Large v Mowbray
[2012] NSWSC 767
•04 July 2012
Supreme Court
New South Wales
Medium Neutral Citation: Large v Mowbray [2012] NSWSC 767 Hearing dates: 2 and 4 July 2012 Decision date: 04 July 2012 Jurisdiction: Equity Division Before: Stevenson J Decision: The money in the controlled account be divided 60 per cent to the plaintiff and 40 per cent to the defendant.
Catchwords: FAMILY LAW - de facto relationships - adjustment of property interests - relevant property - inheritance - superannuation entitlements - just and equitable order - Property (Relationships) Act 1984 s 20 Legislation Cited: Property (Relationships) Act 1984 Cases Cited: Chanter v Catts (2005) 64 NSWLR 360
Farnell v Farnell (1996) 20 Fam LR 513
Hodgson v Grebert [2010] NSWSC 223
Jones v Grech (2001) 27 Fam LR 711
Lipman v Lipman (1989) 13 Fam LR 1
Mayne v Mayne (2011) 46 Fam LR 197
Sharpless v McKibbin [2007] NSWSC 1498Category: Principal judgment Parties: Deanne Large (plaintiff)
Daryl Mowbray (defendant)Representation: Counsel:
M G Y Wong (plaintiff)
D R Alexander (defendant)
Solicitors:
Rita Thakur & Associates (plaintiff)
Verekers Lawyers Wollongong (defendant)
File Number(s): SC 2011/262199
Judgment - EX TEMPORE
This is an application for a property adjustment order pursuant to s 20 of the Property (Relationships) Act 1984 ("the Act"), which provides: -
"20 Application for adjustment
(1) On an application by a party to a domestic relationship for an order under this Part to adjust interests with respect to the property of the parties to the relationship or either of them, a court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to:
(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and
(b) the contributions, including any contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:
(i) a child of the parties,
(ii) a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.
(2) A court may make an order under subsection (1) in respect of property whether or not it has declared the title or rights of a party to a domestic relationship in respect of the property."
For convenience, and without intending any disrespect, I shall refer to the parties by their given names.
The plaintiff, Deanne Large ("Deanne"), and the defendant, Daryl Mowbray ("Daryl") were in a "domestic relationship" as that term is defined in s 5 of the Act, from September 1982 until January 2009. It is common ground this was a "de facto relationship" within the meaning of s 4 of the Act.
Deanne was born in June 1964 and is now 48. She was 18 when the relationship commenced. Daryl was born in February 1958 and is now 54. He was 24 when the relationship commenced.
There are two children of the relationship. Curtis was born in February 2001 and is now 11. Smith was born in May 2005 and is now seven.
Deanne commenced proceedings several months outside the two-year period referred to in s 18 of the Act. It is common ground Deanne should be given leave to bring these proceedings pursuant to s 18(2) of the Act. I propose to make an order granting that leave.
The exercise of jurisdiction under s 20 of the Act involves three steps: -
(1) identification and valuation of the property of the parties;
(2) identification and valuation of the respective contributions of the parties; and
(3) determination of what, if any, order is just and equitable having regard to these contributions.
(See Chanter v Catts (2005) 64 NSWLR 360 per Hodgson JA at [22]; Lipman v Lipman (1989) 13 Fam LR 1 at page 18; Jones v Grech (2001) 27 Fam LR 711 at [29]).
I will consider those three steps in turn.
Identification and valuation of the property of the parties
There is substantial agreement about the asset pool. The parties have reached agreement as to how motor vehicles, household contents and personal possessions should be divided.
It is common ground that Daryl has a share portfolio worth $155,580.92 that is to be divided equally between the parties.
Daryl has an accrued capital gains tax liability arising from a recent sale of a part of that portfolio of $2,809.55.
Superannuation
Daryl has an interest in a superannuation fund. On 30 June 2009 (five months after the parties separated) the value of Daryl's interest in that fund was $163,731.02. The current value of the fund is $216,368.09.
The reason for the increase in the value of the fund between 2009 and now, appears to be because of the making of employer contributions in the sum of something in the order of $15,000 and because of capital growth of the fund, income and distributions made to the fund arising from, I infer, investments in the fund.
Daryl will have access to the fund on turning 60 (that is, in six years time).
Money in Controlled Money Account
The other asset of the parties is constituted by funds in a controlled money account at a firm of solicitors. The amount in that account is $994,887.33. The fund represents the net proceeds of sale of a jointly owned property at Kiama Downs ("the Kiama Downs Property"). The parties were living in that property at the time of their separation. I will refer to it further below.
The controversy between the parties is as to how that fund should be divided. Deanne claims an entitlement to 75 per cent of the fund; Daryl claims an entitlement to 60 per cent of the fund.
Liability to Kieran Mowbray
It is common ground that the parties are liable to account to Daryl's niece, Kieran Mowbray ("Kieran"), for an amount of $16,654.19 withdrawn by the parties from a trust account in which Daryl held in trust for Kieran. The funds were withdrawn on or about 6 February 2002. The funds then in that account represented an amount of $10,000 left to Kieran by Daryl's late mother, together with growth on that fund.
Kieran is now 21. To this day she does not know of the fund. According to Daryl, her parents (Daryl's brother and sister-in-law) know of the fund. As Kieran is now 21 and is, I am told, a legally capable person, she is entitled to the fund, and to interest on it.
Daryl is equivocal as to precisely when he proposes to tell Kieran about this fund. Daryl suggests he might do so by the time Kieran is 25. For present purposes, the point is that Deanne and Daryl must account to Kieran for the money - in my opinion, immediately.
Daryl calculates the total due, with interest compounded at five per cent, is $27,677.70. A final calculation of what is due to Kieran could not be made without giving her an opportunity to make a submission about that matter. I find the amount due by the parties to Kieran is no less than the figure I have mentioned, and that sum, at least, is a joint liability of the parties to Kieran.
Paid Legal Costs
It is common ground both parties have used some funds from the relevant pool of assets to pay legal fees. My attention is drawn to the decision of the Family Court in Farnell v Farnell (1996) 20 Fam LR 513 in this regard. It is common ground the net figure, $3,823, should be treated as "add back" by Daryl.
Add Back - Separation Expenditure by Daryl - Premature Distribution of Assets?
Daryl has given evidence that, since the parties separated in January 2009, he has spent funds in relation to home repayments for the Kiama Downs Property, various expenses described by him as "bills/utilities" said to have been paid on behalf of Deanne and expenses for the children, child care expenses and expenses in relation to the repair of the Kiama Downs Property when listed for sale, and rent that Daryl has paid.
Daryl has also given evidence of time he has spent, since separation, attending to affairs at the Kiama Downs Property.
In his evidence Daryl did not address the question of the source of funds for that expenditure.
During cross-examination it emerged that Daryl had sold, since separation, some shares in his name (purchased before separation) and had made various withdrawals from bank accounts which represent part of the asset pool. Mr Wong, who appeared for Deanne, submitted that I should take into account those matters when considering the significance of Daryl's evidence concerning post-separation expenditure.
The principles relevant to "add backs" were considered recently by the Full Court of the Family Court of Australia in Mayne v Mayne (2011) 46 Fam LR 197 at [73], [75] and [79] as follows: -
"[73] Parties to proceedings about the division of property before the Family court (and the Federal Magistrates court) frequently urge the court to add-back assets or funds that have been applied by one party or another for allegedly his or her own purposes after separation. The rationale is that one party should not benefit from a premature distribution of the assets. An obvious example is withdrawing and using money from a bank account either joint or owned by one of the parties. It is also the case that the parties may decrease the pool by increasing liabilities. The issue in such cases is whether the liability should be a joint liability or a liability only of the party who created it.
...
[75] If the former is the case this has generally found to be a pre-emptive unilateral division of property. If the latter is the case then the principles enunciated in Marker v Marker and NHC v RCH apply. If the money was, or part of the money, was used to meet reasonable living expenses then that money, or that part of the money, is not 'added-back' or regarded as a pre-emptive distribution.
...
[79] It is not the court's function to conduct an audit of the marriage or of the relationship finances. The parties' remedies for resolving disputes about expenditure while they are together are centred on them and them alone. Choosing one transaction from many prior to separation for different treatments, specifically 'to be added-back' or notionally included in the pool of property may make doing justice and equity between the parties difficult."
Had the evidence established that Daryl had made a "premature distribution" of jointly held assets to himself, the principles referred to in Mayne v Mayne would establish the proposition that moneys so distributed could be "added back" into the notional pool of assets to be considered by the Court under s 20 of the Act.
However, there was no suggestion made to Daryl in cross-examination, nor was there any evidence, that he had used any of the proceeds of sale of shares or funds withdrawn from the account for private purposes or that he has secreted funds so dealt with. That is, there is no evidence that Darryl has made any "premature distribution" of joint assets to himself.
Mr Wong drew attention to the fact that Daryl had not, in his affidavit evidence, given an explanation as to how he had funded the post-separation expenditure to which he referred. There is also a suggestion in the evidence Daryl may have been less than completely forthcoming in disclosing documentation in relation to that matter. However, I am not satisfied that Daryl intended to deceive the Court about what use he had made of the funds.
The material available to me does not enable me to make a precise finding as to how much of the funds, represented by the proceeds of these shares or withdrawals from the accounts, were used to meet the post-separation expenditure referred to.
Mr Wong submitted the proper course for the court to adopt is either to add back the amount the cross-examination revealed had been utilised by Daryl in the way I have described, or to treat Daryl's post-separation financial contribution as being negligible.
The best I can do is to conclude that to a large extent Daryl has used these funds for the post-separation expenditure.
Identification and valuation of the respective contributions of the parties
Deanne and Daryl lived together, as if man and wife, for over 26 years. Neither party suggests that the other did not, throughout the period of their cohabitation, contribute all they could to the relationship as a partner, financial contributor, and as carers for their two children.
At one point during the cross-examination Deanne said of Daryl (albeit in the context of his role in maintaining a property) "he did what he could". It seems to me this is a fair description of the contribution made by both parties to their joint endeavours for the period of their relationship. They each "did what they could".
Work History
When the relationship commenced, Deanne was working as a clerk with the Valuer-General. Shortly thereafter she established and conducted a retail clothing business called "DeZines". Deanne borrowed $40,000 from the Commonwealth Bank of Australia to start that business. She maintained a come-and-go facility with the bank in that amount throughout the life of the business.
Deanne operated the business from a number of retail locations in Wollongong and drew between $500 and $1,500 per week from the business. That money was used for joint purposes.
Deanne sold the business in 2002 (when Curtis was a babe in arms) for $60,000. Some $40,000 of that amount was used to retire the debt to the bank. The balance was used for joint purposes.
Thereafter, Deanne has, with, I have inferred, Daryl's agreement, devoted herself to the care of the children and the home.
Daryl is an electrician and he worked in the mining industry from the commencement of the relationship until 2004. Between 1982 and 2004 Daryl's salary was used for the joint purposes of the parties.
In 2004 Daryl was retrenched and received a retrenchment payout of $100,000. He was only able to obtain casual work between his retrenchment and December 2009 (some 10 months after the parties' separation). He then obtained full-time casual work as an electrician. He remains in that employment at present.
Although there is some dispute between the parties as to the details of these matters, some of which dispute was explored in cross-examination, there is no doubt, in my opinion, they both worked as hard as they could, both earning money. They invested that money in property. They both contributed all of the fruits of their endeavours to the joint relationship.
Property Acquisition
Both parties brought a modest property holding into the relationship in 1982. Deanne owned a property at Sussex Inlet; Daryl owned a property at Fig Tree. There is a minor difference between the then value of the Sussex Inlet property and the value of Daryl's then equity in the Fig Tree property. However, at this remove, over a quarter of a century later, I do not think that difference is of any great significance.
Thereafter the parties purchased and sold investment properties in the Wollongong area, as well as the Kiama Downs Property to which I have referred.
When the parties purchased the Kiama Downs Property, in 2001, there was a cottage on it. The cottage was pulled down and a new home built. The parties lived there, with their children, from around May 2005 until January 2009. Deanne and the children remained at the Kiama Downs Property for some time after separation.
In December 2010 the Kiama Downs Property was sold and its net proceeds paid into the controlled money account to which I have referred.
Deanne (and the children) and Daryl are now living in rented accommodation.
Again, there is some dispute between the parties as to the precise role played by each in the identification, improvement and management of these properties and their purchases and sale. However, the substance of the matter, it seems to me, is that both parties worked hard to accumulate properties for their mutual benefit and for that of their children. I do not think it is necessary for me to deal with, let alone resolve, the relatively minor disputes that emerged in the evidence concerning those levels of contribution.
Children
So far as the children are concerned, again, there was some dispute between the parties as to the role they have played and the contribution they have made in the lives of their children.
However, there is nothing in the evidence that causes me to have any doubt about the commitment of both Deanne and Daryl to the children. Nor do I doubt they have both done all they could, both as parents and financially, to promote the children's welfare. At present the children live full time with Deanne. They stay overnight with Daryl on three nights per fortnight.
"Special contributions"
On Daryl's behalf it is said he has made "special contributions" of a financial nature to the relationship as follows: -
(1) the parties lived at his mother's home rent-free for 12 months in 1996;
(2) Daryl received an inheritance from his Uncle Keith in 1990 of about $1,500;
(3) Daryl received about $5,000 as a gift from his mother in 1994-1995;
(4) Daryl received a retrenchment payment of $100,000 in 2004;
(5) Daryl worked as an owner builder on the Figtree Property;
(6) in October and November 1997, Daryl inherited about $73,458.63 following the death of his mother;
(7) Daryl worked and supervised work on the Kiama Downs Property; and
(8) in July and October 2005 and October 2006 Daryl inherited about $75,647 from his Uncle Ross.
Rent-free Accommodation
There is no dispute that in 1996 the parties lived in Daryl's mother's home rent-free for 12 months. I accept that is a factor which weighs - albeit, in my opinion slightly - in the balance.
Retrenchment Fund
So far as concerns the retrenchment fund, those funds were no doubt intended to compensate Daryl for the termination of his employment in 2004. He remained, effectively, unemployed until around 2009. I would infer the retrenchment funds were used, as they were doubtless intended, to help make ends meet during that period. Mr Alexander ultimately accepted in argument that I would not pay particular regard to this matter.
Work as Owner Builder
So far as Daryl's work as an "owner builder" is concerned, the evidence establishes, in my opinion, that both parties performed work on the various properties that were purchased from time to time.
It may well be that because of his trade skills and availability, especially after the children were born; Daryl spent more time on this work than did Deanne. However, there is no suggestion in the evidence that Deanne was idle during these periods. In any event she necessarily played a significant role in the care of the children.
Inheritances
In about 1990, Daryl inherited approximately $1,500 from his Uncle Keith. In around 1995, Daryl inherited $73,458.63 from his mother.
In around 2005 he inherited a further sum from his Uncle Ross in the sum of $75,647. This money was used for the mutual benefit of the parties.
In regard to the question of inheritance, Brereton J said in Sharpless v McKibbin [2007] NSWSC 1498 at [85]: -
"Thus, while there are significant differences between the adjustive property jurisdiction in the United Kingdom, that under the (Cth) Family Law Act and that under the Property (Relationships) Act, there is universal recognition in the contribution-based systems of the prima facie claim of a party who introduces an asset to retain it, but also that the significance of such a contribution is diminished over time by the other relevant contributions. Ultimately, it is a question of weighing the initial contribution with all other relevant contributions to achieve a just and equitable result, the nature and the source of the property and the manner in which it has been used during the relationship being material considerations. This will typically involve one party being regarded as having contributed to the improvement or conservation of an asset introduced initially by the other, but in a lesser proportion than the first party's overall contributions to the relationship: as Macready AsJ has suggested, speaking extra-judicially at the 2006 Supreme Court Conference, usually it is neither appropriate that any increment in value of an asset introduced exclusively by one party be equally shared between the parties, nor that it be wholly attributed to the party who introduced it; the answer will usually lie somewhere between."
Further, in Hodgson v Grebert [2010] NSWSC 223, Slattery J said at [82] (citations omitted): -
"Stated simply, the idea is that the original contributions should not be carried forward as a mathematical proportion but ultimately when it comes to the trial such initial contributions, are one of the number of factors to be considered. The longer the marriage or relationship, the more likely it is there will be later factors of significance and in the ultimate, the exercise is to weigh the original contributions with all other later factors. And those later factors whether equal or not may in the circumstances in the individual case reduce the significance of the original contribution".
I accept that the receipt of these inheritances can be regarded as "one-off" contributions by Daryl to the relationship. However those contributions must be seen in light of all the contributions, both financial and non-financial, made by the parties over the term of their lengthy relationship. Further, the inheritance from Daryl's mother was received some 14 years before the relationship ceased, and was used by both Daryl and Deanne in their joint endeavours. Indeed both inheritances were used by the parties to purchase and improve property, and generally for living expenses.
Superannuation
I also take into account that Daryl will, when he turns 60, be entitled to access his superannuation. As I have said, the current value of that superannuation is $216,368.09. Deanne, on the other hand, has no superannuation entitlements to look forward to.
It is now well established that superannuation entitlements should be included in the asset pool of the parties for the purposes of s 20 of the Act. They can be taken into account to determine what order is just and equitable, whether or not the other party, in this case Deanne, made a direct or indirect contribution to the accumulation of that superannuation, per Hodgson JA, Chanter v Catts at [23].
The relationship between the parties has subsisted during most (if not all) of the time during which Daryl's superannuation entitlements accrued. They represent a benefit he will obtain in the reasonably near future.
What order is just and equitable?
As I have indicated the parties have reached agreement as to the distribution between them of motor vehicles, household and personal effects, and the share portfolio in Daryl's name.
From the funds in the controlled money account there should first be paid to Kieran her entitlement. The quantum of that entitlement cannot properly be fixed without notification by the parties to Kieran of her entitlement. It is no less than $27,677.70.
It is not possible for the Court to arrive at a mathematically precise way of dividing the asset that the parties have accumulated; that is, in this case the money in the controlled money account.
It seems to me the parties have made, in substance, an equal contribution to the accumulation of that asset. I appreciate if one were to do a financial audit of the dollar contribution made by the parties, the figure contributed by Daryl would be higher than that contributed by Deanne. However, it seems to me that such an approach overlooks the reality of the matter, which, as I have tried to emphasise in this judgment, is that over a long relationship the parties have contributed equally, in dollars' worth and otherwise, to what is now to be divided between them.
A matter which I find of particular importance is that one of the contributions Deanne made to the relationship is that, in the course of the relationship, and at the time she sold her business (when Curtis was around one) she decided to "devote myself to caring for Curtis, and later Smith as well".
There is no suggestion that Daryl's did not wholeheartedly agree that Deanne should make this contribution to the relationship.
It seems to me, in exercising my discretion under s 20 of the Act, I am entitled to take into account that contribution and its effects.
Deanne is now 48. She is caring for children who are aged seven and 11. It seems likely that Deanne will continue to be the primary carer of the children for a number of years to come. There was no contrary suggestion in the evidence. The result of that will be, if and when she decides to go back into the work force, that she will be in her fifties. Not only that, she has no superannuation entitlements. It seems to me that justice of this case requires I take that into account.
I do so, and doing the best I can to balance all of the factors I have set out in this case, my opinion is the appropriate order to make is to divide the money in the controlled account 60 per cent to Deanne and 40 per cent to Daryl.
I propose now to stand the matter over to a date convenient to counsel so short minutes can be brought in to give effect to those reasons and so I can hear any submissions as to costs.
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Decision last updated: 06 July 2012
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