Kale and Karmel (No 2)
[2012] FamCA 954
•20 November 2012
FAMILY COURT OF AUSTRALIA
| KALE & KARMEL (NO. 2) | [2012] FamCA 954 |
| FAMILY LAW – PROPERTY - De facto relationship - Where there are disputes as to the value of the pool and the contributions of the parties – Where there is a dispute as to the duration of the de facto relationship – Where there is disparity of capital contributions – Whether superannuation interests to be included in single divisible pool or “two pools” or asset by asset approach in respect of superannuation |
| Family Law Act 1975 (Cth) |
| Browne & Green (1999) FLC 92-873 Cerini & Cerini [1998] FamCA 143 Chorn & Hopkins (2004) FLC 93-204 Coghlan & Coghlan (2005) FLC 93-220 DJM & JLM (1998) FLC 92-816 Jonah & White (2011) 45 Fam LR 460 KQ v HAE [2007] 2 Qd R 32 Norbis v Norbis (1986) 161 CLR 513 Omacini & Omacini (2005) FLC 93-218 Pierce & Pierce (1999) FLC 92-844 Polonius & York [2010] FamCAFC 228 Williams & Williams [2007] FamCA 313 |
| APPLICANT: | Mr Kale |
| RESPONDENT: | Ms Karmel |
| FILE NUMBER: | BRC | 1093 | of | 2011 |
| DATE DELIVERED: | 20 November 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Kent J |
| HEARING DATE: | 5, 6 November 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Sweetapple |
| SOLICITOR FOR THE APPLICANT: | SJP Law |
| COUNSEL FOR THE RESPONDENT: | Mr Freeburn SC |
| SOLICITOR FOR THE RESPONDENT: | Feeney Family Law |
Orders
The proceedings be adjourned until 9.00 am on Friday 23 November 2012 for the making of orders giving effect to these reasons for judgment.
In the event the parties are able to reach agreement on the form of orders which give effect to these reasons for judgment, the parties be at liberty to submit those orders to my associate …., together with confirmation by both parties that the form of orders is agreed, in which case such orders shall be made in chambers and the hearing at 9.00 am on Friday 23 November 2012 shall be vacated.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kale & Karmel has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 1093 of 2011
| Mr Kale |
Applicant
And
| Ms Karmel |
Respondent
REASONS FOR JUDGMENT
These are property settlement proceedings, within the meaning of s 90M(1) of the Family Law Act 1975 (Cth) (“the Act”) between Mr Kale (“the Applicant”) and Ms Karmel (“the Respondent”) after the breakdown of their de facto relationship.
Whilst the parties contend for different conclusions as to the duration of their de facto relationship, it is not in issue that they previously lived in such a relationship and that, by choice, they are no longer living in a de facto relationship. By their competing applications for orders pursuant to s 90SM(1) and the evidence and submissions in support of the making of such orders, both parties contend that one consequence of them no longer living in a de facto relationship is that it would be just and equitable for the Court to make orders altering their interests in property.
As will be seen from the further discussion below, the breakdown of the parties’ de facto relationship ended the mutuality inherent in that relationship; their common use of property, in particular the use of the home they had previously occupied together prior to the breakdown; and assumptions implicit in the existing property arrangements they chose.
It follows from the fact that both parties actively seek the Court’s intervention in the making of orders altering their property interests that their mutual assumptions implicit during their relationship that existing arrangements of their property interests were sufficient or appropriate ended with the end of their de facto relationship.
For these and reasons which follow, I am satisfied that the just and equitable requirement of s 90SM(3) is fulfilled by the making of orders.
There is no issue that the Court has jurisdiction to make orders under Part VIIIAB, and indeed such orders are sought by both parties. The dispute concerning the period of the relationship is relevant only to the assessment and evaluation of the parties’ contributions, and perhaps future needs, in a context where there were no children of the relationship and thus neither party has the care and control of a child.
The Applicant contends that the parties were in a de facto relationship within the meaning of the Act from June or July 2002 until October 2009, a period of just over seven years. The Respondent contends that their de facto relationship subsisted from October 1998 until January 2010, a period of just over eleven years.
The Applicant is 54 years of age, having been born in 1958. He has two children from a previous marriage, which ended in October 1994, namely J, born in 1985 and now aged 27 years, and E, born in 1987, now aged 25 years.
The Applicant completed the requirements for his PhD in late 1997, and was employed by a University as a part-time Senior Research Assistant. Between 2003 and 2006, the Applicant returned to university study in a health related area whilst maintaining part-time employment from 2003 to 2005. Since December 2006, the Applicant has been employed in a health related area on a casual basis. Until about mid-2003, in respect of J, and up until 2005, in respect of E, the Applicant was also caring for his children on a more or less equal shared care basis with his former wife.
The Respondent completed a Bachelor of Laws degree in about mid-2000 and a Bachelor of Arts degree in late 2000. In about July 2000, the Respondent commenced employment with a company as a business consultant and in 2003, undertook the Bar Practice Course . From January 2004 to January 2005, the Respondent was employed as a paraprofessional and in about April 2005, commenced her current self-employment as a barrister in private practice.
In final oral submissions at the conclusion of the trial, it was initially contended on behalf of the Applicant that in respect of a pool of assets combining both non-superannuation and superannuation interests as contended for by the Applicant (discussed further below, a pool which included a $70,000.00 notional add-back), the assessment of the parties’ contribution-based entitlements would result in an apportionment of 75 per cent/25 per cent in favour of the Applicant, with a further 10 per cent adjustment in favour of the Applicant upon consideration of the future needs or s 90SF(3) factors. Thus, on a combined pool of assets, including superannuation, the Applicant initially contended for an overall 85 per cent/15 per cent division in his favour.
Prompted by the Court as to whether a “two pools” approach ought be taken in the circumstances of this case given the history and circumstances of the accumulation of the Applicant’s superannuation, it was then submitted on behalf of the Applicant that each party ought retain the whole of their respective superannuation interests and the non-superannuation assets ought be divided overall 75 per cent/25 per cent in favour of the Applicant, derived from a 65 per cent/35 per cent assessment of contribution-based entitlements with a 10 per cent adjustment in favour of the Applicant for future needs factors.
Subsequent to the conclusion of the trial, but pursuant to a direction then made, the Applicant provided a final form of orders sought. Those orders reflect an alteration in the Applicant’s position subsequent to his Counsel’s oral submissions at trial in that, by those orders, the Applicant contends for an overall 80 per cent/20 per cent division of non-superannuation assets in his favour, with both parties retaining their superannuation, and if the superannuation interests are included in a single pool as an alternative, the Applicant seeks a division of that combined pool of 85 per cent/15 per cent in his favour.
On behalf of the Respondent, it was contended in final oral submissions at trial that in respect of the pool for which the Respondent contended, combining non-superannuation assets with superannuation interests, there ought be a 60 per cent/40 per cent contribution-based assessment in favour of the Applicant, with no more than a 2-5 per cent adjustment in favour of he Applicant for future needs factors.
Pursuant to leave then given for the purpose, Counsel for the Respondent subsequently provided written submissions primarily directed to the question of whether or not there ought be a “two pools” approach with non-superannuation assets receiving separate consideration to the parties’ superannuation interests. The primary contention in those submissions did not depart from the oral submissions at trial in that the Respondent maintained the position outlined above and it was submitted that whether or not a “two pools” approach was adopted, the outcome ought achieve the same result.
Non-Superannuation Assets
By the time of final oral submissions on behalf of each party, and in the course of those respective submissions, significant adjustments and important concessions were made by each party as to the findings that ultimately ought be made with respect to the divisible pool as compared with previously filed Balance Sheets; affidavit material or Case Information Documents on behalf of each party.
Without being exhaustive about such adjustments or concessions, the Applicant resiled from his previous contention that the main non-superannuation asset, being the property at N Street, S Suburb ought be included at a determined value of $495,000.00 rather than $550,000.00, based upon an interpretation of the expert valuation evidence contended for by the Applicant. In other words the Applicant accepted, ultimately, that the value of this property is $550,000.00, being the value contended for by the Respondent based upon valuation evidence, including Exhibit 3.
Other, relatively minor, differences about bank balances of the parties respectively and the mortgage debt and the value to be attributed to chattels were also resolved. As to the latter, the Respondent acknowledged that there was no valuation evidence with respect to certain items of chattels in the possession of the Applicant, and whilst the Applicant did not challenge that he had possession of those items, it was accepted that there was no reliable valuation evidence to place even the modest value on those items that was previously contended for by the Respondent.
Both parties have historical Higher Education Contribution Scheme-Higher Education Loan Program debts in respect of their past tertiary studies, but consistent with these being met by the parties out of future income under the terms or conditions of those loans, both parties agreed these debts ought be excluded from consideration. That is, whilst the debts exist, it was acknowledged by both parties, in effect, that appropriate orders could be determined without inclusion of those debts in calculating the divisible pool. Likewise, both parties agreed to exclude their respective current liabilities for credit card debts and, in the case of the Respondent, her current overdraft debt with respect to her practice. Again, there was tacit acknowledgement by both parties that such post-separation credit card debts as exist were unnecessary to consider in framing just and equitable orders, and in respect of the Respondent’s overdraft debt, its exclusion is accompanied by the exclusion of any outstanding invoices or prospective invoices for completed work. I am satisfied that just and equitable orders can be achieved without including the items referred to.
Similarly, the respective financial statements of each party identified other liabilities, most significantly for legal fees, but the parties agreed that such liabilities need not be included in the “pool” considered to achieve appropriate orders.
What remained in contention as a pool issue was the Applicant’s contention that there ought be a notional add-back to the divisible pool of $70,000.00, referable to financial conduct on the part of the Respondent post-separation justifying that approach. As the outcome with respect to this issue depends upon other factual findings, including as to the period of the relationship, it will be dealt with later in these reasons. Subject to that issue, I find that the existing interests of the parties or either of them in non-superannuation assets and liabilities is as agreed by the parties and set out in the following table together with the parties’ agreed values as to their respective superannuation interests:
| ITEM | VALUE |
| Non-Superannuation Assets | |
| N Street, S Suburb (title registered in the name of the Respondent) | $550,000.00 |
| Applicant’s Mitsubishi Motor Vehicle | $9,000.00 |
| Applicant’s QTMB Account | $5,559.00 |
| Respondent’s NAB Offset Account | $2,700.00 |
| Applicant’s chattels: - furniture and effects - bicycle and tools | $2,000.00 $1,600.00 |
| Respondent’s chattels: - furniture and effects - bicycle, double bass, piano - artwork - Office furniture and computer | $2,000.00 $2,500.00 $3,500.00 $2,250.00 |
| TOTAL GROSS ASSETS | $581,109.00 |
| Liabilities | |
| Mortgage balance for N Street property | ($89,502.00) |
| TOTAL LIABILITIES | ($89,502.00) |
| TOTAL NET NON-SUPERANNUATION ASSETS | $491,607.00 |
| Superannuation Assets | |
| Applicant’s superannuation interests | $286,325.00 |
| Respondent’s superannuation interests | $22,800.00 |
| TOTAL SUPERANNUATION ASSETS | $309,125.00 |
Period of De Facto Relationship
As already noted, there is no issue as between the parties that they were in a de facto relationship within the meaning of the Act at least between mid-2002 and October 2009. The difference lies in the Respondent’s contention that a de facto relationship commenced in 1998 and not mid-2002 as the Applicant contends, and that the de facto relationship did not end until January 2010, whereas the Applicant’s contention is that it ended upon physical separation in October 2009.
The definition of a de facto relationship is set out in s 4AA(1) of the Act as follows:
A person is in a de facto relationship with another person if:
(a) the persons are not legally married to each other; and
(b) the persons are not related by family (see subsection (6)); and
(c) having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
…
Subsection (2) provides that those circumstances may include any or all of the following:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g) whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children;
(i) the reputation and public aspects of the relationship.
Importantly, subsection (3) provides that, “No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.” Moreover, subsection (4) provides that the Court is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the Court in the circumstances of the case in determining whether a de facto relationship exists.
In Jonah & White (2011) 45 Fam LR 460, Murphy J undertook an analysis of the definition by reference to authorities in this and other jurisdictions. In particular, Murphy J had regard to the provisions of State legislation in each of Queensland and New South Wales and cases where those provisions have been considered, noting that such provisions are not, “…entirely cognate…” with s 4AA of the Act. In the course of that discussion, Murphy J referred to the decision of the Queensland Court of Appeal (McMurdo P, Keane and Holmes JJA) in KQ v HAE [2007] 2 Qd R 32 where at [19] in a joint judgment, their Honours said:
[19] These considerations all then support the view taken in earlier cases that a “de facto relationship” will not be established for the purposes of Pt 19 of the Property Law Act [1974] unless it can be seen that “the parties have so merged their lives that they were, for all practical purposes, living together as a married couple” (citing Thompson v Department of Social Welfare [1994] 2 NZLR 369 at 274; Mao v Peddley [2002] DFC 77,515 at 77,522 and K v H-J [2006] QSC 168 at [67]).
Murphy J also referred to passages in that judgment where, at [18], their Honours noted that the fact that two people have a sexual relationship will not suffice to establish that they are “de facto partners” by reason of the fundamental requirement that the parties must be, “…living together as a couple on a genuine domestic basis…” and, at [20], that it may also be accepted that a continuing cohabitation in a common residence is not necessary to establish the continuation of a “de facto relationship”, at least where the parties have lived together and have not effected a permanent separation. In that same paragraph ([20]) of their joint judgment, the Court of Appeal referred to cases where friendship, or even courtship, had not matured into the commitment whereby, “…the parties have so merged their lives that they were, for all practical purposes, living together as a married couple.”
The Applicant contends that whilst the parties were in a relationship from 1998, it was not a “de facto relationship” within the meaning of the Act until they commenced cohabitation in about July 2002 in the N Street, S Suburb property purchased in the name of the Respondent but with resources provided by both parties. For her part, the Respondent contends that the parties were in a de facto relationship within the meaning of the Act from 1998.
Having regard to all the circumstances of their relationship, I find that the parties’ de facto relationship within the meaning of the Act commenced in late 2001, but not earlier. The circumstances of the relationship of most relevance to that conclusion, operating in concert, are as follows:
a)For a significant time after their relationship commenced in 1998, the parties continued to maintain separate residences with the Applicant’s primary residence continuing to be his W Suburb property, purchased many years before, whilst the Respondent maintained her rental accommodation at L Suburb. Whilst the parties differ as to the extent, both acknowledge that they each spent overnight periods each week, more or less, in each of these residences, but relevantly, they maintained separate residences.
b)I accept the Applicant’s evidence that he made work and career decisions driven by his desire to sustain shared care of his children with his former wife and that until the Applicant commenced residing in the S suburb property with his children, this was largely provided at W suburb. Both children, who are now adults, provided affidavit evidence and were not required for cross-examination. There is no reason not to accept their evidence. Acceptance of their evidence leads to the conclusion that, at least prior to the Applicant taking up residence at the S suburb property with the children, it could not be said that a central feature of the Applicant’s life, namely his role with his children, had merged with his relationship with the Respondent, and vice versa.
c)Prior to March 2002, when the Applicant transferred a capital sum to the Respondent to facilitate the purchase of the S Suburb property, the parties had maintained separate finances. That is, there is little or no evidence which I accept as to any financial dependence or interdependence by the parties of substance or any arrangements of substance for financial support between them. Each of the parties met the costs of their separate residences separately. The Respondent was paying rental to her parents for the property in which she resided.
A simple but important example of the parties’ commitment to maintaining separate finances is their respective evidence as to a “loan” for expenses made by the Applicant to the Respondent in July 2000. The Respondent deposes to a shortfall in her capacity to then meet expenses, including rent, and deposes to the Applicant making a loan of funds to her (as does the Applicant) and both parties depose to the loan being repaid shortly thereafter, once the Respondent was in funds from her then-employer. It is contrary to the notion of financial interdependence that the parties would so act.
d)Commencing in late 1999, and for a significant portion throughout the year 2000, the Respondent was pursuing an application for employment with a Commonwealth Department, which would have involved the Respondent relocating to Canberra, at least in the first instance, and potentially further afield thereafter. That application did not fail to come to fruition because of a decision by the Respondent not to pursue it. Rather, the Respondent was ultimately not successful following an interview process in late 2000. Whilst the Respondent asserts, and the Applicant denies, that there were discussions of arrangements for the Applicant to visit Canberra on an alternate weekend type basis so as to maintain the relationship if she succeeded in her application, it is, in my view, completely contrary to a merger of their lives in the relevant sense, particularly having regard to the Applicant’s continuing role with his own children, which obviously meant the Applicant would always be remaining in Brisbane, that the Respondent was pursuing such an employment option, with all its ramifications. That is, I find it contrary to the existence of a de facto relationship at the time that the Respondent would pursue this option for her employment and future.
In this context, I accept the Applicant’s evidence to the effect that the Respondent had told him that her career goal was to work for the Commonwealth, preferably in an overseas posting…. In that context, the Respondent’s pursuit of such employment, and the Applicant’s support of her in that pursuit, seems clearly at odds with a merger of their lives. It is more consistent with the position that the parties’ relationship, or at least its endurance, was at least at that time secondary to their individual career and lifestyle choices.
It is not in issue that the parties met and formed a relationship from April 1998, including a sexual relationship. Nor is it in issue that each spent overnight periods at the residence of the other. Otherwise, it is clear they spent time together socialising and as will be further discussed, both were later involved in renovating the W Suburb property. It is clear that both parties spent some time in the company of the Applicant’s children although, as already noted, the evidence of the children diverges significantly with that of the Respondent as to the extent of her role. However, beyond some sharing of expenses for groceries and the like in the form of each party supplying the household needs for their separate residences that were enjoyed by both on occasions when both were present and the use of motor vehicles, the preponderance of evidence is that the parties maintained separate finances, separate residences and did not engage in any co-ownership or mutual acquisition of assets until the point was reached in late 2001 that the decision was made to acquire property together.
Whilst the property was not acquired until early 2002, on the Applicant’s evidence in cross-examination he acknowledged a decision being made in late 2001 that he would assist the Respondent to acquire a property, suitable also for the accommodation of the Applicant and his children for the periods when the children were in his care. Whilst a significant body of evidence on each side, including from other witnesses, was directed to illustrating the seriousness of the relationship or the commitment of each party to it from time to time, in my judgment the relationship between the parties became, definitively, a de facto relationship within the meaning of the Act upon the parties’ decision at the end of 2001 for effectively a joint acquisition of a property, given the degree to which that decision reflects a degree of mutual commitment to a shared life; plans to maintain a common residence and, in the words of the authorities, a “merger” of their lives. Whilst they were a “couple” before that, only then can it be said that they became, “…a couple living together on a genuine domestic basis.”
I find that a de facto relationship existed between the parties commencing as at about November 2001, and not before. That is not to say that, as will be discussed, contribution by each party prior to its commencement is not to be taken into account.
I further find that a de facto relationship as defined concluded with the separation of the parties at the end of October 2009, when the Respondent vacated their joint home. It is clear on all the evidence, particularly that of the Respondent, that for a considerable period prior to October 2009, the relationship had been unhappy, and arguably the parties separated under one roof in mid-2009. Whilst, as at October 2009, both parties may have harboured some hopes of achieving a reconciliation and, consistent with that, the parties pursued a number of joint activities and visits to each other, with the benefit of hindsight it can be said that a de facto relationship within the meaning of the Act came to an end in October 2009 when the Respondent vacated the parties’ common residence.
I therefore find that a de facto relationship within the meaning of the Act subsisted between the parties between November 2001 and until October 2009, when the Respondent vacated the parties’ home, a period of about eight years.
Contributions – s 90SM(4)
The Applicant completed the requirements for his PhD in late 1997, and as at the commencement of the de facto relationship, was employed by a University in Queensland as a part-time Senior Research Assistant. As already noted, the Applicant was also caring for his children on a shared basis with his former wife. Between 2003 and 2006, the Applicant returned to university to study in the healthcare field while maintaining some part-time employment in the years from 2003 to 2005. From December 2006, the Applicant has been employed in health care on a part-time or casual basis.
The Respondent commenced working for a company in about the middle of 2000, and remained in that position until the end of 2003. For a twelve month period from the beginning of 2004, the Respondent worked as a paraprofessional and after a shared holiday with the Applicant in early 2005, commenced private practice as a barrister in 2005.
At paragraph 47 of her affidavit filed 12 October 2012, the Respondent sets out the periods during which she worked on a full-time basis or a part-time basis as a barrister, and I accept the accuracy of that.
Extrapolated from paragraph 49 of the Respondent’s affidavit filed 12 October 2012; Exhibit 4; paragraphs 75 and 76 of the Applicant’s affidavit filed 17 October 2012 and Annexures “DRC12” and “DRC13” to that affidavit, it would seem that for the period of the de facto relationship from the end of 2001 until the end of October 2009, the income of each party from employment was, at least in broad terms, as follows:
| Income Period | Applicant | Respondent |
| End 2001-June 2002 (6 months) | $9,219.00 | $16,263.00 |
| 2002-2003 | $18,751.00 | $38,775.00 |
| 2003-2004 | $17,154.00 | $27,718.00 |
| 2004-2005 | $2,448.00 | $21,693.00 |
| 2005-2006 | $2,295.00 | $28,478.00 |
| 2006-2007 | $12,708.00 | $2,047.00 |
| 2007-2008 | $23,206.00 | $2,986.00 |
| 2008-2009 | $22,947.00 | $36,200.00 |
| 1 July 2009 – 31 October 2009 | $6,506.00 | $14,600.00 |
| TOTAL | $115,234.00 | $184,760.00 |
| SAY | $115,000 | $185,000 |
Whilst there are some differences between the respective documents identified above with respect to particular financial periods, the differences are not substantial. For example, in compiling his table, the Applicant deducts from the Respondent’s income any amounts paid in reduction of the Respondent’s Higher Education Contribution Scheme debt and in terms of assessing income available to the relationship, that is probably a reasonable approach. Conversely, for the financial year ending 30 June 2008, the Applicant contends a figure of nil for the Respondent, presumably based upon her Notice of Assessment for that financial year disclosing a nil taxable income, but the Respondent claims an income of $2,986.00 for that year presumably, I infer, because the level of income was earned but did not exceed the tax threshold, explaining the nil assessment.
Aside from other capital contributed by the parties respectively to the acquisition and maintenance of the S Suburb property, analysed in more detail below, proper comparison of respective financial contribution during the period of the relationship is not confined to income earned by each party. In the case of the Applicant, his unchallenged evidence[1] is that he retained in excess of $9,000.00 from the net proceeds of sale of his B Street, W Suburb, block of land over and above the amount of $78,000.00 from that source which he transferred to the Respondent’s bank account, and from the sale of his W Suburb house property in June 2003, after payments to the Respondent and repayment of a loan of $90,000.00 to his parents, the Applicant was left with $74,000.00 to be added to his savings. The Respondent deposes that as at 1 September 2003, his accumulated savings totalled about $88,260.00, which diminished by 1 July 2009 to an amount of about $2,000.[2]
[1] Paragraphs 95 and 96 of Applicant’s affidavit filed 17 October 2012.
[2] Paragraph 139 of Applicant’s affidavit filed 17 October 2012.
In respect of the Respondent, whilst it can be seen that for the financial years ended 30 June 2007 and 30 June 2008, she earned very limited income from employment, it is not in issue that on 12 June 2007, the Respondent received payment of $43,862.00 via an inheritance.
I am satisfied on the evidence and find that, in one form or another, each party can be taken to have contributed these amounts to the relationship. That is, that the Applicant supplemented his income by resorting to using his savings to which the capital sums referred to formed part, and likewise, the Respondent supplemented her income from employment by applying the proceeds of her inheritance.
When these respective sums are added to the respective columns outlined above, the Applicant’s column increases to a total of about $200,000, and the Respondent’s column increases to a total of about $230,000.
In terms of the use made of these respective financial contributions, I have regard to the feature that the Applicant’s children, neither of whom is, “…a child of the de facto relationship…” within the meaning of s 90RB of the Act, resided with the parties in their household in the early stages of the de facto relationship, at least in the period from when the parties had a common household in the S Suburb home. On J’s evidence, which I accept, he left the S Suburb home in early to mid-2003, whilst E deposes to leaving the home in January 2005. Prior to those respective times, the children were in the care of the Applicant for up to about half of each week and alternate weekends. Obviously, their support had to be met, including their financial support, in the periods when the children were in the Applicant’s care.
Balanced against that, I accept that in establishing her practice as a barrister and in maintaining that practice, the Respondent had expenses which had to be met. Clearly enough, even allowing for tax deductions, the expense of maintaining chambers in, for example, the 2007 and 2008 financial years, would have exceeded by a margin the income from self-employment the Respondent derived in those periods, albeit that, as I have already noted, the Respondent received her lump sum inheritance in June 2007.
The further factor to be considered is that in respect of the proceeds of sale of the Applicant’s W Suburb house property, the Respondent claims a contribution via her assistance to the Applicant in renovating that property for the purpose of sale. Whilst the Applicant disputes the extent of the Respondent’s claimed assistance in this respect, discussed further below, it can be accepted that the Respondent made contribution of significance. Whilst there is nothing in the way of admissible evidence to demonstrate the extent to which improvements carried out to the W Suburb property enhanced the sale price ultimately achieved, both parties seemed to proceed upon the basis that the renovations enhanced not only the marketability of the property, but the value. To what extent is unclear and cannot be determined on the evidence.
Nevertheless, at least to some extent, it can be concluded that the Respondent made some contribution to the yield from the W suburb property, discussed further below, so attributing the entirety of this to the Applicant (as in the figures above) may distort the position somewhat in favour of the Applicant.
It will be seen from what follows that I find there to be no forensic need to determine, even if that were possible on the evidence, the extent to which the Respondent can be said to have contributed, measured in a dollars sense, to the sale price ultimately achieved for the W Suburb house property.
Capital Disparity
A significant and central feature of this case is the disparity between the parties of capital introduced.
Some two decades prior to the parties’ relationship, in 1980, the Applicant became the owner of two vacant blocks of land in W Suburb. In 1992, he purchased a house property in W Suburb which became the Applicant’s principal place of residence and remained so until the Applicant commenced cohabitation with the Respondent in about June 2002.
But for a debt to his parents in the amount of $90,000.00, the Applicant owned these properties outright by the time cohabitation between the parties commenced.
In February 2002, the Applicant sold one of the blocks of land and received $87,159.76 in net proceeds. On 19 March 2002, the Applicant transferred $78,000.00 from these sale proceeds to the Respondent’s bank account to provide funds for the purchase of N Street, S Suburb, in the Respondent’s name. That property was acquired in the Respondent’s sole name on 18 April 2002 for $365,000.00 plus stamp duty of $6,525.00 plus conveyancing costs.
Aside from the capital investment of $78,000.00, the Applicant provided a statutory declaration to support bank borrowing in which he declared the $78,000.00 deposit to the Respondent as a gift and further declared an ability and intention to deposit a further $120,000.00 to the Respondent’s home loan account when he sold his W Suburb house property. Clearly, the provision of the deposit and the statutory declaration and the Applicant’s other participation was instrumental in the National Australia Bank approving a loan facility of $292,000.00 to the Respondent to enable her to purchase in her name the S suburb property.
On 25 November 2002, the Applicant sold his remaining block of vacant land at W Suburb for net proceeds, after commission, of $147,369.19. The entirety of the proceeds were made payable to the Respondent and banked to her NAB housing loan offset account in relation to the loan for the S Suburb property.
On 16 June 2003, settlement of the sale of the Respondent’s house property in W suburb was effected for $295,000.00. The evidence establishes that when those sale proceeds were available, the total debt owing in respect of the NAB housing loan for the S suburb property was $116,000.00. The Applicant caused that amount to be paid to the Respondent’s offset account on 16 June 2003, with the balance of proceeds of the property being deposited by the Applicant into his savings. Thereafter, the Applicant transferred $90,000.00 from his savings to repay his debt to his parents.
I accept the Applicant’s evidence that as at 1 September 2003, the Applicant’s savings stood at about $88,000, after making the payments referred to.
It can thus be seen that, after the purchase of the S suburb property in the Respondent’s name in April 2002 for a cost, including stamp duty, of $371,525, by 30 June 2003, the Respondent had injected capital from the sales of the three real properties he owned, transferred to the account of the Respondent, totalling $341,000.00. When the stamp duty amount is added, which I accept the Applicant paid from his savings, the total amount is $347,525, which equates to approximately 94 per cent of the cost of acquisition of the S suburb property.
It is clear that the parties arranged for the purchase to be solely in the name of the Respondent to take advantage of the Respondent’s entitlement to the First Home Owner’s Grant of $7,000.00, which was received by the Respondent and applied to the purchase. I accept that the Respondent also contributed savings in the order of $10,000 or perhaps $11,000 initially to the acquisition, but I also note by way of comparison that on the Applicant’s evidence, which I accept, he had purchased in October 2001 his Mitsubishi motor vehicle for a price then of $21,200 and that vehicle forms part of the currently available assets at the value noted above.
It is well-settled by authorities of this Court considering the equivalent provisions in Part VIII of the Act that it is not only the disproportionate dollar value of capital introduced but the use made of that capital which falls for consideration.[3]
[3] See, for example, Pierce & Pierce (1999) FLC 92-844, 85,881; Williams & Williams [2007] FamCA 313.
In Williams & Williams [2007] FamCA 313, the Full Court, after reviewing authorities and approaches concerning contribution of capital, said (at [26]):
We think that there is force in the proposition that a reference to the value of an item as at the date of commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards 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 initial value at the time of commencement of cohabitation. But in so doing, it is equally as important to give recognition to myriad of other contributions that each of the parties has made during the course of their relationship.
Whilst purchased in 2002 for a price of $365,000.00, it is accepted that the S suburb property now has a value of $550,000.00. Simply recognising the historical dollar values of the capital injected by the Respondent from the sales of his real estate does not properly recognise the “worth” of those capital contributions, given the value of the asset that now exists which those contributions facilitated. It is clear, and I find, that the initial capital injection of the $78,000.00 deposit and the statutory declaration of the Applicant, was instrumental in obtaining the initial borrowing from the National Australia Bank to enable the property to be purchased. That purchase gave both parties a home. It also, for example, provided the capacity for income from tenants occupying rooms in the property to be earned, such income being, on the Respondent’s case, in the order of about $10,000. Further, the subsequent capital injections minimised interest on the loan funds borrowed from the bank.
Indeed, as at the time of the injection of the final payment of $116,000.00 referred to, that amount, if paid directly against the bank loan, would have eliminated any debt on the property.
The Applicant acquiesced in the capital paid to the Respondent being retained in her offset account. Whether this was to provide for future renovations of the property as the Respondent contends, or not, that facility enabled the Respondent to have access to those funds in establishing her private practice as a barrister and thus the income from that source. True it is that the Respondent applied the income she earned to the offset account (or at least almost all of it), but that facility, and the ability to use or have access to those funds, has significance in the Applicant thereby assisting the Respondent in the establishment of her private practice and chambers.
The Applicant acknowledges on his evidence, and I accept, that the Respondent made some contribution to the renovations of the W Suburb house property. The Respondent claims essentially non-financial contribution in various forms other than relatively minor matters, such as, for example, the provision of pot plants. Accepting that the marketability of the W Suburb house property, and indeed the price achieved by its sale, probably was enhanced by the renovation leads to the consequent conclusion that the Respondent made contribution to the proceeds yielded from the sale of that property. However, as already noted, it is impossible, on the evidence, to frame that in any monetary or value terms.
Moreover, I am inclined to prefer the evidence of the Applicant as to the extent of the Respondent’s contributions in this respect. By analogy, given my acceptance of the evidence of J and E in preference to that of the Respondent in terms of the extent of her claimed contributions to their care and support, I hesitate to accept the extent of the Respondent’s claimed assistance regarding the renovation of the W Suburb property. As the Applicant highlights, the Respondent was in full-time employment throughout the period from when renovation commenced (other than the bathroom) until its sale. She resided mainly at L Suburb, and in comparison to her working full-time, five days a week, the Respondent had significant available time to apply himself to the renovations. It would seem not to be in issue that it was the Respondent who funded any renovation costs. Most fundamentally, there was only a house to renovate in the first place because the Respondent had acquired it many years before. Nevertheless, I take into account the Respondent’s contribution in this respect, and I find that it is likely to be greater than that acknowledged by the Applicant, but more probably than not was closer in extent to that which he has outlined in some detail in his affidavit evidence than that claimed by the Respondent as set out in her affidavit evidence.
Of course, viewing any aspect of contribution in isolation may result in unfair conclusions. That is, to consider financial contribution, even of capital, in isolation without the contextual setting of the mutual aspects of a relationship, including non-financial contribution such as homemaking and the like once a de facto relationship is on foot, may give unfair emphasis to financial aspects. I take that into account in dealing with non-financial contributions below. However, before doing that, it is convenient to deal with the parties’ post-separation financial contributions.
Post-Separation Financial Contributions – Add-Back Issue
The Respondent has, both in her affidavit and oral evidence at trial, explained the operation of the mortgage offset account as well as her other accounts more generally.
Aside from the capital contributions by the Applicant to the offset account already referred to, the Respondent acknowledges other lump sum payments to that account by the Applicant in May 2007 totalling $9,000.00.
In general terms, outgoings on the S suburb property were met by the Respondent from her accounts, including the offset account, whilst her income was banked to those accounts. However, that is in the context that substantial capital was contributed by the Applicant to that account, as already noted, and the credit balance of that account offset interest that would have otherwise been charged on the mortgage debt for the property.
At paragraph [49] of her affidavit filed 12 October 2012, the Respondent tabulates what is described as a “comparative table of financial contributions to the relationship”, including, for the period from November 2009 to trial. Focussing upon the period from November 2009 to October 2012, it would seem that the Respondent claims as her contributions anything paid from capital because it is sourced from the offset account in her name. This ignores the original sources of the capital and the fact that, as at the end of the de facto relationship as I have found, there was a credit balance in the offset account of some $147,000.
By reference to the amounts tabulated, it is obviously illusory for the Respondent to claim, as her contributions, a total of $207,751.00 when, at paragraph [53] of the same affidavit, she confirms that the total of her net income, after tax, in the same period was, “…approximately $115,000.” Add to that her deposition at paragraph [80] of the same affidavit that she has paid approximately $57,000 in legal expenses during the period from May 2010 to trial, it is illusory for the Respondent to suggest that the contributions she nominates are to be treated as her sale contribution.
The amounts particularised in fact total $123,915.00 and not $207,751.00 as asserted there. This arithmetical error is repeated at page 13 of the Respondent’s Amended Case Information Document filed 2 November 2012.
Whilst the Respondent’s inheritance in June 2007 of approximately $44,000 was deposited into the offset account, I have already noted above that that sum arrived at the end of a financial year in which the Respondent earned exceedingly modest income, followed by a like year thereafter. I have also taken it into account in the above income table.
Thus, while I accept the accuracy of the amounts of the outlays tabulated for the period referred to by the Respondent (but not the total which is $123,915.00 and not $207,751.00), I do not accept these are to be treated as solely the contributions of the Respondent. Plainly, a total after tax income of $115,000 did not go far in meeting the tabulated expenses totalling $123,915.00 plus legal costs of $57,000. That difference of about $66,000 was obviously met from the existing capital held in the offset account as at separation, given that the amount remaining in that offset account has been reduced to a balance for the purposes of this trial of only $2,705.00 and that is before account is taken of the Respondent’s living expenses over a three (3) year period. Most importantly, on the factual history, the existing balance in that account as at the point of separation can substantially be traced to capital contributions made by the Applicant, as already discussed.
At paragraph [139] of his affidavit filed on 17 October 2012, the Applicant deposes to the utilisation of his savings, to the extent of some $86,000, between September 2003 and July 2009.
Taken with paragraph [143] of that affidavit, I infer that the Applicant’s utilised savings plus income were applied, in one form or another, to the relationship or for the benefit of both parties, save only to the extent of necessary support of his children in the early period of it.
Taken from the income table earlier set out, commencing with the 2004 financial year (given the capital injections by the end of the 2003 year) and until the parties separated, the Applicant’s utilised savings plus after-tax income totals about $167,000, whilst the Respondent’s after-tax income plus her inheritance totals an equivalent amount of about $168,000.
Over the same period, outlays for the S suburb property, including rates, utilities and the like were met out of the offset account, into which the Respondent’s income was banked, but it does not follow that such expenditure is to be treated solely as a contribution by the Respondent, or at least a contribution over and above that of equivalent contributions being made by the Applicant. Moreover, both of them also historically met expenses in relation to repairs and renovation of the S suburb property.
Importantly, over and above income of the Respondent banked to the offset account, the Applicant paid, as has already been noted, $116,000.00 into that account in June 2003 and $9,000.00 in May 2007, a total of $125,000.00 (the $9,000.00 is part of the utilised savings figure already referred to).
Given the foregoing, it cannot be concluded that the capital amount in credit in the offset account at the time of the parties’ separation can be attributed solely, or even mostly, to the Respondent. From her net after tax income and inheritance, the Respondent had to meet numerous expenses, including living expenses, as did the Applicant from his income and savings.
The Respondent deposed at paragraph [140] of her affidavit filed 12 October 2012 that, “The balance of the NAB offset home loan account at date of separation [October 2009] was $151,849.” The Applicant identifies that in November 2009, there was $147,000 in the offset account.
The Applicant contends that, after allowing for $62,486 expended on mortgage repayments for the S suburb property and $15,037 expended on rates, insurance and utilities in the period since separation on that property (a total of $77,523), the sum of $70,000 ought be notionally added back to the pool on the contention that the Respondent has, “…effectively unaccounted for…” this $70,000 and that the Respondent has acted recklessly and wantonly with the remaining $70,000 in the offset account at separation.
The written submissions on behalf of the Respondent (at paragraph [36]) identify, by reference to Omacini & Omacini (2005) FLC 93-218 (“Omacini”), what are said to be, “…three categories of add-back…” including, “…where the parties have expended money on legal fees…” as the first of those. Thereafter (at paragraph [37]), it is submitted that the Applicant has not demonstrated that this case falls into any of those categories.
That submission would appear to ignore, or at least not deal with, the Respondent’s own evidence at paragraph [80] of her affidavit filed 12 October 2012 that the Respondent has paid approximately $57,000 in legal expenses during the period from May 2010 to date from the offset account. Notably, the Applicant’s evidence in his Financial Statement filed 15 October 2012 is that he owes $105,050.00 in legal expenses to his previous lawyers. The Applicant was not cross-examined about any paid legal expenses, and there is no evidence otherwise of any paid legal expenses by the Applicant.
Chorn & Hopkins (2004) FLC 93-204 (“Chorn & Hopkins”) is authority for the propositions that while the treatment of funds used to pay legal costs remains ultimately a matter for discretion, in determining how to exercise that discretion, regard must be had to the source of the funds. If the funds used to pay legal fees existed at separation, and were such that both parties could be seen as having an interest in them, then such funds ought be added back as a notional asset of the party who has had the benefit of them. In contrast, if the funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours, or received in his or her own right, they will generally not be added back as a notional asset.
Whilst the Respondent deposes to $18,000 of a $20,000 loan from her mother being deposited to the relevant account in the post-separation period, she also deposes, and gave oral evidence in cross-examination, of utilising the whole or virtually the whole of those funds on two trips overseas in the post-separation period. Otherwise, the total of the Respondent’s after tax income post-separation contributed to the account is $115,000.00.
If it be notionally assumed in favour of the Respondent that she paid her legal fees from her post-separation income, then only $58,000 remained available from which the Respondent had to provide her living expenses over a three year period. Whilst the Respondent’s most recent Financial Statement contains little in the way of a breakdown of her claimed weekly expenditure (paragraph [32]), it can readily be inferred that the remaining balance referred to, which translates to a weekly figure of about $370 per week over the subject three-year period, would largely have been required by the Respondent for her own needs.
Turning to the particulars of payments made from the account identified in paragraph [49] and elsewhere in the Respondent’s affidavit filed on 12 October 2012, it is clear that the Applicant is not prepared to give the Respondent credit for the $40,000 she has paid for rental accommodation, nor any interest or fees paid with respect to the account.
As to rental, in circumstances where the Applicant has had the benefit of residing in the S suburb property ever since separation, with the expenses for that property, including utilities, having been met from the subject account, it does not seem to me to be unreasonable for account to be taken of the Respondent’s need to rehouse herself elsewhere and pay rent. More specifically, I find that it cannot be said to be unreasonable for the Respondent to have expended funds on rental accommodation, even if it be said that that expenditure came from the capital existing in the subject offset account.
In Omacini, the Full Court of this Court rejected the notion that the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation will not result in that expenditure being added back, “…with nothing more.” There, the Full Court considered it a necessary requirement to examine and make some assessment of the reasonableness or otherwise of the expenditure made.
It is now well-settled by that and other authorities (Cerini & Cerini [1998] FamCA 143; Chorn & Hopkins; Browne & Green (1999) FLC 92-873; DJM & JLM (1998) FLC 92-816) that the notional adding back of funds which no longer exist ought be the exception rather than the rule.
Moreover, in Polonius & York [2010] FamCAFC 228, the Full Court of this Court endorsed several approaches to the way in which relevant financial conduct or financial behaviour can legitimately be taken into account in the analogous s 79 process. Those approaches include, first, including a notional asset in the divisible pool; second, taking it into account when assessing contributions; and third, in considering future needs factors.
The items identified in paragraph [49] of the Respondent’s affidavit for the period from November 2009, including her rental, total approximately $124,000 (and not $207,751 as there appears). Notably, according to the Respondent’s Financial Statement filed on 12 October 2012, the balance of the account was then $12,347, but by the first day of trial on 5 November 2012, the schedule provided disclosed that the account had reduced to $2,705, which is the amount included in the divisible pool.
Plainly, there was sufficient capital in the subject fund as at the time of separation ($147,000) to meet all of the expenses identified by the Respondent, including her rental, which can be said to have been for the benefit of both parties in respect of the S suburb property and the Applicant’s use and occupation of the property, as well as the Respondent’s rental expenditure (total $124,000). That leaves a difference of $23,000.
That reduces to about $20,000 when account is taken of the remaining balance in the offset account already included in the divisible pool.
I conclude that in the exercise of my discretion, the amount of $20,000 ought be notionally added back to the divisible pool. Such conclusion is not because of a finding that the Respondent has acted negligently, wantonly or recklessly, as is contended by the Applicant, but because an add-back of this amount is consistent with Chorn & Hopkins. Having effectively made allowance for the Respondent using $40,000 of the fund to re-house herself, and having regard to the income available to the Respondent totalling $115,000 in net after tax terms since separation, it seems to me an inescapable conclusion that not less than $20,000 from the capital fund has been applied by the Respondent to the payment of her own legal fees. In circumstances as earlier discussed, where the Applicant has a significant liability for outstanding legal fees which is not being brought into account (and no other evidence of him paying legal fees from any capital exists), it would be unjust and inequitable not to notionally add back this amount.
Moreover, whilst I am not persuaded that as much as $70,000.00 ought be notionally added back given the use made of the capital fund, I accept the submission on behalf of the Applicant to the effect that credit must be given to the Applicant for post-separation contribution in circumstances where the capital fund to which he substantially contributed has been applied, post-separation, to the items identified.
Other Non-Financial Contribution
To my mind, it is unnecessary and would be unproductive to undertake a detailed discussion or examination in minute detail of each and every assertion by either party concerning this aspect.
I am satisfied that, commencing prior to the de facto relationship, each party made relevant non-financial contributions for the benefit of both. That included, in the case of the Respondent, contribution for the benefit not only of the parties but also for the Applicant’s children.
Whilst, as earlier indicated, I do not accept, based on the evidence of the Applicant’s children (which went unchallenged), that the Respondent’s contribution of either a homemaking or “parenting” kind was to the extent claimed by her; nevertheless, a distinguishing feature of her non-financial contribution as compared with the Applicant is that her contributions of a homemaking kind were made for the benefit also of the Applicant’s children, in particular when they were part of the parties’ household.
I accept the evidence of the Applicant’s children and the Applicant himself that the children were largely independent, given also their ages, when they resided in the S suburb property and that they, too, contributed to the household, but it would seem that their contributions are to be seen largely for their own benefit rather than necessarily benefitting the Respondent.
Likewise, as I have earlier noted, whilst I do not accept that the Respondent’s non-financial contributions to the renovation of the W suburb home owned by the Applicant were to the extent claimed, the relevant point is that, by the time the substantial part of that renovation was underway, the parties were in a de facto relationship and the Respondent did contribute to this venture as part of the joint endeavours of the parties.
In relation to the W suburb property, I accept that the Respondent undertook tasks of the kind identified in paragraph [52] of the written submissions on her behalf, and I have already noted qualifications as to the extent of time and effort involved in that, as referred to by the Applicant. Nevertheless, I accept the proposition that the renovation was a joint enterprise for the mutual benefit of the parties, albeit that the Applicant bore the major share of the responsibility.
I also accept that both parties made non-financial contributions (in addition to their financial contributions) as regards the work that was undertaken to the S suburb property although, as will be further discussed, it would appear that has not reflected in any enhanced value for that property.
Obviously enough, the purchase of the S suburb property was a joint enterprise, and the Respondent substantially involved herself in finding that property and negotiating its purchase and her loan was initially arranged via her employment.
I accept that the Applicant made substantial non-financial contributions both to the renovations concerning the W suburb property and to the S suburb property.
I accept that both parties made non-financial contributions in the form of homemaking and mutual society and support, consistent with a de facto relationship which endured for as long as it did.
Superannuation
It is not in issue that the Applicant came to the relationship with significant superannuation interests.
It appears to be accepted that by mid-2002, when the parties commenced cohabitation in the S suburb property, not long after the commencement of the de facto relationship as I have found, the value of the Applicant’s superannuation interests was $182,500.00.
The Applicant relies upon a summary of contributions prepared from statements (Annexure “DRC-14” to his affidavit filed 17 October 2012) for the proposition that the growth in value of his superannuation interests to the current total of $286,325.00 is overwhelmingly due to accruals from the initial capital he had, rather than to contributions made to these interests during the relationship.
The Applicant acknowledges withdrawing $5,030.00 from his superannuation post-separation and it can be inferred that this amount was used to fund his living expenses.
As appears from the annexure referred to, contributions by the Applicant to superannuation during the relationship were exceedingly modest. Whilst matched by some co-contributions from the employer, the schedule referred to discloses that a total of about $6,000 only were made as voluntary contributions by the Applicant during the period when the de facto relationship subsisted.
As already noted, the Respondent commenced her employment with a telecommunications company in mid-2000, and maintained that employment until the end of 2003. By reference to her Financial Statement filed 12 October 2012, the Respondent accumulated $17,925.00 during the period of her telecommunications company employment. I infer that her QSuper superannuation of $4,479.00 is attributable to the period from the beginning of 2004 until the end of 2005 when the Respondent was employed as a paraprofessional. The Respondent has a third fund with a very modest balance. The total of her superannuation interests is agreed to be valued at $22,800 currently and obviously most of that was accumulated during the period of the de facto relationship.
On the evidence, I accept the Applicant’s contention that the current value of his superannuation interests is overwhelmingly attributable to the superannuation interests he had accumulated over the period of his working life prior to the relationship, with accretions to that base over the period since, with only modest contributions being made during the relationship. As a matter of simple mathematics, the current value of the Applicant’s superannuation interests would be arrived at by investing the sum of $182,500.00 some ten years ago on a 5 per cent per annum cumulative rate of return.
It is also true that the Respondent did not make, in relative terms, substantial contributions to her superannuation interests during the relationship, nor did she have the benefit of employer-funded contributions for much of it, but it was largely accumulated during the relationship.
It is also of significance that the parties finally separated, as I have found to be the case, some three years ago, so a significant portion of accretions to these respective interests, particularly in the case of the Applicant, may be attributed to the post-separation period.
On behalf of the Respondent, it is contended that she ought be treated as having made a substantial notional contribution to the Applicant’s superannuation, including in the period from when the parties commenced a relationship as a couple in 1998 until their de facto relationship commenced and thereafter, essentially on the contention that mutual financial contribution and the sharing of expenses between the parties allowed contribution to be made by the Applicant. In short, that the Respondent ought be regarded as having significantly contributed to the increase in value of the Applicant’s superannuation interests as set out above.
I do not accept the Respondent’s contentions in this respect, at least to the extent that the Respondent contends her notional contribution is substantial. Whilst the Applicant contributed $6,000.00 over the years of the de facto relationship to his superannuation interests, in the scheme of things, that is minor when placed in the context of all other contributions by both parties. On the facts here, it cannot be said that the Respondent sacrificed her own capacity to build superannuation in favour of both parties electing to maximise the Applicant’s contributions to superannuation during the relationship.
Moreover, the submission on behalf of the Respondent directed to gender, that is, “As often happens, the woman’s contributions and resulting superannuation balance are lower than her partner…” is not apposite to this case. The primary reason for the modest amount of the Respondent’s superannuation as compared with that of the Applicant is that the Applicant started with a very significant base. The Respondent chose to engage in private practice as a barrister during the relationship, which obviously meant she did not have the benefit of employer-funded contributions to superannuation. In circumstances where the Applicant was about 43 years of age when the de facto relationship commenced, whilst the Respondent was 27 years of age, the current superannuation interests of the Applicant largely reflect his accumulation of superannuation over a significant part of his working life as compared with the Respondent’s position to the point of commencement of the de facto relationship.
In my judgment, on the facts here it is consistent with Coghlan & Coghlan (2005) FLC 93-220 to separately consider the parties’ non-superannuation property from their superannuation interests. Indeed, on the facts already referred to, an asset by asset approach which separates superannuation interests from non-superannuation interests is far more likely to achieve a just and equitable outcome.
Moreover, I am satisfied that a just and equitable outcome can be achieved by making orders which preserve to each party their existing superannuation interests and making the adjustment of their property interests out of the non-superannuation assets. I do not consider it just and equitable to make orders which would adjust any amount in favour of the Respondent by way of a splitting order out of the Applicant’s superannuation to meet the Respondent’s entitlement, as will be discussed further.
In those circumstances, I take into account the foregoing discussion about the accumulation of the parties’ superannuation interests in approaching the assessment of contributions, albeit in the context of addressing the outcome with respect to non-superannuation assets.
Contribution-Based Entitlements
Inclusion of the added-back notional sum of $20,000.00 to the net non-superannuation assets means that the relevant net non-superannuation pool totals $511,607.00.
A 75 per cent/25 per cent apportionment of that pool in favour of the Applicant produces a 50 per cent disparity between the parties. That 50 per cent disparity represents, in dollar terms on that pool, $255,803.50.
As earlier discussed, the Applicant can point to direct capital injections substantially from the sale of three real properties he owned prior to the relationship totalling $347,894.19. Relative to the acquisition cost of the S suburb property of about $371,000, that injection of capital has obvious significance, given the value now of that property at $550,000.
The contribution-based assessment finally contended for on behalf of the Applicant is obviously based upon the proportion his contributed capital represents to an asset now worth $550,000.00. On that contention, a 50 per cent disparity, or approximately $255,000, falls short not only of returning to the Applicant his invested capital in historical dollar terms, but also does not make sufficient allowance for the time value of money – essentially, that it does not adequately reflect the increase in value of the S suburb property since its acquisition by an amount of about $185,000.
However as, for example, Pierce & Pierce (1999) FLC 92-844 and the other authorities earlier referred to demonstrate, it is not legitimate to simply carry forward, on a mathematical basis, the proportion of capital disparity and apply it to the final pool, given the “myriad” elements of contribution to be considered, and given also that many of those elements are unamenable to measurement in money terms.
It has often been observed that assessments pursuant to the analogous Part VIII (s 79) process proceed in the context of a broad discretion, and not in some mathematical or quasi-mathematical formulation. For example, in Norbis v Norbis (1986) 161 CLR 513 at 523-524, Mason and Deane JJ said:[4]
The Family Court has rightly criticised the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
[4] See, also, McGregor & McGregor (1996) FLC 92-710; Garrett & Garrett (1984) FLC 91-539 at 79,372.
Balanced against the significance of capital disparity are the following central features:
a)There is disparity in favour of the Respondent in respect of income earned during the relationship, even after taking into account the Applicant’s utilisation of savings and the Respondent’s inheritance;
b)The Respondent made a contribution to the renovation of the W suburb property. Both parties accept that the renovation enhanced not only the marketability of that property for sale, but the sale price ultimately achieved. Whilst the added value of the renovation cannot be quantified, and thus the contribution of the Respondent to the renovation cannot be quantified in dollar terms, it was a contribution of significance in circumstances that the sale achieved proceeds of $295,000.00. In that respect, the Respondent can be taken to have made a contribution to not only the capital of $116,000.00 invested in the offset account from those proceeds, but also the balance received by the Applicant;
c)The Respondent also made capital contribution to the acquisition of the S suburb property via the First Home Owner’s Grant and her savings. I have already noted that the Applicant’s contribution to the relationship included the Mitsubishi motor vehicle purchased from his savings;
d)Effectively all of the Respondent’s earnings were paid into the offset account as well as her inheritance. It was from that account that all utilities on the S suburb property were paid;
e)Plainly, the purchase of the S suburb property was a joint enterprise, and the Respondent located the property and negotiated its purchase and assumed liability for the borrowing;
f)The S suburb property had the capacity to accommodate the parties and the Applicant’s children. A distinguishing feature between the parties of non-financial contribution is that the household included the Applicant’s children for a time and, as already noted, regard must be had to the fact that the Applicant was obliged to provide for the financial support of his children, at least in the early part of the relationship, from his earnings so the income disparity would be greater;
g)Even though there were no children of the relationship, it endured for eight years. That is, whilst in what may be termed a short relationship direct financial contributions may more readily be accommodated in a mathematical or quasi-mathematical approach, the length of the relationship here means that elements which are incapable of being measured in money terms assume more prominence;
h)The Respondent also contributed to the credit balance remaining in the offset account as at the point of the parties’ separation. Together with the notional add-back, it can be seen that the Respondent has also contributed post-separation to the items already identified which were paid from that account;
i)Account is to be taken that the notional contribution of the Respondent to the Applicant’s superannuation is being accounted for with respect to the assessment of contribution to non-superannuation assets.
Conversely, I consider that the Respondent’s contention for a 60 per cent /40 per cent apportionment in favour of the Applicant (upon a single pool including superannuation) for contribution-based entitlements in no way properly reflects or gives sufficient weight to the disparity in capital contributed and the use that was able to be made of that capital contribution as part of contributions overall, having regard to the relatively modest pool under consideration. I do not consider that a 20 per cent disparity, or about $102,000, is within any legitimate range of outcomes.
In circumstances where, but for the element of the care of the Applicant’s children in the early stages of the relationship, the parties’ non-financial contributions may be taken to be essentially equal, proper and fair recognition must be given to financial contribution.
I therefore conclude that contribution-based entitlements are appropriately assessed overall at 75 per cent/25 per cent in favour of the Applicant of the non-superannuation assets leaving each party with their respective superannuation interests intact.
Future Needs Factors – s 90SM(4)(d), (e) including s 90SF(3)
No order I propose to make will have any effect upon the earning capacity of either party.
On a 75 per cent/25 per cent apportionment in favour of the Applicant of the non-superannuation divisible pool, the Applicant will receive the equivalent of $383,705.25 plus retain his superannuation interests at $286,325.00.
The Respondent will receive $127,901.75 plus retain her superannuation interests at $22,800.00.
As already noted, each party has liabilities agreed not to be included in the divisible pool, particularly for legal expenses, but the reality is that such liabilities exist, and in the case of the Respondent, she is credited with a notional add-back of $20,000.00 she has already had to her benefit but which has been expended.
The Respondent accepts that, at her age and stage in life, when compared to the position of the Applicant, she has a superior future earning capacity. She expressed the desire in cross-examination and the prospect that once these proceedings are behind her, she will enhance her level of earnings in private practice as a barrister and I accept that.
Both parties depose to historical health issues, particularly mental health issues, although these were not the subject of medical evidence. Nevertheless, based upon history, I accept that the Respondent has the capacity to earn higher income than the Applicant and most significantly, has the capacity to earn such income over a very substantially greater period, whatever notional age of retirement one selects, given the age difference between the parties.
At age 54, the Applicant will soon be in the position to access his superannuation interests, even by payment of partial distributions or part pension from the age of 55 years. In comparison, at age 38, it will likely be many years before the Respondent can access her superannuation interests and indeed, to accumulate further interests, she will need to provide for superannuation out of her self-employment given her intention to continue in private practice/self-employment.
Neither party has the care or control of a child and both are capable of meeting their commitments for support. Neither have the responsibility to support any other person.
Both are capable, from their potential future incomes (and superannuation in the case of the Applicant) to enjoy a reasonable standard of living in all the circumstances.
On the history, both parties contributed to the income, earning capacity, property and financial resources of the other. In particular, the Respondent was supported by the Applicant in her move to private practice as a barrister, and likewise, the Applicant provided support to the Respondent in his transition to a career as a health care provider.
The duration of the subject de facto relationship has not adversely affected the earning capacity of either party.
On the evidence before me, neither party is cohabiting with another person. In my judgment, balancing of the competing considerations leads to the conclusion that no adjustment in favour of either party ought be made for the relevant factors.
In particular, I find that the Respondent’s superior future earning capacity is balanced out against the capital the Applicant is to retain; his superannuation interests, his own capacity to earn income in the future and the fact that the Respondent will need to provide for her own future needs for a significantly longer period into the future compared with the Applicant given the difference in the parties’ ages.
Just and Equitable Requirement – s 90SM(3)
Apart from what has been stated at the outset of these reasons as to this requirement being fulfilled, it is necessary that the form of orders made be just and equitable.
On the Respondent’s most recent affidavit evidence as to her historical discussions with her financier, taken with the proposed outcome, I cannot be satisfied that there is any realistic prospect of the Respondent being capable of retaining the S suburb property and paying to the Applicant the cash amount that would be required to achieve the division.
Moreover, in any event I am satisfied that in all the circumstances, a just and equitable outcome ought provide for the Applicant to retain the S suburb property if that is possible. That has been his home for a decade, including post-separation and he has made substantial contribution to its acquisition.
It would not be just and equitable for the Respondent to receive any of her entitlement (other than her own superannuation interest) in the form of a split of the Applicant’s superannuation interests. The Respondent is only 38 years of age and it is more probable than not that there is a long time to pass before she is eligible to access any superannuation.
It is obviously in the interests of both parties that the Applicant retain the S suburb property, if that is possible, rather than the costs of sale of that property being incurred as yet another reduction on the relatively modest pool available to the parties.
Twenty five per cent of the divisible non-superannuation pool equates to $127,901.75. The Respondent is to be taken to retain or to have had the benefit of the following:
a)Her NAB offset account - $2,700.00;
b)Her chattels - $10,250.00;
c)Notional add-back - $20,000;
That results in a total of $32,950.00 and leaves a rounded up balance of $95,000 to achieve 25 per cent.
In these circumstances, if the Applicant seeks to retain the S suburb property, it is just and equitable that he re-finance the existing mortgage debt to remove that liability from the Respondent and pay to her the cash sum of $95,000.00 in exchange for a registerable transfer of her interest to him.
I note that the present equity in the S suburb property, on the tabulated figures, is $460,498.00 ($550,000.00 less mortgage balance of $89,502.00). The cash payment of $95,000.00 represents 20.6 per cent of that equity. In the event that the property has to be sold, which may be for a net figure achieving either more or less than the current equity figure, provision needs to be made for the Respondent to receive 20.6 per cent of the net proceeds after deduction of costs of sale.
As to the prospects of the Applicant being capable of retaining the subject property by paying out the cash sum to the Respondent and re-financing the mortgage debt, I have concerns as to the Applicant’s capacity, given the current level of his earnings and his other liabilities, including legal expenses in excess of $100,000.00. On the expert evidence of Mr U, registered valuer, difficulties attend the subject property in its present state.
In Part 6.5 of his report attached to his affidavit filed 9 May 2012, Mr U addresses the particular problems with respect to the subject property. It holds classifications which mean that the existing improvements cannot be removed from the land, yet in its current state, it is described by the expert as in a, “…non-habitable state of repair.” There are structural defects in the existing dwelling, and the expert assesses that the cost of remedying these defects and completing renovation of the existing dwelling make it uneconomical to complete based upon the likely end value.
All of these factors would seem to result in the conclusion that it is by no means certain that the Applicant can in fact retain the subject property and fulfil the requirements for payment of a cash sum to the Respondent and a re-financing of the current debt.
Likewise, it is to be noted that the observations of the expert with respect to valuation of the subject property may mean that it is not readily saleable. A purchaser prepared to expend what the expert describes as an, “…uneconomical…” cost to rectify the dwelling, which cannot be removed, will need to be found in the event of the property being marketed for sale.
Whether the Applicant seeks to retain the property, or pending its sale, the Applicant ought henceforth be responsible for the payment of all outgoings, including such payments as are necessary to maintain the mortgage debt at no greater than the value identified currently, given that the Applicant continues to reside in the subject property.
Provided the Applicant immediately assumes responsibility for payment of the outgoings on the S suburb property, including rates and utilities as well as mortgage repayments so as to maintain the mortgage debt at its current dollar value, if the Applicant intends to and can facilitate the necessary financing arrangements, it would be just and equitable for him to have until 18 December 2012 to pay the Respondent $95,000.00 in exchange for a registrable transfer of the title to the property, with re-financing to release the current mortgage.
If the Applicant no longer maintains that intention or cannot accommodate these requirements, the subject property ought forthwith be listed for sale by auction to take place, given the time of the year, eight (8) weeks hence. In the event the Applicant does not refinance and pay out the Respondent for any reason there ought be a default provision for sale by auction.
Otherwise, each party is to retain all items of property presently in their possession, power or control and also shall retain their respective superannuation interests. Each party is obviously to be solely responsible for any debt or liability presently in the name of that party (except the mortgage on the S suburb property).
Given the issues identified with respect to the alternative outcomes, having regard to my conclusions, the parties ought have an opportunity to agree formal orders giving effect to these reasons, having regard also to whether the Applicant continues to seek to retain the subject property or whether it is to be sold. If the latter, the parties ought be able to agree terms of sale by auction which maximise both parties’ prospects, but if not, that will be resolved by the Court.
I therefore order that the proceedings be adjourned until 9.00 am on Friday 23 November 2012 for the making of orders giving effect to these reasons for judgment.
I further order that, in the event the parties are able to reach agreement on the form of orders which give effect to these reasons for judgment, the parties be at liberty to submit those orders to my associate, together with confirmation by both parties that the form of orders is agreed, in which case such orders shall be made in chambers and the hearing at 9.00 am on Friday 23 November 2012 shall be vacated.
I certify that the preceding one hundred and sixty five (165) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Kent delivered on 20 November 2012.
Associate:
Date: 20 November 2012
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