Lakin and Lakin
[2009] FMCAfam 52
•30 January 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LAKIN & LAKIN | [2009] FMCAfam 52 |
| FAMILY LAW – Property – pool of assets – contributions – s.75(2) factors – husband’s use and occupation of former matrimonial home since separation – superannuation – discount for cash adjustment. |
| Family Law Act 1975, ss.75(2), 79(2), 79(4) |
| Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Russell v Russell (1999) FLC 92-877 Ascot Investments Pty Ltd v Harper and Harper (1981) FLC 91-000 Kessey and Kessey (1994) FLC 92-495 |
| Applicant: | MR LAKIN |
| Respondent: | MS LAKIN |
| File Number: | MLC 6792 of 2007 |
| Judgment of: | McGuire FM |
| Hearing date: | 25 November 2008 |
| Date of Last Submission: | 25 November 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 30 January 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Indovino |
| Solicitors for the Applicant: | Mirabelli D’Ortenzio & Co |
| Counsel for the Respondent: | Ms Colla |
| Solicitors for the Respondent: | William J Keough |
ORDERS
That the husband shall:
(a)Within 60 days of the date of these orders:
(i)Pay to the wife a lump sum of $282,632.00.
(ii)Transfer and/or vest in the wife all his right, title and interest in the following absolutely:
A.The wife’s BMW motor vehicle;
B.All personalty and chattels in the possession of or under the control of the wife as at the date of these orders;
C.Any bank account or like investment in the name of or to the benefit of the wife as at the date of these orders.
(iii)Do all such things and sign all such documents so as to obtain a release for the wife of her obligations and liability under the ANZ mortgage number [T] secured by the property at Property G in Victoria.
(b)Be solely responsible for and indemnify the wife in respect of the following:
(i)Any and all the liabilities attaching to any of the assets to be retained by the husband pursuant to these orders;
(ii)Any and all liabilities incurred by the husband since separation in either joint names or in his name alone.
That the wife shall:
(a)Contemporaneously with the payment referred to in paragraph (1)(a) hereof, transfer and/or vest all her right, title and interest in the following to the husband absolutely:
(i)The property situate at Property G in Victoria and comprised in Certificate of Title volume [0] folio [3].
(ii)The husband’s Mercedes Benz motor vehicle.
(iii)All personalty and chattels in the possession of or under the control of the husband as at the date of these orders.
(iv)Any bank account or like investment in the name of or to the benefit of the husband as at the date of these orders.
(b)Be solely responsible for and indemnify the husband in respect of the following:
(i)Any and all liabilities attaching to any of the assets to be retained by the wife pursuant to these orders;
(ii)Any and all liabilities incurred by the wife since separation in either joint names or in her name alone.
AND THE COURT DECLARES
A.Pursuant to these orders there is to be no splitting or flagging order in respect of the superannuation entitlements of the parties or either of them.
B.That these orders are intended to finally determine the financial relationships between the parties pursuant to Part VIII of the Family Law Act 1975.
IT IS NOTED that publication of this judgment under the pseudonym Lakin & Lakin is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 6792 of 2007
| MR LAKIN |
Applicant
And
| MS LAKIN |
Respondent
REASONS FOR JUDGMENT
Background
This is an application by the husband for property settlement.
The parties married in May 1985. They separated under the same roof in September 2005 and the wife left the former matrimonial home on 28 December 2005.
There are three children of the marriage, namely [X]born in 1988 (aged 20 years), [Y] born in 1991 (aged 17 years) and [Z] born in 1994 (aged 14 years).
[X] and [Y] continue to live with the husband in the former matrimonial home. [Z] lives with the mother. [X] is engaged in tertiary studies. [Y] will be entering year 12 in 2009. [Z] is of course still in high school.
[Z] spends four nights each fortnight with the husband and her brothers. For reasons, I assume, associated with their ages and the limited accommodation available to the mother, it seems that [X] and [Y] have only irregular and limited time with their mother.
The husband is employed as a [omitted]. His annual gross income is approximately $184,000.00. The wife is employed as a [omitted]. Her income is $75,000.00 per annum.
Evidence
The husband relied on his affidavits filed 15 June 2007 and
11 November 2008together with a financial statement filed
11 November 2008.
The wife relied upon her affidavit also filed 11 November 2008 and
a financial statement filed the same day. In addition, the wife relied upon an affidavit of her father Mr T. Mr T gave evidence and was cross-examined.
Both parties were cross-examined.
Parties’ proposals
The husband seeks a 50/50 division of the net property of the parties. He wishes to retain his superannuation entitlements and thus asks for
a cash adjustment accordingly on the wife but with a discount factor
on account of the wife receiving a cash payment.
The husband seeks to retain the former matrimonial home as a part
of the settlement and hence make a cash adjustment on the wife.
The wife seeks a 60/40 division of net property. She also seeks a cash adjustment in respect of the discrepancy in superannuation entitlements and rather than a splitting or flagging order in relation to the husband’s superannuation.
The wife also seeks an order that she retain the former matrimonial home as a part of the settlement and hence she would be prepared
to make a cash payment to the husband.
The law
The proper approach to the determination of an application for property settlement is now well established. In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener)[1] the Full Court of the Family Court of Australia said at [78,386]:
That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
[1] (2003) FLC 93-143.
Section 79(4) of the Family Law Act 1975 (“the Act”) sets out those matters to be taken into account in making orders for alteration of property interests as between the parties. They are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 75(2) obliges me to consider the following:
(a)the age and state of health of each of the parties;
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d)commitments of each of the parties that are necessary
to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty
to maintain;
(e)the responsibilities of either party to support any other person;
(f)subject to subsection (3), the eligibility of either party for
a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party
to undertake a course of education or training or to establish himself or herself in a business or otherwise
to obtain an adequate income;
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l)the need to protect a party who wishes to continue that party’s role as a parent;
(m)if either party is cohabiting with another person–the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i)the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties.
The Full Court of the Family Court of Australia in Russell v Russell[2] said at [86,439]:
Furthermore, it must be remembered in this regard that under
s.79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties’ assets. Indeed we take the opportunity to emphasise that in what his Honour has termed “the fourth stage”, that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not the percentage distribution which must be considered.
[2] (1999) FLC 92-877.
Property pool
There was an issue as to the status to be given to the wife’s interest,
if any, in a discretionary trust known as T Family Trust, the deed
of settlement of which is dated 1985. The wife is a trustee of that trust. The wife is also a primary beneficiary. The other two trustees and primary beneficiaries are her siblings. The appointors are the wife’s father and mother, being Mr T and Ms T.
There was evidence that the wife anticipates being removed as a trustee of the trust.
The evidence of the wife is that she does not, and has not, received distributions from the trust. The husband in his evidence agreed that this was the case.
It is clear that, the trust being discretionary in nature, the wife (or any beneficiary) does not have any entitlement per se to income
or property of the trust although by virtue of being a trustee the wife’s name appears on the title of real property being the assets of the trust.
To ascertain the relevance, if any, of a trust for the purposes of family law proceedings, it is necessary to look “behind the veil”. That is, if the trust is a sham or the alter ego of one of the parties, then the assets and/or income of the trust may be brought into account in the pool
of assets.[3]
[3] See Ascot Investments Pty Ltd v Harper and Harper (1981) FLC 91-000.
The wife’s father, Mr T, gave evidence. His evidence left the Court in no doubt as to who had control of the trust, namely himself, and despite the terms of the trust deed, he considered the assets of the trust, being effectively real property, to be his own. It is clear that he treated the assets of the trust and the income from those assets as his own.
The wife’s father also corroborated the evidence of the wife and the husband to the effect that there were no distributions to the wife although there appears to have been some small distributions
to grandchildren.
I find therefore that the assets of the trust are not “property” for the purposes of s.79 of the Act.
For the same reasons I am of the view that the assets and the income of the trust is not a financial resource of the wife. If she had historically received distributions then I may have reached a different conclusion.
On the evidence the wife has only a “mere expectation” to benefit from the trust at some time in the future. The situation is analogous to that of a beneficiary under a will. There can be no certainty in respect
of entitlement. There was no suggestion of ill health or incapacity
on the part of Mr T.
Consequently, for the purposes of these proceedings, I disregard the assets and income of the T Family Trust.
There was a further issue in respect of the mortgage liability. The wife argued that there should be an “add-back” of $16,000.00-$18,000.00.
The husband remained in the home following separation. The evidence is that the mortgage instalments amounted to $1,125.00 per month with unknown elements for principal and interest. It is conceded that for
a period of 16 months following separation the husband did not make payments to the mortgage account. The wife asked me, therefore,
to add back approximately $18,000.00 being 16 payments each of $1,125.00.
The evidence is that orders were later made by consent for the husband to resume payments of the mortgage. The mortgage liability as of September 2005 was $88,099.00. That liability as of December 2005 was $86,813.00.
The husband says that the Court should take into account for the purposes of these proceedings a figure of $87,000.00 being roughly
the figure as of December 2005 when the wife left the home.
I do not accept the argument by counsel for the wife that the Court should simply add back the sum of $18,000.00 being the total payments the husband might have made if he had continued to pay the mortgage each month for that 16 month period. As mentioned above,
I do not have precise figures for the interest and principal components of the monthly payments. It is obvious, however, that the mortgage liability would not have reduced by the sum of $18,000.00 in that
a substantial proportion of each monthly payment would have been allocated to interest.
The husband says that by “quarantining” the mortgage at the figure
of December 2005, I should consider his contribution to be equal
or similar to that of the wife. That is, he has maintained the mortgage at that static figure, and hence can be seen as meeting that interest component (whilst not reducing the principal). He would say that this offsets the fact that the wife has been required to pay rent for her own accommodation.
I find the husband’s argument to be too simplistic. The fact is that the husband has had the use and benefit of the major asset of the parties namely the matrimonial home since separation and to the exclusion
of the wife.
The wife conceded in cross-examination that she had an amount
of approximately $9,000.00 in cash at separation.
It is clear that during the relationship the husband had major control
of the finances including the bank accounts. He retained the benefit
of those bank accounts at separation. However, he also retained the credit card liability. It is clear that the parties made purchases using
a credit card and so to obtain frequent flyer points. The husband would then transfer significant sums from savings accounts or cheque accounts to pay the credit cards. It is obvious also that the husband’s wages were paid into these accounts.
The Commonwealth Bank Cash Management Call Account in the name of the husband had a credit balance of $24,443.00 as of 28 September 2005. The balance of that account at November 2005 was $12,102.00. The balance on the 25 January 2006 was $22.00. The husband’s evidence is that he used these moneys to make payments on the credit card and also a sum of approximately $5,000.00 was used to purchase furniture and necessities for the wife when she left the former matrimonial home.
All in all, the evidence of both parties is unsatisfactory in respect of the amounts they retained at separation and what happened to these moneys. The wife did not disclose until cross-examination the fact that she had retained $9,000.00. The husband’s evidence, at its most simple, suggests that he retained an extensive credit card liability and spent in excess of $5,000.00 for the wife’s benefit, and this accounted for the positive balances in accounts in September 2005.
Given the confusing state of the evidence, I am of the view that there should be no add-backs as suggested by counsel for the wife. It is clear that the wife has retained $9,000.00. Equally, however, that sum has now been exhausted and I presume that she has been required to
re-establish accommodation for herself and the daughter of the parties. On the other hand, the husband has certainly had the use of the balances of the accounts since September 2005. However, at least $5,000.00 of those moneys has gone to the benefit of the wife. Other sums have been put to the credit card during the period from September to December 2005. I do not intend to make any adjustments to the property pool or the settlement in respect of these moneys.
The wife owns a BMW motor vehicle. There is a debt attaching to that vehicle and owing to her father in the sum of $22,000.00. She says that the vehicle is valued at $15,000.00.
The husband owns a Mercedes Benz motor vehicle. There is a debt
of approximately $38,000.00 attaching to that vehicle. He says it has
a trade-in value of $26,500.00.
It is clear that there is nil equity in each vehicle.
Counsel for the wife however asked that the liabilities attaching to each vehicle be dealt with in a different manner. She argues that the debt
to the wife’s father is current whilst the liability in respect of the Mercedes Benz is in reality in the form of lease payments and can
be paid over time.
I do not accept this argument. The fact is that the husband’s motor vehicle does have a current debt. If he were to sell the vehicle
today, then there would be a pay-out figure and presumably is it approximately $38,000.00.
Conversely, I do not accept that the wife is “currently” obliged to pay the sum of $22,000.00 owing to her father. Mr T was a most impressive and forthright witness. He is clearly a gentleman of high standards and one who is gracious in helping various members of his family. However, in cross-examination he could only say that
he would “expect the wife to offer to pay him back sometime”.
Consequently, both parties have depreciating assets but with no equity in those assets. I do not believe that there is any immediate intention on the part of either of them to dispose of their vehicles. As such,
I do not think it proper to consider the vehicles, or more appropriately, the liabilities in my calculations. Rather, I consider that both parties have motor vehicles but without equity in those vehicles.
As mentioned above, during the relationship the parties used a credit card for purchases. They did so to obtain frequent flyer points.
At the time of the wife leaving the home this liability was $8,920.00. The husband proposes that he retain his shareholdings in a Malaysian company which, according to the best evidence, have a value
of approximately $5,000.00 and that this asset be set-off against the credit card liability which he also retained. This appears to be
a suitable course and I intend to order that the husband retain those shareholdings but be responsible for the credit card debt. I do not intend to otherwise bring either the shareholdings or the credit card debt into the calculations.
Assets and liabilities
I am therefore to deal with only the former matrimonial home, the mortgage liability attaching to that property, and the parties’ superannuation entitlements.
The home has an agreed value of $535,000.00. As mentioned above, the mortgage liability for the purposes of these proceedings
is $87,000.00. The equity in the former matrimonial home is therefore $448,000.00.
The superannuation entitlements of the parties are as follows:
Husband’s AMP superannuation
$57,306.00
Husband’s MasterPlan superannuation
$26,033.00
Wife’s Catholic superannuation
$42,243.00
Wife’s ANZ superannuation
$6,824.00
Total
$132,406.00
Contributions
As at the date of marriage neither party owned any substantial assets other than, and the husband does not dispute, that the wife had cash savings of $10,000.00.
The parties agree that the wife’s parents made gifts of amounts
at various times usually to assist with the purchase of real estate.
The husband was equivocal as to the amounts, but not as to the fact of the gifts from the wife’s parents. Consequently, I accept the wife’s evidence as to the quantum of those gifts. She describes the advances of money as “early inheritance”.
The wife’s parents provided $10,000.00 in 1985. A further advance
of $10,000.00 was made in 1989, and $16,700.00 in 1991. Each advance of money coincided with the purchase of real estate by the parties.
Whilst it is true that these advances occurred some years ago with
the most recent being approximately 17 years ago, it is clear that they were used directly to assist with the purchase of real estate. It is obvious that the current equity enjoyed by the parties in the former matrimonial home reflects to some degree those inputs.
Given the source of the funds to be from the wife’s parents and her evidence that she considered them to be “early inheritances”, I find them to be a contribution by or on behalf of the wife.[4]
[4] See Kessey and Kessey (1994) FLC 92-495.
The husband worked throughout the marriage.
The wife was in full time employment until near the birth of the parties’ oldest child. She returned to the workforce in a part time capacity in 1995 and full time in 2007.
Whilst the husband was undoubtedly the major financial provider from 1988, it is also the case that the wife was the primary homemaker and parent until the parties’ separation.
Both parties have made contributions to the welfare of the family since separation.
[Z] has lived with the wife. The sons have lived with the husband and were aged 17 and 14 years as at separation. No child support has been paid by either party to the other.
Both parties have continued to contribute to their superannuation entitlements since separation.
After considering all of the contribution factors, I am of the view that, on contributions alone, an adjustment of 2.5% of the net property of the parties in favour of the wife would be appropriate.
Section 75(2) factors
The husband is 50 years of age. The wife is aged 48 years.
The husband has a far superior income to the wife. He grosses approximately $184,000.00 per annum. The wife has an annual gross income of $75,000.00.
[Z] lives with the wife. She is 14 years of age and the wife will have the primary responsibility for the actual and financial support of [Z] for some years yet.
It is relevant that [Z] spends four nights per fortnight with the husband. However, the primary responsibility remains with the wife.
The sons of the parties, [X] and [Y], continue to live with the husband. [X] earns a small amount from part time work, however, both boys are occupied with their studies. The husband is currently primarily responsible for their financial support.
Whilst there is no evidence as to when [X] and [Y] will become financially independent, logic suggests that the wife will have
a responsibility in respect of [Z] for a longer period of time.
The wife lives in a rental property owned by her father. The husband suggested that she might not actually be paying rent. I have heard the evidence of Mr T, the wife’s father and also her landlord. I accept his as a witness of the truth and therefore find that the wife is obliged to pay rent to her father.
I have already found that the wife’s interest in the T Family Trust
is in reality nothing more than a mere expectancy and has no status
as a resource. I do not intend to make any adjustment in respect of this issue.
The husband by reason of his greater earning capacity will be able
to superannuate himself to a larger degree than will the wife. This
is a matter to be taken into account.
The husband has had the sole use and occupancy of the former matrimonial home since separation. It is the major valuable asset of the parties. He seeks an order that he retain that property. As such, he also accepts the inevitability of making a significant cash adjustment on the wife. It is true that he has maintained the status quo in respect of the principal of the property in that I will factor in the mortgage liability
as at the date of separation. For all intents and purposes therefore he has paid the interest but nothing from the principal. During this period since separation the wife has been paying rent.
The husband’s solicitors would argue that his payment of the interest equates to the wife’s payment of rent. I am of the view that this argument is too simplistic. The fact is that the wife has always had
an interest in the former matrimonial home. The extent of that interest will be determined by these orders. The husband has had the use and benefit of the wife’s interest since separation. To put it another way, the wife has not had the benefit of her interest in the property since separation. I am of the view that this is a relevant matter for consideration under s.75(2)(o) of the Act.
Each party seeks, as part of the final orders, that they retain the former matrimonial home. It is in my view a consideration under s.75(2)(o)
of the Act that the party who does not retain the home will have the additional re-establishment expenses of stamp duty and legal expenses in the purchase of a new residence.
The wife has previously vacated the home. She says that she would present as a more attractive visiting proposition for her sons if she had the home. She currently lives with [Z] in a two bedroom unit with no proper facilities for her sons to stay overnight. She will, of course, need to provide [Z] with accommodation during her minority.
The husband has remained in occupation of the home since separation and this is a matter I have considered above. The two sons of the parties continue to live with the husband. [Z] spends four nights per fortnight at the home with the husband. There is an established and settled status quo for the living arrangements for the children.
On balance, I am of the view that the husband should retain the home as part of these orders.
When I consider all of these matters, including the current and future living arrangements for the children, the discrepancy in earning capacity, and the fact that the husband will retain the home, I am of the view that an adjustment in favour of the wife of 7.5% of the property pool would be appropriate.
Conclusion
In summary, therefore, after consideration of the contributions and s.75(2) factors, I am of the view that an order that the wife receive 60% of the net property pool would be appropriate.
Both parties seek an order that there be a cash adjustment in respect
of superannuation rather than a splitting or flagging order. This will require an adjustment from the husband’s superannuation which
is larger than that of the wife.
The total of the parties’ gross superannuation entitlements
is $132,406.00. The wife will receive an immediate cash payment
in lieu of a split from the husband’s superannuation entitlements. Consequently, it is appropriate that there be a discount for the obvious benefit received by the wife in taking her entitlement in the form
of cash. I am of the view, therefore, that the superannuation entitlements are divided so that the wife received 47.5% of the total and the husband receives 52.5%. This would give the wife a total from the pool of superannuation of $62,893.00. She retains her own two policies and entitlements in sums of $42,243.00 and $6,824.00 respectively being a total of $49,067.00. As such, the cash adjustment from the husband to the wife will be $13,832.00.
The equity in the former matrimonial home is $448,000.00. The wife will receive 60%. That is $268,800.00. The additional payment
in respect of superannuation is $13,832.00. I calculate the total cash adjustment from the husband to the wife therefore to be $282,632.00.
I must be satisfied that the orders I make are, in all the circumstances, just and equitable. In my view, such a settlement is just and equitable for the purposes of s.79(2) of the Act.
I certify that the preceding eighty four (84) paragraphs are a true copy of the reasons for judgment of McGuire FM
Associate: Ann Creek
Date: 27 January 2009
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