Lester & Lester
[2008] FMCAfam 1392
•23 December 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LESTER & LESTER | [2008] FMCAfam 1392 |
| FAMILY LAW – Property – comparison of contributions – assessment of section 75(2) factors – wife in new relationship. |
| 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 Pierce v Pierce (1999) FLC 92-844 Money and Money (1994) FLC 92-485 Bremner and Bremner (1995) FLC 92-560 Hayne and Hayne (1977) FLC 90-265 Patterson and Patterson (1979) FLC 90-705 |
| Applicant: | MS LESTER |
| Respondent: | MR LESTER |
| File Number: | HBC 1359 of 2007 |
| Judgment of: | McGuire FM |
| Hearing date: | 20 November 2008 |
| Date of Last Submission: | 20 November 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 23 December 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Smith |
| Solicitors for the Applicant: | PWB Lawyers |
| Counsel for the Respondent: | Ms Fowler |
| Solicitors for the Respondent: | Simmons Wolfhagen |
THE COURT ORDERS
That the property situate at Property J in Tasmania be sold on terms as agreed between the parties but failing agreement then:
(a)by private treaty;
(b)using an agent nominated by the President of the Real Estate Institute of Tasmania;
(c)on such terms and conditions as advised by the nominated agent.
That the proceeds of sale be applied as follows:
(a)to discharge the parties’ Viridian line of credit;
(b)to pay reasonable costs and disbursements on the sale;
(c)to pay the liability on the credit card in the joint names of the parties;
(d)to pay the liability on the wife’s credit card;
(e)to pay the husband’s outstanding taxation liabilities;
(f)to pay the wife’s outstanding taxation liabilities;
(g)to pay the wife’s Centrelink liability; and
(h)the balance to the parties to give effect to a 50/50 distribution of property excluding superannuation entitlements and pursuant to these orders.
That the parties divide the furniture and contents in the former matrimonial home equally as to approximate value by agreement and failing agreement then the furniture and contents be sold by public auction as soon as practicable with the net proceeds of sale to be divided equally between the parties.
That the husband retain for his own use and benefit the following: Mazda 626 motor vehicle, Holden Utility motor vehicle, Ford Falcon van motor vehicle and business tools.
That the wife retain the Toyota Camry motor vehicle for her own use and benefit.
Each party retain to the exclusion of the other all items of personalty or chattels in his or her possession or control.
Subject to these orders each party be solely responsible for and indemnify the other in respect of any and all liabilities incurred by that party since separation in either joint names or in that party’s name alone.
That there be no splitting or flagging orders in respect of either party’s superannuation entitlements and policies.
AND THE COURT DECLARES
That these orders are intended to finally determine the financial relationships between the parties with respect to Part VIII of the Act.
IT IS NOTED that publication of this judgment under the pseudonym Lester & Lester is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
HBC 1359 of 2007
| MS LESTER |
Applicant
And
| MR LESTER |
Respondent
REASONS FOR JUDGMENT
Application
This is an application for property settlement commenced by the wife in November 2007.
That application initially sought orders in respect of children. The parties wisely however have resolved those matters with the three children of the marriage living in a week-about arrangement between the parties.
Background
The parties commenced cohabitation in 1995. They were married in January 1997 and separated in July 2007.
There are three children of the marriage, being [X] born in 1997 (aged 11 years), [Y] born in 1999 (aged 9 years), and [Z] born in 2003 (aged 5 years).
The husband is a self-employed [tradesman]. The wife is employed in the retail industry.
The wife re-partnered only two weeks prior to the hearing to a Mr L.
Parties’ proposals
The wife in her amended application filed 19 November 2008 seeks an order for distribution of the tangible assets (excluding superannuation) as to 55% to her and 45% to the husband.
The husband seeks a 60% distribution of those tangible assets in his favour.
The husband’s superannuation entitlement is agreed at $133,880.00. The wife has an agreed entitlement of $80,312.00.
Neither party seeks a splitting order in respect of superannuation. The wife argues that the discrepancy of superannuation in the hands of the parties offsets any superior direct financial contribution of the husband. The wife argues that the husband’s direct financial contribution should still be given weight and that he did, in fact, enter the relationship with the sum of $70,000.00 in superannuation entitlements.
Issues
I understand the issues between the parties to be the following:
a)Whether a Centrelink liability of the wife in the sum of $8,000.00 should be included in the pool of property.
b)The weight to be attributed to the superior financial contributions of the husband.
c)The relevance of current income disparity between the parties.
d)The relevance of the wife’s cohabitation with her new partner.
e)The relevance of the disparity in superannuation entitlements of the parties.
The law
The Family Law Act 1975 (Cth) (“the Act”) at s.79(4) sets out the matters that the Court must take into account in considering proper orders to be made for the alteration of property interests. 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.
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.
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.
Assets and liabilities
The only issue in this regard is whether the wife’s Centrelink liability in the sum of $8,000.00 is to be included in the pool.
The wife’s evidence is that this liability was incurred as a result of her partnership with the husband in his [omitted] business. She says that she applied for and received Centrelink benefits after separation. Her evidence is that Centrelink then sought a refund once the husband’s taxation return disclosed a distribution of income to the wife. She says that she did not receive that income.
The husband says that the liability should not be included because no prior notice of it had been given and no documentary evidence provided. In cross-examination however, the husband did not deny the distribution of income under the partnership arrangement and the fact that no actual income was paid to the wife. That situation is corroborated by the 2007 Partnership Tax Return for Ms and Mr Lester, tendered in evidence.
I therefore accept the evidence of the wife that such a liability exists.
It is clearly a liability of the marriage given that the husband claimed
a taxation advantage through being able to distribute the income of the business but not actually making any payments to his business partner, the wife, in the relevant financial year.
There is a minor discrepancy in the estimated values of motor vehicles. It is clear that both parties have relied upon The Red Book values. The best evidence before me is the annexures to the husband’s affidavit filed 14 November 2008. I accept the husband’s estimates as to the values of the motor vehicles.
With the exception of the wife’s Centrelink debt as mentioned above, the parties agree the remaining liabilities. There is a difference in estimates as to the amount of the Viridian line of credit liability.
I assume that it is, in any event, a figure which varies from month to month and probably from day to day. The wife’s most recent sworn financial statement is silent as to that debt. The husband’s financial statement sworn as recently as 14 November 2008 states an amount of $4,212.00. I accept that evidence.
Consequently, the assets are as follows:
Property J property
$690,000.00
Husband’s furniture and home contents
$10,000.00
Husband’s Mazda 626
$28,150.00
Husband’s Holden Utility
$24,000.00
Husband’s Ford Falcon Van
$3,500.00
Wife’s Toyota Camry
$13,700.00
Husband’s business tools
$500.00
Total
$769,850.00
The superannuation entitlements of the parties are as follows:
Husband’s ING superannuation
$133,880.51
Wife’s PSS superannuation
$80,312.00
The liabilities of the parties are as follows:
Viridian line of credit (variable)
$4,212.00
Credit card (in joint names)
$8,249.00
Wife’s credit card
$1,571.00
Husband’s taxation liability
$8,431.00
Wife’s taxation liability
$8,431.00
Wife’s taxation liability (2008)
$3,551.00
Wife’s Centrelink liability
$8,000.00
Total
$42,445.00
The net value of the tangible assets is $727,405.00. Inclusive of superannuation the net property pool is $941,597.51.
Contributions
The husband entered the relationship with the following:
Equity in property at Property S
$64,000.00 E
Block of land at Property F
$30,000.00 E
Motor vehicle
$6,000.00 E
Furniture and contents
$2,000.00 E
Superannuation entitlements
$69,000.00 E
Total
$171,000.00 E
In about May 1996, at a very early stage of the relationship, the husband received a redundancy from the Commonwealth Government in the sum of approximately $30,000.00.
In 2002, the husband received an inheritance from his late father’s estate of approximately $33,000.00.
During the relationship the husband was the primary breadwinner. The wife took major responsibility for the parenting and homemaker roles.
Counsel for the husband argues for a further contribution by the husband in respect of the net sale proceeds of the property at
Property S. That property was sold in 2002. The net proceeds were approximately $120,000.00. As mentioned above, the husband’s equity in that property at the date of commencement of cohabitation in 1995 was approximately $64,000.00. The husband would claim the capital gain during cohabitation of about $56,000.00 to be a contribution by him.
Whilst it is true that the husband’s ownership of the property gave the impetus to the capital proceeds on sale, it must be remembered that this was a 12 year relationship. It was not in the category of a “short marriage”. The wife made direct financial contributions and indirect contributions to that property in which the parties lived for a substantial period of the marriage. Two of the parties’ three children were born during this period.
Early in the relationship the wife received $30,000.00 from a property settlement with her former husband. She contributed this amount, or a significant portion of it, towards the mortgage on the property at Property S.
The wife had superannuation entitlements of approximately $50,000.00 as at the date of commencement of cohabitation.
Since separation, and for a period of about 16 months, the husband has had sole occupation of the unencumbered former matrimonial home. He has had the benefit of the parties’ furniture and contents.
The husband has also had the benefit of the income from
the partnership business. Although he has worked the business, significantly he has also had the advantage of being able to “split”
the partnership income for taxation purposes by reason of his partnership with the wife. She has received no income. This is a contribution by the wife.
Despite the apparent disparity in the incomes of the parties and the arrangements for the children since separation, the husband has not paid child support to the wife.
In respect of the issue of contributions, counsel referred me to the well known decision of Pierce v Pierce[3]. That case, like the one before me, was concerned to a large part as to the weight to be attributed to initial contributions. The Full Court of the Family Court of Australia in Pierce said at [85,881]:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home.
[3] (1999) FLC 92-844.
I have regard to the husband’s greater initial financial contribution by way of his equity in the property at Property S and the block of land at Property F. I also have regard to the husband’s other financial contributions from his redundancy payment and his inheritance. I also have regard to the direct financial contribution of the wife from her property settlement. I consider the contributions of the parties during the relationship to be otherwise equal. I take into account the post-separation contributions which in my view favour the wife, noting the contribution to the partnership business together with the husband’s sole use and benefit of virtually all of the tangible assets of the marriage. I also note the duration of the relationship.
In the decision of Money and Money[4] his Honour Justice Fogarty, dissenting, said at [81,054]:
…an initial substantial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party.
[4] (1994) FLC 92-485.
A differently constituted Full Court of the Family Court of Australia in the later decision of Bremner and Bremner[5] agreed with the approach taken by Fogarty J in Money.
[5] (1995) FLC 92-560.
Further, the authorities are clear that an assessment of the contributions in respect of property matters does not require me to enter into an exercise of precise mathematical calculation. As his Honour Justice Pawley said in the well-known decision of Hayne and Hayne[6]
at [76,415]:In matters such as this one cannot approach the problem with an eye for meticulous detail. It should rather be dealt with broadly so that the end result can be said to be just and equitable.
[6] (1977) FLC 90-265.
Taking all these matters into account, I am of the view that should this matter be considered on contributions alone then it would be appropriate for there to be an adjustment of 5% of the total net value of assets in the husband’s favour.
However, in making a final order, I am also to consider the relevant matters under s.75(2) of the Act and an order that is just and equitable in all the circumstances.
Section 75(2) factors
The husband remains a self-employed [omitted]. The partnership return for 2007 discloses total business income of $174,515.00. This is of course a gross figure. He has the legitimate costs of running the business. Conversely, he receives some advantages to being self-employed.
The husband says that 2007 was an exceptional year for his income. His taxable income in that year was $52,000.00. Logically, however, his “real” income was much higher given his distribution for taxation purposes to his business partner, namely the wife. The evidence is clear, however, that no actual distribution was made to the wife.
His evidence is that his 2008 taxable income is $27,000.00 or again in real terms much higher as he has again not made any actual distributions to the wife.
The husband relied upon an affidavit of Dr S as to some arthritic and back ailments. The doctor was not available for cross-examination and I am not asked to rely on his affidavit as to any future incapacity for work. I find that the husband has a current and continuing capacity for his employment.
The husband suggested in his evidence that his income-earning capacity is limited to a degree by his obligations to care for the children. However, when pressed on this issue it seems that he is able to maximise his hours of work in the weeks that the children are with the wife and overall the children do not appear to inhibit his capacity for employment or self-employment.
The wife also has the care of the children in each second week. Like the husband, she maximises her work hours during the week in which she does not have the children. She detailed her attempts to obtain employment. She has previously worked as a nurse’s aid and in the hospitality and retail industries. She currently works in the retail industry.
The evidence is clear that the husband has a superior earning capacity to the wife.
The wife has re-partnered with a Mr L. That arrangement occurred only some two weeks prior to the hearing of this application. Mr L is a real estate agent with an income of $100,000.00 per annum.
Section 75(2)(m) obliges me to consider:
if either party is cohabiting with another person—the financial circumstances relating to the cohabitation.
The evidence as to the financial circumstances of the wife’s cohabitation with Mr L is scant. It is clear, however, that she will lose the benefit of her Centrelink income. Conversely, at the very least, the wife’s household will have the benefit of Mr L’s considerable income. The Court is entitled to take this potential into account.[7]
[7] Patterson and Patterson (1979) FLC 90-705.
A further factor for me to consider is the discrepancy in the parties’ superannuation entitlements. I stress that neither party seeks a splitting order. They are asking me only to deal with the tangible assets. I am of the view however that I must at law consider the superannuation entitlements as property in the hands of the respective parties. I must equally consider the issues of contributions and needs. The husband has a current entitlement of $129,000.00. The wife’s entitlement is $80,000.00. There is, consequently, a greater “resource” in the hands of the husband.
Further, it is clear that the husband by way of his greater earning capacity will be able to contribute to a larger degree in the future to his superannuation.
Considering all of the relevant factors under s.75(2), I am of the view that there should be an adjustment for these factors in favour of the wife of 5% of the tangible assets (excluding the superannuation).
Conclusion
Consequently, each party will receive 50% of the net value of the tangible assets excluding superannuation.
Whilst following the submissions of counsel for the parties in distributing only the tangible assets, I calculate that the orders would amount to 53.15% of all property to the husband and 46.85% to the wife if the superannuation entitlements are included in the pool of assets and each party retains their own superannuation entitlements.
Consequently, I am of the view that the overall result is a just and equitable one for the purposes of s.79(2) of the Act.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of McGuire FM
Associate: Ann Creek
Date: 23 December 2008
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