Kinley and Lutz
[2018] FCCA 3714
•20 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KINLEY & LUTZ | [2018] FCCA 3714 |
| Catchwords: FAMILY LAW – Undefended property proceedings – matters to be considered in respect of determining proceeding in absence of one party –assessment of contributions - contents of property pool – satisfy requirements of section 79(2) - assessment of section 79(4) factors – just and equitable. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79 Federal Circuit Court Rules (Cth), rr.13.03A;13.1A |
| Cases cited: Taylor v Taylor (1979) 143 CLR 1 |
| Applicant: | MS KINLEY |
| Respondent: | MR LUTZ |
| File Number: | ADC 2093 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 7 December 2018 |
| Date of Last Submission: | 7 December 2018 |
| Delivered at: | Adelaide |
| Delivered on: | 20 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms Pengallo |
| Solicitors for the Applicant: | Doconade Adelaide Lawyers |
| Counsel for the Respondent: | No appearance |
ORDERS
That in full and final settlement of all claims that either party may have for settlement of property or alteration of interests in property under Parts VIII and Part VIIIB of the Family Law Act 1975 (as amended) in the past, in the present or in the future:
(a)That as and from the date of this order the Applicant wife shall retain for her sole use, free of any further claim or demand of the Respondent Husband, the Motor Vehicle 1 and the Applicant Wife shall be responsible for all costs arising with respect to this motor vehicle, including any tax duties and registration fees.
(b)That in relation to Respondent Husband’s Super Fund F Superannuation entitlements, member number …(‘the Fund’):
(i)That the court allocate, as required by section 90MT(4) of the Family Law Act 1975 (as amended) (‘Cth’) (‘the Act‘) such base amount of $20,078.50 to the Applicant wife from the Respondent husband’s entitlement in the Fund;
(ii)That pursuant to section 90MT(1)(a) of the Act whenever a splittable payment within the meaning of section 90ME of the Act becomes payable to the Applicant’s Wife from the Respondent’s entitlements in the Fund, the Applicant Wife is entitled to be paid (by the Trustee of the Fund) an amount calculated in accordance with Part 6 of the Family Law (Superannuation Regulations 2009 (‘the Regulations’) using such base amount as is equivalent to provide the sum of $20,078.50 to the Applicant’s wife and there shall be a corresponding reduction in the entitlement that the Respondent husband would have had in the Fund but for this order;
(iii)That paragraph 1(b)(i) herein have affect from the operative time and that the operative time for these orders is the fourth business day after the day on which a certified copy of the sealed court orders is served on the Trustee of the Fund;
(iv)That having been afforded procedural fairness in relation to the making of these orders, the Trustee of the Fund shall be bound to observe paragraph 1(b)(i) herein and the Trustee obligations as set out under the Act and the Regulations;
(v)That within 7 days of these orders being made; –
(1)that the Applicant wife shall serve a certified copy of these orders upon the Trustee of the Fund; and
(2)that the Applicant wife shall give notice, in writing, to the Fund pursuant to section 72 of the Regulations;
(vi)That the parties shall each pay one half of any fees charged by the Trustee of the Fund in administering the payment split pursuant to these orders.
(c)That the monies held by Doconade Adelaide Lawyers Law Practice Trust Account being $247,631.89 be distributed as follows:
(i)To the Applicant wife the sum of $146,804.73 representing the proceeds of sale of Property A and adjustments in her favour:
(ii)To Doconade Adelaide Lawyers in accordance with the Order dated 14 August 2018, the sum of $1,851.22 for costs so ordered;
(iii)To Doconade Adelaide Lawyers for the costs of this application the sum of $1,040.43;
(iv)To the Respondent husband the sum of $97,935.54.
(d)The parties retain:-
(i)Any items of personality, furniture, jewellery, household goods and effects, presently in their possession;
(ii)Any monies held in bank accounts in their sole name;
(iii)Any shares and investments including life insurance in their name or due to accruing to them and to which they may become entitled;
(iv)Subject to paragraph 1(b)(i) of these orders, any superannuation benefit in their name or accruing to them and to which they may become entitled;
(v)Any benefits, rights or entitlements to or entitled to or which they may vest in them under any trusts or deceased estate including rights in any loan amounts;
(vi)All entitlements or benefits are or accruing to them by reason of or arising out of their employment including any service leave and benefits paid or to be paid in respect of resignation, retirement, dismissal or separation from employment; and
(vii)Any motor vehicle currently in their possession.
(e)That the monies held by Mahony’s Lawyers trust account being $17,042.50 be distributed to the Respondent husband.
(f)That subject to any other terms of these orders each party shall be solely liable for and indemnity the other party against any liabilities encumbering any item of property to which they are entitled pursuant to the terms of these orders.
(g)That the husband shall keep and indemnity the wife against any and all claims, actions, suits or demands of whatsoever nature;
(h)That the wife shall keep and indemnity that the husband against any and all claims, actions, suits or demands of whatsoever nature;
(i)The Applicant wife and Respondent husband will split any capital gains liability incurred from the sale of the property known and situated at Property B South Australia.
A copy of the orders made in these proceedings and these reasons for judgment be served by prepaid post on the husband at his last known address.
All extant applications be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Kinley & Lutz is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 2093 of 2017
| MS KINLEY |
Applicant
And
| MR LUTZ |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment relate to undefended property proceedings. The case was listed for undefended final hearing on 7 December 2018. The applicant wife had instructed counsel to appear on her behalf at this hearing. She has been diligent in pursuing her application, which has put her to significant expense.
The husband has not been so diligent. His solicitor has withdrawn from the proceedings. It was necessary for the court to issue a warrant of possession, against the husband, in order to realise an earlier consent order regarding the sale of the parties’ former family home.
Much time was spent, at an earlier stage, in trying to resolve an issue regarding who of the party’s should retain a motor vehicle, which I am satisfied has significant sentimental value to the wife. The husband after earlier vehemently asserting his entitlement to this vehicle has not followed through on his assertions.
The wife was ready to proceed on the date appointed. The husband did not appear. I was satisfied, after having heard brief submissions from counsel for the wife, Ms Pengallo, that the orders proposed by her, on behalf of the wife, were just and equitable, particularly given the relatively modest extent of the asset pool and the unchallenged evidence of the wife regarding her acquisition of the motor vehicle.
I indicated at the time I was satisfied that the court could determine Ms Kinley’s application in Mr Lutz’s absence and I would make the orders as sought. However, given Mr Lutz’s absence, it is appropriate that the legal basis for the decision be formalised in reasons for judgment. These are those reasons.
Background
Mr Kinley “the wife” and Mr Lutz “the husband” began to live together in 1995. They separated in 2004 but reconciled shortly afterwards. They then married on …2005 and separated on 27 November 2015. The relationship between them was one of around twenty years in duration. It is clearly appropriate that the financial relationship between them be finalised.
In 1995, they purchased a property at Property A, which was their former matrimonial home. At separation, the husband left the property. Later, in mid-2017, the wife herself moved into other accommodation in Adelaide.
As a consequence, in controversial circumstances, Mr Lutz re-occupied the property. The parties’ other significant asset is an investment property situated at Property B, which was acquired in 2003. The property has since been sold and a portion of the proceeds divided between the parties.
At various times, the husband has indicated a desire to purchase the wife’s interest in the Property A property. At other times, he has agreed to the property being sold. From the wife’s perspective, he has been difficult to deal with and has not kept the property in a good state of repair or been reliable in paying the mortgage on it. This state of affairs has contributed to the delay in the case being resolved.
On 26 May 2017, the wife commenced proceedings, in this court, seeking orders for the settlement of matrimonial property. Ms Kinley’s application first came before the court on 2 June 2017. On this occasion, various procedural orders were made by consent and the parties were ordered to attend a conciliation conference on 16 October 2017 to try and resolve the matter.
The parties reached agreement about disposing of the Property A and Property B properties. However, in August 2018, the husband reneged on this agreement, and the wife was forced to obtain a warrant of possession with respect of the Property A property in order to complete the sale. The court’s registrar had to be appointed to execute necessary documents, adding to the expense incurred by the wife.
It was at this time, the solicitors for the husband ceased to act for him, and he took no further part in the proceedings. In these circumstances, the wife seeks that her application be finalised without any involvement of the husband.
The wife’s application
The final orders sought by the wife can be summarised as follows:
· The properties at Property A and Property B be sold and the proceeds be disbursed to pay any agents fees or sale expenses, discharge the mortgages on the properties, and discharge any loans with …Credit Union.
· The amount of $25,000.00 be paid to Doconade Adelaide Trust to be held in trust for payment of invoices rendered by qualified tradesmen with respect to expenses reasonably incurred by the parties for work necessary to bring the property at Property A into a fit and proper state for presentation for sale.
· The wife retain for her sole use and free of any claim or demand of the husband, the Motor Vehicle 1.
· The husband pay periodic spousal maintenance to the wife in the amount of $450 per week or other such amount as the court deems fit.
· In relation to the husband’s Super Fund S Superannuation entitlements, member …, the court allocate such base amount as equivalent to provide 60% to the wife from the husband’s entitlement in the fund.
· Otherwise each party retain property currently in their respective possession or control.
The husband’s application
The final orders sought by the husband can be summarised as follows;
·The parties’ net assets be divided on 50/50% basis.
·The parties’ superannuation be equalised.
The wife has not pursued her application for spousal maintenance. She agrees that it is appropriate that the parties’ assets be divided approximately equally, given the significant length of their marriage and their superannuation be equalised. Indeed, on 20 June 2018, an order to this effect was made. However, difficulties have arisen in its implementation.
Evidence
The wife was born in 1967. The husband was born in 1976. The parties commenced living together in 1995. The wife had three children from a previous relationship, and the parties have one child together, Ms C. All are now adults and financially independent, with the exception of Ms C who lives with the wife, who continues to partially financially support her.
Throughout a large part of the relationship the husband has been employed as a tradesperson and operated his own business for some time. The wife has been engaged in unskilled work and home duties. Both the husband and wife are currently unemployed and reliant on social security payments to support themselves.
The parties each have an interest in motor vehicles, particularly Motor Vehicle 1 vehicles. The husband currently retains a Motor Vehicle 2 model; the wife retains a Motor Vehicle 1 model. As indicated above, much time and energy has been expended in exploring the value and provenance of these vehicles and who of the parties should retain them.
In the initial stages of the proceedings, the parties were able to reach agreement with respect to selling the Property A and Property B properties. Orders to this effect were made on 2 June 2017. It was agreed that the proceeds of sale of the Property B property were to be held in the trust account of the wife’s solicitor. In December of that year, the parties agreed on an interim distribution of the proceeds of sale of the Property B property.
However, as the proceedings progressed, a dispute arose over the Property A property and the Motor Vehicle 1 vehicle. In this context, orders were made for Mr D, a motor vehicle expert to value both motor vehicles. It was agreed that other vehicles in the husband’s possession would be sold at auction. Some money from the sale of a truck remains in the trust account of the husband’s former solicitor.
In June 2018, the parties agreed to divide their assets on a 50/50 basis and that necessary formal orders be made to place their former matrimonial home, at Property A on the market for sale. Orders were made to this effect on 20 June 2018. They nominated an estate agent and directed
Despite agreeing to vacate the former matrimonial home, the husband resumed living at the Property A home and sought to refinance. The mortgage subsequently fell into arrears and the wife sought vacant possession in order to sell the house to satisfy the debt to the bank.
It was at this time that the husband ceased being represented and took no further part in the proceedings. A warrant of possession was granted so the house could be sold and a hearing allocated to deal with the outstanding issue of the Motor Vehicle 1 vehicle on 7 December 2018. Each party was given leave to file further affidavit material with respect to the vehicle by 9 November 2018. The wife filed a further affidavit. The husband did not file any further material.
The nature of an undefended hearing
It is a significant thing for proceedings to be determined in the absence of one of the parties. The court has an obligation to ensure that the parties to proceedings before it have an opportunity to participate in those proceedings.
Before a person can be adversely affected by judicial order, he or she must be afforded an adequate opportunity to be heard.[1] I am satisfied that Mr Lutz has been given an adequate opportunity to appear in these proceedings and put his position before the court.
[1] See Taylor v Taylor (1979) 143 CLR 1
The Federal Circuit Court is a court of private law. It determines disputes, between parties, according to law. In this case, according to the provisions of Part VIII of the Family Law Act 1975, which relate to the division of property following the breakdown of a marriage relationship.
Order 13.1A of the Federal Circuit Court Rules deals with the court’s authority to enter judgment against a respondent if that respondent defaults in complying with a court order or fails to prosecute any proceedings with due diligence.
Pursuant to Rule 13.03A(2) a respondent is in default if, amongst other things, he or she has failed to:
·Comply with an order of the court in the proceedings;
·Produce a document as required; or
·Defend the proceedings with due diligence.
The legal principles applicable
The process to be followed for the division of the parties’ property is well established by law.[2] The relevant legal principles are primarily contained in sections 79 and 75(2) of the Family Law Act 1975. I am required to follow a number of specific steps.
[2] See Lee Steere v Lee Steere (1998) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The normal rule is that those assets are to be determined as at the date of trial.[3]
[3] See Wardman & Hudson (1978) FLC 90-466; and Biltoft & Biltoft (1995) FLC 92-614
In the second step, I must ascertain the contributions, which each party has made towards the matrimonial pool of assets, as I have found them, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage, including any contribution made in the capacity of home maker or parent.”[4]
[4] See Family Law Act s79(4)(c)
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act 1975. Pursuant to section 75(2)(o), the Court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
Finally, in determining what order the court should make under section 79, the court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the court must consider.[5]
[5] See Russell v Russell (1999) FamCA 187
Accordingly the fourth step is for the court to take a step back and examine whether the orders it proposes are just and equitable. These considerations must also inform each of the preceding steps. [6]
[6] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60]
Step one – the pool of property
The parties’ pool of assets is modest. The husband and wife are both currently unemployed. As such, they do not face a secure financial future. The major asset of the relationship is the proceeds from the sale of the Property A property.
I find that that parties pool of assets is as follows:
| ASSETS | Value ($) |
| Proceeds of the sale of Property A (held in trust by Doconade Adelaide Lawyers) | 247,631.89 |
| Monies held by Mahoney’s Lawyers in trust | 17,042.50 |
| Motor Vehicle 1 (in wife’s possession) | E18,000.00 |
| Motor Vehicle 2 (in husband’s possession) | E25,000.00 |
| Total Assets | 307,674.39 |
| Superannuation | Value($) |
| Super Fund S Member No. …(Husband) | 79,972.00 |
| Super Fund T no. …(Wife) | 39,815.00 |
| Total superannuation | 119,787.00 |
| Total net assets (excl. Superannuation) | 307,674.39 |
| Total net assets (incl. Superannuation) | 427,461.39 |
Step two – assessment of financial contributions
Throughout the marriage the husband was employed on a full time basis, with the wife working on a part time basis and undertaking homemaker duties. The husband has worked as a tradesperson and is the sole director and shareholder of his own company.
The husband was working at Employer 1, in the early years of their relationship, later he worked at Employer 2; whilst the wife was employed at a business. The husband commenced a small business in 2009. The wife did the books for the husband’s accountant.
The parties’ daughter Ms C was born on …1996. The evidence seems clear that the parties divided their responsibilities along conventional lines. The husband was always in the workforce; whilst the wife engaged in a mixture of part-time work; home duties; whilst assisting with the business. As such, it seems clear to me that the parties were mutually dependent upon one another and shared their resources.
In 2003, the parties purchased an investment property at Suburb P, which was rented to the wife’s adult daughter. The rent covered the mortgage payments and outgoings on the property.
The wife deposes that since 2012 she has been unable to work on a full time basis due to a severe thyroid condition. No extensive medical evidence has been provided in respect of her condition. Since separation, the wife has maintained the mortgage payments and associated costs on the Property A property.
She currently lives a frugal existence and still provides modest financial support to two of her children by way of accommodation and food. It is the wife’s case that she paid all payments since separation.
In all these circumstances, it is my finding that factors relevant to contribution support the equalisation of the parties’ superannuation interests and an equal division of the proceeds of the sale of the property.
Step three – Section 75(2) factors
The wife is currently unemployed She receives a modest income, and has limited opportunities to advance her career and earning potential due to the severe thyroid condition she has had since 2012. She is also providing financial support to two of her adult children.
The husband is also unemployed and cannot work as a tradesperson, as he has lost his licence. He also lives with his mother who provides him with financial support as needed. At present, each party faces a difficult and uncertain future. Neither has any extensive skills or educational qualifications. However, I would anticipate that the husband will be able to return to work, as a tradesperson, once he has recovered his licence.
In all these circumstances, I accept that there are no factors, arising under section 75(2), which justify any further distribution of assets in favour of either party. More complicated issues arise in respect of superannuation. The wife is a little off fifty. She currently holds a modest amount of superannuation. It seems clear that this is attributable to the fact that she was out of the full-time paid workforce for many years.
On the other hand, the husband is forty two years of age. In theoretical terms, he has the potential to engage in the paid workforce for at least a decade more than the wife. I accept, however, that his previous work experience, in trade work in Adelaide, is not likely to be available to him due to far reaching changes in the nature of the workforce in South Australia, which are not helpful to a person in the husband’s situation, given his current skill set.
Neither party can be regarded as well prepared for retirement, but the husband has twice the amount of superannuation held by the wife. She also has some significant health issues and, like the husband, must be regarded as having extremely limited employment opportunities. In the parties’ situation, an age disparity of eight or so years is significant. In my view, these factors favour an equalisation occurring in respect of their separation.
The wife has sought to retain the Motor Vehicle 1. She has provided the court with an affidavit outlining her financial and emotional attachment to the vehicle. The husband has not provided the court with any evidence as to his claim to the vehicle as he has not taken part in the proceedings since August 2018.
The Motor Vehicle 1 was purchased in 2002 through a friend of the wife’s brother. It was the parties’ joint intention that they would recondition and restore the car. However, this plan did not eventuate and the vehicle languished in a shed at the Property A property. Later, the parties apparently purchased a later model Motor Vehicle 2, which the husband has.
Ms Kinley’s late brother had a similar vehicle to the Motor Vehicle 1. He sadly passed away and from the wife’s perspective, this creates a special bond between her and the vehicle concerned. It is also her position that it is fair, if she retains the Motor Vehicle 1, whilst the husband retains the Motor Vehicle 2 and a number of other vehicles. None of these vehicles has been registered and they are testament to the fact that both parties and many of their friends are car enthusiasts. From my perspective, I accept that this is a just and equitable outcome.
Conclusions – what is a just and equitable outcome
I am satisfied that a proper consideration of both considerations relating to contribution and future needs of the parties favour the wife receiving a slightly larger share of the relatively modest pool of assets, which are currently available for distribution.
In recognition of the fact that the wife has met the outgoings on the Property A property since separation, approximately 53% of the asset pool will go to the wife and 46% of the asset pool to the husband. There is also an amount of $2,891.65 (1% of the pool) to be paid to Doconade Adelaide Lawyers from the asset pool as costs in the proceedings.
Ms Kinley faces an uncertain financial future. She receives a modest income, and continues to provide financial support to her children that still live with her. She wishes to sever her financial relationship with the husband. In my view, she has not made any outlandish claims for property settlement.
In my view, her application to equalise the parties’ respective superannuation holdings is a modest one, which is equitable in all the circumstances. It will result in a 50% split of the superannuation interests to each of the parties. In this context, I also note that it is the formal position of the husband that superannuation be equalised. This is appropriate given the length of the marriage.
Ms Kinley wishes to retain the Motor Vehicle 1 for her sole use. She has an emotional connection to this model vehicle through her late brother. Mr Lutz has had the benefit of retaining four of the six vehicles held by the parties throughout their marriage.
In all these circumstances, I am satisfied the various section 79(4) factors justifies an equalisation being made in respect of the alteration of the property interests of the parties as sought by the wife. In these circumstances, I will make the orders as sought by the wife in the minute prepared by her solicitor.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 20 December 2018
Clauson v Clauson (1995) FLC 92-595; Hickey v Hickey and Attorney General for Commonwealth of Australia (2003) FLC 93-143 at 78,386
Key Legal Topics
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Family Law
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Civil Procedure
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Procedural Fairness
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