LABELLE & LABELLE
[2010] FMCAfam 751
•17 September 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LABELLE & LABELLE | [2010] FMCAfam 751 |
| FAMILY LAW – Property – assessment of contributions – valuation of assets – parties’ future earning capacity – just and equitable order. |
| Family Law Act 1975, ss.75(2) (b), (c), (d), (m), 79(1), 79(4) (a), (c), (g), 90(MT)4 |
| NHC & RCH (2004) FLC ¶93-204 M v M (2008) 37 Fam LR 150 AJO v GRO (2005) 33 Fam LR 134 Pierce & Pierce (1999) FLC ¶92-844 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259 |
| Applicant: | MS LABELLE |
| Respondent: | MR LABELLE |
| File Number: | CAC 1488 of 2009 |
| Judgment of: | Neville FM |
| Hearing dates: | 27 – 28 May 2010 |
| Date of Last Submission: | 28 May 2010 |
| Delivered at: | Canberra |
| Delivered on: | 17 September 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moss |
| Solicitors for the Applicant: | Strong Law Pty Ltd |
| Counsel for the Respondent: | Mr Millar |
| Solicitors for the Respondent: | Consensus Family Lawyers |
ORDERS
That forthwith the parties do all acts necessary to sell the property, [Property J], and that upon the sale, the proceeds (after payment of commissions, normal rate adjustments and the loan secured by way of mortgage) be divided as to:
(a)40% to the Wife; and
(b)60% to the Husband
That the Husband be entitled as against the Wife to the whole of his interest in [Labelle’s Business], the [Labelle's Trust] and [Labelle's] business and indemnify the Wife and keep her indemnified with respect to the business overdraft and other liabilities of the Company, Trust and business.
That the base amount of $70,000 is allocated, as required by section 90MT(4) of the Family Law Act 1975, to the Wife out of the Husband’s interest in the [Super Account] number [omitted].
That in accordance with section 90MT(1)(a) of the Family Law Act 1975:
(a)The Wife is entitled to be paid the amount calculated in accordance with Part 6 of the Family law (Superannuation) Regulations 2001 and;
(b)The Husband’s entitlements and the entitlement of such other person to whom a splittable payment may be made to out of the Husband’s interest in the [Super Account] is correspondently reduced.
That the Trustee of the [Super Account] (“The Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
(a)Calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlements created by Order 3; and
(b)Pay the entitlement whenever the Trustee makes a splittable payment out of the Husband’s interest in the [Super Account].
That Order 3 has effect from the operative time and the operative time is four days after service upon the Trustee.
That otherwise each party be entitled as against the other to all personalty, savings and shares currently in their possession or control.
The Wife be declared the sole owner of [the] motor vehicle registration number [omitted].
IT IS NOTED that publication of this judgment under the pseudonym Labelle & Labelle is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT Canberra |
CAC 1488 of 2009
| ms labelle |
Applicant
And
| mr labelle |
Respondent
REASONS FOR JUDGMENT
Introduction and background
These are property proceedings brought by Ms Labelle against her former Husband. Ms Labelle is currently aged 40 while the Respondent Husband is currently aged 54. Neither party has raised any issues concerning their health or well-being that should be the subject of consideration by the Court.[1]
[1] Mr Labelle gave evidence that he suffered from Hepatitis C. See Transcript (28th May 2010) p.5. Certainly there was no medical evidence before the Court on this or any other matter.
The relationship was, respectfully, of modest proportions: in total the relationship lasted eleven years, for nine of which the parties were formally married. There are two young children for the relationship: [X], who is eight and [Y] who is five. Both parties have older children from a previous relationship.
For all practical purposes, Mr Labelle has worked for most of his life in a family business called [Labelle’s Business]. He continues to work in that company. Because of various competitors, he is concerned about the long-term profitability (perhaps even the viability) of the company business.[2]
[2] Exhibit A was an extract from the Yellow Pages telephone book, which was used (and not seriously challenged) to show that a number of competitors to [Labelle's Business] had emerged in recent times.
Ms Labelle worked at different times in a part time capacity in the same business for some period of the marital relationship. Currently, she conducts [another] business from which she earns approximately $850 per week.
From what is set out later in these reasons, in my view, the scope of the differences between the parties, and the orders which each of them seek, is rather narrow. That being so, it made the fact of litigation (and the attendant costs – personal and financial) all the more unfortunate.
By way of general observation the evidence before the Court in the proceedings was quite limited. Indeed, it was limited in terms of the oral evidence given at trial, as well as in the documentary evidence provided to the Court.
For example, there was only one valuation provided in relation to the business known for the purpose of these reasons as [Labelle's Business].[3] It came from Mr B. That evidence was challenged only in the sense that questions of a quite general nature were put to Mr B about his two reports, both of which were attached to his affidavit that was filed on 20th May 2010. No alternative valuation evidence was put before the Court on behalf of the Applicant. Indeed, Counsel for
Ms Labelle conceded that his client had no valuation evidence to rebut or otherwise to challenge the valuation put before the Court on behalf of Mr Labelle.[4] In the absence of any alternative evidence, I accept the valuation of Mr B in relation to the business.
[3] Mr B notes in his two reports, dated 27th October 2009 and 15th May 2010, which are annexed to his affidavit, the formal relationship between “[Labelle's Trust]” [omitted]which trades as “[Labelle's Business].” Exhibit C formally details the respective shareholdings of Mr Labelle and his brothers in [Labelle’s Business]. Ms Labelle challenged the extent of the shareholding of Mr Labelle in [Labelle’s Business], but again because there was no evidence tendered that could support the challenge, the shareholding as shown in the Exhibit must prevail. Ultimately, however, because of the way the case was conducted little, if anything, turned on this issue.
[4] See Transcript (28th May 2010) p.39.
Also by way of general observation, I found both principal witnesses -the Applicant and the Respondent - as generally truthful, although there were some obvious gaps in their evidence, which is typical of most litigation. In my view, little turned on the modest discrepancies in the evidence.[5]
[5] Because I raised it at the trial, I should note that some of the procedural and documentary deficiencies, notably on the Applicant Wife’s case, were attributable to the unfortunate circumstance where her solicitor had inadvertently noted the incorrect dates for trial. This had the understandable, but nonetheless unfortunate, effect of making the preparation for the trial rather more challenging that it usually would have been. See the discussion at the pre-trial directions hearing with the solicitors for the parties, Transcript (4th May 2010) pp.2-5, and the further discussion with Counsel for the parties, Transcript (28th May 2010) p.30.
A. Orders sought
During the course of the trial the Orders sought were amended whereby the Applicant Wife, Ms Labelle, sought orders for a split of the asset pool of 44.4% in her favour and 55.6% in favour of Mr Labelle. For his part, Mr Labelle sought a split, in percentage terms in relation to the net proceeds of sale of the former matrimonial home, as seen below in more detail, of 34% to the wife and 66% to the Husband. It is on the basis of this relatively small difference in the respective percentages that I based my comment concerning the somewhat narrow scope of the dispute.
The formal Orders sought by each of the parties are as follows:
Applicant Wife’s Amended Minutes of Orders Sought
1. That the parties forthwith do all things and sign all documents necessary to cause the property situate at and being [Property J] and being the whole of the land contained in [omitted] (“the property”) to be sold by private treaty at a price and with an agent as agreed between the parties and failing agreement as determined by the President of the Real Estate Institute of the Australian Capital Territory or his nominee and to disburse the proceeds of sale in the following manner and priority:
a. Payment of all costs and expenses of sale including legal costs and disbursements, agent’s commission and marketing expenses;
b. Payment of all outstanding mortgage to[Bank N];
c. The balance remaining to the Wife.
2. That the Wife’s solicitor have primary conduct of the sale on behalf of both parties.
3. That in the event the property in not sold by private treaty within a period of 180 days of the date it was first listed for sale the husband and the Wife do all things necessary to offer the property immediately for sale by public auction with the reserve price being the market value determined in accordance with Order 1.
4. That until such time as the property has been sold and the proceeds received in accordance with these Orders, the Wife be entitled to occupy, to the exclusion of the Husband, the property.
5. That until such time as the property referred to in Order 1 herein has been sold and the proceeds received , the Husband shall be responsible for all mortgage repayments, rates and insurance and shall continue to make such repayments as are required as and when they fall due.
6. The Wife be declared the sole owner of [the] motor vehicle registration number [omitted].
7. The Husband be declared the sole owner of [Labelles Business] (omitted) and/or the [Labelle's Trust] (“the business”).
8. That contemporaneously with order 1 hereto the Wife will transfer all her right title and interest to the Husband in the amount standing to the credit of the Wife in the Loan Beneficiary Account in the business.
9. That as between Husband and Wife, and subject to the above Orders, the Husband and Wife shall each respectively retain all interest in and entitlement to:
a. All personal property now in his/her respective possession or control.
b. All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his/her sole name respectively.
c. All interests in life insurance policies and superannuation funds standing in his/her sole name respectively.
Respondent Husband’s Minutes of Orders Sought
1.That forthwith the parties do all acts necessary to sell the property, [Property J], and that upon the sale, the proceeds (after payment of commissions, normal, normal rate adjustments and the loan secured by way of mortgage) be divided as to:
a. 34% to the Wife; and
b. 66% to the Husband
2. That the Husband be entitled as against the Wife to the whole of his interest in [Labelle’s Business], the [Labelle's Trust] and [Labelle's Business] and indemnify the Wife and keep her indemnified with respect to the business overdraft and other liabilities of the Company, Trust and business.
3. That the base amount of $63.000 is allocated, as required by section 90MT(4) of the Family Law Act 1975, to the Wife out of the Husband’s interest in the [Super Account] number [omitted].
4. That in accordance with section 90MT(1)(a) of the Family Law Act 1975:
a. The Wife is entitled to be paid the amount calculated in accordance with part 6 of the Family law (Superannuation) Regulations 2001 and
b. The Husband’s entitlements and the entitlement if such other person to whom a splittable payment may be made to out of the Husband’s interest in the [Super Account] is correspondently reduced.
5. That the Trustee of the [Super Account] (“The Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
a. Calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 the entitlements created by Order 3; and
b. Pay the entitlement whenever the Trustee makes a splittable payment out of the Husband’s interest in the [Super Account].
6. That Order 3 has effect from the operative time and the operative time is four days after service upon the Trustee.
7. That otherwise each party be entitled as against the other to all personalty, savings and shares currently in their possession or control.
IT IS NOTED:
That the Trustee of the [Super Account] has been provided with a copy of and approved orders 3 – 7.
B. Asset pool
As noted above, for his part, Mr Labelle sought Orders that would result in a split of the non-superannuation assets, which comprised essentially the former matrimonial home, in the proportions of 34 percent to Ms Labelle and 66 percent to Mr Labelle. He also proposed that there be allocated a sum of $63,000 out of his not insignificant superannuation fund which value I accept as $285,188.
I have already mentioned that the only valuation before the Court came from Mr B, which related to the value of [Labelle's Business].
Having regard to the principles that were set out by the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority,[6] I accept Mr B’s formally unchallenged valuations. For the purposes of the current proceedings I accept the approximate mid-range figure proposed by Mr Labelle from that valuation for [Labelle's Business] of $99,000.
[6] (2008) 233 CLR 259 at [51]
Only three other matters from the proposed list of assets were questioned.
First, there was an estimate of furniture and effects in the former matrimonial home from Ms Labelle in the sum of $30,000. That figure is set out in her financial statement dated 11th May 2010.[7] On the basis of that figure and nothing formally put before the Court of any other estimate, I am bound to accept it.
[7] Also, see the submissions at Transcript (28th May 2010) pp.40-41. I accept Mr Millar’s submissions in this regard.
The other two items related to a term deposit in Ms Labelle’s name of $4,000 and a sum of $8,224 in a bank account in the wife’s name.
The term deposit of $4,000 is referred to in documents provided in annexure ‘L’ to Mr Labelle’s primary affidavit. On the basis of those documents, that figure should stand.
Similarly, although it was submitted by Mr Moss (Counsel for Ms Labelle) that the term deposit was in fact already included in the sum standing in Ms Labelle’s bank account, again in the absence of relevant evidence, I see no reason why I should not accept the figure in the documents provided to the Court in relation to the Wife’s bank balance of $8,224. Accordingly, for the purposes of the asset pool I accept the figures that are set out in the list of assets provided by Mr Labelle’s Counsel, Mr Millar.[8]
[8] See the submissions in this regard at Transcript (28th May 2010) p.41.
A fourth issue was raised, but, it seemed to me, not with much enthusiasm, which related to a submission from Counsel for
Ms Labelle that certain legal fees paid by Mr Labelle should be “added back” into the asset pool. Mr Labelle’s evidence in this regard was that he had paid $50,000 in legal expenses, which sum comprised $10,000 that he had paid directly and the balance had come from the overdraft. The overdraft, of course, related to the business of [Labelle].
Mr Moss simply submitted that the full amount of $50,000 should be added back to the pool. In the circumstances, I understand why no authority was cited in support of the submission. As a basic proposition, the Full Court decision in AJO v GRO is clear as to the categories of funds that would, in the ordinary course, be added back to the pool.[9]
[9] See, for example, AJO v GRO (2005) 33 Fam LR 134 at pp.144-145 [30]. See also the discussion by the Full Court in M v M (2008) 37 Fam LR 150 at pp.155-158 [29] – [45].
Alas, as with much of the evidence, to speak somewhat colloquially, there was little material to work with. This is to say that, apart from Counsel’s questions to Mr Labelle, the Court ultimately did not have much or any other detail about the legal expenses.
For my part, and being bound by the Full Court authority in AJO v GRO, legal fees should be included in the asset pool. The real issue, however, in the light of Mr Labelle’s unchallenged evidence, is whether the full amount of those fees should be included in the pool.
Mr Millar submitted, in the alternative, that if I was minded to include the $10,000 portion of legal fees in the pool, because the balance came from the overdraft and that debt will remain with Mr Labelle, on the authority of NHC & RCH,[10] the balance of $40,000 should be excluded from the pool. He submitted that the $10,000 came from Mr Labelle’s own labours from the business of [Labelle].[11]
[10] NHC & RCH (2004) FLC ¶93-204 especially at pp.79,320 – 79,323 [47], [49], [51], & [56] – [60].
[11] See Transcript (28th May 2010) p.41.
Because the $40,000 is a debt that will remain with Mr Labelle, that sum should not be included in the pool. As for the balance of $10,000, because its source was via the business, in my view, it should be included in the pool.
In the light of the above discussion, list of assets is as follows:
| Asset List | |||
| 1 | [Property J] (in joint names)- being valued | $710,000.00 | |
| Less loan to [Bank A] | $440,000.00 | ||
| Equity | $270,000.00 | ||
| 2 | [Labelle's Business] includes the overdraft and business cheque account | $99,000.00 | |
| 3 | [Ommited] shares in wife's name (631 @$3.48) | $2,196.00 | |
| 4 | [Omitted] motor vehicle (in wife's name) | $15,000.00 | |
| 5 | Furniture and effects in [Property J] | $30,000.00 | |
| 6 | Tax refund to wife | $18,250.00 | |
| 7 | Tax refund to husband | $9,576.00 | |
| 8 | Term deposit in wife's name | $4,000.00 | |
| 9 | Husband's debit card Account number: [omitted] | $3,495.00 | |
| 10 | Husband's cheque account Account number: [omitted] | $2,045.00 | |
| 11 | Husband's credit card | -$500 | |
| 12 | Wife's bank account | $8,224.00 | |
| 13 | Wife's credit card | -$1,490.00 | |
| 14 | Add back of Husband’s legal fees | $10,000.00 | |
| Total | $469,796.00 | ||
| Superannuation | |||
| 1 | Husband's Super | E | $285,188.00 |
| 2 | Wife’s [super] | E | $45,000.00 |
| Total | $330,188.00 | ||
C. Contributions
For the purpose of determining contributions pursuant to the Family Law Act1975 (“the Act”), the following may be taken to be findings in the light of the very limited evidence that was put before the Court by both parties.
First, at the commencement of the relationship, Mr Labelle had non-superannuation assets to the value of approximately $540,000 and superannuation of approximately $90,000. I also accept, largely on the basis of submissions, which were essentially uncontradicted, that
Ms Labelle had few assets other than a car at the commencement of the relationship.[12] At the commencement of the relationship Ms Labelle was employed by a marketing company.
[12] s.79(4)(a)
I also accept that during the relationship the Company to which I have referred, [Labelle's Business], was a Company in which Mr Labelle had an interest prior to the commencement of the relationship. Through that Company, the parties’ first matrimonial home was purchased.
I also accept that the proceeds of sale of the first matrimonial home were distributed to Mr Labelle and that they were used to purchase the second matrimonial home, known in these proceedings and referred to as the [J] property. It was not denied that the Company has paid, and continues to pay, the mortgage repayments on the [J] property.
I also accept that Ms Labelle’s son from a former relationship resided with the parties throughout their relationship and that his expenses were paid for from household income with little or no child support received from that child’s Father.[13]
[13] s.79(4)(g)
It was not denied and therefore I readily accept that Ms Labelle was the primary homemaker and parent throughout the relationship.[14]
[14] s.79(4)(c)
Nor was it denied that, at various times during their relationship, Ms Labelle worked for [Labelle's Business], to a not insignificant degree as her home responsibilities permitted (e.g. after [X]’s birth in 2002) in dealing with the accounts of the Company.
It also was essentially not denied that Ms Labelle has had mortgage-free accommodation since separation with the mortgage being paid by the Company, as I have previously noted.
It was also not seriously contested that for approximately two years Mr Labelle’s brother had provided the premises to the business of [Labelle's Business] by way of rent free accommodation, and after that arrangement, for less than standard market rental.
D. s.75(2) factors
Mr Moss did not challenge that Mr Labelle’s earning capacity is directly related to the viability and profitability of [Labelle's Business].
Likewise it was not seriously challenged that Ms Labelle proposes to conduct [another] business from which she has the capacity to earn approximately $850 per week. Although not explored to any significant degree, given her age and obvious various capacities in which she is able to work (e.g. the conduct of [another] business, her previous experience in book-keeping and financial statements in the course of assisting in those matters related to [Labelle's Business]), I do not have any difficulty in accepting a general submission that Ms Labelle has reasonable capacity to earn reasonable income in various other fields of work.[15]
[15] ss.75(2)(b), (d)
A further relevant consideration under s.75(2) concerns the settled fact that the two young children of the relationship reside primarily with
Ms Labelle (approximately two-thirds of the year) and spend substantial and significant time with Mr Labelle (approximately one-third of the year).[16] Mr Labelle pays child support in accordance with an assessment.
[16] s.75(2)(c)
Ms Labelle denied that she has re-partnered. This was the one area I confess where I found her evidence perhaps less than fulsome. Certainly Mr Labelle makes something of a new relationship for
Ms Labelle in his affidavit material. And indeed, in cross-examination, Ms Labelle confirmed that she had been in what she described as an “off and on” relationship since May 2009, and which ended only the month before the trial. Ms Labelle had not mentioned anything about a relationship in any of her affidavit material. Her “friend” had given her $600 towards expenses; she also confirmed that this person (Mr C) remained listed on her private health cover. Although Ms Labelle confirmed that Mr C lived off his investments, she denied that he was a wealthy man. She also confirmed that Mr C had stayed at her house, that the children knew him, and that he had been a friend for 23 years.[17]
[17] See the general discussion at Transcript (27th May 2010) pp.31-33.
All of the above said, the Court only has Ms Labelle’s testimony in relation to Mr C and her relationship with him. As I have said, the evidence is less than fulsome. However, I can proceed only on the most reliable evidence made available to the Court. In the circumstances,
I am unable to take any settled view, one way or the other, as to
Ms Labelle’s relationship status, and in turn, whether Mr C should be considered, for the purposes of these proceedings as a partner of “financial resource” for Ms Labelle.[18] That said, the lack of information on this front has not assisted the Court very much at all.
[18] s.75(2)(m)
Mr Labelle confirmed – and was again not challenged in his evidence in this regard – that he wished to retire in approximately five years’ time.[19]
[19] See Transcript (27th May 2010) p.49.
Conclusion
In the light of the above discussion, the following summary will suffice.
First, accepting that the assessment of financial contributions is not a meticulous mathematical exercise, the financial contributions (particularly at the outset of the relationship and in its early years) significantly favour Mr Labelle. I do not accept the submission by
Mr Moss that the initial contributions by Mr Labelle had effectively ‘eroded’ or otherwise diminished over time. As the Full Court said in Pierce, the issue really is one of the “weight” that should be attached to the initial contributions.[20] That weight, as I have said, strongly favours Mr Labelle.
[20] Cf.Pierce & Pierce (1999) FLC ¶92-844. I note that the duration of the relationship in Pierce was very similar to the relationship in this case. There were two children in that case, as there are here. There, on appeal, the Full Court made orders of a distribution of 70% to the husband, plus an additional 5% for s.75(2) factors. This result was significantly based on the weight to be attributed to the initial contributions of the husband.
Secondly, the non-financial contributions during the course of the marriage should be taken to be approximately equal. I take this course for a number of reasons: the lack of detailed evidence for any other conclusion, and the importance not to under-value the labours of
Ms Labelle particularly in her role as Mother and home-maker. I also accept that she worked, to a not insignificant degree, outside the home for [Labelle's Business], while Mr Labelle worked full-time in that enterprise. I am also conscious that a child of a previous relationship of Ms Labelle lived with the parties and was basically provided for on the same basis as the children of the relationship.
Thirdly, Ms Labelle has the primary care of the two young children of the relationship, while Mr Labelle pays child support and also spends substantial and significant time with his children.
Given her age and experience, in my view, Ms Labelle has good prospects in terms of her future earning capacity. Indeed, this is supported by Ms Labelle establishing [another] business. Given his age and state in life (Mr Labelle is 14 years older than Ms Labelle), Mr Labelle’s prospects, while not by any means grim, are likely to be something of a constant struggle to ensure that [Labelle's Business] remains viable in the face of increased competition. Mr Labelle’s stated intention to retire in five years’ time was not challenged.
On balance, in my view, the s.75(2) factors should be taken to balance themselves out.
In such circumstances, the just and equitable order, in my view, falls to be determined essentially by the weight to be ascribed to the significant initial contributions by Mr Labelle, the ongoing mortgage payments made by the Company, and of course, taking into account the relevant s.75(2) factors for both parties.
In the light of the considerations to which I have referred and the evidence – limited though it was – in my view, a just and equitable order would provide for the following orders:
(i)
In relation to the [J] property, the net proceeds of sale should be divided as to 40 percent to Ms Labelle and 60 percent to
Mr Labelle.
(ii)
In relation to the superannuation payment from Mr Labelle to
Ms Labelle, in my view a base amount of $70,000 (rather than the $63,000 proposed by Mr Labelle) should be allocated pursuant to s.90(MT)4 of the Family Law Act[21] to Ms Labelle out of
[21] s.90(MT)4
Mr Labelle’s interest in the [Super Account] number [omitted].
(iii)Ms Labelle also sought an order, which seemed not opposed, for her to be declared the sole owner of a [motor vehicle]. Such an order will be made.
(iv)
Subject to the amendments noted above, the orders sought by
Mr Labelle should be made.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Neville FM
Associate:
Date: 17 September 2010
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