Kennedy and Nash

[2016] FCCA 1068

FEDERAL CIRCUIT COURT OF AUSTRALIA

KENNEDY & NASH [2016] FCCA 1068

Catchwords:
FAMILY LAW − Consideration of initial contribution in de facto property division.

Legislation:

Family Law Act 1975 (Cth), ss.90SM, 90SF(3)

Cases cited:
Pierce & Pierce [1998] FamCA 74, [1999] FLC 92-844

Applicant: MS KENNEDY

Respondent: MR NASH

File Number: DGC 2330 of 2015

Judgment of: Judge Phipps

Hearing date: 26 April 2016

Date of Last Submission: 26 April 2016

Delivered at: Dandenong

Delivered on: 6 May 2016

REPRESENTATION

Counsel for the Applicant: Ms Mendis De Costa

Solicitors for the Applicant: David Gibbs & Associates

Counsel for the Respondent: Mr Howe

Solicitors for the Respondent: JKB Lawyers

ORDERS

1. That the proceeds of sale of the property situate at and known as Property T be applied as follows:

   (a)First to pay all costs, commissions and expenses (including repair costs of $5,760) of the sale;

   (b)Secondly to discharge the mortgage and any other encumbrances affecting the real property;

   (c)Thirdly to pay the sum of $536 to the applicant for her MasterCard bill;

   (d)Fourthly by paying the balance to the parties as follows:

   (i)Add to the balance the sum of $20,000, being the value of assets retained by the parties (“the total”);

   (ii)Dividing the total 65% to the applicant and 35% to the respondent and make payments accordingly taking into account the applicant has retained assets to the value of $9,000 and the respondent has retained assets to the value of $11,000.

2. The applicant retain for her sole use and possession the (omitted) Nissan X Trail motor vehicle and the money in her (omitted) bank account.

3. The respondent retain for his sole use and possession the (omitted) Nissan Patrol motor vehicle, the (omitted) motorbike, the motorbike trailer and the tradesman’s trailer.

4. That the solicitor for the applicant prepare a minute of proposed order to provide for a splittable payment in respect of the superannuation interest of the respondent in (omitted) Superannuation Fund providing for an entitlement to the applicant using a base amount of $18,795, provide procedural fairness to the trustee of the fund and provide proof of procedural fairness and the minute of proposed order.

5. That unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these subsequent orders;

   (a)Each party be solely entitled to the exclusion of the other to all other property (including choses in action) owned by or in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the property being deemed to be in the possession of the respondent;

   (b)Insurance policies remain the sole property of the owner/beneficiary named thereon or therein;

   (c)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.

6. That pursuant to section 90MT(1)(a) of the Family Law Act 1975 (Cth), whenever a splittable payment becomes payable in respect of the superannuation interest of Mr Nash in (omitted) Superannuation Fund (“the Fund”) (Member No (omitted)):

   (a)The Applicant, Ms Kennedy, shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount of $18,795.00 (provided that such base amount shall not exceed the value of the interest);

   (b)There be a corresponding reduction in the superannuation interest of the Respondent Mr Nash to whom the splittable payment would have been made but for this Orders; and

   (c)That the operative time is four business days after service of final sealed orders on the Trustee of the Fund.

7. That there be liberty to apply to each party and the Trustee of the Fund in relation to the implementation of the Orders affecting the superannuation interest. 

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 2330 of 2015

MS KENNEDY

Applicant

And

MR NASH

Respondent

REASONS FOR JUDGMENT

1. The parties lived together in a de facto relationship from (omitted) 2006 until (omitted) 2015.  There are two children of the relationship, X born (omitted) 2008 and Y born (omitted) 2014.  They are aged seven and two.  They live with the applicant, their mother and spend some time with the respondent.

2. The parties lived at Property T.  This property is registered in the name of the respondent.  He purchased it about a year before the relationship commenced.  The purchase price was $175,000.  The respondent paid the deposit of $25,000.  He had $10,000 in savings, $15,000 was given or lent to him by his father and he received the first home owner’s grant of $12,500.  The balance was financed by a mortgage from the (omitted) Bank.  At the time of the hearing the property was being auctioned the next Saturday.

3. The values of the property in Property T and each party’s motor vehicle are agreed.  The applicant has $4,000 in a (omitted) bank account which is agreed.  The respondent owns a (omitted) motorcycle and two trailers.  The values are disputed.  The respondent, through his counsel conceded a value of $2,000 for the motorcycle and $500 as the combined value of the trailers.  The applicant estimates $6,000 for the motorcycle and $1,200 for each of the trailers.

4. Initially when the hearing commenced the respondent presented his case on the basis that he no longer owned the motorcycle and neither of the two trailers were his property.  In the course of the hearing he conceded that he still owned the motorcycle and that both trailers were his property.

5. The motorcycle was purchased in 2008 for $11,000.  The applicant, who claims no valuation expertise, uses this as the basis of her estimate of $6,000.  The $1,200 for each of the trailers is her estimate.  The motorcycle trailer, it appears from a photograph, will carry three motorcycles.  The trailer, described by the applicant as a tradesman’s trailer, was built as such but has had the top removed so it is now a conventional trailer.

6. The fact that a motorcycle was purchased for $11,000 in 2008, without any more evidence, does not help at all in determining its value in 2016.  There is no expert evidence, nor is there any expert evidence about the trailers.  The only material upon which I can act is the respondent’s concessions about their value.  These are $6,000 of the motorcycle and $500 for the trailers combined.

7. Liabilities which are agreed are the mortgage of $162,500 and the applicant’s credit card $536.  The respondent says that the $15,000 his father contributed should be treated as a loan and so a liability to be deducted from the sale price of the Property T property and paid to the respondent’s father.  The applicant says it should be treated as a gift.  If it is a gift it is part of the contribution made by the respondent.

8. The evidence of both the respondent and his father is that some amounts were paid back by the respondent but then lent again when the respondent needed the money.  While there are real issues about the respondent’s credit his father struck me as quite open in his approach.  He runs a (omitted) business.  He has six children and employs them or at least some of them in his business.  He will help them when they need it.  The clear inference from the respondent’s father’s evidence is that if the respondent was in a good financial position he would expect some repayment but not otherwise.  The respondent is unemployed and has been for two years.  If he is to make any repayment to his father it will be well into the future.  In the circumstances treating the $15,000 from the respondent’s father as a debt is not appropriate.  Taking it into account as part of the applicant’s initial contribution at the commencement of the relationship is appropriate.

9. The applicant has $43,611 in superannuation and the respondent $81,200.  The parties agree that the superannuation should be equalised.  The respondent’s superannuation fund had not been given procedural fairness and so the orders I make will take into account that that needs to be done.

10. Division of property following the breakdown of a de facto relationship is provided for in s.90SM of the Family Law Act 1975 (Cth). The first step is to determine the assets and liabilities.

11. The assets and liabilities are.

Asset	Owner	Value
Property T	Respondent	$  275,000
(omitted) Nissan X Trail	Applicant	$     5,000
(omitted) Nissan Patrol	Respondent	$     8,500
(omitted) motorbike	Respondent	$     2,000
Two trailers	Respondent	$        500
(omitted) Bank Account	Applicant	$     4,000
Total	$  295,000
Liabilities
Mortgage	Respondent	$  162,500
MasterCard	Applicant	$        536
Total liabilities	$  163,036
Net assets	$  131,964
Superannuation
(omitted)	Applicant	$    43,611
(omitted)	Respondent	$    81,200

1. The first step in a de facto property application is to determine whether it is just and equitable to make an order.  The parties’ relationship has come to an end, the basis upon which they shared their lives and finances is finished and both apply for an order.  It is just and equal to make an order.

2. The next step under s.90SM is to determine contributions. The one issue between the parties is how the respondent’s initial contribution should be taken into account.

3. The applicant was born on (omitted) 1979 and is 36.  She lives in rental accommodation in (omitted) with the children.  She works part-time as a (occupation omitted) at the (employer omitted).  The respondent is 33 was born on (omitted) 1983.  He currently lives in the Property T property.  He is a (occupation omitted) and according to the applicant, previously earned approximately $90,000 per annum.  He has been unemployed for two years and now receives a social services payment, the Newstart Allowance.

4. The applicant moved in with the respondent at the Property T property when they commenced living together on (omitted) 2006.  At that time both were working full-time.  When the first child was born, the applicant had 10 months maternity leave and then went back to work.  She then ceased employment for about 10 months but went back on a casual basis in July 2011.  The applicant was employed until about August 2014.  The respondent made the greater financial contribution in the course of the relationship.  This is a typical case where the respondent’s greater financial contribution is balanced by the applicant’s role caring for the children and as a homemaker.  Thus, if it was not for the respondent’s greater initial contribution, equal contributions would be the obvious result.

5. The respondent says that taking into account his initial contribution, overall contributions should be assessed at 70% by him and 30% by the applicant. He then says that adjustment for s.90SF(3) changes the result to 60% to the applicant and 40% to him. The applicant’s submission is that the overall division should be 70% to her and 30% to the respondent.

6. Both counsel referred to Pierce & Pierce [1998] FamCA 74, [1999] FLC 92-844.  For the respondent emphasis was placed on the Full Court’s references to the need to take into account the initial contribution.  The applicant’s counsel emphasised the Full Court’s statements that contributions should be assessed overall.

7. The Full Court’s assessment of the proper approach is set out at [28]:

   In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home:

8. In Pierce & Pierce the parties had a 10 year relationship.  The net assets at the time of the hearing were $319,190.  The husband’s initial contribution was $226,000 and the wife’s $11,500.  The husband’s initial contribution was the largely unencumbered matrimonial home.  The parties had two children born of the marriage, both of whom resided with the husband after separation.  The husband was continually employed throughout the relationship and the wife worked till the birth of the first child then resumed part-time employment about two years after the birth of the second child and ceased that employment about two years later.  The Full Court assessed the husband’s contribution at 70%.

9. The respondent’s submission is that his initial contribution should be assessed at $37,500, the total of the savings of $10,000, his father’s contribution of $15,000 and the first home owner’s grant of $12,500.  There was some discussion about how the first home owners grant should be treated.  It is a government grant to someone purchasing a home for the first time.  Given that the applicant has lived in that house in a de facto relationship with the respondent and that house is a de facto relationship property under the Family Law Act 1975 (Cth), there may be some issue about whether the respondent now has the ability to apply for first home owners grant or whether she will be treated as having already received the benefit of a first home owners grant.

10. Neither counsel could assist on this issue and finding the answer may be extremely difficult.  If the answer could be found there would then be an added difficulty in how that information should be used because the government schemes for first home owners grant has changed since 2008.

11. The $12,500 does have to be taken into account as something to which the respondent was entitled and which assisted him to purchase the home.  His initial contribution cannot be mathematically assessed as a total of $37,500.  His initial contribution is the net value of the home at the commencement of the relationship which I assess at $25,000 or a little more.  He may have spent more because he had to pay stamp duty and legal costs and disbursements but that does not add to the value of the house.

12. A nine year relationship during which two children were born is a significant relationship but it does not completely balance out the respondent’s contribution.  He brought the home into the relationship which had a substantial amount of equity in it.  He purchased it for $175,000 about a year before the relationship commenced.  The amount of the mortgage loan he obtained is not part of the evidence but it would seem to have been about $150,000, less than the current mortgage.  This suggests that the net equity in the property at the time the relationship commenced was $25,000 or perhaps a little more.  The net equity is now $112,500, a relatively substantial increase over the period of the relationship during which the parties contributions were equal.

13. The respondent has lived in the property since separation and the mortgage has increased in that time given that the respondent concedes he has had difficulty in paying it.  The amount by which it has increased is not known.

14. The passage of time, the birth of two children and the parties contributions otherwise have decreased the significance of the respondents initial contribution but not completely.  Taking everything into account, contributions are 55% by the respondent and 45% by the applicant.

15. The matters relevant to adjustment under s.90SF(3) are these. The applicant has nearly the whole of the financial burden of caring for the children. The applicant has paid $187.68 in child-support since separation and there is a child support debt of $2,119.30. The respondent says this requires adjustment because his income has changed.

16. The respondent says he suffers anxiety and depression and this is why he is unable to work.  There is no medical evidence about this anxiety and depression.  He is well qualified for gainful employment, capable of earning a substantial amount more than the applicant.  She says before he ceased work he was earning about $90,000 a year, something not challenged.  He was self-employed and so to what extent he had expenses which had to be financed out of the $90,000 is not known.  Nonetheless, the inference is that as a qualified (occupation omitted), if capable of full-time work his income earning ability is substantially more than that of the applicant.  She is earning $35,000 a year in part-time work, something which is reasonable given the ages of the children, seven and two.

17. The position is this.  Either the applicant will have the care of the children with little financial assistance from the respondent or the respondent will have employment earning substantially more than that the applicant.  If the latter is occurring, then the respondent will pay child support.  Either way, this points to the need for an adjustment in favour of the applicant.

18. Another matter of significance is the small size of the property pool and so to some extent the realities of the situation rather than percentages need to be taken into account.  Again, relevant to this is that the applicant has the majority care of the two children.

19. Whether the adjustment is considered as if the respondent remains unemployed or as if he is working full time as qualified (occupation omitted), a substantial adjustment in the respondents favour is required and the need for this is reinforced by the small size of the pool.  The proper adjustment for the applicant is 20%.  This means that the applicant receives 65% to the respondent 35%.

20. The applicant sought an order for payment of a fixed amount rather than a percentage because, she says, she does not trust the husband to sell the property at its full value.  At the conclusion of the hearing, I made an order that the property not be sold without both parties instructing the selling agent of the amount to be accepted.  This deals adequately with this issue.

21. In preparing the Property T property for sale, plastering painting and glazing has been carried out costing $5,760.  This has been arranged by the selling agent and will be paid out of the proceeds of the sale of the house before the net amount is distributed to the parties.

22. The applicant argues that the respondent, since he is not working, could have carried out the painting work or at least some of it.  The work has been done on the recommendation of the selling agent.  The valuation annexed to the affidavit of Mr M, the valuer, points to the damage to the house.  Since the work is being carried out at the recommendation of the selling agent and organised by the selling agent employing tradesmen to carry out all the work is reasonable.

23. The applicant retains $9,000 in assets ((omitted) Nissan X Trail, $5,000, (omitted) Bank Account, $4,000) and the respondent $11,000 in assets ((omitted) Nissan Patrol $8,500, (omitted) motorbike $2,000, two trailers-$500) and so the distribution of the net proceeds of the sale of the property must take this into account.

24. The division of 65% to the applicant and 35% to the wife must be done by adding the net proceeds of sale of the Property T property to the value of the assets each party retain, the applicant, $9,000 in assets ((omitted) Nissan X Trail, $5,000, (omitted) Bank Account, $4,000) and the respondent, $11,000 in assets ((omitted) Nissan Patrol $8,500, (omitted) motorbike $2,000, Two trailers $500).  The division is then done and the payment made by deducting the value of the assets each retains.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date:  6 May 2016