Kostov and Kuslev - [2008] FMCAfam 757

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KOSTOV & KUSLEV

[2008] FMCAfam 757

FAMILY LAW – Property.

Applicant:

MS KOSTOV

Respondent:

MR KUSLEV

File Number:

CAC 1343 of 2007

Judgment of:

Brewster FM

Hearing dates:

3 & 6 June 2008

Delivered at:

Canberra

Delivered on:

17 July 2008

REPRESENTATION

Counsel for the Applicant:

Ms Tonkin

Solicitors for the Applicant:

Mamdouh Elmaraazey

Counsel for the Respondent:

Ms Snell

Solicitors for the Respondent:

Bevan Snell

ORDERS

That within 45 days the wife pay to the husband the sum of $51,638.
That if this amount is not paid within the specified time the parties take all steps to sell the property situated at Property Q and to divide the net proceeds of that sale equally between them.
That as against the other each party be entitled to retain the chattels presently in his or her possession and the choses in action in his or her name.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
CANBERRA

CAC 1343 of 2007

MS KOSTOV

Applicant

And

MR KUSLEV

Respondent

REASONS FOR JUDGMENT

Introduction

This matter involves a dispute between the parties as to property division.

Background

The husband is aged 43 and the wife 35. They were married in 1991 and separated on 6 March 2007. There are two children of the marriage [D] who will be 16 in August and [M] who will be 13 in August.
In 1994 the parties bought a unit at Property Q. This cost $75,000. They borrowed $60,000 from St George Bank and the wife’s mother lent them $15,000. The wife’s mother also assisted by putting her name on the mortgage. The mortgage was later increased. I assume the mother’s loan was interest free.
In August 2003 the husband suffered an injury at work. He received a number of lump sums by way of compensation in 2006 and 2007. These totalled $487,061. The payments were referred to in the affidavits filed by each of the parties as being from a workers compensation claim but, given the size of the payout which did not seem to fit easily with a workers compensation redemption, I queried this at the outset of the trial. I was told by counsel for the wife that it was in fact a settlement of a common law claim.
By the time the parties separated the compensation monies remaining had shrunk very significantly. At that date there was about $68,000 of those monies remaining in a bank account in the name of the husband and about $220,000 in a joint account. There is a dispute as to what happened to the balance. The wife concedes that an amount of about $28,000 was paid to her mother to repay a debt. The husband maintains that the debt, and the amount paid, was $38,000 and I accept his evidence. About $6,000 was paid to a woman identified only as [X] also to repay a debt and an amount of about $28,000 was used to pay off a gambling debt of the husband. The husband maintains that other debts were paid but this is not conceded by the wife. She says that the husband lost the balance gambling. The husband admits to having a gambling problem but maintains that both parties were involved in gambling throughout the relationship.
I accept the evidence of the husband that both parties were engaged in gambling up until a couple of months before the separation when he took to gambling by himself. He says he did this after he discovered the wife was having an affair. His evidence was not entirely consistent on this point. At one stage in re-examination he said that he had started gambling by himself at some stage prior to his compensation monies being received. The problem with this case is that the husband is by no means fluent in English and I am inclined to think that his earlier evidence was the more accurate. In any event I think it likely that he lost more in gambling than did the wife. As will be seen nothing really hangs on this.
On 8 May 2007 the parties undertook an informal property settlement. By that stage the husband had purchased a utility motor vehicle for $13,500 using the monies in his account and had disposed of the rest.

I am satisfied that for the most part this was probably in gambling. There remained the monies in the joint account which by this time totalled about $223,000. The wife took $165,000 of these monies and the husband the remaining $58,000. It was stated on behalf of the husband that the basis for this settlement was that the wife was to receive enough to discharge the mortgage on the Property Q unit and to have about $58,000 remaining and for him to have the remaining $58,000. The way the figures work out gives some credence to this contention. In the event the wife applied only $12,000 of her money to the mortgage and all that remains of the money she received from this division is $13,000. The husband has spent the whole of his $58,000.
I had understood from cross examination of the husband, and indeed from statements made in response to my query to counsel for the wife during that cross examination, that it would be submitted that the informal property division had some legal significance and that the husband should be held to it. I did not press the issue at the time and was prepared to await the submissions that had been foreshadowed. Ultimately however no submissions were made to this effect. That was an appropriate and, it seems to me, inevitable decision. The only way an agreement as to property division can be binding between the parties is if it is in the form of a financial agreement made under Part VIIIA of the Family Law Act and if it strictly complies with the formal requirements for such an agreement. The May 2007 agreement did not so comply. The only possible exception to this is found in the

Full Court
case of Schokker v Edwards (1986) FLC 91-723 where a majority of the Full Court held that the wife in that case should be held to an agreement and the property division made pursuant to that agreement. That case has never been expressly overruled but it has never been applied in any subsequent case of which I am aware.

The present case lacks the particular aspects of Schokker v Edwards that led majority of the court in that case to hold the wife to the agreement between the parties. In any event, given the decision of the Full Court of the Family Court in Black (2008) FLC 93-357, any flicker of life that may have remained in Schokker v Edwards has now been snuffed out. I remain puzzled as to the purpose of the cross examination on this issue.

The parties’ applications

The husband seeks an order that the wife pay him $51,638 and that he transfer his interest in the Property Q unit to her. The wife seeks an order that he transfer his interest in the unit to her and that she not be required to pay him any money.

The process to be applied

The Full Court of the Family Court of Australia has indicated that a four stage process is to be applied in property division cases. The first stage involves making findings as to the pool of property. The second stage involves a consideration of contributions of various types made by or on behalf of the parties. If appropriate an adjustment may be made in the property interests of the parties on account of these.

The third stage involves a consideration of such matters set out in section 75(2) of the Act as may be relevant. Again, if appropriate, an alteration in property interests may be made on this basis. The fourth stage involves taking an overview of the results derived from the second and third stages to determine if, overall, that result is just and equitable. In most cases the second and third stages would involve making a specific percentage adjustment under each heading.

For reasons which will become apparent I need not do so in this case.

The pool

The parties agree as to the value of the pool insofar as it consists of actual property. The pool on this basis is as follows:
·Equity in the Property Q Unit                $105,000
·Husband’s car  $13,000
·Wife’s car  $12,000
·Wife’s contents  $2,000
·Wife’s savings  $13,000
The parties agree that there should be monies added back to the pool as notional property representing property that once existed but has now been spent. They disagree as to the amount that should be added back in each party’s column. A common feature of both sides has been that they have worked on calculations involving periods prior to separation. I do not think that this is appropriate. The only monies I intend to add to the pool as notional property are those monies which existed at separation. It will be recalled that the husband had $68,000 in his account and from this he purchased a motor vehicle for $13,500.

This vehicle is in the pool. Therefore I propose to attribute to him the sum of $54,500 plus the $58,000 that he received from the May 2007 division. This results in a total of $112,500 notional property on his side of the ledger. On the wife’s side I deduct from the $165,000 she received the $12,000 she applied towards the mortgage and the $13,000 she has remaining and which is in the pool. Thus I allocate $140,000 on her side of the ledger as notional property.

Contributions

During the marriage each party was in paid employment although in the case of the husband this ceased in August 2003. Each party was also involved in domestic and parenting tasks. Each party maintains that he or she made greater contributions to domestic and parenting tasks but I am unable to make a finding which would justify an adjustment in favour of either party on these grounds. There is no evidence as to the parties’ incomes during the relationship. Even when the husband was not working he received workers compensation payments. I assume these ceased when he received the first of his compensation payments.
I am satisfied that for a period after his accident the husband was disabled from his injuries and the wife would have borne the brunt of the domestic and parenting tasks, including some care of him. I am satisfied however that in time he recovered sufficiently to contribute to these tasks and, as he was not in employment, I infer that he was the primary parent. Overall I am unable to make a finding which would justify my making an adjustment in either party’s favour on the basis of this aspect of the case.
As I have indicated the wife’s mother provided some assistance in the acquisition of the unit in Property Q. I regard this as a contribution made on behalf of the wife.
Post separation both children have lived with the wife and she has thus continued her contributions as a parent. The husband has paid no child support.
I propose now to I discuss the relevance of the husband’s damages award.
The first thing to be observed is that the husband’s damages award is a contribution made by the husband and by the husband alone. In her written submissions counsel for the wife pointed out that the settlement would in all probability have included an amount under the principles in Griffiths v Kerkemeyer. She contended that therefore a part of the damages were referable to contributions made by the wife. By way of explanation to the parties, and to any non-lawyer who may read this judgment, I will explain what this means. If a person in the position of the husband suffers injury, and is unable to care for himself, and if a person in the position of the wife provides care for him, then the husband would be entitled to recover damages referrable to the gratuitous care that has been provided by the wife. This is called a Griffiths v Kerkemeyer award after the High Court case which definitively established this principle. However the submissions made on behalf of the wife have three major problems. The first is that there is no evidence that a claim was made for damages under this head.

The file of the solicitors who acted for the husband was not in evidence. The second is that even if it were apparent that such a claim was made there is no evidence as to the portion of the settlement that might relate to such a claim. The third is that in any event this aspect of the case is irrelevant as the whole of a damages award, however comprised, is a contribution by the husband alone. See Wrona (Finn J, unreported, 17 December 2004).
As I have indicated the husband maintains that both parties lost money in gambling. As I have indicated I accept that this was the case but find that he lost more than the wife. This is irrelevant however. As the husband’s damages monies were a contribution made by the husband alone it does not advance the wife’s case that he dissipated much of those monies on gambling. To paraphrase Archbishop Cranmer’s Order for the Burial of the Dead “the husband gave and the husband hath taken away”. The highest that the wife’s case can be put is that he should only get credit for those parts of his damages monies that were applied for the benefit of the family or to reduce debt or which form a part of the pool. It could be argued that Wrona is also authority for the proposition that the whole of the husband’s damages monies, including those gambled away, should be credited to him but I need not discuss this. For the purposes of this case I will only credit the husband with those parts of his damages monies that:
(a)Were applied to reduce debt. In this respect I will ignore the husband’s gambling debt.
(b)Were applied for the benefit of the family. Under this heading I include the parties’ add backs.
(c)Are represented by an asset in the pool. These comprise the husband’s car and the wife’s savings.
On this basis the monies to be credited to the husband under the contribution based division comprise the monies applied to the repayment of the debts to her mother and [X], the monies which the wife used to reduce the mortgage, the wife’s savings, the husband’s car and the parties’ add backs. If these monies and these monies alone are to be credited as a contribution by the husband it is irrelevant what he did with the balance.
Given that the compensation monies were received quite late in the relationship and that their treatment insofar as a contribution based division is concerned will be different to the treatment of the other assets I believe it is appropriate to apply an asset by asset approach to that contribution based division. I divide the pool into what I will call “non-damages” assets and “damages” assets. The non-damages assets comprise the equity in the Property Q unit, the wife’s car and her furniture. These have a total value of $119,000. The damages component of the pool comprises the husband’s car, the wife’s savings and each party’s add backs. These total $278,500. The total pool amounts to $397,500.
It can be seen that I have not included the $12,000 paid towards the mortgage in the damages assets. I will treat this as a post separation contribution made by the husband to the non damages assets.
Whilst the wife made no contribution to the damages assets that does not meant that she should not receive a contribution based share of those assets. She contributed generally throughout the marriage both financially and non financially and has since separation made significant contributions as a parent. See for example Farmer v Bramley (2000) FLC 93-060. However, given that fact that the damages assets were a contribution by the husband, he must be credited with the greater share of those assets.
I believe that a contribution based division of 80% to the husband and 20% to the wife is appropriate in relation to the damages assets. Whether or not the wife should have an adjustment made in her favour with respect to the non damages assets is not easily resolved. She has made a significant post separation contribution as a parent but only over a period of some fifteen months and post separation $12,000 of the husband’s damages monies were applied to the mortgage. However for present purposes I will divide the non-damages assets on a contribution basis at 55% to the wife and 45% to the husband. That is, if anything, erring on the side of the wife. The wife’s share of the non damages assets is therefore $65,450 and the husband’s $53,550.

The wife’s share of the damages assets is $55,700 and the husband’s $222,800. The wife share amounts to $121,150 and the husband’s $276,850. This represents a split of 30.5% to the wife and 69.5% to the husband.

Section 75(2) factors

The husband says that his medical condition precludes his performing heavy work. He is a concreter by trade. No medical reports were put in evidence as to his condition and its impact on his earning capacity. However from the size of the damages settlement I can infer there must have been evidence that his future earning capacity was compromised to a degree. He says that he is presently in business in partnership with another man in the concreting trade. He says that, given his limitations, and I assume the limitations of his partner who is aged in his late 60s, he expects the firm will make about $50,000 per annum profit or about $25,000 each. At times during his oral evidence he gave figures somewhat less than this but I will hold him to this figure. I am unable to make a finding that his earning capacity exceeds $25,000 per annum.
The wife has in the past worked as a cleaner. She is not in employment at present. There is no evidence that she is unable to work.
Overall I would make no adjustment based on any discrepancy in the parties’ income earning capacities.
The only other section 75(2) factor that applies in this case is the care of the two children. At present they are living with the wife but the husband does not concede that this will continue in the longer term.

He believes that when he obtains appropriate accommodation, which he expects to do when he receives his share of the property settlement, the children may come to live with him. The wife is in a new relationship and it appears that the children do not get along with her partner. I add however that she and her partner do not live together. I found the wife’s evidence as to her relationship with the children, given the introduction into her life of her partner, to be most unsatisfactory. She has also fallen out with her mother and indeed has taken out an Apprehended Violence Order against her mother. It appears the children have a good relationship with their maternal grandmother and it may be that this is placing strains on their relationship with the wife. Overall I found her evidence as to her relationship with the children most unsatisfactory. I infer that there may be problems in that relationship and that there is some uncertainty as to whether the children will continue to live with her in the longer term.
If I were to fix an adjustment under section 75(2) I would make an adjustment in the wife’s favour to reflect the fact that she has the care of the children but I would temper this to reflect the possibility that the children may ultimately end up with the husband. As will be apparent I need not dilate on this issue. In the result, even if I were satisfied that the children will continue to live with the wife, I would not make an adjustment under section 75(2) which would result in her having a greater share of the pool than the husband would concede to her.

He seeks about $52,000 which, when added to the $13,000 in the form of his motor vehicle and the $112,500 in the form of add backs, would give him a total of about $178,000. This represents about 45% of the pool. The wife would need to receive more than 55% to achieve a better outcome than that proposed by the husband. On a contribution based division the wife is to receive 30.5% of the pool. To convert that result to a 55% share of the pool under section 75(2) would require an adjustment of 24.5%.

It is necessary to look at an adjustment under section 75(2) in dollar terms and not just in percentage terms. The pool totals $397,500.

A 10% adjustment would be about $40,000 or a difference in the parties’ entitlements of about $80,000. That is a substantial difference. A 24.5% adjustment would represent a difference in the parties’ entitlements of about $196,000. This is a much greater adjustment than I would be prepared to make under any circumstances.

Conclusion and Overview

It can be seen from the foregoing that I regard the husband’s claim as a reasonable one, indeed a modest one. It is therefore just and equitable that I accede to it. As I have indicated he seeks an order that he be paid $51,638. I need not explain how he comes to this figure. It bears no relationship to the way I have approached the case. I will make the orders he seeks. If the wife is unable or unwilling to pay this amount the unit will have to be sold. The proportion that $51,638 bears to the total equity in the unit is little over 49% and I propose to round this off to 50%. I will make orders accordingly.
I assume there will be an application by the husband for costs.

I adjourn the matter to 21 August 2008 at 9.30am for the hearing of that application. If this date is not convenient to either of the lawyers they should contact my associate to have it rescheduled.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Brewster FM

Associate:

Date: 17 July 2008