Holt and Holt
[2010] FMCAfam 107
•11 February 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HOLT & HOLT | [2010] FMCAfam 107 |
| FAMILY LAW – Property – wife seeks more than total value of asset pool – pool worth less than value of contributions made by wife – each to retain superannuation – values of chattels – significant contributions made by wife’s family – husband’s improvements to properties through physical efforts – wife’s homemaker and parent contributions exceeded those of husband – assessment of contributions not an exercise of mathematical precision – children live predominantly with the wife – husband’s time with children to increase when he has daytime employment and suitable accommodation – husband paying minimal child support – wife paying children's expenses at Catholic schools – control of scholarship fund. |
| Family Law Act 1975 (Cth) ss.75, 79 |
| Lee Steere (1985) FLC 91-626 Ferraro (1993) FLC 92-335 Clauson (1995) FLC 92-595 Hickey (2003) FLC 93-143 C v C (2005) FLC 93-220 Kessey and Kessey (1994) FLC 92-495 Russell v Russell (1999) FLC 92-877 Parshen (1996) FLC 92-720 Hayne and Hayne (1977) FLC 90-265 Garrett and Garrett (1984) FLC 91-539 Poulos and Poulos (1984) FLC 91-515 Bremner and Bremner (1995) FLC 92-560 Clives and Clives (2008) FLC 93-385 Kowaliw and Kowaliw (1981) FLC 91-092 Browne v Green (1999) FLC 92-873 |
| Applicant: | MS HOLT |
| Respondent: | MR HOLT |
| File Number: | MLC10038 of 2008 |
| Judgment of: | Roberts FM |
| Hearing dates: | 9 & 10 November 2009 |
| Date of Last Submission: | 10 November 2009 |
| Delivered at: | Devonport |
| Delivered on: | 11 February 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr P Davis |
| Solicitors for the Applicant: | J A Middlemis |
| Counsel for the Respondent: | Mr T Serra |
| Solicitors for the Respondent: | Ellinghaus Weill |
ORDERS
That within sixty days MR HOLT (“the husband”) must do all such things and sign all such documents as may be required to transfer to MS HOLT (“the wife”) all of his right, title and interest in the real property situate at Property L in the State of Victoria (“the real property”).
That contemporaneously with the transfer of the real property referred to in Order No. 1 hereof the wife must:
(a)pay to the husband the sum of sixty three thousand eight hundred and ten dollars ($63,810); and
(b)re-finance the mortgage secured over the real property so as to discharge the husband’s liability in relation to that mortgage.
That pending the transfer referred to in Order No. 1 hereof the wife is to have sole use and occupation of the real property to the exclusion of the husband and she must meet all mortgage repayments, rates and any other outgoings associated with the real property as and when they fall due.
That contemporaneously with the transfer referred to in Order No.1 hereof the wife must do all such things and sign all such documents as may be necessary to transfer to the husband any interest that she may have in the business known as “[S]” (“the business”) and in the assets of the business.
That the husband is to retain all assets of the business to the exclusion of the wife and be liable for and indemnify the wife in relation to any liability of the business.
That the husband must do all such things and sign all such documents as may be required to discharge any liability of the wife, including any liability as guarantor, in relation to the assets of the business including but not limited to the Commonwealth Bank loan securing the [equipment omitted] asset of the business.
That the husband must pay to the wife the sum of one thousand five hundred and forty dollars ($1,540) being half the cost of the Family Report prepared for these proceedings, and if such has not already been paid, the wife may reduce her liability pursuant to paragraph (a) of Order No. 2 hereof by any amount still outstanding.
That the husband must sign all such documents and do all such things necessary to enable the account currently held in joint names with the Australian Scholarship Fund to be held in the wife’s sole name.
That unless otherwise specified in these orders and save for the purposes of enforcing any of these or any subsequent orders:
(a)each party is solely entitled to the exclusion of the other to all other property in the possession of such party as at the date of these orders;
(b)each party foregoes any claims they may have to any superannuation benefits belonging to or earned by the other;
(c)life insurance policies remain the sole property of the life insured named therein;
(d)each party is solely liable for and must indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Holt & Holt is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC10038 of 2008
| MS HOLT |
Applicant
And
| MR HOLT |
Respondent
REASONS FOR JUDGMENT
Applications
The Applicant is MS HOLT (“the wife”) and the Respondent is
MR HOLT (“the husband”). Although they have been unable to resolve their dispute in relation to property matters, they are to be congratulated for settling matters in relation to their children by the making of consent orders on 17 June 2009.
The wife seeks orders which will have the following effect:
·that the husband will transfer to her the former matrimonial home, and that she be fully responsible for discharging the mortgage over that property;
·that she will transfer to the husband all her interest in the parties’ [omitted] business and that he be fully responsible for discharging all liabilities associated with that business;
·that each will retain his or her superannuation free from a claim by the other (which is agreed);
·that each will retain any other assets in their possession or control subject to any liability encumbering those assets; and
·that the husband will reimburse her for half the costs in relation to the preparation of a family report (which I infer assisted the parties to resolve children's matters, and which is agreed to be paid in the sum of $1,540).
By my calculation, the wife is seeking orders that would result in her retaining non-superannuation assets with a net value that exceeds 100% of the total net value of the non-superannuation asset pool. That is because the assets that the wife would have the husband retain are subject to debts that exceed their value. I will refer to this in greater detail below.
At the start of the hearing the husband was seeking a division of the non-superannuation assets on the basis of 70% to the wife and 30% to him. By the end of the hearing, he was seeking a two thirds/one third division in the wife’s favour.
The wife also sought an order that the husband do all that may be necessary to transfer control of a scholarship fund to her. Because the parties did not include that in the asset pool (presumably because any balance in that fund is intended for the benefit of their children), I will deal with that separately from the other orders that the parties seek.
Background
The parties, who are both aged 41 years, started living together in 1993. They married in 1996 and they have three children, aged 15, 12 and 10 years.
They separated under one roof in March 2008, and physically separated in December 2008 when the husband vacated the former matrimonial home.
The parties started living together when the husband moved into a home owned by the wife (“the first home”). It is agreed that the wife's equity in the first home was approximately the $11,000. The wife also had an unencumbered block of land (“the block”) worth approximately $46,000, a car worth approximately $8,000 and some household furniture. The husband had a car worth approximately $2,000.
Both parties were working full time at that time; the husband worked for [local government] and the wife worked [in the hospitality industry].
In 1995 the husband received a redundancy in relation to termination of his employment. I accept his evidence that the redundancy payment was approximately $41,000, and $20,000 of that was used as a deposit for the parties’ second home. He also paid a substantial proportion of the purchase price of a new vehicle; with a trade-in of wife’s previous vehicle making up the balance.
The first home was tenanted and the rent received was applied towards the mortgage over the first home.
In 2003 the wife was given a block of land by her father. It was sold in 2004 for $40,000.
In 2004 the parties purchased the property in which the wife and children are now living for $348,000 (“the former matrimonial home”). The deposit for that property was the sum of $40,000 referred to in the paragraph above.
The first home was also sold in 2004 and the agreed net proceeds were approximately $90,000. That sum was used to pay:
·Capital Gains Tax;
·the costs of an in-ground swimming pool at the former matrimonial home;
·for a family holiday; and
·for a reduction in the parties’ mortgage liability.
In 2005 the wife received a distribution from her family in the sum of $245,000. That money was used as follows:
·for concreting and improvements around the swimming pool;
·to purchase [hospitality] equipment for $30,000;
·to fund a holiday for the parties in the United States of America;
·to purchase a [equipment] for their [omitted] business; and
·to substantially reduce their mortgage liability.
Relevant law
Section 79 of the Family Law Act 1975 (“the Act”) sets out the matters that the court must take into account when considering what orders should be made for the alteration of the property interests of parties. They include:
a)the financial and non-financial contributions made directly or indirectly by or on behalf of each party to the acquisition, conservation or improvement of any property of the parties;
b)the contribution made by a party to the welfare of the family including any contribution made in the capacity of homemaker or parent;
c)the effect of any proposed order upon the earning capacity of either party; and
d)the matters referred to in sub-section 75(2) as far as they are relevant.
The general approach to the determination of a property settlement application has been well established by authority.[1] It is essentially a multi-step process. The first step is to identify the property, liabilities and financial resources of the parties (generally at the time of the hearing). The second step is to evaluate the contributions made by the parties as defined in section 79(4) of the Act and the third step is to consider those matters contained in section 75(2) that are relevant.
[1] See Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and C v C (2005) FLC 93-220
In determining what order the court should make under section 79, the court must be satisfied in all the circumstances that it is just and equitable to do so.[2] It is the justice and equity of the actual orders that the court must consider and this has been referred to as “the fourth step”. In Russell v Russell,[3] the Full court said:
Furthermore, it must be remembered in this regard that under s79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.[4]
[2] See Sub-section 79(2)
[3] (1999) FLC 92-877
[4] See page 86,439
The asset pools
In accordance with the reasoning of the majority in C v C,[5] I find that it is appropriate not to include the parties’ superannuation interests in the same pool of assets as the non-superannuation assets. This is because:
·it is the manner in which the parties wish those superannuation interests to be treated; and
·they agree that they should each retain their superannuation interests free from any claim by the other.
[5] (2005) FLC 93-220
In accordance with their agreement, the husband and the wife will retain superannuation interests worth less than $19,000 and $22,000 respectively. Certainly, on those values it would not be appropriate for there to be any splitting orders in relation to their superannuation.
To their credit, the parties were in broad agreement about the composition and value of the non-superannuation asset pool. However, there were three areas of disagreement in relation to the values of some chattels, so I will deal with those disagreements before setting out details of the pool.
In 2005 the wife had purchased some specialised [hospitality] equipment at a cost of $30,000 for a business that she had wished to operate with her sister. That equipment remains in a shed at the former matrimonial home and the wife’s sister did not contribute towards its purchase. The wife says that the equipment is now worth $20,000 and the husband says that it is worth $30,000. Neither party sought to have it professionally valued. In those circumstances, I accept that it has a value of $20,000, because:
·the equipment is essentially second-hand even if it has not been used; and
·by admitting to a value of $20,000, the wife is making an admission that is against her interests.
The husband believes that the chattels in the former matrimonial home to be retained by the wife are worth $21,000, whereas she says they are worth $5,000. Again, the parties did not obtain a valuation so I accept the wife’s admission against her interests that they are worth $5,000.
Similarly, the parties do not agree upon the value of the tools in the husband’s possession. He says they are worth $2,000 and she says they are worth $5,000. In this instance, I accept the husband’s admission against his interests.
The assets are therefore as follows:
Former matrimonial home
$410,000
Wife's car
$39,000
Wife's bank account
$2,000
Wife's chattels
$5,000
[Hospitality] equipment
$20,000
Husband's car
$18,000
[Equipment for business]
$10,000
[Equipment for business]
$3,000
[Equipment for business]
$22,000
AMP shares
$1,016
Husband's bank account
$733
Husband's tools
$2,000
Total
$532,749
The parties’ liabilities are:
Home mortgage
$154,000
Wife’s car loan
$50,000
Wife’s Visa card
$3,500
Husband’s car loan
$23,476
[Business equipment] liability
$40,000
Husband’s MasterCard
$1,520
GE line of credit
$4,390
Total
$276,886
The net value of the asset pool is $255,863.
The wife wishes to retain:
Former matrimonial home
$410,000
Wife's car
$39,000
Wife's bank account
$2,000
Wife's chattels
$5,000
[Hospitality] equipment
$20,000
Total
$476,000
She would take those assets subject to:
Home mortgage
$154,000
Wife’s car loan
$50,000
Wife’s Visa card
$3,500
Total
$207,500
Consequently, the assets the wife would like to retain have a net value of $268,500. That equates to almost 105% of the total net value of the non-superannuation assets. It follows that her proposal would leave the husband with assets with a negative net value, or approximately minus 5% of the non-superannuation asset pool.
Contributions
It is quite clear that during the parties’ relationship greater financial contributions were made by the wife, or by her family on her behalf.
In Parshen[6], Ellis, Finn and Purdy JJ said the following about financial contributions generally:[7]
In our view, in the absence of evidence to the contrary, it should be inferred in proceedings pursuant to the provisions of s 79 that moneys howsoever received by a party during the course of the parties' cohabitation, are used by that party for the benefit of the family unit. Such moneys, in those circumstances, thus constitute a financial contribution by the party who received the moneys.
[6] (1996) FLC 92-720
[7] At page 83,665
During their relationship of 15 years, the husband contributed his earnings from his paid employment and a redundancy. The wife also contributed her earnings from her paid employment, but she had also contributed significantly more than the husband at the start of the relationship[8] and the parties’ finances received significant injections from the wife's family from time to time.[9]
[8] See paragraph 8 above.
[9] For example, see paragraphs 12 and 15 above.
In relation to family contributions, in Kessey and Kessey,[10] the Full Court of the Family Court said: [11]
In other words, a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.
[10] (1994) FLC 92-495
[11] At page 81,150, emphasis by the Full Court
Although the wife only begrudgingly conceded that the husband made improvements to properties through his physical efforts, I am satisfied that his work on the properties was significant and it improved their values. Unfortunately, it is not possible to quantify that improvement with a dollar value.
The wife’s homemaker and parent contributions clearly exceeded those of the husband. However, like the husband’s improvements to various properties, it is not possible to place a dollar value on those contributions.
This case is no different from many others; because it is clear that the assessment of contributions is not often an exercise of mathematical precision. In Hayne and Hayne,[12] Pawley J said:
In matters such as this one cannot approach the problem with an eye for meticulous detail. It should rather be dealt with broadly so that the end result can be said to be just and equitable.
[12] (1977) FLC 90-265 at p. 76,415
In Garrett and Garrett[13] the Full Court of the Family Court of Australia held that in long marriages, where the parties have devoted their resources and incomes for the benefit of the family, it is not possible to have a precise accounting of their contributions.[14]
[13] (1984) FLC 91-539
[14] See also Poulos and Poulos (1984) FLC 91-515 at p. 79,184.
In Bremner and Bremner[15], Nicholson CJ said:
I would also add that when one considers cases of this sort, it should be remembered that they are not decided upon a pure mathematical basis … …
[15] Bremner and Bremner (1995) FLC 92-560
In Clives and Clives[16] the Full Court said:
We accept that the task to be undertaken by a trial Judge in assessing weight to be attached to initial contributions, and other contributions, is not always an easy one and not discharged by a strict accounting exercise.
[16] (2008) FLC 93-385 at paragraph 44
Further, in the decision of Kessey mentioned above the Full Court also said:
In many - indeed probably in most - property settlement cases the Court has to evaluate and assess contributions to property in the absence of precise valuations of the contributions in question. Indeed, where the contributions to property are indirect or non-financial, precise valuation is impossible, and even where the contributions are direct or financial so that a valuation might be provided, other factors (not capable of precise mathematical statement) may well have eroded the initial value of such contributions. In a case such as the present, it is not necessary to arrive at precise mathematical valuations of the parties' contributions - all that is necessary is to evaluate the weight that should be given to each party's contributions relative to the contributions of the other party.
It is clear therefore that an evaluation of the weight to be attributed to different types of contributions – such as direct financial contributions and indirect non-financial contributions - cannot be a science involving precise measurement.
Counsel for the husband said that I could be critical of the wife for spending $20,000 on a family holiday in Fiji (from which the husband was excluded), especially in circumstances where the wife now says that she has financial difficulties. I concluded that counsel was inviting me to find that the wife had made a negative contribution or there was an unnecessary wastage of assets by her.
In Family Law proceedings, it is not uncommon for one party to argue that the other party’s negative contribution or wastage of assets should be taken into account. A well known case on this point is Kowaliw and Kowaliw.[17] In that case Baker J said:[18]
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.
[17] (1981) FLC 91-092
[18] At page 76,644
The Full Court in Browne v Green[19] considered whether there is a “Kowaliw principle”. However, Lindenmayer, Finn and Holden JJ preferred to think of Baker J's statement as a “well-accepted guideline” rather than as a “principle”.
[19] (1999) FLC 92-873
In this case, however, I do not consider that the wife embarked upon a course of conduct designed to reduce or minimise the assets, nor did she act recklessly, negligently or wantonly. Although the holiday in Fiji was one that may have initially included the husband, it appears from the evidence that his inclusion was “cancelled” because of the poor state of the parties’ relationship at that time.
I am satisfied that both parties contributed to the work of the [omitted] business; with the husband operating the [equipment] and the wife doing the administrative work. Although it is clear from the evidence of the husband and his aunt that the wife was not as diligent about that in later months, I see that as more of a symptom of the deteriorating relationship than as a lack of contribution.
As mentioned above, the wife seeks an award that exceeds the total net value of the non-superannuation assets. As I understand it, her claim to such an entitlement is based upon the fact that the values of assets and direct financial contributions made by her and her family well exceeded the total net value of the non-superannuation assets that now exist. In my view, that is a misguided argument because:
·Firstly, it is not uncommon for parties’ assets to be worth less than what parties may have contributed; and
·Secondly, in this case, it completely ignores the value of the husband’s contributions.
In my opinion the parties’ direct financial contributions from paid employment and their non-financial contributions during their relationship should be given equal weight. However, it is very clear that the wife made greater initial contributions and the parties subsequently had the benefit of significant contributions from the wife’s family. Those must also be given appropriate weight.
When I weigh up all those contributions, I assess the weight attributable as being 70% to the wife and 30% to the husband. However, these matters are not decided upon contributions alone.
Section 75(2) factors
The parties are both aged 41 years and they were each in employment at the time of the hearing.
The wife was receiving an income from her employment [in the hospitality industry]. She was earning $1,408 per fortnight (and not per week as stated in her Financial Statement), giving her an earned income of approximately $36,000 per annum.
The husband was working for an employer and also conducting the [omitted] business (that had been previously conducted by the parties jointly). His Financial Statement revealed that he was earning $1,040 per week from his employer, but his [omitted] business was losing $100 per week. When he was cross-examined, he clearly contradicted what he had stated in his Financial Statement, because he said that the [omitted] business had “always made a profit”. However, it appears that the business has not yet made profits in excess of $10,000 per annum.
Having heard and considered their evidence, it is easy to conclude that that neither party is a high income earner.
The parties have three children, aged 15, 12 and 10 years, who live predominantly with the wife. As mentioned above, the parties reached an agreement in relation to the parenting of their children. That agreement provides that the husband’s time with the children will increase when he has both daytime employment and suitable accommodation (a three-bedroom house). The children will then be with him for four nights per fortnight during school terms and for half of each school holiday. I accept the husband’s counsel’s calculation that they will then spend approximately 40% of their time with the husband. However, it is clear that in the foreseeable future the wife will have to bear a significantly greater proportion of the burden of the children’s care than the husband. Even if the husband is able to achieve daytime employment and obtain a three-bedroom house, the children will still be with the wife more than they are with him.
It is very clear from the evidence that the husband has been paying minimal child support. By an assessment dated 24 April 2009, he was assessed to pay only $26 per month for the period 16 January 2009 to 15 April 2010. That is only $2 per week per child.
Notwithstanding this, the wife is currently meeting the children’s day to day needs, in addition to their expenses at Catholic schools. Although the husband now considers that to be an expense that cannot be afforded, his evidence was that he had agreed to them attending Catholic schools.
The husband conceded that one of the children suffers from dyslexia (as does he) and is in a special reading program. However, he said that the eldest child had also had learning problems but has now “turned the corner and is doing very well”.
Having heard her evidence, I have absolutely no doubt that the wife will do everything within her power to keep the children at the Catholic schools that they are attending, because she believes that it is educationally in their best interests, notwithstanding that it will be a significant financial burden to her.
I am of the opinion that the section 75(2) factors require an adjustment of a further 10% in the wife’s favour.
Conclusions
I have concluded above that the weight of contributions favours the wife on a 70/30 basis and the section 75(2) factors require a further 10% adjustment in her favour. This means that there should be a division of the parties’ non-superannuation assets on the basis of 80% to the wife and 20% to the husband.
The net value of the asset pool referred to at paragraph 28 above is $255,863. Eighty per cent of that is $204,690.
However, as set out at paragraphs 28 to 30 above, the wife wishes to retain assets with a net value of $268,500. That is $63,810 more than the 80% entitlement that I conclude is appropriate. I therefore consider that the wife needs to pay the husband $63,810 as a cash adjustment and I will make Orders that takes account of that and the transfers of assets that are agreed. In this regard, the husband’s counsel indicated that most of the Orders sought by the wife were acceptable, provided that there was to be an appropriate cash adjustment. However, the cash adjustment that I am ordering is clearly less than that sought by the husband.
Although the wife has a relatively low income, she should still have the capacity to borrow the sum needed to meet her obligation under the Orders that I will make, because the apparent equity in the former matrimonial home is in excess of $250,000.
When I consider the overall settlement, I conclude that it is just and equitable.
The scholarship fund
It is to the parties’ credit that they did not include the value of the scholarship fund in the asset pool to be divided.
The wife seeks an order that would give her control of that fund and in my view such an order is appropriate because:
·the wife very clearly has the children's educational interests at heart;[20] and
·it is very unlikely that the husband will be making any contribution to that fund in the near future.
[20] See paragraph 60 above.
Consequently, I will make the order that the wife seeks.
Procedure
I heard this matter in Melbourne. However, I will be delivering this decision in Tasmania, because I am not scheduled to sit in Melbourne again until 15 March 2010. My Associate will provide copies of these Reasons to the parties’ legal representatives by electronic means today.
If any applications are to be made arising from the Orders that I make today, that can be done by contacting my Associate to arrange for a listing of the matter. Any such application could be heard either by telephone or video link, or when I am next sitting in Melbourne if time permits.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date:
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