Lam and Lam

[2008] FamCA 493

FAMILY COURT OF AUSTRALIA

LAM & LAM [2008] FamCA 493

FAMILY LAW – PROPERTY SETTLEMENT – gift to husband from his parents in 1992 contributed – wife’s contributions post separation by payment of mortgage instalments and other outgoings referable to investment properties – wife’s contributions post separation to the care of the children and little child support paid by husband. 

Family Law Act 1975 (Cth)

Chorn and Hopkins (2004) FLC 93-204
Harrington and Harrington (2007) FLC 93-317
Carter and Carter (1981) FLC 91-061
Townsend and Townsend (1995) FLC 92-569
Omacini and Omancini (2005) FLC 93-218
M and M [1998] FamCA 42
GVC v HPC [1998] FamCA 143

APPLICANT: Mr Lam

RESPONDENT: Ms Lam

FILE NUMBER: SYF 3886 of 2006

DATE DELIVERED: 17 June 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 2 & 3 June 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gould

SOLICITOR FOR THE APPLICANT: Karras Partners Lawyers

COUNSEL FOR THE RESPONDENT: Mr Sansom

SOLICITOR FOR THE RESPONDENT: Shepherds The Family Law Specialists

Orders

1. Pursuant to s 90MT(1)(a) of the Family Law Act 1975 whenever a splittable payment becomes payable in respect of the superannuation interest of the wife in the AXA Super Directions Fund (Member Number …) the husband is entitled to be paid an amount calculated in accordance with the regulations using a base amount in the sum of $216,000 at the operative time of the date of these orders and there is a corresponding reduction in the entitlement of the wife to whom the splittable payment would have been made but for this order.

2. Order 1 binds NM Superannuation Pty Ltd as the Trustee of the AXA Super Directions Fund. 

3. The wife is to pay to the husband the sum of $363,650 on or before six (6) weeks from the date of these orders and contemporaneously the husband is to do all things and sign all documents to transfer to the wife his interest in the home at L being the whole of the property contained in Certificate of Title Folio Identifier ….

4. The husband and the wife are to forthwith do all acts and sign all documents necessary to sell the properties at M in the State of New South Wales and R in the State of New South Wales and the following is to apply unless there is agreement to the contrary:

   (i)the properties are to be offered for sale by public auction through a reputable local real estate agency;

   (ii)the reserve price is to be agreed and failing agreement at a price nominated by the auctioneer;

   (iii)each party is to be responsible for payment of one half of any expenses related to the listing and sale. 

5. Pending the sale of the properties referred to in order 4 hereof each party is to be responsible for payment of one half of the mortgage instalments, rates and other outgoings after accounting for the rents received from the properties. 

6. Upon settlement of the sale of each of the properties referred to in order 4 hereof, the proceeds of sale are to be applied as follows:

   (i)payment of costs of sale and commission and the usual adjustments on settlement;

   (ii)payment of any outstanding land tax;

   (iii)discharge of the mortgage;

   (iv)of the balance remaining, 57.5% to the wife and 42.5% to the husband. 

7. Upon issue of Notices of Assessment by the Australian Taxation Office for payment of capital gains tax related to the sale of the properties referred to in order 4 hereof, the husband is to pay to the wife such sum as will distribute the total liability for capital gains tax according to the Notices of Assessment equally between them. 

8. The wife is to indemnify the husband and keep him indemnified against all liability for repayment of any debt owing to her mother. 

9. Unless otherwise specified in these orders each party is solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession or control of that party at the date of these orders. 

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 3886 of 2006

MR LAM

Applicant

And

MS LAM

Respondent

REASONS FOR JUDGMENT

[To assist editing for anonymity and ease of identification the parties will be referred to at times as ‘husband’ and ‘wife’]

Proceedings

1. This is the determination of the parties’ property settlement arising from the breakdown of their marriage. 

2. The husband instituted the proceedings by an application filed on 19 September 2006 but the orders he now seeks are to be found in exhibit 1 tendered at the commencement of the hearing and later amended in the running.  The wife filed a response on 6 December 2006 but the orders she now seeks are to be found in exhibit 2.  The detail is recorded in a Schedule at the end of these Reasons. 

Evidence

1. As well as their own evidence, the husband called evidence from Mr C, an accountant, and the wife presented evidence from her mother.  Neither were required for cross-examination; nor was Mr O who was appointed as a single expert to value certain real estate. 

2. Much of the history of the relationship is uncontentious but there were some differences.  Counsel for the husband made submissions urging the adoption of his version where it conflicts with that of the wife by reason of inconsistencies in her evidence and the manner in which she gave it.  Yet I see nothing to be gained from that approach because the more central issues in dispute are capable of resolution on the balance of probabilities without the need to discuss and rely on those criticisms.  To the extent explanation is required for making a finding on any disputed material fact, it will be given in context when recording their financial history. 

Assets and liabilities

1. Their assets and liabilities are set out below.  Most are agreed.  To the extent there is dispute, items are marked with a notation and discussion will follow.  They have been arranged into three categories - (A) non-superannuation, (B) investment properties to be sold, and (C) superannuation – which drew no dissent from counsel.  As I see it, that approach will facilitate evaluation of their respective contributions as well as calculation of respective ultimate entitlements. 

   A. Non-superannuation

Husband

ANZ Bank account      2,468

WBC account   639

J Holdings  2,000

Pajero motor vehicle  4,000

Dell laptop  300

Paid legal fees [note]   56,596

Share sales [note]        144,000

210,003

Less:

Debt - legal fees   51,359         158,644

Wife

Y house  1,000,000

WBC account   1,000

SGB account   20

ANZ account   100

Honda motor vehicle  5,000

House contents   12,000

Paid legal fees [note]   42,531

Sale of shares [note]       42,626

1,103,277

Less

Debt – wife’s mother [note]   33,000      1,070,277

B. Investment properties to be sold [note]

M house   600,000

R property     425,000

Total:  1,025,000

Less [Note]

R mortgage      150,000

M mortgage   301,960

Y mortgage       69,344

Y mortgage       93,740

Land tax   7,989         623,033            401,967

C. superannuation

Husband

Perpetual superannuation                    111,611

Wealthtrac Credit Suisse  78,042

BT Lifetime Super  10,813     200,466

Wife

AXIS superannuation   535,391

UniSuper   190,893     726,284            926,750

Total net assets:  2,557,638

Total non-superannuation & investment                 1,630,888

Total superannuation   926,750

Notes:

·    Legal fees paid

1. It is submitted for the husband that paid legal fees should be included for both parties and the husband’s related debt should also be included - or, as Mr Gould put it, paid legal fees should be ‘both in or both out’, but that leaves no room for differentiating the underlying circumstances and is rejected.  It is submitted for the wife that paid fees should not be added back because the funds came from her post-separation earnings, a submission supported by reference to Chorn and Hopkins (2004) FLC 93-204 [per Finn, Kay and May JJ].

2. The relevant passages from Chorn and Hopkins, so far as it relates to paid legal fees, are these at [56]-[58]:

   ‘In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge, in determining how to exercise that discretion, regard should be had to the source of the funds.

   If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.

   If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties.  Funds generated from assets or businesses to which the other party has made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.’

3. More recently in Harrington and Harrington (2007) FLC 93-317 [per Warnick, Boland and Stevenson JJ] the Full Court considered the last mentioned guideline, which has attracted some attention at first instance, in an appeal from a decision of O’Ryan J, including the treatment of legal fees paid from post-separation earnings. At first instance in Harrington [2006] FamCA 274, O’Ryan J said at [59]:

   ‘In K v K (unreported decision delivered 30 August 2005) referring to NHC V RCH [alternative citation for Chorn and Hopkins (supra)] I said:

   “133.  In my view, it is plainly wrong as submitted by counsel for the husband that “If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset”’.

   Nothing put to me on behalf of the Wife has caused me to change my view as to the correctness of what was said in NHC V RCH.’

4. The Full Court said at [19] and following:

   ‘…even if this Court may give guidelines with “…the force of a binding rule”, we were not referred to any cases and have not for ourselves located any, which purport to give the guidelines set out in Chorn and Hopkins such binding effect.  Rather, in our view, the guidelines in Chorn and Hopkins fit into that category where in the event of a failure to give reasons for a departure from them, close scrutiny may be given to the circumstances of the case by the appellate court.

   Accordingly, even though O’Ryan J said that he rejected the guideline because he disagreed with it, it is appropriate that we examine the findings to see if within them are adequate reasons for the inclusion of the wife’s paid costs in the asset pool.’

5. The appeal was dismissed; no error was found as his Honour had given adequate reasons for the approach he took [ie including fees paid from post-separation income]. 

6. It is curious that costs paid from post separation income would be excluded from the assets when there is rarely, if ever, any argument about including a party’s current bank balance - nor is there any appellate guideline about that - and yet the money paid for legal fees would otherwise be in the bank, notionally at least.  The current bank balance is included as an asset because that is consistent with a line of authorities to the effect that, except in some unusual circumstance, it is proper to include all of the parties’ property from whatever source at this first step [eg Carter and Carter (1981) FLC 91-061] and contributions are evaluated at the next step. Also, costs are more appropriately dealt with under s 117 at the end of the day should a claim be made. The topic and related points are well discussed in the article by Paul Doolan “Now You See It, Now You Don’t – Notional Property and Add-Backs in Family Law”, 13^th National Family Law Conference, Adelaide, April 2008. 

7. Here, there is argument about the use made of post separation income.  Inclusion of paid legal fees brings to the forefront the funds which otherwise would have been available to each party; their respective contributions to those funds can be evaluated at the next stage which will also be the point when consideration can be given to expenditure to meet reasonably incurred living expenses.  Responsibility for the costs of the proceedings can be considered later should a claim be made.  It is appropriate therefore to include what has been paid for legal costs, including from post-separation income, and to include also, in the husband’s case, related debt. 

   ·    Sale of shares

8. Since separation each has sold shares accumulated during the course of the marriage.  The related facts are discussed later as well as the reasons for including in the assets the sale proceeds each retained. 

   ·    Debt to wife’s mother

9. The origins of this debt will be mentioned in due course and the reasons for adopting the figure of $33,000 for which the wife contends, rather than the $20,000 advanced by the husband, will be discussed then. 

   ·    Capital gains tax

10. It is common ground that the investment properties are now to be sold; the wife abandoned her application for a transfer of the husband’s interest virtually on the eve of the final hearing.  It is also common ground that capital gains tax will have to be paid although it is not possible to calculate the quantum and neither party advanced an estimate.  Nonetheless, some provision has to be made for it in the orders; more particularly, since they hold their interest in the R property in the proportions 88% to the wife and 12% to the husband any capital gain will be distributed accordingly and their responsibility for the tax payable will follow suit unless altered by orders made here.  The orders as drafted are intended to re-distribute the responsibility equally. 

Brief background

1. The husband (51) and the wife (49) married in Sydney in April 1984.  It is of no great significance but there is a question about when their cohabitation began: either when they married [the husband] or two years earlier in 1982 [the wife].  It became clearer during cross-examination that in the two years or so before they married the husband stayed at the wife’s home at times and he returned at times to his family home, yet nothing said suggests they formed a common household or committed to any of the other indicia of life as a couple, including the pooling of resources and the like.  For present purposes their relationship should be seen as having commenced when they married.  They separated in late October 2004 and were divorced in December 2006.  The husband presently lives in rented premises with his partner and her children; the wife remains living in the family home at Y and she has not re-partnered. 

2. They have two children: a son (16) born in August 1991 and a daughter (13) born in December 1994.  The son attends a boy’s high school where he is in year 11 and the daughter is in year 8 at a Catholic school.  They live with their mother.  Consent orders made on 23 November 2006 provide for them to spend time with their father on alternate weekends and additional times during school holidays and special occasions.  However, their time with their father has been irregular and patchy, a situation he contends has come about for reasons unrelated to his own interest or commitment as a parent. 

History

1. They were in their mid-twenties when they married in 1984.  There is no common account of the assets they owned although this was not explored and nor were submissions made about it.  In any event, neither seems to have had anything of any great value: the husband says he had shares worth no more than $20,000; the wife says she had savings of $15,000 and a Mazda motor vehicle which she sold in 1992 for $8,000. 

2. At the time the husband had completed a Commerce degree and he was working full time.  He had been supporting his family by providing money to his parents for their living expenses and for the education of his sister; he retained between $50 and $100 per week from his income for his own needs.  After the marriage he says he continued the financial support but the level of his support changed; thereafter he gave them amounts such as $100 per week and thus he retained more of his income than he had previously.  This continued until 1990 when his parents’ circumstances changed.  He completed a Masters of Business Administration during the mid 1990’s.  Over the years he changed employment many times but he says he worked continuously throughout.  The wife, on the other hand, says he was retrenched on three occasions and thereafter he was out of work for varying periods ranging from several months to a year.  He did not put this in contest but he pointed out he received a retrenchment payout on one occasion of $60,000. 

3. For her part, the wife says she was working part time at a university and part time as a consultant, earning $18,000 per annum.  She says she was studying for her Masters.  At some point she completed her doctorate.  Her position at the university changed over time: prior to the son’s birth she was employed as a researcher and by the time the daughter was born she was employed in a senior research position.  She took time off on full pay around the births of both children and she made all the necessary arrangements about their care so she could return to work. 

4. There is no evidence that would allow a comparison of their incomes over the years they were together but, apart from the money the husband directed towards his family during the initial years before their first child was born, there is nothing to suggest they used their earnings for anything other than their own support and meeting financial commitments to improve their capital base. 

5. They lived with the wife’s parents until they purchased the first of three homes they owned.  There is some disparity in the detail given about these transactions:

   (i)In early 1984 they bought a home in B for $85,000 or $88,000.  They borrowed either $50,000 or $60,000 and the rest came from savings as well as, according to the husband, a first home owner’s grant.  They sold it in 1988 or 1990 for $245,000 or $248,000. 

   (ii)Their next home was at C which they bought for $260,000.  They applied the funds received from the B home as well as some savings and they borrowed $70,000 from the bank to complete the purchase.  According to the wife they sold it in 1991, although exhibit 5 suggests a sale either in March 1992 or later since that is the date the mortgage was discharged.  It was sold either for $300,000 [husband] or $310,000 [wife] and they received net either $280,000 [husband] or $300,000 [wife]. 

   (iii)Their third and last home is located at L which was acquired in early 1992 around the time they sold the C property.  It appears to be common ground the purchase price was $455,000 and not $445,000 as the wife had stated in her affidavit.  There also appears to be no contention about the fact that to complete the purchase they used the sale proceeds of the C property [however much that might have been], they borrowed $120,000 from the bank, and the wife’s mother lent them $50,000 [corrected by the wife to this figure from $60,000 stated earlier].  But two related issues arise from these transactions: the amount still owing to the wife’s mother and the source of funds required to complete the purchase of the L property. 

6. Taking them in that order, it is common ground that the wife’s mother lent them money at this time – the husband gave a range but he offered no contest to the wife’s evidence ultimately that it was $50,000.  Repayments were made over time, the last 8 years ago, and the wife now says $33,000 remains owing whereas the husband says it is $20,000.  It is true, as the husband’s counsel submits, that the reliability of the wife’s evidence is undermined by the fact that she swore to four different amounts in various documents over time.  That noted, she attributes the precision of the latest figure to the availability of her mother’s diary and it has to be said that the various earlier figures are not vastly different.  Also, the point is well made by her counsel that the husband offers no basis for the figure he advanced. 

1. The evidence on both sides of the argument is not very satisfactory.  But it is not a large sum in the overall context of the case and the balance tips in favour of accepting the wife’s figure because there is at least some basis for it which was capable of investigation.  Despite the long period since the last repayment, it is not the husband’s case that the loan is not repayable, albeit he argued a lesser amount, and it is accepted it should be included as a debt. 

2. Turning to the second issue, it is the husband’s evidence that his parents advanced two sums of money to them in 1992: the first was for $100,000 which was put towards acquiring the L home and the other was for $50,000 (later in the year) and used to buy a Pajero motor vehicle. 

3. In her evidence about the purchase of the L home, the wife said [paragraph 13] the husband’s parents advanced funds which were applied to the purchase and she referred to this as a loan [‘the Husband’s parents also advanced funds which we applied to the purchase.  Due to the loans from our respective parents, the Husband and I were able to purchase ….the property without a bank mortgage.’].  She went on to say [paragraph 14], after referring to developments during 1992 in the finances of her husband’s family, ‘…In or about 1992, the Husband’s parents advanced to us sums.  At around this time, the Husband purchased a Mitsubishi Pajero motor vehicle which was registered in our joint names.’  Her case ultimately did not take issue with the receipt of the $50,000 used to purchase the vehicle – although she asserted no knowledge of what had occurred, only what the husband told her - yet she did not maintain the position that his parents had lent them money which was put towards the purchase the home; rather, she put in contest whether any money had been received at all from his parents and used for that purpose. 

4. Cross-examined on the topic, she said amongst other things the ‘sums don’t add up’.  In fact, the sums are difficult because there are no documents underlying these inter-related transactions, the parties offer different figures for the sale price of the C property, and there is no evidence of the costs of purchase of the L property.  The evidence to resolve the issue therefore is scant.  Nonetheless, a broad look at the situation demonstrates sufficiently that money had to come from somewhere to complete the purchase and the husband’s evidence – not to mention the wife’s admission in paragraph 13 of having received funds, albeit by loan – leads to a finding on the balance of probabilities that money did come from his parents and his evidence about it should be accepted.  That finding is supported by the hypotheses discussed below:

   ·    First, to take the wife’s figures and therefore err in her favour, if the sale price of the C property was $310,000 and there remained $300,000 net, the mortgage of almost $68,000 owing on the CL property was discharged with money from somewhere in March 1992 [exhibit 5].  It either came from the sale proceeds of the C property along with the usual costs and commission or it was paid out from some other source; for this exercise, it makes no difference.  Deducted from the $300,000 net, there remains $232,000.  Next, the L property purchase price was $455,000 and it is probable that the stamp duty alone was in the order of $16,000.  Mr Gould is right to say the document Mr Sansom tendered to quantify the likely stamp duty does not indicate it would have been the duty in 1992 but it can be taken as near enough for this purpose.  Accordingly, purchase price plus stamp duty brought the cost to around $471,000.  Obviously there would have been other costs such as fees and charges but they can be put aside for the moment.  The position on that scenario resembles this:

   Cost purchase L property & stamp duty  471,000 E
     Net from sale of C property            232,000
     Loan from wife’s mother   50,000
     Loan from bank  120,000         402,000 E
     Remainder required   69,000 E

   ·    Of course if the husband is right and they had $280,000 available from the sale of the C property rather than $300,000 they needed to find another $20,000.  Either way, the figure required is less than $100,000 and the unknown costs, commission and fees related to the transactions are unlikely to bring the shortfall up to that amount.  Even so, the exercise demonstrates that a sizeable sum of money, at least in the order of $69,000, had to come from somewhere else. 

   ·    It was only when this source and application of funds exercise was put to the wife for her comment that she introduced the proposition that they ‘tended’ to sell shares around the time they bought properties.  However, that is nowhere to be found in her account of their financial dealings and in any event it is a speculative explanation rather than an assertion of fact. 

   ·    The husband offers an explanation for the gap which is not improbable or unreasonable and in the absence of anything else can be accepted.  As I find, therefore, the husband’s parents did gift $100,000 in 1992 and the money was used, wholly or mostly, towards real estate transactions at the time. 

   ·    As I also find, later in 1992 his parents gifted a further sum of $50,000 which he used to buy the Pajero motor vehicle for family purposes. 

5. As well as the family homes, over the years they acquired investment properties.

   (i)In 1996 they purchased a unit at Tfor $243,500, most of which they borrowed from a bank.  It was rented, the rent was put towards the mortgage instalments and expenses, and that remained the case until it was sold in February 2007 pursuant to orders made in November 2006.  Even though the sale was relatively recent, they give different figures for the sale price – either $539,000 or $550,000.  From the sale proceeds they each retained $10,000 and the balance was used to reduce debt. 

   (ii)In 1992 they purchased a property at M for $422,000 which came [all or most] from funds borrowed from the bank.  It has been rented and the rent applied towards the mortgage instalments and other expenses.  Its value is agreed, as noted earlier. 

   (iii)In 2004 they purchased a holiday house at R for $520,000 which came from money borrowed from the bank.  They are registered as tenants in common with the wife having an 88% interest and the husband a 12% interest.  After a few months it was rented and the rent put towards the outgoings.  Its value is also agreed. 

   (iv)The wife undertook the work necessary to obtain development approval from the local councils to develop both the M and R properties. 

6. During the course of the marriage they both contributed to superannuation from their earnings.  When the funds were established is not apparent. 

7. They also undertook share trading and by the time of their separation they had accumulated a share portfolio either in joint names, their individual names or the names of the children.  Annexure I to the husband’s affidavit is a share register statement with the details as at 14 October 2004.  All shares have since been sold and I shall come to argument about that shortly. 

8. As for their roles in the home and within the family generally, the husband lists the work he undertook around the home [paragraph 49] and he outlines the role he took with parenting responsibilities [paragraph 50].  Apart from that, which is accepted, the wife saw to the household arrangements and to the children’s arrangements. 

9. I turn now to their circumstances and other developments over the 3 ½ years or thereabouts since separation. 

10. The wife continues to work at the university; her current gross income is $2,211 per week or $114,972 per annum.  As noted earlier, she continues to occupy the family home with the children. 

11. Unquestionably she has been overwhelmingly responsible for the children’s care and supervision these past few years, including the oversight of their education and their apparently busy extra-curricula schedule.  She maintains their father has not taken up her offers to look after them, including while she is away for work purposes, and he has been irregular and inconsistent in spending time with them.  He does not dispute what she says of his time with the children; he says his role has been much reduced although more recently the children have been in his care more regularly.  It would be obvious to any observer at the hearing that the separation is an unresolved and sensitive topic, at least from the wife’s perspective, but on the available evidence I could not make any finding about where responsibility lies for the state of the children’s arrangements with their father, if it were to be apportioned at all, and this seems to have been recognised sensibly by the absence of any real argument directed to it in closing.  For present purposes, only the historical fact can be observed; their mother has had the overwhelming share of parental responsibility surrounding their care these past 3 ½ years. 

12. It is also the case that she has had the overwhelming responsibility for the children’s financial needs.  She says, and it is accepted, that she has received little in the way of child support and little else has been forthcoming from their father towards their financial needs.  At no stage has she taken the step of reviewing the child support assessments issued over time.  More recently a child support assessment has issued to operate from 1 July 2008 and it requires payment of $109 per month for both children.  She annexed to her most recent affidavit a schedule of certain expenditure for the children totalling $18,662 per annum and that is some indicator of the financial cost to her of meeting their needs. 

13. The husband mounts no strong argument against any of this although he puts his contributions in recent months a bit higher; for example, exhibit 6 is his bank statement, with child support payments marked, which reflects $2,204 paid since 19 November 2007 and total payments between 13 July 2007 and 19 May 2008 of $3,804.  Either way, a very modest amount of child support has been paid for two adolescent children. 

14. Since separation the wife has managed the investment properties which she proposed retaining in the settlement until recently.  She has received the rent and paid the mortgage instalments as well as other expenditure without any contribution from the husband.  In annexure C to her recent affidavit she attaches a schedule of rent received and payments made related to the investment properties.  That reveals this:

    Total rent received   93,212
    Total mortgage repayments             199,912
    Total expenses   14,270
    Total tax paid   28,478           242,660
      (149,448) shortfall

15. The wife says there is still owing $7989 in land tax and that is not disputed. 

16. It is also her evidence that she has found it necessary since separation to sell shares to meet some of the expenditure; she has received a total of $42,626 which she has applied towards the financial needs of herself and the children.  I shall return to that shortly. 

17. As for the husband’s circumstances, he lives in rented premises with his partner and her two children who are aged 8 and 5 years.  His partner is not in paid employment, she receives child support from the children’s father of $4,500 per month, and her property consists of a bank account of $20,000. 

18. In December 2005 the husband purchased with another person a professional practice for $127,500, his share of the cost being $63,750.  It was not successful, they incurred losses of almost $30,000 in the first 6 months, and they ceased to operate the practice in March 2007.  During the 15 months or so of its operation he did not draw any income and he introduced funds to meet practice expenses.  As he had no income, he also had to fund his own living costs from capital.  He sold shares to fund his portion of the purchase price and to meet the shortfall in income over expenditure as well as support himself during this period.  He received a total of $144,000 from the sale of shares.  In 2006 he and his partner instituted court proceedings against the vendor.  The proceedings were eventually settled at mediation and he received an award of $12,500 which he put towards legal costs incurred.  After they ceased the practice his partner took over whatever client base they had and, while the partnership returns and therefore the final figures have not yet been completed, it is the husband’s evidence that any payment he might have anticipated for the client base was offset by relief from GST obligations.  He now has nothing to show for the venture.  However, he will have capital losses of at least the purchase price (and possible greater) he can carry forward and set off against capital gains in the future. 

19. After his exit from the practice he began work as a consultant for his present employer, earning $130,000 per annum.  In August his employer offered him a full time position which he accepted.  He remains employed there and earns $2,417 gross per week or $125,684 per annum. 

20. Since separation each has made further contributions to their superannuation funds; it is agreed the husband has contributed a further $19,260 and the wife a further $113,156. 

21. I come now to the treatment of the proceeds of sale of shares each received.  It is submitted for the wife that the $144,000 received by the husband should be included as an asset of his and regarded as a premature distribution of property to him, relying on the principle discussed in Townsend and Townsend (1995) FLC 92-569. It is submitted for the husband, on the other hand, that neither amount should be added back to the assets but dealt with in ‘some other way’, presumably taking the expenditure into account in the assessment of their contributions.

22. In Townsend Nicholson CJ [with whom Fogarty & Jordan JJ agreed] said at 81,654:

    ‘In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets.  What the husband did was to distribute to himself an asset in which the wife had a legitimate interest.  In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2).  It seems to me that the husband has had the benefit of that money.  Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case.  Accordingly, I am of the view that the correct way in which to deal with the husband's receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.’

23. In the later decision of Omacini and Omancini (2005) FLC 93-218 the Full Court recognised that disposition of assets that existed at separation may be seen as a premature distribution of assets, but to be treated in that way requires some examination and assessment of the reasonableness or otherwise of the expenditure, at [39]- [41] :

    ‘Her Honour seems to be saying that the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation, will result in that expenditure being added back ``in the usual way'' as a premature distribution of assets with nothing more.  If that is what her Honour is saying, in our view, she is being unduly simplistic.  In our opinion, it was a necessary requirement for her Honour to examine and make some assessment of the reasonableness or otherwise of the expenditure.  The need to satisfy that requirement was particularly critical in a case such as this because…’

24. The need to consider the reasonableness of a party’s conduct of financial affairs post-separation, in so far as that relates to expenditure on living expenses, is highlighted by decisions such as Chorn and Hopkins which referred with approval to this passage in M and M [1998] FamCA 42 [per Baker, Kay and Chisholm JJ]:

    ‘There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law requires that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support.’

25. In a similar vein, in another Full Court decision that same year, GVC v HPC [1998] FamCA 143 [per Nicholson CJ, Ellis and Kay JJ], this was said at [46]:

    ‘Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule.  The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.’

26. In my opinion these principles favour including the $144,000 in the assets and regarding it as an asset the husband has received.  His counsel makes the point that if the practice had been a success the wife would be making a claim of contribution by reason of the use of joint funds.  That may well be the case, but the fact remains the husband spent the money in a manner of his choosing, he did not seek the wife’s permission to sell the shares, he did not inform her of his intention to invest some of the funds in a professional practice and, as her counsel points out, he left a paying job to go into the venture and he did not have the qualifications necessary to conduct the practice without his partner.  None of that is necessarily to be critical of the husband for what he did, but it would be unfair to the wife in the circumstances to have her share the risk with him and not to recognise that (effectively) he took funds that would otherwise be available and used them as he unilaterally determined. 

27. As for the wife’s sale of shares, the position is not so clear and some might see it as falling more squarely within the passages from M and M and GVC v HPC as expenditure for reasonably incurred living expenses, particularly given the very modest level of financial support she was receiving and the financial burden she had of meeting the shortfall of income over expenditure for the investment properties.  Excluding the amount she received has some merit, but of course if it is excluded then her post separation circumstances would be evaluated accordingly; that is to say, she would be seen as having not only her share of the sale proceeds available for expenditure but also the husband’s share.  Conversely, if it is included as an early distribution of what otherwise would have been available to both, as with the shares sold by the husband, so too must her post separation circumstances be evaluated accordingly; that is to say, the husband could not be regarded as having contributed a portion of the sale proceeds to the expenditure she paid.  In the final analysis, I have determined to include it as a premature distribution and have regard to the flow on effect when evaluating their post-separation contributions. 

Evaluation - contributions

1. For present purposes their contributions can be evaluated to the acquisition, conservation and improvement of (i) their superannuation entitlements and (ii) their non-superannuation and investment properties. 

2. It will be apparent from what has been said that the parties have each made contributions of the kind described in s 79(4)(a)-(c).  It was a long marriage of more than 20 years duration during which two children were born.  While they each had some assets at the outset, neither seems to have been in the stronger financial position in any material way.  Both worked throughout their time together and contributed their earnings for common purposes in ways discussed earlier.  They both studied and improved their tertiary qualifications during the marriage and they acquired three family homes in that time as well as investment properties, two of which they retain.  They each took a role within the home and with the household arrangements generally.  While it can be said that the husband’s support of his parents from the time of the marriage until 1990 diminished his income, it is not said that he did not contribute to the needs of himself and the wife during those 6 years or so from what he retained or that in some way the wife took on an inequitable financial burden because of his commitment to his family.  It can also be said that the husband had periods of unemployment over the years and yet he did receive a relatively substantial retrenchment payment on one occasion, the purpose obviously being to compensate him for loss of future income.  Where the evidence does not allow a comparison of their earnings, his intermittent unemployment does not weigh against him. 

   superannuation

1. Obviously over the years some of their earnings were directed towards their respective superannuation funds and, equally obviously, by separation there was some disparity in their entitlements.  But over the years they had arranged their affairs, including the application of their earnings, for common purposes and therefore their contributions to ‘savings’ through superannuation entitlements should be seen as approximating equality up to the date of their separation.  Since then their contributions have differed markedly. 

2. It is submitted for the husband that he should be entitled to a split that would see him receive 52.5% of the total.  On the other hand, it is submitted for the wife that each should be entitled to receive the post separation contributions they have made and otherwise their entitlements should be divided equally.  In my opinion, this latter proposal is a more appropriate reflection of their contributions up to now since it more directly recognises what they have each contributed over the past 3 ½ years. 

3. This means the husband would be entitled to a split of $215,961 [say, $216,000] which is calculated as follows:

   Husband’s total entitlement  200,466
   Less his post separation contributions         19,260
   ‘Net’ contributions  181,206
   Wife’s total entitlement  726,284
   Less her post separation contributions      113,156
   ‘Net contributions  613,128
   Total ‘net’ contributions  794,334
   One-half total ‘net’ contributions               397,167
   Less husband’s net contributions                181,206
   Split to equalise net contributions              215,961 (to husband)

1. Therefore, the orders will provide for the husband to receive a further (say) $216,000 from the wife’s AXIS fund.  That means the husband would have superannuation entitlements worth $416,427 and the wife would have $510,323 or, to put it another way, he would have almost 45% of the total and the wife would have 55%. 

   non-superannuation & investment

2. Turning to their other assets, in the final analysis there are two developments of note from the pre-separation period.  One is the interest free loan advanced by the wife’s mother of $50,000 in 1992 to acquire the L home, of which $33,000 is still to be paid and now will be paid.  This falls to the wife’s credit.  The other is the gift from the husband’s family of $150,000 to assist in the finances involved in the sale of one home and the purchase of another and to buy a motor vehicle for family use, also made in 1992.  This falls to the husband’s credit.  Comparison plainly favours the husband since one is a loan, albeit interest free, with the balance now to be repaid and the other is a gift and there is a significant disparity in the sums involved. 

3. But there must also be added to the scales the developments since separation. 

4. Over these past years the wife has had the use and occupation of the family home while the husband has had to pay for rented accommodation.  Obviously the home has been shared with the children and she has maintained it and paid the outgoings.  Nonetheless, the situation has been of some benefit to her by comparison. 

5. On the other hand, she has received very little in the way of child support or with the children’s day to day care.  She has also managed the investment properties and at considerable cost with no contribution from the husband, financial or otherwise.  It is true, as the husband’s counsel points out, that she proposed to take a transfer of these properties until recently, but there is no way of knowing whether selling them before now would have been to their mutual benefit or, despite the cost, they are better off having retained them and kept up all the payments.  There remains the historical fact that she has borne the considerable costs alone.  She has also been the source of the legal fees she has paid.  These considerations weigh in her favour. 

6. The gift from the husband’s parents in 1992, some 16 years ago, can be put on one end of the scales.  On the other end are the wife’s more recent contributions to the maintenance and conservation of the investment properties, for a not dissimilar amount although made much more recently, along with her contribution to her paid legal fees and the greater responsibility she has had for the care of the children post separation. 

7. The balance of their contributions overall in my view would be recognised by an assessment to the wife of 52.5% and to the husband 47.5% of their non-superannuation and investment assets. 

8. Expressed in monetary terms, that would entitle the wife to receive assets to the value of $856,216 and the husband to $774,672. 

Section 75(2) factors

1. At the ages of 51 and 49 the parties have some years to go before they are of retirement age and it can be expected they will continue to earn income consistent with their qualifications by one means or the other.  Their current incomes were recorded earlier and are broadly similar.  It can be anticipated both will continue to contribute to superannuation over the rest of their working life which in the husband’s case is likely to be a couple of years less given the age difference. They will each receive entitlements to property in the proportions assessed which means the wife will have assets of greater value, including greater superannuation.  However, as discussed earlier the husband does have capital losses he can carry forward. 

2. Primarily it is the future care and responsibility for the children which attracted attention in closing addresses and this does call for an adjustment in the wife’s favour.  She will have the greater share of responsibility for their upbringing until they attain their majority.  At the ages of 16 and 13 years, there are still some years left before that occurs and they will be years when vigilance is usually necessary to see they are not squandering their potential in one direction or another.  There is not a lot of cause for confidence that there will be an equal sharing of the financial burden during what remains of their upbringing if the amounts paid for child support so far are any indicator, which they are.  Nor does the assessment post 1 July this year suggest the burden is likely to shift to any real extent.  The husband can be relied upon to meet whatever is assessed by the child support agency, but the wife should be seen as responsible for filling a significant gap in the children’s needs. 

3. These matters call for a further adjustment in her favour of another 5% of the non-superannuation and investment assets or, converted to monetary terms, an additional $81,544. 

Conclusion

1. That would give to the wife 57.5% of their non-superannuation and investment assets and approximately 55% of their combined superannuation entitlements.  Converted to monetary terms, she would be entitled to retain assets worth $937,760 and her superannuation of $510,284 after a split of a base amount of $216,000, giving her a total entitlement of $1,448,044.  It follows the husband would receive 42.5% of the former, or assets worth $693,127 and his superannuation after a split in his favour of a base amount of $216,000, giving him a total entitlement of $1,109,593. 

2. In the final analysis this means that of their total assets of $2,557,638 the wife will be entitled to receive approximately 56.6% and the husband 43.4% approximately.  Expressed another way, the wife will be entitled to receive assets worth $338,451 more than the husband.  That differential is the result of her contributions to superannuation and other assets as discussed as well as adjustment for relevant s 75(2) factors. 

3. This outcome will achieve a just and equitable outcome in my view. 

Form of orders

1. The form of orders can be addressed in three parts (i) non-superannuation; (ii) investment properties; and (iii) superannuation. 

2. First, to the non-superannuation assets which are to be distributed 57.5/42.5 in the wife’s favour.  For her to retain the home and the other assets listed earlier and pay the debt to her mother, she will need to pay to the husband the sum of $363,648.  That is calculated this way:

   Total non-superannuation assets                 1,228,921
   Wife has  1,070,277
   Wife entitled to 57.5% of $1,228,921         706,629
   Payment to husband to retain   363,648 (say $363,650)

3. In the absence of any submission about it, a reasonable time for payment of that amount is six weeks. 

4. As for the investment properties, the actual figures will only be known on sale and so the orders will have to provide for them to receive their entitlements proportionately after payment of the usual deductions, discharge of the mortgage and payment of the outstanding land tax.  No submissions were made about the method of sale or the time it can be expected to take, but it seems reasonable to see the sale concluded as soon as practicable rather than have further delay.  The orders are drafted to implement what I regard as reasonable, but provision is also made for the parties to take some other course if they agree.  In the meantime, they will be held responsible equally for payment of outgoings such as mortgage instalments and rates and the like after accounting for receipt of rental income. 

5. Finally, the splitting order will apply, as agreed, to the wife’s larger superannuation fund and provide for the base amount mentioned earlier. 

6. As for the capital gains tax, that will not be known until assessed and at that point the husband will be required to pay to the wife such sum of money as will see them equally responsible for the amounts assessed according to the Notices of Assessment. 

SCHEDULE

Orders sought by husband – exhibit 1

‘1.That within 42 days of the date of these Orders the wife pay to the husband a bank cheque in the sum of $732,007.00.

2.Upon the wife's compliance with Order 1 hereof the husband do all acts and things necessary and sign all instruments, documents and writings required to transfer to the wife the whole of his right, title and interest in the following properties:-

2.1The former matrimonial home known as [L property], being the whole of the property contained in Certificate of Title Folio Identifier […].

2.2The investment house known as [M property], being the whole of the property contained in Certificate of Title Folio Identifier […].

2.3The holiday house known as [R property], being the whole of the property contained in Certificate of Title Folio Identifier […].

3.The wife shall simultaneously upon the husband's compliance with Order 5 hereof indemnify and save harmless the husband in relation to all of the following loan accounts with Westpac Bank Limited and shall further do all acts and things necessary to discharge and refinance the relevant mortgages registered upon the title of the properties referred to in Order 2 hereof:-

3.1      Rocket Investment Property loan account no. […].

3.2      Investment Property loan account no. […].

3.3      Investment Property loan account no. […].

3.4      Rocket Equity loan account no. […].

3.5      Rocket Investment Property loan account no. […].

3.6      Rocket Equity loan account no. […].

4.The husband shall, within 14 days, do all acts and things necessary to transfer to the wife the joint Westpac Classic Plus account no. […].

5.The wife shall, within 14 days, do all acts and things necessary to discharge Westpac Mastercard account no. […] and otherwise indemnify and save harmless the husband in relation to all amounts outstanding pursuant thereto.

6.That the wife, within 14 days, do all acts and things necessary to transfer to the husband the whole of her interest in the Mitsubishi Pajero motor vehicle registration no. […].

7.The wife's superannuation interests with National Mutual Tailored Superannuation Fund (the Super Directions Fund, plan no. […]) shall be split to create a superannuation interest for the husband as follows:-

7.1Pursuant to Section 90MT(2) of the Act and Regulation 27 of the Family Law (Superannuation) Regulations the Court determines the amount in relation to the wife's superannuation interest in the Super Directions Fund is $535,391.

7.2Pursuant to Section 90MT(4) of the Act the Court allocates a base amount to the husband in respect of the wife's superannuation interest in the Super Directions Fund of $286,078.

7.3Pursuant to Section 90MT(1)(a) of the Act whenever a splittable payment becomes payable in respect of the wife's superannuation interest in the Super Directions Fund the husband is entitled to be paid an amount calculated in accordance with the Family Law Regulations where the base amount is $286,078 and there is a corresponding reduction in the entitlement of the wife at the time of the splittable payment.

7.4The operative time for the payment under this Order is 4 days after the date of service of this Order.

7.5The Trustee shall do all such acts and things and sign all documents as may be necessary, in accordance with the obligations set out under the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 to calculate the entitlement to make payment to the husband in accordance with these Orders.

7.6The wife shall not give or grant to the Trustee of the Super Directions Fund a binding death nomination in favour of a child which would have the effect of in any way reducing the value to the husband of the splittable order herein and in particular the base amount allocated to him and the wife and her legal personal representatives in the event of her death, do hereby indemnify and keep indemnified the husband in respect of any loss that may be suffered by him as the result of any failure by her to comply with this Order.

7.7The wife shall forthwith do all acts and things and sign all documents necessary to cause and maintain the husband to be the nominated death beneficiary of her entitlement to a proportion of not less than 51.5% of the total value of her entitlement in the Super Directions Fund until such date as there is a split of payments in favour of the husband pursuant to these Orders.

7.8That having been accorded procedural fairness in relation to the making of this Order, this Order binds the Trustee of the Super Directions Fund.

8.In the event that either party refuses or neglects to execute any deed or instrument in order to give validity and operation to these Orders, then a Registrar of this Court is hereby empowered pursuant to Section 106A of the Act to execute such deed or instrument in the name of the person who has so refused or neglected to comply.

9.        Matter removed from the list of cases awaiting determination.”

Orders sought by wife – exhibit 2

‘1. (a) That, pursuant to Section 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the Wife's interest in the AXA Super Directions Fund (Member Number […]), the Husband shall be entitled to be paid an amount calculated in accordance with the regulations, using a base amount, at the date of these orders, in the sum of $209,264 and that there be a corresponding reduction to the entitlement the Wife would have had in the AXA Super Directions Fund but for this order.

(b)That these orders have effect from the operative time and the operative time for this order is four days following the making of these Orders.

(c)That this Order binds NM Superannuation Ply Ltd as the Trustee of the AXA Super Directions Fund.

2.That the Husband and the Wife shall forthwith do all acts and things and sign all necessary documents to effect a sale of the real properties situated at and known as:

§[M] in the State of New South Wales ("the [M] Real Property"), and

§[R] in the State of New South Wales ("the [R] Real Property") and by way of consequential arrangement:

(a)The listing price for the Real Properties shall be as agreed between the parties and if there is no agreement then the listing price shall be as advised by a Valuer nominated by the President of the Real Estate Institute of New South Wales.

(b)The Real Properties shall be listed for sale by a private treaty with Estate Agents as agreed upon between the parties and if there is no agreement then the Estate Agent shall be as nominated by the President of the Real Estate Institute of New South Wales.

(c)In the event that the Real Properties have not been sold by or before a date three (3) months from the date of these Orders and unless otherwise agreed then the Husband and the Wife shall make all such arrangements and do all such acts and sign all such documents and pay all moneys equally, necessary to procure a sale by public auction of the Real Properties upon the following terms:

(i)The Auctioneer shall be as agreed upon between the parties and if there is no agreement then the Auctioneer shall be as nominated by the President of the Real Estate Institute of New South Wales.

(ii)The auction shall take place within three (3) months after the deadline date for sale by private treaty.

(iii)The reserve price shall, unless agreed upon by the parties, be as proposed by the Auctioneer.

(iv)The Husband and the Wife shall each pay and be responsible for payment of one half of auction expenses payable before the Real Properties are auctioned.

(v)In the event that the Real Properties are not so sold by auction or by private negotiation within fourteen (14) days after the said auction, then the Husband and the Wife shall do all such acts and sign all necessary documents and shall pay all moneys equally necessary to procure a second auction within a further five (5) weeks of that date otherwise upon the same terms and conditions as applied to the first auction.

3.On completion of the sales pursuant to Order 2 above, the proceeds of the sales shall be applied as follows:

(a)To pay all costs, commissions and expenses of the sales and to pay any Council and Water Rates and maintenance levies outstanding in respect of the Real Properties.

(b)To discharge the mortgage and any other encumbrances affecting the Real Properties.

(c)       The balance to the Husband.

4.        That pending completion of the sales:

(a)The Husband and Wife shall pay one half of all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the Real Properties as they fall due, after application of all rents received from the Real Properties.

(b)The parties hold their respective interests in the Real Properties upon trust pursuant to these Orders.

(c)Neither party shall encumber or further encumber the Real Properties without the consent in writing of the other party.

5.That within two calendar months of settlement of the sale of both the [M] and [R] Real Properties, the Wife shall pay a further sum of to the Husband calculated as follows:

$330,000 — (NSP — 40%) = Sum to be paid by Wife

Where NSP is the sale price of [M] and [R] Real Properties less amounts to be paid pursuant to Order 4(a) above, and also less amount to be paid to discharge mortgage and other encumbrances pursuant to Order 4(b) above.

6.        That unless otherwise specified in these Orders:

(a)Each party shall be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party at the date of the making of these Orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the Bank's record thereof, insurance policies are deemed to be in the possession of the party named as the life insured, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements and the chattels in the Real Property are deemed to be in the possession of the Wife.

(b)Each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.

7.That if either party refuses or neglects to sign, within fourteen (14) days of a written request to do so, any documents necessary to effect the terms of these Orders, a Registrar or such other officer or person as may be appointed by the Family Court of Australia is hereby appointed pursuant to the provisions of Section 106A of the Family Law Act to execute such documents on behalf of such party.”

I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore.

Associate: 

Date: