Hocking and Hocking - [2009] FMCAfam 307

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HOCKING & HOCKING

[2009] FMCAfam 307

FAMILY LAW – Property case – inclusion of property owned by husband for seven years before commencement of cohabitation considered – husband in poor health – consideration of s.75(2) factors.

Family Law Act 1975

Pierce, in the Marriage of (1998) FLC 92-844
Money, in the Marriage of (1994) FLC 92-485
Bremner, in the Marriage of (1995) FLC 92-560
Williams v Williams [2007] FamCA 313

Applicant:

MR HOCKING

Respondent:

MS HOCKING

File Number:

MLC 7454 of 2008

Judgment of:

Burchardt FM

Hearing date:

4 March 2009

Date of Last Submission:

4 March 2009

Delivered at:

Melbourne

Delivered on:

1 May 2009

REPRESENTATION

Counsel for the Applicant:

Mr A B J Combes

Solicitors for the Applicant:

Aughtersons

Counsel for the Respondent:

Mr G A Devries

Solicitors for the Respondent:

David Stagg Tonkin & Co

ORDERS:

That pursuant to Rule 13.04 of the Federal Magistrates Court Rules 2001, orders are made in accordance with the attached minutes of orders placed on the Court file.

THE COURT DIRECTS THAT:

The solicitors for the Respondent file three clean typed copies of these orders within 7 days.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC 7454 of 2008

MR HOCKING

Applicant

And

MS HOCKING

Respondent

REASONS FOR JUDGMENT

This is a property dispute. Although there are a number of subsidiary and relatively minor issues, the two big issues are:
a)should a property at Property D, owned by the husband since 1995 be included in the asset pool; and
b)what proportions of the pool should the parties receive.
For the reasons that follow, I have decided that:
a)the Property D property should not be included in the pool and
b)what remains of the pool should be divided between the parties in proportions of 55 per cent to the husband and 45 per cent to the wife.

Introductory Facts

In order that the parties' competing positions can be understood, it is necessary to set out some introductory facts.
The husband was born in 1962 and is therefore 46 years old. The wife was born in 1961 and is 47.
The parties commenced living together in the latter part of 2002 and married in July 2003.
Despite the parties undergoing IVF treatment, they remain childless and they separated finally in October 2007. The relationship in total was thus one of about five years.
As indicated earlier, the husband had bought the Property D property in 1995. It has upon it both a house and a unit, both of which are rented out. The rental income from the house is presently $1,100.00 per week and the rent from the unit is $750.00 a week. It is not entirely clear whether these are gross or net figures but the outgoings would not be gigantic in any event. The property is managed by an agent.
It would appear from exhibit R2 that at the time of the commencement of cohabitation, the Property D property was encumbered by a mortgage of about $150,000.00, which mortgage is now approximately $145,000.00 but which also has attached to it a $10,000.00 credit limit which the husband uses from time to time.
At the time of the commencement of cohabitation, the parties lived at another residence at Property G, which the husband had bought, together with his former de facto, for about $170,000.00 in early 2000.
There was considerable debate before me about the exact extent of the equity in the Property G property at the time of the commencement of the relationship and indeed upon its subsequent sale.
In about 2003 the parties bought a property at Property S which they sold some years later, netting net proceeds which are not clearly ascertained but appear to have been somewhere about $20,000.00. All that money was spent on routine expenditure of the parties.
In about 2004 the parties bought a property at Property R for approximately $255,000.00. The entire sum was borrowed and indeed excess funds were borrowed for associated purposes such as stamp duty and the like.
In about 2005 following the sale of the Property G property, the parties bought a property in Property U, predominantly using funds from the sale of the Property G property but also borrowed funds. That property has now been sold and the net proceeds of sale held in trust are $61,000.00.
The husband had a heart attack in 2004 and I would infer a more serious one on 1 September 2008. Having heard evidence from his treating medical specialist, I have no doubt that his health has been seriously affected and his future prognosis remains very uncertain, save to say that it is clear that his long‑term health expectations have been seriously reduced.

The Pool

At this point, it is possible to turn to deal with the issue of the pool.
The first issue to be determined is whether the Property D property should be included in the pool. It was bought by the husband in 1995, some seven years before cohabitation and cohabitation itself lasted for only five years.
Although it will be necessary to return to this issue under the heading of Contribution, it is common cause, as both counsel conceded, that in a general day-to-day way, the contributions of the parties were roughly equal. Accordingly, as might be expected, the wife doubtless contributed to at least some degree to the maintenance and upkeep of the Property D property for the five years that the relationship inured.

I accept that she assisted in resolving some issues with tenants and repairs and that she chased up some insurance debts. Nonetheless I find that the wife’s contribution to the maintenance of the property (and its value) was of minimal proportions. The wife made no initial contribution to the property and the net effect of the period of time that the relationship lasted has been that in effect there has been virtually no reduction of its mortgage whatsoever.
There is a plethora of authority as to the way in which the Court should approach the issue of initial contributions. Such authority includes authority of the Court of Appeal of the Supreme Court of New South Wales in relation to de facto property proceedings under state legislation (albeit that that legislation is in different terms to the Family Law Act). Reference is frequently made to the case of Pierce, in the Marriage of (1998) FLC 92-844 and the observations quoted therein at [27] of Foggarty J in Money, in the Marriage of (1994) FLC 92-485 and Bremner, in the Marriage of 1995 FLC 92-560. These authorities canvass the question of the extent to which an initial contribution may become less significant (sometimes referred to as eroded) over time.
There is authority, by no means to uniform effect, as to whether or not it is the value of the asset at the beginning of the relationship or its end that should be considered, particularly in shorter relationships such as this one.
With respect I would adopt what was said by the full court of the Family Court in Williams v Williams [2007] FamCA 313 at [26] to this effect (having had regard to the NSW authorities to which I have referred already above)
We think that there is force in the proposition that a reference to the value of an item at the date of the commencement of cohabitation without reference to the value to the parties at the time it was realised or its value to the parties at the time of trial, it still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties. Thus, where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or at the time it was realised rather than simply pay attention to its value at the time of commencement of cohabitation. But in so doing it is equally important to give recognition to the myriad of other contributions that each of the parties have made during the course of their relationship.
That was of course a case in which the court was concerned with the value of an asset that remained in the pool but here, bearing in mind the observations of Foggarty J in Money, it seems to me that it is not appropriate in the particular circumstances of this case to include the Property D property in the pool. While I am quite satisfied that the wife made some element of contribution by way of liaising with agents, chasing up tenants and maintenance and the like, it was in the scheme of things trivial. The reason that the Property D property is owned and is an asset to the parties is because the husband owned it at the commencement of the relationship and the rental on the property paid for the mortgage throughout the period of the relationship.
In these circumstances, it is clear in my view that the proper application of relevant case law requires that this asset, which in substance owes nothing to the wife's input, should indeed be excluded from the pool.
It is common cause that there is $61,000.00 held in trust arising from the sale of the Property U property, although clearly the purchase of the Property U property owed something to the proceeds of the sale of the Property G property. That is a matter to which I shall return under the question of contribution. Additionally to the $61,000.00, there is also equity in the Property R property. There is a sworn valuation in respect of that property in the sum of $310,000.00 and it appears to be encumbered by a mortgage of approximately $270,000.00, leaving an equity of only $40,000.00.
The husband brought into the relationship a Cherokee car said to be worth either $5,000.00 or $10,000.00, although neither party gave any expert evidence about the value of this car. Likewise, there is a Land Rover Defender motor vehicle which has an agreed value of $5,000.00. The wife brought a Land Rover of her own to the relationship but it has been sold and there is no convincing evidence of its worth.
I interpolate at this stage and say that I think the preferable result is that each party keeps the car they presently posses which I understand is the Cherokee on the part of the wife, and the Defender on the part of the husband. In the absence of expert valuation, I am not prepared to allot any discrete additional values to these issues. I appreciate that the Cherokee was owned by the husband prior to the relationship but I accept the wife’s evidence as to her role in its upkeep.
The parties' moneys at the bank, save for several particular matters to which I shall come, are not of such size as to be significant.
It is common cause that the parties had a significant interest in dogs and the husband retains two mastiffs, which have an unchallenged value of $3,500.00, whereas the wife retains a dog worth $500.00.
I agree that the dogs were jointly owned and therefore had a value of some $4,000.00. Making an adjustment to even it up requires a credit of $1,500.00 to the wife.
I am not prepared to allot any value to the two other dogs apparently unable to be kept by the parties. They appear to have had to have been given away because they could not be retained and there is no expert valuation in any event.
Household contents are not the subject of any valuations and subject to one aspect to which I will return later, the parties should simply keep what they have.
The evidence about superannuation is that the wife's was worth $21,362.00 at the commencement of the relationship and is now worth about $62,000.00.
The husband's superannuation is not the subject of any credible evidence at commencement, save that the husband had an idea that it might have been a bit more than the $10,000.00 he initially nominated. His superannuation is now at approximately $46,500.00.
In the circumstances, the wife' superannuation appears to have increased by $40,000.00-odd since the period of the commencement of the relationship and the husband's by somewhere between $30,000.00 and $40,000.00.
It is not possible to say exactly how much had accrued during the relationship and how much may have accrued (or in fact been lost) since separation.
Nonetheless, the figures for superannuation are broadly similar and bearing in mind that not insubstantial amounts had accrued prior to the commencement of the relationship and the fact that neither party seeks a splitting order, I will simply order that each party retain their superannuation.
Although it is clear that each party has from time to time generated a credit card debt both during the relationship and thereafter, I am not satisfied on the evidence that the credit card debts of the parties, to the extent that they arose during the relationship, were other than standard day‑to‑day household expenditures. To the extent that they have been incurred afterwards, the same applies. In my opinion, each side should simply accept their own liabilities in respect of such credit cards as they have.
I should deal also with the husband's redundancy payment of $40,000.00, received some six months after separation. The husband's evidence is that that money has been dissipated in day‑to‑day expenses since his retrenchment and I accept that evidence. It is inherently probable and is consistent with his lack of income since retrenchment. It does not form part of the pool.
Likewise, the husband has received an insurance payment of some $27,000.00 arising from his cardiac episode in 2008. Once again, he says that has been essentially subsumed in his own financial affairs and I accept that evidence. Even if I did not, plainly it is not a payment that owes anything to the wife in any event. It should not be included in the pool. I note that in any event that the sum still extant is now substantially lower.
Finally, although there has been mention of monies allegedly loaned by the wife’s parents, I am not satisfied that there are any loans of this sort to be repaid.

Contribution

I repeat that the parties' counsel both agreed that in a day‑to‑day way, the parties put in as best they were able during the currency of the relationship.
Since I have excised the Property D property from the pool, the real issue that arises here is what weight, if any, should be given to the husband's ownership of the Property G property at the time the relationship commenced, and the extent to which the parties were able to utilise such equity as there was in the Property D property in the various other financially successful initiatives that they undertook in purchasing properties.
There is no precise or really satisfactory evidence as to how much equity there was in the Property G property at the time of the commencement of the relationship, but it is clear that it was not trivial. Whichever set of figures one looks at, there was equity of some tens of thousands of dollars. It seems clear that it expanded to at least an extent by the time of the sale of the Property G property and it was those funds that was applied into the Property U property and gave rise in the ultimate to an equity of $61,000.00 presently held in trust.
Furthermore, although it is not possible to put a precise value on it, it is more probable than otherwise to me that the equity in the Property D property was of assistance to the parties in obtaining the loans that they were able to obtain and which now give rise to not only the $61,000.00 in trust but the $40,000.00 equity in the Property R property.
To say this is not in any way to set aside the financial contributions made by the wife. Nonetheless, I note that at all times during the currency of the relationship, the earning capacity of the husband was slightly greater than that of the wife and there is no dissipation argument advanced by either side.
These are never areas of precision but in all the circumstances it seems to me that the husband should receive a credit of 10 per cent in his favour for the additional contribution he made predominantly through the properties he owned at the time of the commencement of the relationship and the springboard effect that they had in generating such funds as are now in existence.

Section 75(2) - Future Needs

As already stated, the husband's health is poor. His future employment prospects are very uncertain. Although Dr M was of the view that it might be possible in time for the husband to perform sedentary work, that is by no means a given. If one looks at the medical evidence carefully, the best that can be said is that the husband's future employment prospects are uncertain.
The wife is in what I understand to be secure employment as a [occupation omitted] and earns $880.00 per week or $3,813.00 per month, ie, $45,760.00 per annum.
Although the husband's health is a matter of the most serious concern and his life expectancy very unfortunately may well have been affected by his heart difficulties, paradoxically in some ways his financial position is better than that of the wife.
He has insurance cover which provides that if he remains unemployed for two years from the date of the incidence of his heart attack in November 2008, he will thereafter receive a monthly sum of $4,843.00 until he is 65, that sum being indexed each year.
Further, as I construe the insurance contract, it appears that he will receive income maintenance in any event but only after the two-year introductory period, bringing him up to the average of his income for the three years prior to the incident.
No-one has presented me with the calculations but from looking at the husband's tax returns, it would seem that would give him an income at least as much as that which the wife would be likely to receive.
Further, it seems as best one can say that should he be held to be totally and permanently disabled, he would receive a cash lump sum in excess of $130,000.00.
The husband additionally has the advantage of the rental of approximately $22,000.00 per annum from the Property D property, which encumbered as it is by a mortgage of $145,000.00 would certainly produce a significant income. At current interest rates of about 6 per cent, the mortgage would be costing around about $8,700.00 in interest.
Additionally, the husband has said that he proposes to have someone live with him because he cannot live alone and I would infer that that person might pay rent, although it might be that there would be some sort of contra deal in return for such care as the tenant might give.
Further, and it is regrettable and unfortunate to have to say this, but the husband’s health prognosis is such that it is more probable than otherwise that the future needs of the wife will be extant for substantially longer than those of the husband.
Given that I propose that the Property D property should remain wholly in the possession of the husband and not be included in the pool, and given the income and health situation to which I have referred, it seems to me that strange as it might initially seem, the proper assessment of future needs should lead to a five per cent adjustment in favour of the wife.

Ancillary Minor Matters

It appears that a number of cattle were run on the Property U property prior to its sale and that they have been sold. The figures are contentious but taking the husband's figures as an admission against interest, it would appear that cattle have been sold with an imbalance of approximately $2,000.00 in favour of the husband. I will award a credit of $1,000.00 to the wife in this regard.
The issue of chattels is still an extant one. I have already pointed out that there are no sworn valuations as to any of the chattels in dispute and on looking at the schedules of those matters, I would strongly suspect that a large number would have virtually no value whatever.

In the circumstances I think that each party should retain those chattels presently in their possession, save for any matter it is agreed was the property of the other prior to the inception of the relationship. Since we are talking about household goods and since we are talking about ownership prior to 2002, I would not imagine that there would be many such items. In the event that any particular item of real significance is outstanding, I will grant liberty to the parties to present further argument about this.
Each party wishes to retain the Property R property. The wife has already obtained approval for the necessary finance to purchase out the husband's interest and says that he could not afford to pay for the property even if he retained it.
The husband on the other hand says that he wishes to continue living there as he has done for some time and with his health and other difficulties, he should not be made to move out. Although he is not able to point to any definite source of finance such as to enable him to pay the mortgage, I suspect that he would be able to, not least because his income seems to me on any view to be somewhat greater than that of the wife.
This is scarcely a satisfactory state of affairs. Each side has a reasonable basis for their desire to have possession of the Property R property. In the event that the parties cannot agree as to its occupation, I will order it to be sold and the proceeds divided to give effect to these reasons.

Just and Equitable

In all the circumstances, it seems to me that once one excludes the Property D property as I have done, an outcome of 55 per cent to the husband and 45 per cent to the wife is just and proper. The husband plainly made the two significant property contributions which formed the wellspring for such property and/or funds as are presently available. It was not a relationship of great length and indeed the pool itself is by no means large but I think that the division I suggest is appropriate.
I will direct the parties to consider the matters in this judgment and bring in minutes of orders to give effect to these reasons for judgment in the event that they are able to do so.
If it is necessary to hear further argument either on the issue of the Property R property or the chattels, then of course I shall do so.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate:

Date: 1 May 2009