J and J - [2003] FMCAfam 304

FEDERAL MAGISTRATES COURT OF AUSTRALIA

J & J

[2003] FMCAfam 304

FAMILY LAW – Property – Husband bankrupt – Husband’s redundancy payments part of matrimonial property – most of redundancy payments kept and spent by Husband – both parties with equal superannuation contributions – Husband with greater need – property pool small – just and equitable principal consideration.

Family Law Act 1975

Hickey & Hickey [2003] FamCA 395

Applicant:

K A J

Respondent:

T L J

File No:

MLM 5479 of 2001

Delivered on:

9 July 2003

Delivered at:

Melbourne

Hearing Date:

9 July 2003

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant:

Mr Pinner

Solicitors for the Applicant:

Webb Korfiatis

Mr J appeared on his own behalf

ORDERS

THAT paragraphs 2 to 6 of these Orders are binding on the Trustee of the Superannuation Trust of Australia (“the fund”).
THAT pursuant to Section 90MT(4) of the Act the base amount to be allocated to the Wife out of the interest of the Husband in the Fund is $30,000.00.
THAT pursuant to Section 90MT(1)(a) of the Act whenever a splittable payment becomes payable in respect of the interest held by the Husband in the Fund, the Wife is entitled to be paid the amount which is calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001, and there be a corresponding reduction in the amount that the Husband would have had but for these Orders.
THAT Order 2 has effect from the operative time.
THAT the operative time for the purposes of these Orders is 31 July 2003.
THAT until the happening of any of:-
(a)the establishment of a separate account in the name of the Wife in the Fund; or
(b)the transfer or “rolling over” into another superannuation fund of the payment split created in Order 2 hereof; or
(c)the Wife satisfies a condition of release and is paid the payment split which was created by Order 2 hereof; or
(d)the Wife executing a waiver of rights within the meaning of Section 90MZA of the Act in relation to the payment split created by Order 2 hereof;
the Husband be and is hereby restrained by himself, his servant or agents from executing a death benefit nomination in favour of any person or doing any other act or thing which would render any part of his interest in the Fund “a non-splittable payment” within the meaning of Regulation 12 or 13 of the Family Law (Superannuation) Regulations 2001 and the Trustee of the Fund give effect to this Order.
THAT all previous orders be discharged.
THAT the Wife be solely responsible for the parties debt to Australian Guarantee Corporation and indemnify the Husband in relation to that debt.
THAT the Wife retain her interest to the exclusion of the Husband in the former matrimonial home situate and known as 49 W Street, B M in the state of V.
THAT unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other all property (including choses-in-action) in the possession of such party as at this date.
(b)Other than as provided for in these Orders each party hereby forgoes any claim they may have to any superannuation benefits belonging to or earned by the other;
(c)all insurance policies to become the sole property of the beneficiary named hereunder;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders
THAT otherwise all extant Applications be dismissed and removed from the Pending Cases List.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 5479 of 2001

K A J

Applicant

And

T L J

Respondent

REASONS FOR JUDGMENT

This is a property application. The parties were married on 30 April 1977 and cohabited for about 12 months prior to the marriage. They separated on 15 July 2000. The marriage has not yet been dissolved. There are three adult children of the marriage. The parties' property consists principally of the former matrimonial home which is situate at 49 W Street, B M, and some chattels. The Wife has a motor car of little value, the Husband has superannuation of $37,000.00 and the Wife has superannuation of $13,000.00.
The application must be dealt with in accordance with the four-stage process which is referred to most recently in Hickey & Hickey [2003] FamCA 395. That process is first to ascertain and value the matrimonial assets; secondly, to determine financial and non-financial contributions in accordance with s.79(1) to ss.79(4)(a) – (d) Family Law Act 1975; thirdly, to determine whether there should be any adjustment made by reason of the matters set out in section 75(2); and, finally, to determine whether the order which is proposed is just and equitable.
The material relied upon by the Wife, the Applicant, are two affidavits sworn by her on 30 June 2003 and 4 June 2001. She gave some brief oral evidence. The Husband appears for himself. He has one affidavit which was filed on 20 June 2001. It was filed in accordance with a requirement of an order made by this court on 12 June 2001, which required him to set out in affidavit form what had happened to amounts of money which he had received. In one sense it is not so much part of his case but something that was put in as a result of a court order. It is relied upon by the Wife. The Husband gave oral evidence and was cross‑examined. The Husband is bankrupt. He went bankrupt on his own application in August of 2001.
So far as the history of what has occurred, I need to rely on what is set out in the Wife's affidavit. She says that at the commencement of cohabitation she contributed $3,000.00 by way of savings. The matrimonial home is subject to a mortgage to Westpac on which $92,000.00 is currently owing. At the time of separation the Husband had a 1996 Holden club sport motor vehicle which was encumbered by a chattel mortgage to Australian Guarantee Corporation Ltd on which both the Husband and Wife were co-borrowers. There was also a 1983 station wagon of little value and the furniture in the matrimonial home.
The Wife puts in her affidavit that the Husband had a driving school business as an asset but the Husband has described that in his evidence and it was not an asset. He had been made redundant in April 2001. The driving school business he explained as giving lessons for a driving school. He had a motor car but it belonged to the driving school and he rented it. If he had stayed in that work for four years he would have owned the motor car but because of the way in which he was giving lessons, spread out over a distance, it made it uneconomic for him and he ceased that work.
Separation was on 15 July 2000. The Wife says that she and the Husband then commenced negotiating about a property settlement and she says she believed in April 2001 that they had reached a settlement. In April 2001 the Husband received a redundancy payment of $38,909.23 from his employer Q where he was an extruder operator. He had worked there for 17 or 18 years. That money was paid into a joint bank account with the Bank of Melbourne. He then received a second redundancy payment of about $25,000.00 which did not go into the joint account.
The Wife says that on 20 April 2001, or thereabouts, they attended at the C Street branch of the Bank of Melbourne and withdrew $18,500.00. The Husband retained $17,500.00 and she retained $1,000.00. The Wife had put a requirement on that joint bank account that there be joint signatories but the Husband was able, using telephone banking, it would seem, to draw on 23 April 2001 $5000.00, 7 May 2001 $13,000.00, on 8 May 2001 $745.35. That meant the account became overdrawn in May 2001 by $725.00
The proceeding in this court, the property proceedings, were commenced by the filing of an application by the Wife on 5 June 2001. There have been a number of court appearances and orders made. On 26 June 2001 there was an order made that the Husband continue to make all payments on the mortgage and on the car loan. On 14 August 2001 there was an order that the Husband vacate the property at the former matrimonial home at 49 W Street, B M and the Wife be permitted to make arrangements for tenanting that property. There was also an order that he deliver the Holden club sport motor vehicle to the Wife, she hold it on trust for sale and sell it, pay out the loan and if there were any balance, pay it into an interest‑bearing account. There were other orders which are not relevant for current purposes.
The Husband in his affidavit of 20 June 2001 sets out what he did with the money he had withdrawn. $17,500.00 he spent on replacement furniture because he says the Wife had removed nearly all furniture from the former matrimonial home. He purchased a bed, bedding, lounge suite, dining table and six chairs, washing machine, vacuum cleaner, microwave, towels and miscellaneous other items. The sum of $5,000.00 drawn on 23 April 2001 was paid off a credit card, leaving $5,000.00 still owing on that credit card.
Of the sum of $13,000.00 drawn on 5 June 2001 $3,000.00 went to the Holden motor vehicle debt, $1,600.00 on what he describes as the GE loan in the Wife's name, of which he said he is guarantor, $3,500 on gas heating, $1,200.00 on tyres and registration for their son P’s car, $1,000.00 to the two younger children and $2,000.00 or thereabouts to the eldest child. The balance of any funds was taken up in living expenses.
As to the $25,000.00 redundancy payment that did not go into the joint bank account, he paid rates on the former matrimonial home which had been outstanding for two years and insurances on both house and car. He spent $3,000.00 on a holiday. He bought a television and stereo worth $10,000.00 and he put a clutch and tyres in the learner vehicle which he taught lessons, for $1,100.00. He deposed at that stage on

20 June 2001, which was before his bankruptcy, to having no money in any bank account.
The situation now is that the Husband and the children, the three sons, live in the former matrimonial home and pay rent. The rent, according to the Wife's evidence, does not quite cover the mortgage payments and she has been paying a little extra towards the mortgage payments. The Wife is employed as a receptionist and earns $31,600.00 per annum. The Husband is on disability benefits or Centrelink benefits.
There is no medical evidence about his circumstances but he gave evidence which is not disputed. In August of last year, over a period of six weeks, he went deaf. Earlier this year he had an implant which involved an operation and an anaesthetic. Following that, he has suffered from what can be inferred from his description as severe depression, depression to the extent that he has contemplated suicide and come close to attempting suicide. He has been treated in a psychiatric hospital at B for that depression, seeing a psychiatrist. He is currently taking medication and that has, he says, the depression under control.
He has a strong work history. As I have said, he gave evidence that he had a long period of employment with Q as an extruder operator. He is now aged 54. He can drive a truck, he said, but because his hearing is bad he cannot do that so he cannot take up that employment. He has a long-standing back ailment and he currently has the depression. He is not working and he has no ability to work. He said in his evidence that he hopes to be able to work in the future but his age and his disabilities present real difficulties for him. He has no formal qualifications, no trade or professional qualifications. He is aged 54. The Wife is aged 52.
The Husband, as I said, went bankrupt in August of 2001. It was about the same time that the motor car was repossessed. There is some dispute between the parties about what happened at that stage, although applying the law to the circumstances, I do not think it matters how it came about. It was in August 2001, just after one of the orders I have referred to, the order which was that the Wife have possession of the car on trust for sale and sell it.
The Husband says that he had arranged for her to come and pick it up. He believed it could be sold for $30,000.00 or $32,000.00. He says then the repossession agents from the finance company came. He told them about the arrangements. They said they would come back in a week. He says the Wife did not pick up the car. The car was repossessed and the documents from the finance company show what happened. At the time of repossession the creditor estimated its value at $18,000.00 but it was sold for $14,900.00. The enforcement expenses were $755.00, net proceeds of sale $14,675.00, leaving an amount due of $16,526.99.
The Wife says that she obtained the order for sale but that the Husband permitted it to be repossessed with the consequences that followed. There is no need to resolve the dispute about who is right or who is wrong about that because the law requires me to find out what the financial situation is. There cannot be any allegation of waste and so the fact is that the car was repossessed and there is now a debt of about $16,000.00. It does not matter now who was right or who was wrong when that happened.
The position with the Husband's bankruptcy is that his statement of affairs, which was tendered, discloses total debts of a little over $20,000.00 but it does not include the Australian Guarantee Corporation debt for the car.
There seems no reason why the Husband will not be discharged from bankruptcy after the minimum three-year period. A letter from the Official Receiver who is the trustee to the Wife’s solicitor, in which he advises of straightforward matters, that is, that the trustee has no interest in the Husband's superannuation fund and that it retains a half interest in the property situate at 49 W Street, B M.
That letter says:
It would be in your client's interest to make the trustee an offer for its interest in the property as soon as possible. The value of the property and consequently the value of the trustee's interest is most likely to increase with time. Alternatively, your client may wish to cooperate with the trustee in sale of the property.
The Husband says he has had some discussions with the trustee which I had a little difficulty in understanding in the context of what a bankruptcy is. He says that the trustee had told him that the trustee should be able to make arrangements with the creditors and that they should be able to retain the house. That is not the way bankruptcy works. The letter from the trustee makes it clear that the trustee will eventually be selling the trustee's interest in the house - the bankrupt estate's interest in the house one way or another, whether he sells it to the Wife or whether that property gets sold to outside parties and the proceeds divided up half to the Wife and half to the trustee.
I have been told by Mr Pinner who appeared for the Wife that the Wife's solicitor has spoken to the trustee or the trustee's representative who describes the amount owing in the bankruptcy as about $28,000.00. That would seem to be consistent with the statement of affairs plus an amount for costs and fees. There has been no professional valuation of the house. The Wife values it at $140,000.00. The Husband said that would be a minimum valuation. He said that 12 months ago the house on one side was sold for $150,000.00 and the house on the other side was valued at $160,000.00. None of that is, strictly speaking, admissible evidence but there is sufficient agreement on a value of $140,000.00 to enable me to proceed on that basis.
The fact situation which exists is this. There is the house. In a sense, the debts the Husband had immediately before going into bankruptcy will look after themselves in that the Husband is no longer liable for them. They may be paid in part or possibly in full from the sale of the house. It seems unlikely that they will be paid in full. So far as the AGC debt is concerned, it is plain that the finance company will look to the Wife for payment of the debt of $16,000.00 because she does have assets to cover it.
In terms of going through the four-stage process, first, to determine and value the matrimonial assets, the appropriate way I think of doing it is this, to go through this exercise. The matrimonial property is, firstly, the house which is valued at $140,000.00, less the mortgage $92,000.00, so a net value of $48,000.00. I think the Husband's redundancy payments should be treated as matrimonial property. There is authority to say that that can be done. They total $63,909.00.
The Wife received a payment from the Bank of Melbourne of $18,835.00 which I have not yet referred to. That was as a consequence of the bank permitting the Husband to withdraw the funds I have referred to without the joint signatures. Whether it was an ex gratia payment or whether it was by way of damages, it does not matter but she received $18,835.00. That should be treated as part of the property.
The Wife says there were chattels at the time of separation of $5000.00. I think it is appropriate to regard the Holden motor car as having no value for the purpose of looking at this exercise. In fact it had a negative value. Of the $5000.00 in chattels, I should take the debts, which is the $16,000.00 owing to AGC and $20,000.00 or thereabouts dollars of debts in the Husband's statement of affairs. That brings a net figure of $99,585.00 or around about $100,000.00.
That really does not give a realistic view of the property pool in terms of how I have to deal with it. The next exercise I think to be done is to look at what each of the parties has received since separation or should be deemed to have received.
The Husband has half the house in effect, although that is in his bankrupt estate. The moneys he was paid total $61,254.00. I have added in an amount for $10,000.00 for chattels that he currently has, but I am not so sure about that. That may be double counting and it is, at best, an estimate. But in any event I have put it in for the sake of the exercise. It will not matter in terms of the decision I have come to. Then I need to take out of that the $20,000.00 debts on his statement of affairs. I reached a figure of $75,095.00. I have not dealt with the superannuation, I should emphasise, for the moment.
The Wife has half the house. She received a $1,000.00 payment out of the joint account, the refund from Bank of Melbourne of $18,835.00. She has got $5,000.00 in chattels, and then I have taken from that the AGC debt. I finish up with $31,835.00. The Husband has $37,000.00 in superannuation. The Wife has $13,000.00 in superannuation.
When I approach the pool on the basis of what have the parties received and adding in the superannuation, adding together all those figures I have referred to, that is, the net figures of $75,095.00 for the Husband, $31,835.00 for the Wife and the two amounts of superannuation, the total amount being $176,089.00. If that was divided in half each party should receive $88,000.00, so there is the imbalance of the Husband having $75,000.00 and the Wife having $31,000.00. The property pool presents some difficulties because of the Husband's bankruptcy and what has happened since separation but in terms of working towards a result, that is the exercise I have done.
In assessing parties' contribution under section 79(1) to (4), there is no need to go through a detailed exercise because the length of this marriage, both parties working throughout the marriage, three children of the marriage, their assets at the start, each has contributed equally

50 per cent. It then becomes a matter of looking at the parties' needs.
I have described the Husband's state of health, so he has a difficult health outlook. He said that he had been told by his surgeon – this is hearsay of course but I think it will assist me – he had been told by his surgeon that he was one of a very small percentage of people probably affected by the anaesthetic in the process of the operation and so he has suffered depression. It will stay for a while but should go away. No doubt the Husband hopes that is what will happen.

It means that there is certainly a period of 12 months or something like that where it is unlikely the Husband can work in any event. His job prospects after that are uncertain, because he has got a severe hearing difficulty. He is 54 now. In 12 months' time he will be 55. He relies on his physical ability to work and he has a longstanding back problem. He said he thought he could work approximately 29 hours a week.

I take that as meaning he thought he might be able to work part-time. He has an uncertain outlook. The Wife has steady employment at $31,000.00 a year.
The adjustment for needs I think would go slightly towards the Husband. But then if I went through that exercise that would result in an adjustment towards the Wife. But having analysed what has happened in that way, I think what is the overwhelming consideration in this case is the final consideration, what is just and equitable. In terms of a fifty‑fifty split, the Husband has received more because of the cash payments he has received, but some of them have gone towards matrimonial debts in a sense.
There is detail of what happened to the $18,000.00 the Wife received. It was paid into her solicitor's trust account. The page from the trust account ledger has been tendered. A substantial amount of it has gone in legal fees. $729.25 was paid in rates on the house and there was an amount which went to the Bank of Melbourne, $2607.81, which was for mortgage arrears. I will take that into account. The Wife will receive whatever her share is in the house. She is faced with a $16,000.00 or more debt which I have described.
In the context of equal contributions but slightly more needs for the Husband, I think a just and equitable result is to leave the Husband with some amount. He says he hopes he can access his superannuation immediately on sickness or hardship grounds, and he would seem to have prospects of doing that. Mr Pinner for the Wife says that if the Wife receives a splitting order of all of the superannuation, she would hope to be able to access it on hardship grounds and so pay off the AGC debt and leave her with some share of the house.
The proposals of the parties were these. The Wife's proposal is that a splitting order be made of the superannuation giving her the whole of the superannuation. The Husband seeks to retain the superannuation. On both sides it is accepted that the house should remain where it is, that is, the Wife keeps her share. There was a proposal put by Mr Pinner on behalf of the Wife that after the bankruptcy comes to an end, if there is any balance left over, that should go towards the AGC debt. I do not propose to make an order in those terms because that would not comply with the requirement in the Family Law Act to attempt to achieve finality with the order.
What looms large is what is just and equitable. I think what is just and equitable is that if I leave the Wife with her superannuation and make a splitting order so that she receives $30,000.00 of the Husband's superannuation and leave him with the balance, which is some $7,000.00 or perhaps a little more. I think also to achieve justice and equity I should order that the Wife be responsible for the AGC debt and I will also make an appropriate order that the Wife will retain the house or retain her current interest in the house to the exclusion of the Husband.
A significant factor in what I think is just and equitable is while there is some force in the Wife saying that the Husband has had more than his share in the matrimonial property and she should get what is left, the Husband's needs must be taken into account. If he is able to immediately access the superannuation fund, a capital sum of $7,000.00 or $8,000.00 will assist him in getting back on his feet.
There will be orders accordingly.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: