KRUGER & KRUGER
[2019] FCCA 2757
•22 October 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KRUGER & KRUGER | [2019] FCCA 2757 |
| Catchwords: FAMILY LAW – Property settlement – ‘add-backs’ – spousal maintenance. |
| Legislation: Family Law Act 1975 (Cth), ss.72(1),74,75 (2), 79 |
| Cases cited: Stanford v Stanford [2012] HCA 52 |
| Applicant: | MR KRUGER |
| Respondent: | MS KRUGER |
| File Number: | LNC 701 of 2018 |
| Judgment of: | Judge McGuire |
| Hearing date: | 30 July 2019 |
| Date of Last Submission: | 30 July 2019 |
| Delivered at: | Launceston |
| Delivered on: | 22 October 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms K Mooney |
| Solicitors for the Applicant: | Berry Family Law |
| Counsel for the Respondent: | Mr M Trezise |
| Solicitors for the Respondent: | Lander & Rogers |
ORDERS
That within 60 days of the date of these Orders the parties do all acts and things and sign all such documents as are necessary so that the husband retains or receives: –
(a)Property A;
(b)Property B;
(c)the husband's business – Company C;
(d)the property situate at Property D;
(e)the entitlement as primary beneficiary to the assets of the Kruger Family Trust subject to the liabilities of the Kruger Family Trust; and
(f)any funds standing to the credit in all bank accounts in his sole name.
That contemporaneously with the transfers and vesting in Order (1) hereof, the parties do all acts and things and sign all such documents as is are necessary so that the wife retains or receives: –
(a)the property at Property E;
(b)all shares owned by the Kruger Family Trust;
(c)the business known as Company F;
(d)the premature distribution of funds made by the wife pursuant to the reasons herein and 'added back';
(e)the motor vehicle currently in the wife's possession and control;
(f)any funds standing to her credit or bank accounts in her sole name.
Simultaneously with the transfers in Orders (1) and (2) hereof the husband pay to the wife such lump sum so as to create an overall distribution of the tangible assets of the parties or either of them as to 60% to the wife and 40% to the husband.
That the husband be solely responsible for and indemnify the wife in respect of mortgages secured over the properties owned by himself or the Kruger Family Trust and in particular: –
(a)mortgage to Commonwealth Bank of Australia secured over Property D and Property B (E$781,000);
(b)mortgage to Commonwealth Bank of Australia … secured by Property A (E$979,000);
(c)mortgage to Commonwealth Bank of Australia … secured by property at Property G (E$1,925,000); and
(d)mortgage to Commonwealth Bank of Australia … – secured by property at Property H (E$595,000).
That the husband and the wife each be solely responsible otherwise for any liabilities in their name and/or which encumber any asset that they receive under these Orders.
That the parties forthwith do all things and sign all documents necessary to affect a sale of the property situate at Property G and for these purposes they shall: –
(a)immediately list the property for sale;
(b)settle a listing price which is either mutually agreed or failing agreement then at a price to be determined by the nominee of the Chief Executive Officer of the Real Estate Institute of Tasmania;
(c)co-operate with the agent, including making the key available to the agent, allowing inspection of the property at all reasonable times requested by the agent and doing or saying nothing to hinder or prevent the sale;
(d)ensure the property is maintained in a neat and clean condition for inspection by prospective purchasers; and
(e)sign all documents reasonably requested by the agent for the listing and the sale of the property.
That the parties do all things and sign all documents necessary to affect a sale of the property situated Property H and for that purpose they shall: –
(a)immediately list the property for sale;
(b)set a listing price which is either mutually agreed and failing agreement then at a price to be determined by the nominee of the Chief Executive Officer of the Real Estate Institute of Tasmania;
(c)co-operate with the agent, including making the key available to the agent, allowing inspection of the property at all reasonable times requested by the agent and doing or saying nothing to hinder or prevent the sale;
(d)ensure the property is maintained in a neat and clean condition for inspection by prospective purchasers; and
(e)sign all documents reasonably requested by the agent for the listing and sale of the property.
That upon the sale of Property G and Property H, the parties do all things, sign all documents and give all necessary instructions to cause the sale proceeds to be applied (to the extent these are not deducted from the sale deposit), in the following priority: –
(a)pay the agent and conveyancing solicitor their costs of and disbursements on the sale;
(b)to pay any agreed costs of preparing the properties for sale (as recommended by the selling agent);
(c)discharge the registered CBA mortgages so far as the bank requires; and
(d)divide any remaining balance as to 60% to the wife and 40% to the husband subject first to these Orders generally.
That upon the sale of Property G and Property H, the parties shall jointly engage at their equal cost J Accountants to prepare an estimate of the capital gains tax due and payable from the sale of each property and thereafter the parties shall:
(a)pay into a trust account in their joint names as a retention against capital gains tax the sum calculated by J Accountants;
(b)do all things necessary to complete relevant income tax returns so as to crystallise the capital gains tax due and owing by each party;
(c)pay the capital gains tax due from the sub-paragraph (a) retention; and
(d)if there are is a surplus of retention over tax liability then divide that surplus as to 60% to the wife and 40% to the husband; and
(e)if there is a shortfall between the retention of the tax liability then the parties immediately make up the difference by payments of 60% of it by the husband and 40% of it by the wife.
That within 60 days of the date of these Orders the wife resign from any office holding she has in Kruger Pty Ltd and any role that she has as an appointor in the Kruger Family Trust and in exchange, the husband shall indemnify the wife and keep her indemnified for any liability, past, present or future which may accrue to her out of her directorship or shareholding in Kruger Pty Ltd or her position as either a appointor, beneficiary or otherwise within the Kruger Family Trust save for any costs, expenses or liabilities of any kind relating to the transfer to her from the Kruger Family Trust of the property at Property E and the transfer from the Kruger Family Trust of her business Company F.
That the parties forthwith do all acts and things and sign all documents necessary to first complete the 2019 financial year income tax returns and financial statements for the Kruger self-managed superannuation fund ('the fund').
That the parties shall convert to cash such amount of the assets of the fund to create a cash component, after the costs of sale of those fund assets equal to at least 50% of the net Fund value.
That parties shall do all acts and things and sign all documents necessary to pay all of the costs of the completion of the 2019 income tax returns and to pay the tax due on those returns to then determine the net entitlements of each of them under the Fund.
That pursuant to S90XT(1)(a) of the Family Law Act 1975 (as amended), the husband and the wife shall each sign all documents and do all acts and things required of them both in their personal capacities, and as Trustees of the fund to the effect a split of their respective member accounts in the Fund in such manner as is required to create a 50/50 split of their interest in the fund.
Order (14) herein has effect from the operative time and the operative time is five (5) business days after service of a certified copy of these Orders on the trustees.
Orders (14) and (15) herein are binding on the Trustees of the Fund ('the Trustees').
That upon the Trustees making the splittable payments necessary to give effect to the provisions of Order (14) herein, the relevant components will be credited to the member accounts of each spouse and their respective member accounts adjusted to reflect the corresponding increase or reduction in the entitlement which each member spouse would had have had but for these Orders.
That within 14 days of the implementation of the split of the interest in the parties of the Fund in accordance with Order (14) herein the parties shall do all acts and things necessary to: –
(a)roll over the wife's member account into another fund of the wife's choosing;
(b)effect the resignation of the wife is a Trustee of the fund; and
thereafter the wife will relinquish any entitlement she might otherwise have in relation to the Fund and shall cease to be a member of the Fund.
That unless otherwise specified in these Orders and except for the purposes of enforcing the payment of any money due under these or any subsequent Orders:
(a)each party be solely entitled to the exclusion of the other to all property in the possession of such party as at the date of these orders but with the wife to retain the chattels listed in annexure “A” to these Orders and the husband to retain the chattels listed in annexure “B” to these Orders.
(b)each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other party;
(c)all insurance policies to become the sole property of the owner named thereunder.
That all joint bank accounts of the parties be closed and the funds be divided as to 60% to the wife and 40% to the husband.
That the parties and each of them have liberty to apply as to the execution of these Orders.
Spousal Maintenance
That the wife's application for spousal maintenance be dismissed.
AND THE COURT NOTES:
That pursuant to Section 81 of the Family Law Act 1975 the parties intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
IT IS NOTED that publication of this judgment under the pseudonym Kruger & Kruger is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT LAUNCESTON |
LNC 701 of 2018
| MR KRUGER |
Applicant
And
| MS KRUGER |
Respondent
REASONS FOR JUDGMENT
Applications
These are proceedings for property settlement pursuant to Section 79 of the Family Law Act 1975 (“the Act”).
The husband is the applicant. He seeks orders which equalise the parties’ current superannuation interests. He argues for an adjustment of tangible non-superannuation property as to a net 46% to him and a net 54% to the wife. He does so on the basis of conceding that no weight be given to either party in respect of differing initial contributions to a lengthy marriage or for contributions during the course of the marriage. He concedes an adjustment to the wife on account of the considerations under s.75(2) of the Act.
The wife argues for orders that would give her 60% of the tangible assets and 40% to the husband. She also agrees for an equalisation of superannuation interests. The wife seeks a further order for spousal maintenance in the sum of $1,000 for a period of three years. That application is opposed in its entirety by the husband.
The Issues
In a matter where much of the factual background is agreed between the parties, the major issues between them can be summarised as follows: –
(a)the wife's application for spousal maintenance;
(b)in circumstances where it is agreed that the wife has since separation given approximately $300,000 to the parties’ 29 year old daughter, the husband asks that these monies be 'added back' to the property pool and to then be distributed as a part of the wife's entitlement or, alternatively, be considered under s.75(2)(o) of the Act therefore giving the husband a greater percentage entitlement than set out above. The wife argues that there should be no 'add-back' or adjustment pursuant to s.75 (2)(o);
(c)a similar argument in respect of an intended 'write-off’ in respect of approximately $100,000 of unpaid rent by the parties’ 31 year old son, Mr J Kruger, in respect of commercial premises from which he continues to run a business in Launceston. Further, the same argument is mounted by the wife in respect of a loan made to Mr J Kruger in a quantum of approximately $360,000 which the parties may concede will not be repaid by their son; and
(d)The treatment of paid legal costs, and in particular, where the husband claims to have paid his legal costs to date from his earnings post separation and where the wife has paid her legal costs to date primarily from the proceeds of a professional litigation loan (save and except the sum of $20,000 which she concedes was not put towards legal costs) but where she therefore accrues a debt to the litigation funder following my final orders in this matter.
There are otherwise no contribution issues between the parties but where they differ to a small degree in what adjustment should be made to the wife that pursuant to s.75(2)of the Act.
Background
That the parties are both originally from Country G. The husband is 61 years old. The wife is 58 years of age.
The parties married and commenced cohabitation in Country G on … 1984.
There are two children of the marriage namely Mr J Kruger (aged 31) and Ms L Kruger (aged 29). Mr J Kruger operates a business in Launceston and out of premises owned by the parties. He lives in another property also owned by the parties but pays continuing and up-to-date rent on that residential property.
Ms L Kruger has a degree and some practising experience as a professional. She currently lives in Country H, and is attempting to establish a clothing business.
There is no disagreement that each of the children has been the beneficiary of considerable largesse from their parents. As mentioned above, it is not disputed that Mr J Kruger owes some $100,000 from his parents unpaid rent on the restaurant premises. He also received a loan during the course of the parties’ marriage of some $360,000 and that repayments are not being made on that loan. The wife concedes that since the parties’ separation she has bestowed some $300,000 on Ms L Kruger and without the prior consent or knowledge of the husband. The husband has made some much smaller and relatively minimal gifts to Ms L Kruger.
The parties separated under the one roof in either September or November 2017 and physically separated in July 2018.
The wife also concedes that she has made payments to her own father of around $98 per week this arrangement commenced during the marriage and apparently with the knowledge of the husband. No ‘add-back’ is pressed.
The husband is a self-employed health practitioner, and has a considerable income in excess of $500,000 per annum.
The wife operates her own business as a distributor for Company F. The wife previously did and continues to operate her business out of the husband's business premises in Launceston. She had previously combined the running of her business with working as the husband's Manager.
In or about 2010 the parties purchased Property A. The parties agree that the wife devoted much time to the improvement of the property including the establishment of market gardens.
The husband has re-partnered and now employs his partner as a Personal Assistant/Practice Manager in his business.
There is no evidence that the wife has re-partnered in the sense of any financial dependency or support.
The Evidence
Both parties gave evidence and were cross-examined. In circumstances where, to their great credit, the parties themselves are fundamentally in agreement as to the asset pool, valuations and contributions and where the major issues rest with the jurisprudence of 'add-backs' premature expenditure of joint monies, each of the husband and the wife gave their evidence in a candid, honest and mutually respectful manner. Similarly, cross-examination by Counsel was relatively discrete and to the points at issue thereby saving some emotional expense for these parties who are quite obviously still dealing with the demise of their marriage and its financial consequences.
The Relevant Law
Section 79 of the Family Law Act (1975) ('the Act’) deals with matters of alteration of property and gives the Court a broad discretion under subsection (1) within the statutory confines of the legislation.
Whereas previously there had been a generally accepted four-step approach for trial judges in considering property settlements, the High Court in Stanford v Stanford[1] emphasised an initial consideration for the Court at s.79(2) in that a Court shall not make any order for alteration of property unless it is satisfied in all the circumstances that it is just and equitable to do so. This is a consideration separate than a simple conflation of considerations of contributions towards a property pool. Nevertheless, in the matter before me where this marriage had continued since 1984 and where the parties interests in assets and liabilities are intertwined and complex, and where I am easily satisfied that the marriage is at an end, I have no difficulty in making findings at s.79(2).
[1] [2012] HCA 52
The Court must then establish the property pool. 'Property' is to include assets, liabilities and financial resources of the parties or either of them. Superannuation, although not strictly an asset, is to be 'treated as property' for this exercise. There is a discretion in the Court to consider the property pool on a 'two-pool' basis with tangible assets in one pool and superannuation entitlements in the other or to consider the entirety of the property on a 'one-pool' basis. In the matter now before me the parties have agreed that their superannuation entitlements will be equalised and I will therefore consider the tangible assets separately. The Court is to then attribute a value to the property pool.
The next step in the consideration is as to the contributions by the parties to the acquisition, conservation and/or improvement of the property pool. Contributions may be of a direct or indirect financial type. Contributions can be of a non-financial type including contributions as homemaker and parent. Again during this long marriage these parties have agreed that the contributions are equal. The husband claims that his contributions after separation have been superior in the meeting of joint liabilities.
After consideration of altering the interests in the property pool on the basis of contributions, the Court is then to consider whether there should be any further adjustment to either of the parties on account of the matters at s.79 (d) – (g) of the Act and including any relevant considerations under s.75(2). Both parties agree that there should be an adjustment to the wife but differ as to the percentage on that adjustment.
Finally, it is generally but not universally considered proper for the Court to then 'stand back' and be satisfied that the proposed orders are 'just and equitable' and not just the percentage distribution of the parties’ property.
The Property Pool
It is here that the parties are primarily in dispute. Specifically, the husband argues that there should be an 'add-back' to the pool by reason of the wife's unilateral and premature distribution of funds to their adult daughter, Ms L Kruger. In the Case Outline document the husband seeks an add-back of $298,803. In her final address, Counsel for the husband quantifies the add-back at $300,003.56. The figure is necessarily liquid by reason of the number, variable type, and quantum of the wife's payments to Ms L Kruger and in circumstances where the wife's evidence under cross-examination was understandably vague in some of these respects.
Significantly, the wife does not dispute that she made these payments to Ms L Kruger. She does not dispute that she made them unilaterally in the sense of no prior consent from or consultation with the husband. The wife claims simply that the contributions to the parties’ daughter were reasonable in the support of an adult child in that child's particular circumstances and hence should not activate the discretion of the Court to make an 'add-back' or otherwise consider the matter favourably for the husband under s.75(2)(o) of the Act. In support of this proposition, the wife asks the Court to note that Ms L Kruger’s financial circumstances are strained where she lives in Country H and is attempting to start a small business but in circumstances where her visa will not permit her to be employed by others. The wife says that the husband himself has made contributions to towards Ms L Kruger’s support albeit she concedes in no sense in the quantum that she herself is contributed. Further, the wife says that the parties have also contributed extensively and in excess of $300,000 towards their son Mr J Kruger in the setting up of a business in circumstances where the husband candidly concedes that this ‘loan' will never be repaid. The wife says still further that Mr J Kruger has operated a business out of premises owned by the parties and is indebted to them for unpaid rent of in excess of $100,000. As I understand it, therefore, the wife's argument can be summarised as being a situation where the parties have either explicitly or implicitly bestowed considerable largess on both of their children and that her payments to Ms L Kruger are consistent with the support given to their children throughout the marriage including the setting up for Mr J Kruger in a business and the paying for Ms L Kruger's law degree at J University.
The husband argues that the payments to their children should be treated differently. He says that the payments made to Mr J Kruger occurred during the marriage and by agreement between husband and wife. He says that there was a connection in intent and quantum between setting Mr J Kruger up in a business and providing for Ms L Kruger’s university education. To the contrary, he says, that the payments to Ms L Kruger made post separation were unilateral on the part of the wife. The implication from his evidence is that he would not, in any event, have consented to such generosity to his adult daughter and indicating some reluctance and regret at his own gift of $1,500 to Ms L Kruger together with the purchase from her of a $900 bed. The tone of his evidence was unambiguously that he was not in favour of any further generosity to Ms L Kruger either by the parties jointly or by either of them.
The husband concedes that he is unlikely to receive repayment from the loan to Mr J Kruger and that Mr J Kruger will not pay the outstanding rental on the restaurant premises. He emphasises, however, in response to Mr J Kruger's failure to meet these liabilities that the relevant premises are to be sold. The wife does not disagree with such a response. It is clear, however, that both parties are resigned to Mr J Kruger’s debts to them being ‘written off’.
In summary, therefore, the husband says that the payments to Mr J Kruger differ from those made to Ms L Kruger in that the former were by agreement and during the course of the marriage whereas the latter were made unilaterally and post-separation.
Jurisprudence in respect of the issue of ‘add-backs' or, alternatively, consideration under s.75(2)(o) has enjoyed recent exposure following comments in Stanford (supra) to the effect that the content of the property pool should normally be determined at the date of the trial. Suffice to say that I am comfortably satisfied that a discretion remains with a trial judge to consider and deal with premature expenditures from property pools by either 'add-back' or under s.75(2)(o) of the Act. The Full Court in Trevi & Trevi[2] have the recently assisted trial judges in providing an historical summary of the process and comment at [27] – [30] as follows:
[2] [2018] FamCAFC 173
Dissipation of property and expenditure other than on legal fees
[27] The Full Court held in Omacini & Omacini[3] that add backs fall into 'three clear categories': where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and 'waste' or wanton, negligent, or reckless dissipation of assets.
[28] However, the Full Court also made it clear that an add back does not necessarily occur whenever 'a party has expended money realised from the disposition of assets that existed as at the date of separation', the Full Court describing such a proposition as 'unduly simplistic'. An earlier Full Court made the same point saying that adding back is 'the exception rather than the rule'.[4]
[29] The fundamental precept that add backs are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, 'the Family Court must take the property of a party to the marriage as it finds it' at trial. An important parallel proposition is that the parties do not 'go into a state of suspended economic animation' after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of add back.
[30] Two fundamental premises emerge from Omacini and the authorities preceding it. First, 'adding back' is a discretionary exercise. When a discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not 'exceptional' justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s.75(2) factor. Indeed, it has been said that the latter is 'a course which is, perhaps, technically more correct' than adding back to the list of existing interests in property.
[3] (2005) FLC 93-218
[4] C & C [1998] FamCA 143
It seems clear then that the Court has a broad discretion as to whether to make an 'add-back' to a property pool or to conduct a consideration under s.75(2)(o) if the circumstances are 'exceptional' against a generality that ‘reasonable' expenditure would attract neither recourse or, more particularly, that a sense of wanton, negligent or reckless behaviour or intent might first be required. What is clear, however, is that there is no general rule but rather a wide discretion to be exercised in accordance with each factual platform and circumstance.
In this matter the considerations are complex, difficult and obviously tinged with what might be perceived as the moral or emotional relationships between children and parents and understandable perception that parents would and should be supportive of their children whether they are adult or not. Nevertheless, this is a Court charged with providing ‘justice and equity' on a statutory basis and guided by considered and informed authority. The Court would easily fall into error if it were to base its consideration on sympathetic or emotional considerations without regard to the learned authorities. Whilst I do indeed harbour some sympathy and understanding for the wife's actions in supporting her 29-year-old daughter, the fact remains that she has acted unilaterally without consultation or consent in respect of joint property. She has done so post separation, and before any proper dealing with that joint property. Arguably, her actions have caused significant detriment to the property pool. I do accept that she acted out of some implied continuation of mutual generosity to each of the parties’ children. The differences in the assistance afforded Mr J Kruger and Ms L Kruger are stark. The first was clearly by agreement of both parties. It occurred during the marriage. The wife's gifts to Ms L Kruger were outside of the marriage and without mutual agreement. Secondly, I do not accept that there was implicitly agreement by reason of the husband's minimal post-separation support of Ms L Kruger.
Whereas the wife has provided Ms L Kruger with some $300,000, the husband has given her only $1,500 and I accept his evidence that he did so with some reticence and regret. Whilst it may be that the wife's generosity was admirable in its intent and not wanton in the sense of being malicious or spiteful to the husband, it was, in the circumstances, negligent or reckless in all of the circumstances where the property is jointly held in the sense of ‘matrimonial property; where the parties have separated; and where the wife’s actions have significantly diminished the pool of property.
The wife's Counsel mounted an alternative argument which I understand to be that the wife owed some legal responsibility to support Ms L Kruger. Counsel referred me to the decision of Elei & Dodt[5]. That is a judgment primarily in respect of interim spousal maintenance but where Counsel sought to draw an analogy. I do not accept such an argument. There is clearly no legal responsibility in the wife or the parties to support their 29-year-old daughter. To put this into perspective, Ms L Kruger is a successful graduate who has practised in her profession for some two years. The evidence suggests that she herself made a career choice which has resulted in whatever financial limitations or difficulty she now suffers. She has enjoyed considerable financial and other support from her parents during the course of her university studies. Counsel for the husband suggests that the financial support for Ms L Kruger in her studies might equate roughly with the financial support given to Mr J Kruger in setting up his business. In any event, the analogy drawn by the wife's Counsel is not persuasive and I cannot find any obligation, other than emotional, for the parties to support their 29-year-old otherwise capable daughter.
[5] [2018] FamCA FC 92
Consequently, for all of the above reasons, I am persuaded that the wife's expenditure on Ms L Kruger cannot be classed as 'reasonable'. Given the discretion in the Court, I am of the view that the matter is more 'cleanly' dealt with by way of an 'add-back' to the property pool. The figures provided by the husband's Counsel vary but only to a small degree. Those provided in the original Case Outline have some mathematical particularity and when seen against the wife's evidence in cross-examination which I find to be both honest but vague satisfy me that the figure to be added back on account of premature distribution of funds to Ms L Kruger is $298,803. Unless there should be confusion, I base these reasons on me accepting the husband's evidence that a total amount of $321,603.61 ‘left bank accounts controlled by the wife between separation and the last bank accounts disclosed by the wife' but with some precision as to $298,803.
There is a separate issue in respect of a parcel of shares held by the wife which she includes in her Case Outline document filed 26 July 2019 at value of $130,422. Whilst the wife in her evidence in the witness box suggests some of the these monies might also have gone to Ms L Kruger, the evidence allows me only to treat the shares as being in her hands as at the date of commencement of the trial and in accordance with her Case Outline document. That is, she offers no further explanation or argument as to why that investment should not be included in the property pool.
In his final address, Counsel for the wife suggested that should the Court be inclined to 'add-back' the wife's payments to Ms L Kruger then it is equally open for the Court to 'add-back' the prior generosity to Mr J Kruger in respect of a loan that will almost certainly not be repaid and unpaid rentals of $100,000. Put simply, and for the reasons set out above, I find a clear distinction between the timing of and joint nature of the decisions made in respect of the advancements to Mr J Kruger as opposed to those made unilaterally and post-separation by the wife to Ms L Kruger. It follows that I will not to make an 'add-back' to those monies advanced to Mr J Kruger.
Consequently, I can finalise the property pool are as follows:
ASSETS
Property A & Property B
2,900,000
Property E
750,000
Property D
925,000
Property G
1,200,000E
Property H
640,000E
Livestock – appraisal less subsequent sales
125,895
Add-back to wife – premature unilateral distribution of funds to Ms L Kruger
298,803
Wife’s shares
130,422
Wife’s business Company F
116,043
(omitted)
112,033
Shares
19,288
Bonds
4,923
Total
7, 222,407
LIABILITIES
Mortgage to CBA – Property D &
Property B
781,000
Mortgage to CBA – Property A
979,000
Mortgage to CBA – Property G
1,925,000
Mortgage to CBA – Property H
595,000
Total
4,280,000
NET TANGIBLE ASSETS
$2,942,407
SUPERANNUATION
Husband
438,000
Wife
187,000
Total
625,000
Neither party asks for any 'add-backs' or other consideration in respect of superannuation drawdowns made by each of the parties. At [81] the husband's unchallenged evidence is as follows:
I have had to drawdown on my superannuation to meet income shortfalls as Mr J Kruger has not honoured our rental agreement, My transition to retirement status permits me to withdraw 10% of the value of my superannuation entitlements each financial year. I did not know this was possible before I found out Ms Kruger had exactly that last financial year. She did that without notice to me. I have had drawdown two tranches 10%, a total of about $104,000 and use those to meet the rent and utility expenses which Mr J Kruger will not pay.
Since the taking of evidence the parties, consistent generally with their propensity for consensus in this dispute, have agreed a detailed distribution of chattels. My reasons incorporate that agreement.
Contributions
This was a long marriage. The parties agree that neither of them owned assets of any significant value as at the date of commencement of cohabitation. The parties agree that each made valuable contributions but of different types during the course of the relationship.
Since separation the husband asserts to have made various payments for maintenance or improvement of the assets including to the business ($20,000), storm damage repairs for Property E ($4,500), a new water pump for Property B ($4,500) and stockfeed ($5,000). Nevertheless, these ‘contributions' must be seen against a superior income which he has enjoyed since separation and I do not propose to make any loading accordingly.
Each party has paid legal fees during the course of this litigation. The husband says, and I accept, that he has paid his fees from his post-separation earnings from his occupation. The wife has paid her fees with the assistance of a litigation loan which will, of course, create a post-separation debt for her. Consequently, I do not intend to either ‘add-back' the legal fees paid or consider the wife's debt as a liability of the marriage given its nature and its creation post-separation.
Consequently, and on the basis of contributions, I am satisfied that such contributions are many, varied and equal during the course of this lengthy relationship and there will be no adjustment for either party.
Section 75 (2) Factors
The wife's Counsel in his final address proposes an adjustment to her of 10% of the tangible asset pool on account of the relevant s.75(2) factors. I am of the view that such an adjustment is just and equitable. This is a lengthy marriage, and as mentioned above, highlighted by various contributions. The husband has achieved qualifications which now bring him an income in excess of $500,000 per annum. The wife's income is derived primarily from her business and its accuracy in respect of real income is somewhat vague due to the vicissitudes of accounting. Her financial statement filed shortly before the trial deposes to an income of $786 from distributions through the business and the family trust. In reality, it seems that her income or at least income potential would be higher noting the business making net profits of $73,116 and $123,809 in 2017 and 2018 respectively. Nevertheless, the wife's income pales in respect of that of the husband and in circumstances where each party will, to a degree, need to re-establish themselves financially, then I am of the view that the 10% adjustment sought by the wife and given the value of the tangible asset pool is just and equitable.
The parties agree that their superannuation entitlements will be equalised.
Conclusion – property settlement
I am of the view that justice and equity is served by the wife receiving 60% of the net value of the tangible property pool and the husband 40% value of that pool.
The husband wishes to retain the Property A and Property B ($2,900,000). In circumstances where the wife does not want those properties but asks for an order for their sale, I am of the view that the husband should be given the opportunity to retain them. Secondly, Property G and Property H are to be sold and any consequent cash adjustment on the wife cannot be quantified until the net proceeds of sales of those properties are quantified.
The wife the wishes to retain Property E and the husband does not to oppose her doing so.
The evidence suggests that the parties agree that Property G and Property H, be sold. It is likely that those sales will attract Capital Gains Tax ramifications for each of the parties and in quantum’s dependent upon their incomes and tax rates.
Consequently, there will be final orders incorporating the above and utilising the helpful aide-memoire handed to the Court by the husband’s Counsel during her final address.
Spousal Maintenance
The wife asks for an order for the husband to pay spousal maintenance to her at the rate of $1,000 per week for three years. The husband opposes any order for spousal maintenance.
The wife provided a sworn financial statement where she deposes to an income of $786 per week and personal expenditure of $2,853 weekly.
The wife was cross-examined as to both her real income and her necessary expenditure. Although only provided as estimates, I accept the submission by Counsel for the husband that a number of the wife's claimed expenditures are either excessive or unnecessary. Specifically, the wife claims for holidays ($250 per week), gardening/lawn mowing ($200 per week), cleaning (house/pool) ($150 per week) and repairs-furnishings and appliances ($100 per week). Since separation the wife has upgraded her vehicle obligating her now in the sum of $333 per week (according to her sworn financial statement). The wife claims obligations for credit cards totalling $212 per week. She asserts a total liability of only $13,891 and I expect that this liability could be easily extinguished consequent upon the settling of these property orders. The wife has, of course, unilaterally distributed almost $300,000 of joint funds to the parties’ daughter since separation.
Generally, I am satisfied that the wife has either exaggerated her expenses or that a number of the expenses are unnecessary. This must be seen against the capacity for the wife to earn from her well-established business. Further, the wife conceded in cross-examination that she has not attempted to mitigate her own position by obtaining alternative or supplementary employment having made no application for any employment. Still further, the wife has had possession of the Property E which apparently has six bedrooms and three bathrooms. The wife agrees that she will consider renting the property on ‘Air B&B' following the resolution of this litigation but has not yet done so as she 'was waiting for the divorce settlement'. Frankly, this can only be seen as a lost income potential for her but one still available. The wife agrees that the property could have had potential income of around $220 per night gross. The wife will also have the benefit of a substantial cash adjustment from the husband albeit such yet to be determined with precision which she may choose to invest and hence to give her income.
Section 74 of the Act provides that:
In proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this part.
Section 72(1) provides:
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).
The phrase “support herself or himself adequately” is not determined according to any fixed standard but rather by reference to the matters set out in s.75(2) of the Act. It is equally well-established that an applicant for maintenance need not utilise assets and capital in her possession or from an award under s.79 in order to satisfy the requirement that she is unable to support herself ‘adequately'. It is proper that the Court notes the applicant's age and potential earning capacity in respect of her future contingencies. Nevertheless, and taking all of these matters into account, and in circumstances where this applicant will retain real property together with a substantial income and where I have found her claimed expenses to be exaggerated or unnecessary, I cannot be satisfied that the applicant here has 'crossed the threshold' of satisfying the Court that she is unable to meet her necessary needs from her own income and resources. Consequently, I do not therefore need to go further to consider the respondent husband's ability to contribute to the applicant's needs and the application for spousal maintenance is dismissed.
I certify that the preceding fifty eight (58) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Associate
Date: 22 October 2019
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Family Law
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