Jacks & Jacks

[2007] FamCA 185

FAMILY COURT OF AUSTRALIA

JACKS & JACKS [2007] FamCA 185

APPEAL – From decision of Federal Magistrate – Six year marriage – The husband appealed the Federal Magistrate’s decision to give the wife 67% of the available property – The Court was hampered in its ability to deal with the appeal and re-exercise of discretion by the husband’s failure to provide the transcript of proceedings in the court below – The Federal Magistrate erred in using the ratio of the capital contributions which the parties put into the property to determine what they should get out – This overlooked the proportion which the parties had jointly borrowed and their day to day contributions – The husband submitted that he should also have received an adjustment for s75(2) factors – No significant disparity between the respective earning capacities of the parties or their capital positions that would justify an alteration – Re-exercise of discretion to award the wife 62.5% for contributions with no alteration for s75(2) factors – Farmer and Bramley (2000) FLC 93-060; Calverley v Green (1984) 155 CLR 242 referred to.

Family Law Act 1975 (Cth)
Federal Proceedings (Costs) Act 1981

Calverley v Green (1984) 155 CLR 242
Clauson and Clauson (1995) FLC 92-595;
Davut and Raif (1994) FLC 92-503;
Farmer and Bramley (2000) FLC 93-060
Ferraro and Ferraro (1993) FLC 92-335;
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143)
Lee Steere and Lee Steere (1985) FLC 91-626;
Prpic and Prpic (1995) FLC 92-574;
Whitely and Whitely (1996) FLC 92-684;

APPELLANT: MR JACKS

RESPONDENT: MS JACKS

FILE NUMBER:	MLM	10220	of	2005
APPEAL NUMBER:	SA	68	of	2006

DATE DELIVERED: 22 February 2007

PLACE DELIVERED: Melbourne

JUDGMENT OF: Kay J

HEARING DATE: 22 February 2007

LOWER COURT JURISDICTION: Federal Magistrates Court

LOWER COURT JUDGMENT DATE: 3 October 2006

LOWER COURT MNC: [2006] FMCAfam 397

REPRESENTATION

COUNSEL FOR THE APPELLANT: In person

SOLICITOR FOR THE APPELLANT:

COUNSEL FOR THE RESPONDENT: Ms Baczynski

SOLICITOR FOR THE RESPONDENT: Goddard Elliott

Orders

1. That the appeal will be allowed.

2. Order 5 of the orders made by O'Dwyer FM on 3 October 2006 be varied by substituting "62.5" for "67" therein appearing.

3. That order 11 of the orders made by O'Dwyer FM on 3 October 2006 be set aside.

4. That the appeal re costs be otherwise dismissed.

5. That the Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.

6. That the Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Kay delivered this day will for all publication and reporting purposes be referred to as Jacks and Jacks.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SA 68  of 2006
File Number MLM 10220 of 2005

MR JACKS

Appellant

And

MS JACKS

Respondent

REASONS FOR JUDGMENT

1. This is an extempore judgment in an appeal against property orders made by O'Dwyer FM on 3 October 2006. 

2. I am sitting as a single judge hearing the appeal in accordance with a direction provided by the Chief Justice in compliance with the provisions of s 94AAA(3) of the Family Law Act 1975 (Cth). 

3. I am significantly hampered in my capacity to deal with the appeal and its aftermath by the appellant’s decision not to provide me with a transcript of what occurred at trial.  He had good reason, namely the cost of the transcript was prohibitive.  The matter occupied two hearing dates before a Federal Magistrate.  The amount in dispute is relatively modest.  The financial circumstances of each party are very strained and it was thought in the circumstances the transcript was a luxury that the appellant could not afford.

4. This certainly limits the matters to which I can pay attention both in determining whether or not there is an error by the Federal Magistrate, perhaps more significantly as a result of reasons that will become apparent shortly, in determining what appropriate orders should be made in lieu of those made at trial.  However, I have been invited by the parties to endeavour to undertake that task rather than remit the matter on the event that I find there is an error.

Background

1. The parties married in March 1999, separating six years later in March of 2005.  Their marriage has now been dissolved.  There are no children of the marriage. 

2. At the time of the judgment in October 2006 the wife was said to be 55 years of age and in good health, the husband was said to be 52 years of age and not in good health.  Thus at the time of the marriage, the husband was in his mid-forties and the wife was in her late-forties. 

3. She owned a property at H and he owned a property at W.  They both sold their properties shortly after the marriage, the wife selling hers first and then the husband later, and together they purchased a property at T in Victoria.

4. The wife's material and the findings of the trial indicate that the wife had received a gross sale price of $170,000 on her H property which his Honour determined netted $140,000.  The husband had netted $85,000 from the W property of which $81,000 was subsequently applied towards the acquisition of the T property. 

5. In addition to the proceeds of sale of the H property, the wife also had some moneys that she had received from a very recent redundancy payment, and some long-service leave payments from the cessation of her employment.  She had deposed that she had $23,000 in the bank from that source.

6. Exhibit  D in the proceedings disclosed that she had received a payment of $25,123 which included a small amount of two days salary, the balance being redundancy pay payment in lieu of notice, termination payments and long-service leave.  The wife had sworn in her affidavit that she received $23,000 from that source.  The Federal Magistrate found she had made a contribution from proceeds she received from a wrongful dismissal claim in the sum of approximately $25,000 plus the savings she had (see paragraph 30 of the judgment).

7. His Honour appears to be confusing two issues of contribution by the wife.  The evidence also disclosed, although there is no finding about it, that the wife had received from a firm of solicitors shortly after commencement of the marriage approximately $4800 being described as “settlement moneys”.  That appears, as best I can determine from the material, although it is not otherwise referred to, as the proceeds of a wrongful dismissal claim.  It is money, in addition to the long-service leave and termination pay and the like, so it is a sum in addition to the $25,000-odd. 

8. The fourth amount of contribution that the wife had at the commencement of the marriage was further savings of $4000.

9. There is some confusion in the findings relating to what equity the wife had in a motor vehicle that was sold at about the time of the marriage.  In her affidavit she said she had a 1997 Lancer Mitsubishi sold in June 1999 for $10,500 but she went on to say the Lancer was on a novated lease that was paid out when the car was sold.  There was no evidence in the affidavit material that would indicate what if any equity existed in the Lancer Mitsubishi and the Federal Magistrate made no finding about it.  I am hamstrung in the circumstances by the absence of any transcript to determine whether or not his Honour ought to have made some finding about it.

10. Thus by way of summary it can be seen that the wife came into the marriage with:

    ·    the proceeds of sale of the H property of about $140,000.  There is some confusion as to how much should be allowed from that sum for agent's commissions. 

    ·    The further sum of about $25,000 from her redundancy payment,

    ·    the sum of $4000 in cash savings and

    ·    a sum of $4800 as the proceeds of what is described as the wrongful dismissal claim. 

    ·    That is a total of $173,800. 

11. The husband had $85,000 from W.  Additionally, there is a finding  that the husband had provided a further $6000 from the sale of some Colt pistols, thus his capital contributions were claimed to be $91,000.  There was a further area not really explored in the course of the judgment in relation to the other capital contributions the husband may well have made at the commencement of the proceedings, and the reason they were not explored is that the assets that he said were acquired with the proceeds of those capital contributions were ultimately left in the husband's possession as a result of the orders made at trial and not the subject of any appeal.

12. For my purposes in focusing on what the Federal Magistrate did and why, I shall ignore the potential of the further capital contribution by the husband from that source it having been dealt with it seems satisfactorily to the parties.  It would be double counting to give him further credit for any other contribution from that source.

The judgment

1. The Federal Magistrate made only passing comments about the evidence the parties had given in relation to their financial contributions during the course of the marriage.  The wife deposed in her material that she was employed at the time of the marriage as a receptionist.  She was there for three months and earned the equivalent of $35,000 per annum.  After leaving that job she worked at several part-time jobs and temporary jobs.  For three to four months she did part-time shift work in hospital administration, then four days a week at an accountancy firm in B, and then four days per week at a school from 2001 until separation in 2005.  She said that in all of those positions she earned approximately the same as at the first job, possibly a bit less.  The finding of the Federal Magistrate relating to the wife's working history was no more than:

   The wife established for a short duration a bed and breakfast business at the property.

2. The husband has joined issue with the wife in relation to some of what she was asserting as to her work during the course of the marriage suggesting that she was only employed for some of the time, and for that part of the time only three days a week. 

3. The wife had asserted in the course of her material that she had met the mortgage payments in relation to the home and the husband had responded by acknowledging that but by asserting that he had met other matters.  It is said in his material, about which the Federal Magistrate made no findings one way or the other:

   The entire six years at [T] I paid the following accounts, food electricity, rates vehicle registration, vehicle insurance, vehicle maintenance, house and contents insurance, entertainment expenses and our holiday expenses. The wife paid $120 per week off the mortgage and her personal expenses.

4. The husband, at the time of the marriage and throughout the marriage, was in receipt of a part-injury pension from the Department of Veterans' Affairs and a government pension based upon his invalidity.  By the time of the trial he was in receipt of a part‑disability pension of $157 per week, and the Department of Veterans' Affairs pension of $366 per week, the total a sum of $543 per week.  The wife was found to be earning from her personal exertion as a part-time administrator in Melbourne, $876 per week.

5. As can be seen there was a modest disparity in their income. 

6. Additional to the husband's receipt throughout the marriage of his pension entitlements, it was the wife's assertion that the husband was running a profitable business in wrought iron on a cash basis.  She was asserting that he had worked hard physically at the tasks and had exhibited his wares very successfully at markets around the state of Victoria.  The husband contested her assertions that he had a capacity to maintain himself and that he had been running a business in the cash economy, but his protestations appear to have not been accepted by the Federal Magistrate, who seemingly preferred the wife's evidence relating to the husband's income earning during the course of the marriage and consequentially his potential for looking after himself in the future in economic terms.

7. His Honour's finding in relation to these matters is paragraph 41:

   On his own evidence, he has been able to manage quiet comfortably on his pension.  I do not accept his evidence that he has had to borrow to survive.  He was able to purchase items, sometimes significant items, from sources not properly explained in his evidence to this court.  I accept the evidence of the wife that in significant ways he is able and mobile at the property in contradistinction to the history he has given medical practitioners.

8. He also indicated in an earlier part of that paragraph that his involvement in wrought iron manufacture was a source of significant undeclared income [at least until a motor cycle accident that he appears to have suffered in 2003]. 

9. So it was with that background in mind, and with assertions by the husband that he had laboured physically to carry out repairs and maintenance in relation firstly to the wife's property at H, and then again at the jointly owned property at T, that the Federal Magistrate came to deal with the division of the existing pool of assets. 

10. I should add to the story that the total acquisition cost of the T property of $271,500 which was met according to the Federal Magistrate's findings, as to $50,000 in joint borrowings, as to $81,000 from the husband, and necessarily as to the balance from the wife which would be a figure of about $140,500 from her direct resources.

11. The Federal Magistrate made no findings in relation to the manner in which the various contributions of the parties outside of their capital contributions should be evaluated.  He did not resolve the conflict between them as to the amount of effort that each one had put into the relationship, nor did he resolve a conflict relating to who paid what accounts.  He did make findings that the husband had done some work on the conservation and improvement of H although he could not, due to a lack of any evidence, attribute a value to that contribution.  He also made a finding that the husband had substantial responsibility for the maintenance of T, but concluded that the time and effort was relatively minor - about 6 hours a week - whilst the wife was working three days a week and running a bed and breakfast business.

12. I should say the bed and breakfast business appears, on the admission of everybody, to be a singularly unsuccessful exercise that rarely attracted a customer. 

13. He found that the parties shared the cooking and the wife did the housework. 

14. His Honour's assessment of that was that the contributions in that regard pretty well cancelled out each other and did not appear to be a basis for adjusting the percentages in favour of the husband.  What his Honour then did was to say incorrectly - in terms of the mathematics - that the wife had brought in $177,500 - and I will indicate why that is a wrong calculation in a moment – and that the husband had brought in $87,000.  That equated to a 67 per cent contribution by the wife and 33 per cent by the husband.

15. His Honour felt it appropriate to ascribe that contribution differential to the asset pool to be divided between the parties namely the former matrimonial home now said to be worth about $500,000 with a liability of about $30,000. 

16. His Honour’s calculation of the sums that the wife contributed appears at paragraph 31 where he said :

    The wife contributed the following:

$140,000	from sale of Wheelers Hill property
26,000	deposit, from savings and redundancy payout
11,500	stamp duty
$177,500	Total

1. As I have already indicated, the contributions that could be attributed to the wife were the proceeds of sale of H, something less than $140,000 but for my purposes not significantly less, a maximum of about $25,000 from her redundancy payment, $4000 cash at hand and the subsequent $4800 wrongful dismissal claim.  Those were the sources that lead to the provision of money into the relationship.  They total $173,000.  The husband's contributions of capital into the relationship, ignoring for a moment the farm equipment, was $85,000 from the proceeds of sale of his property and a further $6000 from the sale of Colt pistols.  If the approach was correct to simply apply the mathematics to the exercise of capital brought into the marriage in ratio to a distribution of the proceeds at the end of the marriage, would have seen $173,000 versus $91,000 - 37 per cent in favour of the husband, 63 per cent in favour of the wife. 

Discussion

1. The task that the Federal Magistrate was obliged to undertake is a statutory task that is set out in s 79 of the Family Law Act 1975 (Cth).  It requires him, according to the authorities, to undertake a four step process.  ((see Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Whitely and Whitely (1996) FLC 92-684 and Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143).

2. The first step is to determine what property there is to be divided up between the parties. In this case there is no challenge to that aspect.  The property to be divided up between the parties is the former matrimonial home.  The other property of the parties, chattels, farm equipment and importantly the superannuation and pension entitlements of the parties have been left to lie where they fall and I will leave them out of the exercise.

3. The next part of the exercise is then to turn to matters in determining whether or not it is proper to make an order altering the interests of the parties in the property. The considerations under s 79(4); (a), (b) and (c) are generally deemed to be the contribution requirements for the court to take into account, and the cases clearly indicate that what has been measured is not the contribution to any one particular asset, but the contribution to the marriage itself. It may well be that the assets that presently exist are assets that are recently acquired, to which there may only be contribution by one of the parties, but over the extent of the marriage there have been massive contributions by the parties to other assets that no longer exist.

4. In this case it is not in my view an orthodox approach to say, "They each did something in the household, I will cancel those out and we are just left  looking at the differential between what capital they brought in."  The task of the Federal Magistrate was to evaluate the contribution of all kinds made by the parties in the course of the relationship, direct financial contribution as referred to in sub-paragraph (a), indirect contribution other than financial contribution in accordance with sub-paragraph (b) and contributions towards the welfare of the family in accordance with sub-paragraph (c).

5. As I said in Farmer and Bramley (2000) FLC 93-060:

   68.…the Court’s task is to evaluate all of the contributions from the time of the commencement of the parties’ relationship until the time of the hearing and give such weight to such contributions as the Court thinks is appropriate in the circumstances.

6. This was a modest relationship in terms of its duration. It appears on the little I am able to glean from the material in the absence of the transcript and the absence of specific findings, to be one in which the parties worked hard to build up an asset which they had hoped would meet their needs for their future life together.  Their expectations and hopes were disappointed and the relationship did not end in the manner in which no doubt they had hoped it would when they entered into it.  But for six years the husband appears to have contributed his labour and the little income he received from his pensions plus the undisclosed income that he received from his work in wrought iron, whilst the wife attributed her talents both by way of income earner and by way of helping develop the joint project of this property, trying to establish in it the bed and breakfast business and by contributing towards the maintenance of the home itself. 

1. Each of them made those contributions and in addition they brought in their capital.  There was a disparity of capital in favour of the wife of about $82,000 on the figures that I have already discussed.  It is proper when tracing that through to the existing pool to ask "What is a fair basis of assessing contribution to the pool as it presently exists?" 

2. If it was merely appropriate to trace the direct contributions towards the acquisition of the property in question, namely the amount of money each party had put into the property, and then simply extrapolate that out to what is left in the property, the proper analysis of that would indicate, that out of the purchase price of $271,500 the husband provided $81,000 initially plus half the borrowings, that is another $25,000, a total of $106,000.  The wife provided the balance.  Thus the husband provided 39 per cent and the wife 61 per cent, not the 67 per cent that the Federal Magistrate indicated had been supplied.

3. I refer by way of analogy to the proper approach in determining the equities of the parties in a joint venture to that described by the High Court in Calverley v Green (1984) 155 CLR 242 where the majority of the court, Gibbs CJ, Mason, Brennan and Deane JJ said the extent of a beneficial interest of a party must be determined at the date of purchase, and the fact the mortgage debt was repaid by one is not relevant. It is erroneous to regard the payment of a mortgage debt as payment of the purchase price.

4. One half of the moneys that were jointly borrowed and applied towards the purchase price were held to have been provided by the respondent in that case.  It was a case in which there was a purchase price of $27,000, $9000 came from one party and the other $18,000 was jointly borrowed.  On a proper analysis, it was not held that the person who put the $9000 had put all the money in and therefore should get all the money out; but, on a proper analysis, it was held the person who put in the $9000 had also put in a further $9000 by way of borrowings and therefore should get two‑thirds of the value of the property.

5. If the Federal Magistrate had gone down that path, and if it was a legitimate path for him to go down, then the mathematics that he applied to the exercise were incorrect because the contributions towards the acquisition of that property alone were in the ratio, as I have already indicated, of 61 per cent in favour of the wife and 39 per cent in favour of the husband, not as otherwise. But that was not the task that his Honour had to undertake. His task was to make assessments in accordance with s 79(4)(a), (b) and (c). Unfortunately, I am unable to glean from the ultimate decision of the Federal Magistrate how he underwent that task other than by simply tracing through his mistaken mathematics about the contributions towards the acquisition of the T property and then disregarding the rest of the contributions because, in his view, they cancelled each other out.

6. This alone is a sufficient basis for interfering with the outcome in the proceedings to determine that his Honour had applied  the wrong principles to the matter, and accordingly it thus makes it appropriate that I now direct my attention to determining what the appropriate outcome should be.  If, by coincidence, my outcome coincides with that of the Federal Magistrate then the appeal would be dismissed.  If it does not, then the appeal will be allowed. 

Discretion re-exercised

1. As I have indicated, the parties have invited me to re‑exercise discretion rather than remit   This is a difficult task because of the lack of all of the evidence. I have to do it within the confines of the findings of the Federal Magistrate as to the various contributions the parties have made in the course of their relationship and as to the balance of the factors to which I must give consideration.

2. In the circumstances, my assessment of the contributions that should be notionally attributed to each of the parties, given the material I have already outlined, would lead me to reach a conclusion that an appropriate assessment that adequately recognises the disparity in the capital introduced by the wife but that otherwise gives weight to an equality of contributions of all other kinds during the course of this relationship by both of the parties is that the available remaining capital should be divided as to five‑eighths to the wife and three‑eighths to the husband.  This gives the wife effectively the first quarter of the capital before they divide the rest. 

3. Of a pool where I have an estimated sum of $470,000 available, this would give the wife the first $117,500 and the parties would divide the rest.  In my view, this is an appropriate recognition of the disparity of capital introduced by the parties into this marriage and otherwise gives recognition to the contributions that each of them has made in the course of the marriage. 

4. Starting from that position, I need to pay attention to whether there are any factors under s 79(4)(e) that would have bearing on the outcome. They are identified by the Federal Magistrate in his findings, he having concluded that there were factors but the factors balanced each other out and no adjustment should be made. He identifies those factors.

5. The wife, as I have indicated, is slightly older than the husband.  She is in good health.  The husband is in poor health, in that the material clearly indicates that he has suffered sufficient disabilities to qualify for a part Veterans' Affairs pension and a part social security based on his incapacity.  He has sought to introduce into evidence in these proceedings of an up‑to‑date medical report.  There was already a plethora of medical reports before the court in the earlier set of proceedings.  The up‑to‑date medical report really takes the matter not much further than the earlier ones in describing his physical disabilities, mainly significant left and right shoulder disabilities; also his need for a hip replacement and some degenerative changes to his knees and hands.  He complains of significant and severe difficulties with his back, including walking difficulties and the like. 

6. The Federal Magistrate was I think less than impressed than the doctors were with the husband's complaints as to his inability to undertake productive physical work.  The state of the medical reports when the Federal Magistrate came to deal with the matter was that he had some limited opportunities for gainful employment with very short hours a week and he was unlikely to find jobs that would accommodate his shortcomings.  The present prognosis is totally and permanently disabled with no capacity to work.  But, as is urged upon me by the wife, the medical evidence needs to be read in light of the findings of the Federal Magistrate that the wife's evidence given at trial was that the husband was much more mobile than the history he had given his medical practitioners and that he had for some years made available by way of a source of income his capacity to work with wrought iron and undertake some fairly major projects, as can be seen from the exhibits to the affidavits.

7. The Federal Magistrate's finding was that, firstly, that if the husband was to undergo a hip replacement it would likely be successful and that should leave him the prospect of at least taking up a further source of income. 

8. His Honour also made a finding that if he did not turn out to have such success with his operation and could not recreate his hobby, then he ought to be able to get some adjustment in his pension, but exactly how that conclusion was reached is not abundantly clear on the material.  It seems, on the limited material that was available - and again I comment on the lack of transcript - that he had gone as far as he was likely to go with the Department of Veterans' Affairs who were attributing many of his injuries to sources other than his time of service in the Navy.  It is not abundantly clear what further pension he would get by way of a part‑pension. 

9. But for all that, as I have already indicated, the differential between his earnings by way of pension entitlements and DVA entitlements and the earnings of the wife, limited to her part‑time employment as a school administrator, is not so great that, given the short period of time that the wife has to stay in the workforce to provide for her future that it would appropriate to make any further adjustment under s 75(2).  Nor is the differential between their earning capacities brought about by the differences in their state of health and the modest assets that are otherwise available to them such that, in my view, it would appropriate to make any further adjustment under s 75(2)

10. In the circumstances, there are no other factors that are relevant under s 75(2).  It cannot be said that the duration of the marriage has affected the earning capacity of the husband - he attributes his lack of earning capacity to matters that occurred either outside of the marriage or independent of the marriage - and generally the financial circumstances of each of the parties as a result of the property orders are going to be very modest, albeit the wife will have a larger share of the available property than the husband. 

11. When I stand back and look at the exercise and give consideration to these various factors, in my view, the outcome that I have already determined on a contribution basis is the appropriate outcome.  To give effect to that outcome it will be necessary to simply vary Order 5. 

Costs appeal

1. Additional to the appeal in relation to the substantive orders there is an appeal against a costs order that was made that the husband pay the wife's costs in the sum of slightly less than $4000.  I do not have the benefit of the transcript relating to the arguments for the costs and all the reasons for costs, but it has been conceded now by counsel for the wife in these proceedings that the costs judgment was based upon a consideration of offers made in correspondence between the parties, which offers had been bettered by the wife as a result of the orders of the Federal Magistrate but could no longer be seen to have been bettered as a result of the orders that I have substituted.  In the circumstances, it is conceded that the costs appeal should be allowed and that the costs orders should be vacated. 

I certify that the preceding fifty seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kay

Associate: 

Date:  13 March 2007