Kirby and Carlton
[2010] FMCAfam 203
•18 March 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KIRBY & CARLTON | [2010] FMCAfam 203 |
| FAMILY LAW – Property – exclusive occupation – execute sale of property. |
| Family Law Act 1975, ss.75(2), 79 |
| G & G (1984) FLC 91-582 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Norbis v Norbis (1986) 161 CLR 513 Pierce v Pierce (1998) FLC 92-844 Williams & Williams [2007] FamCA 313 |
| Applicant: | MS KIRBY |
| Respondent: | MR CARLTON |
| File Number: | SYC 796 of 2009 |
| Judgment of: | Altobelli FM |
| Hearing date: | 15 December 2009 |
| Date of Last Submission: | 15 December 2009 |
| Delivered at: | Sydney |
| Delivered on: | 18 March 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Campton |
| Solicitors for the Applicant: | Newnhams Solicitors |
| Counsel for the Respondent: | Ms Paraska |
| Solicitors for the Respondent: | Collins & Thompson |
ORDERS BY CONSENT
That the husband within 42 days vacate the property situate and known as Property B being the whole of the land comprised in Folio Identifier [omitted] (herein after referred to as “the Property B property”).
ORDERS
That the wife have occupation to the exclusion of the husband of the Property B property.
That the husband forthwith do all acts and things and execute all instruments, documents and writings to transfer to the wife all of his right, title and interest in the Property B property.
That forthwith the parties do all acts and things and execute all deeds, documents and writings necessary to procure the sale of the property situate and known as Property C by public auction and in particular:
(a)Place the said property with auctioneers agreed to between the parties or failing such agreement as nominated by the President of the Council of Auctioneers and Agents (“the auctioneers” for the sale of the said property by public auction at the earliest possible date.
(b)Execute all documents requested by the auctioneer for the sale of the said property by auction.
(c)Place the property for sale at a reserve price of $140,000.00 or as agreed in writing between the parties.
(d)Pay to the auctioneer equally any sum requested for advertising expenses in relation to the auction.
(e)Give such instructions to solicitors agreed to by the parties, or in the absence of agreement as appointed by the President of the Law Society of New South Wales for the preparation of an appropriate Contract and other documents as are necessary for the sale of the said property by auction.
(f)Cooperate in every way with the auctioneer in relation to the auction of the said property.
(g)Attend at the auction sale of the said property and negotiate with the highest bidder in the event that the reserve price is not reached.
(h)Execute the Contract for Sale.
(i)Execute all other documents necessary to complete the sale of the said property.
That both parties do all acts and things necessary to procure that upon the sale of the property the proceeds of sale to be paid in the following manner and priority:
(a)In payment of agent’s commission and auction fees, if any due on the sale.
(b)In payment of legal costs of the sale.
(c)In payment to the husband of the balance.
Within 90 days from the date of these orders the wife is to pay to the husband $124,441 (being the difference between the husband’s net cash entitlement pursuant to paragraph 34 of the reasons for judgment published on this date in the sum of $264,441 and the agreed value of the Property C land). Interest is to accrue on this sum at the rate prescribed under the Family Law Act, its Rules and Regulations. If payment has not been made within 120 days, the husband has leave to relist before me to seek orders for sale of the Property B property.
That the wife forthwith do all acts and things and execute all instruments documents and writings necessary to transfer the caravan currently situated at the Property H property to the husband.
That other than as specifically dealt with herein all the property, items of furniture, motor vehicles, jewellery, bank accounts, effects and superannuation in the possession, custody or control of the wife are the property of the wife and all the property, items of furniture, motor vehicles, jewellery, effects, bank accounts and superannuation in the possession, custody or control of the husband are the property of the husband.
In the event that either party refuses or neglects to execute any document necessary to give effect to these orders the Registry or Deputy Registrar of this Court be appointed pursuant to s.106A of the Family Law Act to execute all such documents in the name of the defaulting party and do all things necessary to give validity and operation to these orders.
IT IS NOTED that publication of this judgment under the pseudonym Kirby & Carlton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 796 of 2009
| MS KIRBY |
Applicant
And
| MR CARLTON |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for alteration of property interest under s.79 of the Family Law Act, commonly known as an application for property settlement. The applicant wife is 52 years old, and the respondent husband, 50. They commenced a cohabitation in April 1994, married in 2004, and separated on 1 February 2008. The main issue in the dispute between the parties is the characterisation of moneys provided to them during cohabitation by the wife’s mother, and also assessment of contribution.
Background
When the parties first commenced cohabitation in 1994, the wife had quite substantial interests in properties at Property H and Property T, as well as an interest in a business, all of which were owned with her prior husband. The husband had minimal assets at the time of cohabitation. In 1998, four years after cohabitation, the wife received about $266,000 representing her share of the proceeds of sale of the Property H property. In December 2001, seven years after cohabitation, the wife received a further $230,000, by way of property settlement from her former husband, and on the basis that she relinquished her interest in the business and the Property T property.
Moreover, the wife also had savings at the time of cohabitation, and I’m satisfied that the evidence confirms that shortly after cohabitation, the savings amounted to about $35,000. She also had a motor vehicle.
It should be noted that the husband conceded these matters, or otherwise did not put them in serious contention.
Whilst I have described the husband’s assets of cohabitation as negligible, they in fact, are comprised of an interest in a property at Property J, a motor vehicle and some tools of personal effects. However, the property at Property J and the motor vehicle were encumbered. The husband received a property settlement from his former wife in 1994, in the sum of about $110,000.
Hence, both the husband and the wife had assets at or about the time of cohabitation, and the real issue in this case is assessing the impact of their contribution of the same. In a strictly financial sense the wife’s contribution exceeded that of the husband, in a ration of 4 or 5 to 1.
During the course of the cohabitation and marriage the wife’s mother, Mrs F, generously provided quite substantial funds for the benefit of the wife, and/or the benefit of both of them. The characterisation of these moneys is an issue in this case. The wife contends that the advance of moneys constituted a loan which needs to be repaid. The husband disputes this, but ultimately concedes that a substantial sum of money was provided for their benefit, whether it is characterised as a loan or as a gift.
Both parties worked during the course of the marriage, in various capacities. They purchased properties at Property B, and Property C, which represent their largest assets today.
During the period of cohabitation, the wife suffered a stroke, arising out of which she received an insurance payment, which was applied for various business purposes, but of which the wife retained about $50,000.
During the course of the cohabitation and marriage, the wife and/or husband entered into various businesses, the details of which are not relevant in the present context. The property at Property B was initially acquired by the husband and the wife with a third party and, in time, the wife acquired that third party’s interest in the property such that, as at the date of these proceedings, her legal interest in the property represents two thirds of the same. The details of the transaction involving the third parties are not relevant in the present context.
The wife maintains that throughout the course of the cohabitation and marriage, she and the husband kept separate finances. She also says that she provided funds to the husband on many occasions, to meet what was supposed to be his share of the outgoings and expenses relating to properties and businesses conducted by them, and also to pay his personal debts. The husband does not dispute that their finances were separated. There is a dispute between the parties as to whether, in view of the matters referred to above, that the court should adopt a global, or asset by asset approach to assessing contribution.
Towards the end of the marriage, the husband received an inheritance from his late mother, the precise details of which did not become known until the hearing, or perhaps shortly before. The husband has re-partnered, and he and his new partner have purchased a property at Property H, using a mortgage. There is an issue about the characterisation of that property and its liability. The husband’s disclosure of the receipt of his inheritance, and the purchase of the Property H property gives rise to issues about whether he has been full and frank in terms of his disclosure to the court.
On behalf of the wife, it was contended that an asset by asset approach was appropriate on the facts of this case. On this basis, it was contended, the husband’s only contribution was to the home at
Property B, and that, ultimately, if he were to receive 20 per cent of the pool of assets and liabilities, this would represent a just and equitable property settlement for both parties.
On behalf of the husband it was contended that a strict asset by asset approach to the assessment of contribution undervalues the husband’s non-financial contribution throughout the relationship. In any event, on his behalf it was submitted that contribution ought to be assessed as to 33 per cent in his favour.
It was the joint approach of both counsel for the husband and the wife that in view of the fact that no super splitting order was sought, each party should retain their own superannuation. The wife contended that there were no facts justifying an adjustment under s.75(2) given the nearly identical s.75(2) considerations affecting each of the husband and the wife (with the obvious exception that the wife would receive more by way of property settlement). There was no serious submission on behalf of the husband that there should be a s.75(2) adjustment in his favour. I will proceed on the basis that no s.75(2) adjustment was sought by either party.
Having regard to that broad introduction and background, the following issues arise in this case. There are a number of discrete issues in relation to the constitution of the pool of assets and liabilities. The main issue in this regard, is the characterisation of the monies advanced by Mrs F to the parties. There is an issue about how I should assess some contribution, ie, on an asset by asset approach, or on a global approach. Contribution then needs to be assessed as between the parties. A just and equitable order then needs to be made.
Applicable law.
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution made by the parties. In this regard, I need to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
26. We think 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 between 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 of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so 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.
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. 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.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
The pool of assets and liabilities
I find the pool of assets and liabilities to be as follows:-
| ASSETS | Ownership | Value ($) | |
| 1. | Property B | 890,000 | |
| 2. | Property C land | Joint | 140,000 |
| 3. | AMP shares | Wife | 2,625 |
| 4. | NAB shares | Husband | 6,275 |
| 5. | Motor vehicle | Wife | 12,000 |
| 6. | Motor vehicle | Husband | 15,000 |
| 7. | Radio controlled equipment | Husband | 3,215 |
| 8. | Caravan | Husband | 23,000 |
| Total Assets | 1,092,115 | ||
| LIABILITIES | |||
| 9. | Car loan | Husband | 16,000 |
| Net non-superannuation assets | 1,076,115 | ||
| SUPERANNUATION ASSETS | |||
| 10. | HESTA | Wife | 67,000 |
| 11. | HESTA | Husband | 56,000 |
| Total superannuation assets | 123,000 |
The balance sheet as I have found it is different to the joint balance sheet that I was presented with at the hearing. Firstly, I have excluded the Property H property together with its liability. This is the property owned by either the husband, or the husband and his new partner, but was purchased after separation. In submissions, counsel for the wife conceded that the husband made a 100 per cent contribution towards this property. I recognise that I could create a separate pool of assets for the Property H property, and possibly even should technically adopt this approach, but in the interests of simplicity it is easier to simply exclude the same from the relevant pool of assets for s.79 purposes. In determining what is a just and equitable order I must, of course, take into account the existence of this property and its liability. I have also taken this into account, in a general sense, for s.75(2) purposes even though neither party claims an adjustment under this section.
I have excluded from the pool of assets relatively minor savings of the husband and the wife as well as various credit card debts which were included in the original schedule submitted to me at the hearing. In relation to the savings, these are minor items and given the fluidity of most savings accounts having relatively small balances, to include them in the pool would be rather artificial. As for the credit cards, given that separation now took place over two years ago, again it is artificial to include them in the balance sheet. Indeed, the tracing exercise that would need to be undertaken to allocate credit card debts to a pre-separation period would be quite disproportionate to any benefit in including these figures.
There was a dispute about the value of the husband’s radio-controlled aircraft and equipment. He produced a valuation indicating that these items were worth $3,215. The wife contends that it should be a higher figure, on the basis that the husband had represented the value of these items as being higher in an earlier financial statement. He clearly didn’t have what purports to be a valuation of that equipment at the time of his earlier financial statement. The valuation is the best evidence I have under the circumstances and thus this equipment will appear at $3,215.
The major issue of contention for balance sheet purposes is whether what the wife purports to be the loan from her mother in the sum of $182,000 should appear as a liability. I decline to do so. There are a number of insurmountable difficulties in the wife’s case and she has failed to convince me, on the balance of probabilities, that the moneys advanced are a loan repayable on demand, but otherwise interest-free, as she asserts. There is no doubt that at least $182,000 was provided by Mrs F to the wife, and/or the wife and the husband, during the period of cohabitation. What I don’t accept is that this is a loan which is repayable. There was no evidence of a demand for repayment. There is inconsistency between the wife’s evidence in cross-examination, and the documentary evidence in relation to the so-called loan. What written documents exist about the loan appear to have arisen very late in the relationship, and arguably after separation. There is some uncertainty in relation to the dates appearing on one of the documents (exhibit H1). My overall impression of the evidence is that at no stage during the period of cohabitation did either the husband or the wife actually need a loan from her mother. Indeed, my impression is that the wife was a very sound and capable financial manager and had financial resources to her at all relevant times. I have no doubt that the moneys advanced by Mrs F were put to good use, particularly in terms of effecting renovations to property. However, I am simply not satisfied that the evidence indicates that it was a loan which is repayable at some time. It is, nonetheless, a substantial contribution that was made, a matter that was eventually recognised even by the husband in his case, and certainly conceded in his counsel’s closing submissions. Accordingly, the alleged liability to Mrs F of $182,000 will not appear in the balance sheet as a joint liability.
I record the fact that the superannuation assets being items 10 and 11 above are figures different to that which was provided to me at the hearing. The figures I have used are based on the sworn most recent financial statements of the husband and the wife. Nothing turns on this because, as I have indicated above, no super splitting orders are sought and both cases proceeded on the basis that each of the husband and the wife would retain their own superannuation entitlements.
The liability in relation to the husband’s car loan has been entered at item 9 as $16,000. In the balance sheet provided to me at the hearing it was entered as $32,000. This is inconsistent with the husband’s sworn financial statement in which he says that the loan is $16,000, not $32,000. Accordingly, the total net non-superannuation assets amounts to $1,076,115. Total superannuation assets amount $123,000.
Asset by asset or global approach to assessment of contribution?
I am grateful to counsel for the wife for his extensive written submissions about the approach to be adopted in the assessment of contributions. Mr Campton makes a compelling, but ultimately not convincing case for the adoption of the asset by asset approach to the assessment of contribution. He emphasised, for example, that the evidence before the court enabled the court to make findings about the respective contributions that each of the husband and the wife made to the acquisition, conservation or improvement of property. This would thus make it much easier to assess contribution by reference to the contribution made to each asset
He submitted that adopting the global approach may result in the husband’s contribution being overvalued. The authorities he cites confirm, however, that the approach to be adopted is a matter for the court to decide, having regard to the facts of each case. This is a case where the financial contribution made by the wife and by the husband is quite clear. If the argument about contributions stopped there it would indeed be tempting to adopt an asset by asset approach. However, a significant part of the husband’s case is that he made non‑financial contributions, particularly as regards renovations, improvements and maintenance to property. The risk with adopting an asset by asset approach, is to minimise the husband’s non-financial contributions. That is the reason why I decline to adopt the asset by asset approach submitted by Mr Campton. However, I must be mindful of the comments of Nygh J, in G & G (1984) FLC 91-582 at page 76,697. In other words, in adopting the global approach, I must “heed the warning that the origin and nature of the different assets ought to be considered.”
Assessment of Contribution
In the wife’s case outline document, her counsel submits that contributions should be assessed at up to 90 per cent of the pool of assets. By the time of closing submissions, however, the wife’s position had quite appropriately moderated to one where contributions should be assessed in her favour of 80 per cent. As for the husband, his original position was the contribution ought to be assessed in his favour at 45 per cent, but during the course of the hearing this was quite appropriately moderated to 33 per cent. By the time of his counsel’s final submissions it was submitted that contribution could be no more than 35 per cent.
One of the significant differences in approach between the two cases is that the wife sought to characterise the relationship between the husband and the wife as primarily a business one, whereas the husband sought to characterise their relationship as an emotional one which subsisted over an extended period of time. The former approach emphasises financial contribution, but the latter urges the court to take into account non-financial contribution. Indeed, the husband’s case clearly recognises the greater financial contribution the wife made. However, his case is that over the course of a long relationship he provided support and comfort to the wife, particularly when she was ill as a result of a stroke she suffered. In addition, he made substantial contributions, he asserts, to improvements to the property.
The wife does not dispute that the husband provided her with support during the period that she was ill. However, she hotly contests the husband’s evidence about the work that he asserts he did initially to the Property H property, and then to the Property B property, all of which is attempted to be particularised by the husband in his affidavit.
I find that the husband did make non-financial contribution by providing maintenance work and renovation to the properties in question. However, I doubt very much that they are as extensive as he asserts in his affidavit and I am inclined to the view that he has exaggerated the nature and extent of the work that he performed. During cross-examination even he conceded that some of his evidence was imprecise. Moreover, there must be a shadow of doubt over the husband’s credibility given that he had failed to disclose the receipt of the inheritance from his mother’s estate late in the marriage, and how those funds were utilised. In addition, he has failed to disclose the true nature and extent of his relationship with his current partner, and their respective interests in the Property H property. In these circumstances, I have some reservations about his evidence in relation to the nature and extent of the non-financial contribution he made, particularly to the properties. Indeed, I must recognise the possibility that the husband has not been full and frank in terms of the disclosure of his assets to the court. Where there is doubt, it ought to be resolved in favour of the wife, and not the husband.
If contribution of the husband were assessed at 20 per cent (proceeding on the basis of exclusion of the superannuation) he would receive about $200,000 in circumstances where his financial contribution towards the Property B property, at its highest, was about $136,000 (according to the wife’s counsel’s written case outline). To give him only 20 per cent in these circumstances would fail to recognise the value to the wife of the non-financial contributions made by the husband.
Conversely, to award the husband 33 per cent on the basis of contribution gives him about $330,000, which I think overvalues the contribution he has made, particularly in circumstances when I’m not satisfied that he has been entirely frank in his disclosure to the court about other assets he holds.
In the circumstances of this case I believe that a just and equitable assessment of contribution in the husband’s favour is 27.5 per cent, which would give him approximately $275,000 as a gross entitlement.
Just and Equitable Order?
If the husband receives 27.5 per cent of the assets this gives him a gross entitlement of $295,931. If he retains his NAB shares, his motor vehicle, the radio controlled aircraft equipment, the caravan, as well as retaining the liability relating to this car, this means the payout to him would be $264,441. In circumstances where both parties agree that the Property C property should be sold, this should be the first source for payment of these funds. Any shortfall, however, will need to be paid by the wife from her own resources, and failing this, out of the sale proceeds of the Property B home. It is possible that the wife will be able to fund the balance of the settlement from her own resources, but there needs to be a reasonable timeframe from the husband’s perspective. Insofar as the settlement is not dependent on the sale proceeds of Property C, interest on the husband’s entitlement should accrue after 90 days from the date of these orders. The parties may well wish to consider a transfer of the Property C property to the husband, in specie, but that is a matter for them. The wife wishes to retain the Property B property, and I suspect it will be reasonably practical for her to do so, having regard to the settlement I will order.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate: Monique Robb
Date: 18 March 2010
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