Kern and Kern

[2014] FCCA 1108

FEDERAL CIRCUIT COURT OF AUSTRALIA

KERN & KERN [2014] FCCA 1108

Catchwords:
FAMILY LAW – Property settlement – marital relationship – gifts from wife’s parents – whether to husband and wife or wife alone – value of assets – price at time of acquisition or sale – possible fraud on the revenue – s.128 certificates – referral to New South Wales Office of State Revenue.

Legislation:
Evidence Act 1995, s.128
Family Law Act 1975, ss.72(1), 75(2), 79(2), 79(4)

Cases cited:
Bevan & Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387;
[2013] FLC 93-545; [2013] FamCAFC 116
Elias & Elias (1977) 29 FLR 393; (1977) 3 Fam LR 11,496;
(1977) FLC 90-267
Jordan & Jordan (1996) 21 Fam LR 382; [1997] FLC 92-736;
[1996] FamCA 15
Kessey & Kessey (1994) 18 Fam LR 149; (1994) FLC 92-495
Stanford v Stanford (2012) 247 CLR 108; (2012) 87 ALJR 74;
(2012) 47 Fam LR 481; (2012) FLC 93-518; (2012) 293 ALR 70;
[2012] HCA 52
Williams & Williams [2007] FamCA 313

Applicant: MS KERN

Respondent: MR KERN

File Number: CAC 1433 of 2012

Judgment of: Judge Riley

Hearing dates: 24 & 25 March 2014

Date of Last Submission: 25 March 2014

Delivered at: Melbourne

Delivered on: 30 May 2014

REPRESENTATION

Counsel for the Applicant: Mr Howard

Solicitors for the Applicant: Phelps Reid

Advocate for the Respondent: Mr Mazengarb

Solicitors for the Respondent: Mazengarb Family Lawyers

ORDERS

1. Within 30 days (“the due date”):

   (a)the husband pay to the wife the sum of $274,344.50 (“the payment”); and

   (b)the husband and wife do all things necessary to release to the wife the proceeds of sale of the [T] property.

2. At the time of the payment the wife do all things necessary to transfer to the husband at the expense of the husband all of her interest in the property known as [Property Q] in the State of New South Wales (“the property”).

3. From the date of the payment the husband indemnify the wife against all rates and land taxes (if any) in relation to the property.

4. Up to the date of the payment or the completion of the sale, if any, pursuant to order 5:

   (a)the husband have the sole right to occupy the property;

   (b)the husband pay all rates and land taxes (if any) payable in respect of the property as and when they fall due; and

   (c)neither party mortgage or otherwise offer the property for security other than for the purposes of compliance with order 1.

5. If the whole of the payment has not been made by the due date:

   (a)the husband, in addition to the payment, pay to the wife interest on the payment or the amount outstanding from time to time at the rate prescribed by the Family Law Rules2004 to be calculated from the due date to the date of the payment;

   (b)the husband and the wife do all things necessary to effect the sale of the property;

   (c)if the husband and the wife are unable within a period of 14 days after the due date to reach agreement as to the manner, conditions or amount for which the property will be sold, the husband and the wife do all things necessary to effect the sale of the property by private treaty at the market value determined in accordance with order 5(e) at the earliest possible date;

   (d)the husband and the wife place the property with an agent for sale to be agreed between the husband and the wife or in default of agreement with an agent (“the agent”) nominated by the President of the Real Estate Institute of the ACT;

   (e)the market value of the property be as agreed between the husband and the wife or failing agreement as is determined by a valuer nominated by the President of the Real Estate Institute of the ACT (“the market value”), such determination to be paid for in equal shares by the husband and the wife;

   (f)if the property is not sold within 3 months of the due date or if the property is sold and the sale does not subsequently proceed to completion the husband and the wife do all such things to offer the property immediately for sale at a public auction by the agent, the reserve price being the market value determined in accordance with order 5(e);

   (g)the husband and the wife execute all documents requested by the agent as auctioneers for sale of the property by auction;

   (h)the husband and the wife execute a contract for sale;

   (i)the husband and the wife cooperate in every way with the agent in relation to the auction of the property including making the keys available for an inspection of the property at times requested by the agent and ensuring that the property is in a clean and neat condition at the time of inspection by prospective purchasers;

   (j)if the property is not sold at the auction within 21 days thereafter the husband and the wife sell the property at the best price then obtainable; and

   (k)during the period that the property is being offered for sale the husband allow prospective purchasers to inspect the property at all reasonable hours by appointment.

6. The husband and the wife do all things necessary to cause the proceeds of the sale of the property, if any, to be distributed as follows:

   (a)to pay all costs, commissions and expenses of the sale;

   (b)to pay the usual adjustments for rates;

   (c)to pay the wife the amount equal to 70% of the combined non-superannuation assets of the parties less the $39,673 in assets that the wife already has in her possession and less the $307,705, being the proceeds of the [T] property that the wife is to receive pursuant to these orders;

   (d)to pay to the wife interest on the amount calculated in accordance with order 5(a) from the due date to the date of payment to the wife; and

   (e)to pay the balance to the husband.

7. Liberty be reserved to each party to apply to the court on seven days’ notice to the other with respect to implementing these orders.

8. If either party refuses, fails or neglects to execute any document necessary to put these orders into effect within fourteen days of being requested in writing to do so, and any such refusal, failure or neglect is proved by affidavit filed and served by or on behalf of the party alleging the refusal, failure or neglect, the Registrar of the Family Court of Australia at Canberra is hereby appointed pursuant to s.106A of the Family Law Act 1975 to execute such document in the name of the defaulting party.

9. Except as otherwise provided in these orders:

   (a)the husband and the wife each be entitled to be the sole legal and beneficial owner of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in his or her possession or control; and

   (b)the husband and the wife each be liable for and indemnify the other against any liability encumbering any item of property to which the husband or the wife is entitled pursuant to these orders.

10. The Registrar refer this matter to the New South Wales Office of State Revenue or other appropriate office for investigation of whether the proper amount of stamp duty was paid on the transfer of land dated

    
    

    6 February 2004 between [R] Pty Ltd (ACN [omitted]) and Ms Kern, and, for that purpose, the Registrar provide to the New South Wales Office of State Revenue all relevant documents including a copy of the wife’s affidavit sworn on 25 September 2013 (see paragraph 32) and a copy of exhibit 7 in this proceeding.

AND THE COURT NOTES THAT:

Certificates have been issued pursuant to s.128 of the Evidence Act 1995 to the wife and to Mr K in respect of their oral evidence regarding the proper amount of stamp duty payable on the transfer of land dated 6 February 2004 between [R] Pty Ltd (ACN [omitted]) and Ms Kern.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT CANBERRA

CAC 1433 of 2012

MS KERN

Applicant

And

MR KERN

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application for property adjustment under s.79 of the Family Law Act 1975 (“the Act”). The parties were married [in] 2002 and commenced cohabitation shortly afterwards. They have one child, [X], who was born [in] 2005. He is presently nine years old. The parties separated on 1 December 2011 and were divorced on 8 February 2013. 

2. A major issue in the proceeding was whether substantial gifts from the wife’s family were to the wife alone or to the husband and the wife.

The legislation

1. Section 79 of the Act gives the court power to alter the interests of the parties to a marriage in the property of the parties to that marriage. Sub-section 79(2) of the Act provides that:

   The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

2. Section 79(4) of the Act sets out the matters the court must take into account when considering what orders, if any, should be made for the alteration of the interests of the parties in property. Those matters are:

   (a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and

   (b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and

   (c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and

   (d)the effect of any proposed order upon the earning capacity of either party to the marriage; and

   (e)the matters referred to in subsection 75(2) so far as they are relevant; and

   (f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and

   (g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.

3. The matters to be taken into account under s.75(2) of the Act are as follows:

   (a)the age and state of health of each of the parties; and

   (b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and

   (c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and

   (d)commitments of each of the parties that are necessary to enable the party to support:  

   (i)  himself or herself; and

   (ii)  a child or another person that the party has a duty to maintain; and

   (e)the responsibilities of either party to support any other person; and

   (f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:

   (i)any law of the Commonwealth, of a State or Territory or of another country; or

   (ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;

   and the rate of any such pension, allowance or benefit being paid to either party; and

   (g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and

   (h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and

   (ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and

   (j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and

   (k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and

   (l)the need to protect a party who wishes to continue that party’s role as a parent; and

   (m)if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and

   (n)the terms of any order made or proposed to be made under section 79 in relation to:

   (i) the property of the parties; or

   (ii)vested bankruptcy property in relation to a bankrupt party; and

   (naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:

   (i)a party to the marriage; or

   (ii)a person who is a party to a de facto relationship with a party to the marriage; or

   (iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or

   (iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and

   (na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and

   (o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and

   (p)the terms of any financial agreement that is binding on the parties to the marriage; and

   (q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.

The approach to applications under s.79

1. In Stanford v Stanford (2012) 247 CLR 108; (2012) 87 ALJR 74; (2012) FLC 93-518; (2012) 47 Fam LR 481; (2012) 293 ALR 70; [2012] HCA 52, the High Court explained the proper approach to an application under s.79 of the Act as follows:

   37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. … The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.

   38.Secondly, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. …

   39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.

   40.Thirdly, whether making a property settlement order is “just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “"just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

   …

   42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4). (emphases added)(footnotes omitted)

2. In Stanford, the critical fact was that the parties had not separated.  The wife had suffered a stroke and had moved into a nursing home, but the parties’ marriage was intact.  It was the wife’s case guardian, a daughter from an earlier marriage, who sought the alteration of property interests. 

3. The wife died while the judgment of the Full Court of the Family Court was reserved.  Consequently, when the Full Court of the Family Court came to re-exercise the discretion, the wife had no future needs, but the husband did.  The High Court noted at [47] that the courts below had not adequately considered the consequences for the husband of the orders made, namely, that his home would have to be sold.

4. Against that backdrop, the High Court emphasised that the just and equitable requirement of s.79(2) of the Act is not necessarily satisfied merely by a consideration of the contributions of the parties as described in s.79(4) of the Act. However, in the usual case before this court, where the parties have separated, the High Court acknowledged at [42] that the just and equitable requirement would be “readily satisfied”.

1. Following Stanford, it is no longer appropriate to think of “contribution based entitlements” or the “adjustment” based on future factors.  Rather, the court is required to take into account all the relevant matters and then determine what order, if any, is just and equitable.  It is also no longer appropriate to think of a pool of assets.[1] 

   [1] Parkinson, Patrick Family Property Law and the Three Fundamental Propositions in Stanford v Stanford (2013) 3 Fam L Rev 80 at 88.

2. Additionally, and significantly for this case, the High Court emphasised that marriage, at common law, does not create a community of ownership: [39]. The rights a person might have in his or her partner’s property and income arise from the Act, notably s.79(4) and s.72(1) respectively.

3. In relation to income, s.72(1) of the Act provides that:

   (1)  A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:

   (a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;

   (b)  by reason of age or physical or mental incapacity for appropriate gainful employment; or

   (c)  for any other adequate reason;

   having regard to any relevant matter referred to in subsection 75(2).

4. In other words, there is not an absolute right to share equally in the income of a partner.  Rather, such a right only arises where a person is not able to adequately support himself or herself and the other party is reasonably able to support the first-mentioned party.  Consequently, there is no obligation to contribute all of one’s earnings to the matrimonial endeavour.  However, if one party to a marriage spends a substantial part of his or her income on extraneous pursuits, it will obviously have an effect on that person’s contributions to the parties’ assets.

5. Stanford requires the following matters to be determined in applications brought under s.79 of the Act:

   (a)whether the parties have separated;

   (b)the assets and liabilities of each party;

   (c)the contributions of each party;

   (d)the future needs of each party;

   (e)bearing in mind all of the foregoing matters, whether it is just and equitable to make any orders altering the interests of the parties in their property; and

   (f)what orders, if any, are just and equitable in all the circumstances of the case.

6. Stanford does not require these matters to be addressed in any particular order. In most cases, it would seem rational to consider them in the order set out above. It does not seem to me to be possible to determine whether it is just and equitable to make an order altering the parties’ interests in their property without the other matters mentioned above having been previously determined. That seems to be clear from the opening words of s.79(4) of the Act, which are that:

   In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account [the various matters set out in s.79(4)] … .

7. The approach outlined above is consistent with the decision of the Full Court of the Family Court in Bevan & Bevan (2013) 279 FLR 1;

   
   

   (2013) 49 Fam LR 387; (2013) FLC 93-545; [2013] FamCAFC 116.
   I note that in that case, the Full Court said at [89]:

   In our view, it will be less likely that the separate issues arising under s 79(2) and (4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order.

8. I also note that, in Bevan, at [79] the Full Court said, in relation to addbacks:

   We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amendable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.

Whether the parties have separated

1. The parties agreed that they had separated.

The assets and liabilities

1. The parties agreed that their joint assets and their values at the time of trial were as follows: 

Joint Assets	Value
Property Q	$500,000
Proceeds of sale of [T] property held in trust account of conveyancing solicitors	$307,705
Total joint assets	$807,705

1. The parties agreed that they had no joint liabilities at the time of trial.

2. The parties agreed that the wife’s individual assets and their values at the time of trial included the following: 

Wife’s Assets	Value
2007 Holden Calais motor vehicle	$18,000
Wife’s collection of crystal	$6,500
Wife’s jewellery	$5,000
CBA accounts	$3,173
Wife’s total agreed assets	$32,673

1. The parties agreed that the wife presently holds the proceeds of sale of a [S] boat.  However, the wife gave evidence that she had actually given that money to her parents in repayment of certain loans.  As such, on the authority of Stanford, the $15,000 cannot be treated as part of the parties’ combined assets. 

2. In addition, the wife has a one third interest in [K] (“[K]”). The wife said it was of no value and the husband said it was of unknown value. This item is discussed further below. 

Wife’s superannuation

Value

[P] as at 30 June 2013

$111,141.07

[B] Self-Managed Super Fund

as at 30 June 2013  

$229,727

Wife’s total superannuation

$340,868.07

Wife’s total assets plus superannuation

$373,541.07

1. The parties agreed that the wife had no individual liabilities at the time of trial.

2. The parties agreed that the husband’s individual assets and their values at the time of trial were as follows: 

Husband’s Assets	Value
Motor bikes	$18,600
Jewellery and fishing rods	$500
NAB accounts	$21,697
Husband’s total assets	$40,797
Husband’s superannuation
[O] Super as at 1 October 2013	$118,718
Husband’s total assets plus superannuation	$159,515

1. The parties agreed that the husband had no individual liabilities at the time of trial.

2. In relation to [K], the wife said her investment was of no value and the husband said the wife’s investment was of unknown value.  The wife entered into a joint venture with two other people shortly prior to separation, which occurred on 1 December 2011.  [K] has built two houses on land owned by a company owned by the wife’s father.  The land was lots [omitted], [B].  The plan is that, when the houses are sold, the wife’s father’s company will be paid for the land.  One of the houses has been sold to date, but the sale has not yet been completed, and there is further work to be done on the house prior to settlement.

3. The wife exhibited to her affidavit sworn on 25 September 2013 an evaluation from [D] dated 5 September 2013, which said that the wife’s estimated profit from the investment was about $7,000.  The letter said that the estimate was based on documents provided to [D], which the letter listed.  

4. The husband claimed that he had been unable to obtain a valuation of the wife’s share in the [K] investment because he did not have the source documents on which the [D] estimate of profit was based.  However, the wife’s solicitor produced correspondence that shows that the source documents were in fact provided to the husband’s solicitor in December 2013. 

5. In these circumstances, I conclude that the husband could have obtained a valuation of the wife’s investment if he had been minded to do so.  As he did not, it seems to me to be appropriate for the court to rely on the only evidence that is before the court about the value of the wife’s investment.  That is the letter from [D] that estimated the wife’s profit from the investment at about $7,000.

6. There could be argument about whether the estimated profit from the investment equals the value of the investment.  However, no such argument was put to the court.  In the circumstances, I conclude that the wife’s interest in [K] is worth $7,000.

7. The wife submitted that her interest in [K] should be excluded from the pool because the investment was made after separation.  The wife cited Family Court authority in support of that submission.  However, Stanford appears to have overtaken those authorities.  I consider that the [K] investment should be included in the parties’ combined assets.

8. In summary, therefore, the parties’ joint assets have an agreed value of $807,705.  The wife’s assets plus superannuation less liabilities have a value of $380,541. The husband’s assets plus superannuation less liabilities have an agreed value of $159,515.  The combined total of their assets is therefore $1,347,761. Consequently, the wife presently holds about 28% of the parties’ combined assets including superannuation. The husband presently holds about 12% of the parties’ combined assets including superannuation.

Contributions

a.         Initial contributions

1. The parties agreed that, at the time of the marriage on [omitted] 2002, the wife owned an unencumbered property at [N].  There was no direct evidence about its value at that time.  The wife bought the property in 1999 for $179,800 and sold it in 2006.  The net proceeds of sale were $335,000.

2. The wife submitted that the court should take into account the value of the property at the time of sale.  The wife referred to Williams and Williams (2007) FamCA 313 as Full Court authority for that proposition. In that case, the Full Court said:

   26. We think that there is force in the proposition that a reference to the value of an item as at the date of the 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 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 the myriad of other contributions that each of the parties has made during the course of their relationship.

3. I accept the wife’s submission on this issue. 

4. The parties agreed that, at the time of marriage, the wife had a 2000 Holden Astra motor vehicle.  There was no expert evidence about the value of the car.  The wife said it was worth $25,000 and the husband said it was worth $18,500.

5. The parties agreed that, at the time of marriage, the wife had $3,750, being her notional half of the funds in the parties’ joint account.

6. The parties also agreed that, at the time of marriage, the wife had $132,846 in superannuation consisting of:

   (a)$111,717 in the [B] Super Fund;

   (b)$4,400 in the [C] Mutual Super Fund; and

   (c)$16,729 in the [P] Super Fund.

7. There was a suggestion that, at the time of marriage, the wife had a capital gains tax liability in respect of the [N] property.  However, as that property was not sold until four years later, any capital gains tax liability would not have accrued as at the time of marriage.  In any event, there was no evidence about how much that liability might eventually have been. 

8. The husband also claimed that, at the date of marriage, the wife had a liability consisting of a debt on the Holden Astra.  The wife denied there was any such debt.  In the absence of any documentary evidence about the debt, I am unable to conclude that there was any such liability.

9. The parties agreed that, at the time of marriage, the husband had a unit in Sydney worth $197,000, a motorbike worth $8,000 and $3,750, being the husband’s notional half of the funds in the parties’ joint account. 

10. In addition, the parties agreed that, at the time of marriage, the husband had some ING shares.  He claimed they were worth $1,000.  The wife did not dispute that. 

11. Also, at the time of marriage, the parties agreed that the husband had a 1999 Holden Berlina.  There was no expert evidence about its value.  The husband claimed it was worth $25,000.  They wife claimed it was worth $15,000.

12. The husband claimed that, at the time of marriage, he had [A] superannuation of about $30,000.  The wife conceded that he had superannuation but did not know how much.  There was no documentary evidence concerning the amount of the husband’s superannuation at the time of the marriage.  In the circumstances, and as it is a modest figure, I am prepared to accept that the husband had $30,000 in superannuation at the time of marriage.

13. In relation to the cars, it is difficult in the absence of expert evidence to attribute any value to them.  The pragmatic course seems to be to treat both parties as having cars of approximately equal value at the time of the marriage.  I understand that the parties did not resist that approach and I adopt it.

b.         Contributions during the marriage

1. The parties agreed that, during the marriage, the wife was principally a homemaker and parent, though she did earn some income, and the husband was principally the breadwinner. 

2. For the first three years of the marriage, the parties lived rent free in the wife’s [N] property.

3. The parties also agreed that, during the relationship, in February 2004, the wife’s parents gave the wife a block of land at [R][2].  The transfer indicates that it was worth $110,000 at that time.  The wife said that was “the developers (sic) cost price”.  Her father’s company was the developer.  The wife’s father gave evidence that the value of the block on the market was $150,000 to $160,000.  The wife said in paragraph 32 of her affidavit sworn on 25 September 2013 that the average price of blocks in the development was $179,000.  (I will return later to the question of whether there may have been a fraud on the revenue.) The parties agreed that the [R] block was sold in 2007 for $325,000. 

   [2] Husband’s chronology and transcript 24.3.14, p38, lines 39-40

4. There was considerable debate about the value that should be attributed to the [R] property.  The husband argued that, based on the Elias principle[3], the [R] property should be treated as worth the sum that the revenue authorities were told it was worth, namely, $110,000.  The wife argued that the Elias principle was debunked in Jordan and Jordan (1996) 21 Fam LR 382; (1997) FLC 92-736.

   [3] Elias & Elias (1977) 29 FLR 393; (1977) 3 Fam LR 11,496; (1977) FLC 90-267

5. That is not correct.  What Chisholm J actually said in Jordan and Jordan is that the Elias principle:

   is a principle which a trial judge may use in circumstances where A and B are married, where B has made representations to C which B now seeks relief from in circumstances where B does not have clean hands. 

6. In the present case, the parties were married and the wife told the stamp duties office that the property was worth $110,000.  As the property at the time was apparently worth more than $150,000, and as the wife knew that she acquired the property at “the developers (sic) cost price”, she did not come to court with clean hands.  Consequently, the court may rely in this case on the Elias principle, and treat the property as worth the lower value, namely, $110,000.

7. However, the wife also sought to argue that the [R] property should be treated as worth $325,000, as that is what it was sold for in 2007.  That argument was based on the principle in Williams and Williams, discussed above.  While that case dealt expressly with initial contributions, there seems no reason in principle that it should not also apply to contributions during the marriage.

8. It seems to me that the court must look at this issue holistically.  The [R] block cost the parties nothing, as it was a gift.  It was eventually sold for $325,000.  That was the sum that was injected into the family finances.  Consequently, that is the contribution made by or on behalf of the wife.

9. The husband claimed that he contributed to the [R] block of land by paying an unquantified amount of rates from joint funds and by cleaning up the property.  The wife said that the “cleaning up” consisted of collecting firewood from the block from time to time.  I consider that the husband’s contribution to the [R] block was negligible. 

10. The parties also agreed that, during the marriage, in 2006 and 2007, the wife’s parents gave $55,000 to someone.  The wife said her parents gave the money to her.  The husband said that the wife told him that it was given to “us”, meaning the husband and the wife.  The parties agreed that $10,000 of the $55,000 was put into an account for [X].

11. The wife’s mother swore an affidavit but it was not read as she was too ill to attend court.  The wife’s father gave evidence.  He said that the $55,000 was given in two lots, primarily by the wife’s mother.  The wife’s father said that the wife’s mother gave similar amounts to the wife’s two sisters at the same time.  The wife’s father said that he was present when the wife’s mother gave the money.  He said that the wife’s mother said words to the effect of:

    This is for the girls, to do with as they wish. 

12. The wife said that her maternal grandfather had died.  She said that her parents gave her $30,000 in cash as an inheritance on 9 October 2006 and a cheque in her name only for $25,000 on 17 December 2007.  The wife produced a copy of a cheque stub dated 14 December 2007, showing the amount of the cheque as $25,000 and the payee as

    
    

    “Ms Kern”.

13. The wife conceded that she had told the husband that the $25,000 had been given to “us”, but said that she meant that $25,000 had been given to each of herself and her two sisters, not to herself and the husband.  She denied that she had insisted that the husband thank her parents for the money. 

14. The husband claimed in his affidavit that the wife told him that:

    Mum and Dad have given us some money.

15. The husband conceded in cross examination that the wife’s mother would not have given him any money if he had not been married to the wife. 

16. The wife noted the case of Kessey & Kessey (1994) 18 Fam LR 149; (1994) FLC 92-495, where the Full Court of the Family Court said:

    … a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child. (emphasis in original)

17. The wife also submitted that the test articulated in Kessey was whether the gift would have been made to the other spouse if he or she had not been married to the parent’s child.  I have been unable to find anything in Kessey that amounts to such a test.

18. The principle from Kessey quoted above remains the law.  In the present case, the evidence does not support the husband’s claim that it was not the intention of the wife’s parents to benefit only the wife.  I do not accept the husband’s claim that the gift was to “us”, meaning both the husband and the wife.  I prefer the wife’s evidence that the gifts were to “us”, meaning the wife and her sisters.

19. In these circumstances, I consider that the $55,000 can only be seen as a contribution on the wife’s account. Although $10,000 of that $55,000 has been put in [X]’s name, the whole $55,000 was a contribution to the family. The $10,000 falls under s.79(4)(c) of the Act.

1. The parties agreed that the wife’s father also gave a [S] boat to someone in 2006.  The wife said it was given to her alone.  The husband said it was given to both the husband and the wife.  The boat was initially insured for $30,000 and was eventually sold for $15,000.

2. The wife’s father said in oral evidence that he recalled speaking to the husband about the gift of the [S] boat.  The conversation occurred in the home of the wife’s father on the Gold Coast.  The wife’s father said that he told the husband that it was the wife’s boat and it was to remain in her name.  The wife’s father said that he was very specific about any gifts to any of his children because of “previous experience”.  He explained that his “previous experience” was his eldest daughter’s property proceedings after separating from her former partner.

3. The husband claimed that the boat was given to both the husband and the wife.  He denied that the wife’s father had said the things set out above.  The husband said that the wife’s father had simply told him to take very good care of the boat and the husband had thanked the wife’s father profusely.

4. The wife said that the boat was and remained registered in her sole name.  The wife produced a certificate of registration for the boat in her sole name. 

5. In all the circumstances, I accept that the boat was given to the wife alone.  The registration papers are compelling evidence of that fact.

6. Having said that, I accept that the wife’s father urged the husband to take care of the boat.  However, I do not consider that any such concern had any bearing on the ownership of the boat.  I also accept that the husband thanked the wife’s father for the boat.  However, that was simply a reflection of the fact that the husband could have reasonably expected to enjoy the use of his wife’s boat.

7. The husband claimed that he spent about $7,000 on the maintenance and upkeep of the boat.  However, as that money came from joint funds, it cannot be regarded as a particular contribution by the husband.

8. The wife’s parents also contributed during the marriage to the wife’s [B] Super fund, which now stands at about $230,000.  It was worth about $110,000 at the commencement of the marriage.

9. The husband did not claim to have made any special contributions during the marriage, other than the gifts from the wife’s parents, most of which he said were to both the husband and the wife.

c.         Contributions post separation

1. Shortly after separation, the husband received compensation of $46,000 for workplace bullying that occurred during the course of the relationship.

2. The wife expects to receive about $7,000 when the sale of her [K] investment settles.

3. The wife recently sold the [S] boat for $15,000 and gave the proceeds to her parents in repayment of certain loans.

4. Following separation, the husband remained in the former matrimonial home.  It was unencumbered, but the husband paid the rates and so on.  The wife after separation has lived with her parents.

5. Since separation, [X] has lived primarily with the wife.  The husband did not pay child support for the first 12 months following separation.  He said that he was not asked to pay child support because it was agreed that he would pay outgoings on the holiday home, which consist of rates and utilities, and would also pay the health insurance for the wife and [X] and would pay for [X]’s school uniforms.  The husband was not challenged on this claim and I accept it.  The husband is now paying the wife about $800 per month in child support.

The s.79(4)(d), (e), (f) and (g) and the s.75(2) factors

1. The wife is 44 years old and the husband is 43 years old.   There was no suggestion that either of them has any health issues. 

2. The wife earns $72,000 per year and the husband earns $103,000 per year.  The husband also receives benefits from his employer including a car, fuel, a telephone and a laptop.  There was no suggestion that either party is not earning to their capacity.

3. The property of each of the parties will be determined in this proceeding.  The wife has a significant financial resource in that her parents are very generous towards her. 

4. [X] lives with the wife and spends five nights a fortnight with the husband and half of each school holidays with each parent. 

5. Nothing was put to the court about the commitments or responsibilities of either party.  It was not suggested that either party has any eligibility for a pension, allowance or benefit. 

6. In all the circumstances of this case, a comfortable standard of living for each party would be reasonable.

7. It was not suggested that either party wishes to undertake a course of education or training.

8. There was no suggestion that the parties have any creditors.

9. It was not suggested that either party had contributed to the other’s earning capacity, or that the duration of the marriage had affected either party’s earning capacity.

10. There was no suggestion that any special accommodation needed to be made to protect a party who wished to continue that party’s role as a parent.

11. The wife is living with her parents, but otherwise it was not suggested that either party is cohabiting, as such, with another person.

12. The orders to be made under s.79 of the Act will be determined in this proceeding.

13. Part VIIIAB of the Act is not relevant in this matter.

14. The husband is paying the wife about $800 per month in child support. 

15. There was no suggestion that there is any financial agreement that is binding on the parties.

16. There are no other facts or circumstances that the justice of the case requires to be taken into account.

Whether it is just and equitable to alter the parties’ property interests

1. The parties agreed that it would be just and equitable to alter their property interests in this case.  In view of paragraph 42 of Stanford, the fact that the parties are no longer living in a marital relationship and the various findings made above in relation to contributions and future needs, I also consider that it would be just and equitable to alter the parties’ property interests in this case. 

What order is just and equitable

1. The parties agreed that:

   (a)the wife should transfer her interest in the [Q] property to the husband;

   (b)each party should keep their own superannuation; and

   (c)each party should keep the items in their possession.

2. However, the wife said that the husband should pay her the sum of $380,000 and the husband said that he should pay her the sum of $133,000.  Those figures were said to represent respectively 85% and 65% of the parties’ combined non-superannuation assets.  The wife seemed to be under the impression that she had already received the proceeds of the [T] property[4], although elsewhere, the parties agreed that the proceeds were a joint asset.

   [4] Transcript 25 March 2014 page 74 line 32.

3. Given that the parties were agreed that there should only be a division of the non-superannuation assets, it is appropriate to deal with the matter on that basis.  The bulk of the wife’s superannuation consisted of gifts from her parents.

4. The total value of the parties’ combined non-superannuation assets is $888,175.  That is the value of the [Q] property, the proceeds of sale of the [T] property, and the parties’ individual assets.

5. When superannuation is excluded, the parties’ initial contributions were roughly equal.  They each had a car and cash in the bank of about the same value.  The husband had other non-superannuation assets worth about $206,000, consisting of his unit, motorbikes and shares.  The wife had the [N] property, which was bought two or three years before the marriage for $179,000 and sold about four years after the marriage realising net proceeds of $335,000.  There was no evidence to say exactly what the [N] property was worth at the time of marriage.  However, it would be reasonable to treat it as being worth roughly the same as the husband’s property at the time of marriage.  That is especially so given that the marriage lasted about nine years, and the impact of initial contributions lessens over time.

6. The parties did not dispute that their contributions during the marriage were more or less equal, except for the gifts from the wife’s parents and the benefit to the parties of living rent free in the [N] property for about three years.  There was no evidence about what the benefit of living rent free in the [N] property was actually worth in financial terms.  However, if one assumes rent of $400 per week for three years, it would have been worth about $60,000.  I will treat that figure as very roughly the financial benefit to the parties of living rent free in the [N] property for three years.

7. The non-superannuation gifts from the wife’s parents during the marriage were the [S] boat, worth about $30,000, in 2006, the $55,000 in money in 2006 and 2007, and the [R] property in 2004.  The [R] property was sold in 2007 for $325,000, and that sum was contributed to the family finances.  Those gifts were worth about $410,000. 

8. Adding the benefit of living in the [N] property rent free gives a figure of about $470,000.  That is over half of the present value of the parties’ combined non-superannuation assets.  In today’s values, the contributions made by or on behalf of the wife in 2006 and 2007 would no doubt be worth significantly more.

9. The post separation contributions of the wife are principally the $7,000 from the [K] investment and being the predominant carer for [X].  The principal contributions by the husband post separation are the husband’s worker’s compensation payout of $46,000 and paying child support of about $800 per month. The wife is living with her parents and the husband is living in the former matrimonial home, which is unencumbered.  I also note that the wife recently sold the [S] boat and gave the proceeds to her parents in repayment of certain loans.

10. In terms of future needs, the wife earns about $72,000 per year and the husband earns about $103,000 per year, with additional benefits.  [X] lives with the wife nine nights a fortnight and with the husband five nights a fortnight.  [X] spends half of each school holidays with each of his parents.  The husband pays the wife $800 per month in child support.

11. On the other hand, the wife has nearly three times as much superannuation as the husband.  She also has the financial resource of remarkably generous parents who have assisted her very significantly in the past and may do so in the future.

12. In all the circumstances, it seems to me that it would be just and equitable for the wife to receive 70% of the parties’ non-superannuation assets and the husband to receive 30%.  This takes account of the wife’s very significant contributions during the relationship and her somewhat greater future needs.

13. Seventy per cent of $888,175 is $621,722.50.  The wife will retain her car, crystal, jewellery, CBA account and [K] investment, which have a total value of $39,673.  She will also receive all of the proceeds of the [T] property, being $307,705.  In addition, the husband will pay the wife $274,344.50.

14. There will be orders accordingly, as well as the usual default and other orders.

The possible fraud on the revenue

1. The wife said at paragraph 32 of her affidavit sworn on 25 September 2013 that the [R] block was given to her at “the developers (sic) cost price”.  She said her father was one of the developers and the average price of the blocks in the development was $179,000.  The wife also tendered a transfer of land showing that the block was given a value of $110,000 for stamp duty purposes (exhibit 7).

2. The wife and her father asked for and were given certificates under s.128 of the Evidence Act 1995 in relation to the possible fraud on the revenue.  However, the evidence given by the wife outlined in the previous paragraph was given by the wife of her own free will and preceded the giving of those certificates.  Consequently, that evidence stands and is not affected by the certificates. 

3. Stamp duty is calculated by reference to the market value of land, rather than its sale price, if the sale price is less than the market value. 

4. In these circumstances, it is possible that the wife, as purchaser, and her father and her father’s property development company, as vendor, have defrauded the revenue in New South Wales.  The matter will be referred to the New South Wales Office of State Revenue for investigation. 

I certify that the preceding one hundred and fourteen (114) paragraphs are a true copy of the reasons for judgment of Judge Riley

Associate: 

Date:  30 May 2014