife’s continuing support of her adult disabled son, and that the husband had a financial resource represented by the financial benefits flowing from his cohabitation with Ms TC who until recently had been employed but in any event owned her residence.

I have not been persuaded that there should be an adjustment in relation to either of the parties having regard to s.75(2) matters.
Each of the parties has the earning capacity in their current occupations reflecting many years of experience.
There is no evidence to suggest that such earning capacity will be, or is likely to be diminished in the foreseeable future due to health reasons or any other economical factors impacting upon the local area.
So far as the wife’s continuing support of her adult disabled son, the facts are that not only the wife but the son’s father is alive and conducting an accounting practice in the local area. They have the responsibility between the two of them to provide ongoing support for their son in such circumstances as that support may be needed and having regard to their capacities to provide such support.
It does not seem to me that this is a factor to which any weight should be given in these proceedings, having regard to the exigencies to which I have referred.
Of course, it is correct that the husband does have an indirect financial resource represented by him being able to reside in the property owned by Ms TC. The husband’s evidence, which I accept, is that the arrangement will shortly cease. There is no evidence of any reliability as to future arrangements between the husband and Ms TC other than the continuation of their relationship. Whilst there is some evidence of the gross value of Ms TC’s property, there is no evidence of the amount, if any, which may be owed pursuant to a mortgage over that property.

Conclusion

Having regard to my findings of contribution-based entitlements, it is clear that the husband will be entitled to 45% of the net property of the parties. This takes into account the wife’s greater proportion of property represented by her initial financial contributions amounting to 59% compared to those of the husband of 41% and the further adjustment I have made in favour of the husband of an additional 4%, totalling 45% of the parties’ current net property.
I have also determined that there will not be any adjustment to those entitlements having regard to relevant matters pursuant to s.75(2).
I have proceeded to consider whether orders would be just and equitable, reflecting a division of the net property of the parties whereby the proportion in favour of the wife is 55% and the remaining 45% in favour of the husband.
In concerning myself with whether it is just and equitable, I have had regard to the practical consequences of making such an order in view of the Full Court’s judgments in Preece[2] and Elsey[3].
[2] Preece and Preece (1981) FLC 91-048
[3] Elsey and Elsey (1997) FLC 92-797
The practical effect of the husband receiving 45% of the net property is that property amounting to the value of $593,194.00 which would be satisfied by him retaining and receiving the following:
§   Property I - $57,000.00
§   Nissan Navarra - $11,350.00
§   S Company - $15,000.00
§   Box trailer - sold $100.00
§   Loan to daughter - $2,500.00
§   Loan to T Company - $8,000.00
§   Superannuation - $177,562, and
§   Lump sum payable by the wife of $321,682.00.
It was common ground that the loan of $8,000.00 to T Company reflected a benefit to the wife’s other son. There was no opposition to the submission on behalf of the husband that the outstanding loan entitlement be transferred by the husband to the wife. However, there is some doubt in relation to whether in fact that loan might even have been repaid, let alone the difficulties of possible enforcement. In the circumstances, given the relationship between the wife and the person through that entity to whom the $8,000.00 was lent, it seems appropriate and consistent with the submissions that the husband’s interest in that loan be transferred to the wife. Therefore, I will reduce the lump sum payment accordingly so that the payment to be made by the wife will be $313,682.00.
The parties have 25% interest each in G Property. That interest has a negative value of $2,646.00 in accordance with Exhibit 2. Therefore, I will make an order that the wife’s interest which currently does not have a positive value be transferred to the husband taking into account that the other joint registered proprietor is one of his daughters.
Having regard to the negative value of the parties’ joint 50% interest there is no loss that the wife will suffer. However, it is important to regularise their relationship in terms of responsibility for all outgoings. An appropriate order will be made to ensure that the husband carries that liability to the exclusion of the wife.
The wife has carried on her business activities at H1 Property and H2 Property. I will make an order that the husband transfer his interests in those properties to the wife which will enable her to maintain continuity of her business activities supported by real estate of which she will be the sole registered proprietor. Indeed, the husband did not show any interest in retaining any part of the title to both or either of those properties. Therefore, an order will be made that the wife meet all outgoings in relation to those properties.
The wife clearly does not have funds to make the payment of $313,682.00.
Therefore, the wife will need a reasonable period of time to make the payment which may involve her having to sell real estate. In that regard, pursuant to the orders which will be made, the wife will retain ownership of the rest of the real estate the subject of these proceedings which will include the real estate set out in Exhibit 2 being:
§   C Property
§   D Property
§   F Property
§   J Property
subject to the registered mortgages in respect of those properties.
As with the husband, the wife will retain personalty in her possession and control.
Neither of the parties sought a superannuation splitting order.
I have considered that a reasonable period of time for the wife to either: raise the finance to meet the lump sum; sell property; or to rearrange property finance as she may be advised, is a period of four months.
The reason for the four month period is that I have taken into account the forthcoming Christmas period when financial institutions may not be readily available together with the volatility in the economic circumstances which presently prevail in Australia.
As a result, the time to pay will be for a period which will conclude at 5.00pm 9 March 2009.

I certify that the preceding ninety-eight paragraphs (98) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rose

Associate:

Date: 5 December 2008

[2008] FamCA 1060

7 November 2008

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Family Law

Property Law

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Injunction

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