Lord and Lord and Anor

[2009] FamCA 476

FAMILY COURT OF AUSTRALIA

LORD & LORD AND ANOR [2009] FamCA 476

FAMILY LAW – PROPERTY SETTLEMENT – One party deceased

APPLICANT: Ms Lord

FIRST RESPONDENT:	D Lord as Executor of  the Estate of the late Mr Lord
INTERVENOR:	Ms Wu

FILE NUMBER: PAF 1917 of 2005

DATE DELIVERED: 27 April 2009

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Stevenson J

HEARING DATE: 17, 19 March 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Nash

SOLICITOR FOR THE APPLICANT: Hutchison Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr Thomas

SOLICITOR FOR THE RESPONDENT:	Lord & Partners
COUNSEL FOR THE INTERVENOR	Ms Friedlander
SOLICITOR FOR THE INTERVENOR:	Sayan & Associates

Orders

1. That the executor of the estate of the late MR LORD do all things and execute all documents required to effect the transfer to MS LORD of the two properties situate at and known as 29 and 37 R Street in the State of New South Wales.

2. That the executor of the estate of the late MR LORD pay to MS LORD a sum of $68,574, with such payment to be made within 2 (two) calendar months of the date of these orders.

3. That the application of the intervenor MS WU is dismissed.

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

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAF 1917 of 2005

MS LORD

Applicant

And

MR LORD

Respondent

MS WU

Intervenor

REASONS FOR JUDGMENT

THE PROCEEDINGS

1. These proceedings concern settlement of property between the applicant wife, Ms Lord (“the wife”), and the estate of the late Mr Lord (“the husband”). Mr D Lord, a brother of the deceased and executor of his estate, has been substituted as a party in the proceedings.

2. The wife’s sister, Ms Wu, intervened and alleged that she is owed $70,000 by the estate and the wife.  She claimed that she and the wife sold a property at H, of which they were joint owners, in 1998.  The whole of the sale proceeds were retained by the husband’s professional practice, known as Lord and Associates.  Further, Mrs Wu alleged that she loaned a sum of $15,000 to this practice in 1997.  Neither of these amounts has been repaid to her.

3. There were a number of other intervenors, all of whom are creditors of the wife.  She has borrowed large amounts of money since her separation from the husband.  I am required to determine only those aspects of the proceedings which involve the wife, the estate and Mrs Wu. 

Background

1. The wife was born in 1941 and is now 67 years old.  The husband was born in 1941 and died in May 2006.  Probate of his will was granted to Mr D Lord in February 2007. 

2. Neither  the husband nor the wife had any substantial assets when they married in April 1970.  The husband was a public servant and the wife worked as a clerk at the time of the marriage.

3. The husband and wife had two children, N and M, who are now aged 36 and 33 respectively.  After the parties separated on 14 April 2002, the wife spent three years overseas, mostly in Hong Kong.  In her absence, the husband obtained a dissolution of their marriage.  Apparently N and M assisted their father to obtain an order for substituted service of that application.

4. In 1970 the husband and wife purchased jointly their former matrimonial home at S for $21,000.  The purchase money came from joint savings, a mortgage advance and a loan of $6,000 from the wife’s uncle.  She repaid this loan by working in her uncle’s restaurant, outside of her normal hours of employment.  

5. In 1973 the husband and wife purchased an investment property at H for $15,000.  They borrowed $11,000 from a bank and the balance of the purchase price came from joint savings. 

6. Also in 1973 the husband purchased commercial premises in Sydney for $350,000.  He borrowed the whole of the purchase money from the Commonwealth Bank. 

7. In 1974 the husband and wife sold a 50% share in the H property to Mrs Wu.  As a result the wife and Mrs Wu became tenants-in-common with equal shares.

8. In 1974 the husband and wife purchased an investment property at T for $13,500.  They borrowed 90% of the purchase price and the balance came from joint savings.  They sold this property for $105,000 in 1984 and used the net proceeds to establish the professional practice known as Lord and Associates. 

9. In 1985 the husband purchased a property at 29 R Street for $170,000.  He paid a deposit of 10% and borrowed the balance of the purchase money.

10. In 1989 the wife purchased a property at 31 R Street for $186,000.  She paid a deposit of 10% and the balance of the purchase money came from a bank loan. 

11. In the early 1990’s the wife began to work as office manager in the husband’s professional practice.  She continued in this role until the separation in April 2002. 

12. In 1993 the husband purchased a property at 37 R Street for $124,950.  He borrowed $130,000 from friends to fund the purchase. 

13. In 1998 the wife and Mrs W sold the H property for $137,000.  Mrs Wu received no money from the proceeds of the sale.  It appears that the whole of the net proceeds were retained by the professional practice Lord and Associates.

14. In 2003 the husband sold a jointly-owned property at B for $344,950. … The wife claimed that she had no knowledge of this sale and signed no documents.  The husband received $17,247 and the wife no money from the proceeds of this sale.

15. In July 2004 the former matrimonial home at S was sold for $1,020,000.  Again, the wife claimed that she had no knowledge of this sale and executed no documents.  From the sale proceeds, $354,000 was paid to the Permanent Trustee Company to discharge the mortgage on the Sydney property.  The husband received $51,500 from the sale proceeds.  The balance was used to discharge mortgages held by the Commonwealth Bank on the former matrimonial home and R Street properties. The wife received no money from the sale of this property.

16. On 6 January 2005 a decree nisi of dissolution of the marriage of the husband and the wife became absolute.  On 8 January 2005 the husband married Ms K.  They have a son, W, who was born in April 2005 and is now four years old.

17. In December 2005 the wife mortgaged the property 31 R Street to the Federal Trustee of Victoria Pty Limited.  She failed to make the repayments, so the mortgagee exercised its power of sale.  The property was sold for $525,000 in September 2008.

18. A contract for the sale of this property had earlier been exchanged for a price of $575,000.  The proposed purchasers failed to proceed to settlement and forfeited their deposit.  The wife thus received a total of $553,750 from the sale of this property.

19. The husband had a superannuation benefit of $981,696 at the time of his death.  This money never formed part of his estate.  The Trustee elected to pay the whole of the funds to Mrs K.  On 3 December 2007 she executed a deed, by which she divided the superannuation money equally between herself and the two daughters of the husband and the wife.

20. It was agreed that the estate has advanced $68,000 to Mrs K.  The last such payment was made to her by the executor on 25 January 2008.

Approach to these Proceedings

1. Section 79(8) provides that, where a party dies before proceedings for property settlement are completed, the litigation may be continued by or against the legal personal representative of the deceased person.  The court may make such order as it considers appropriate, provided that it is of the opinion:

   ·    that it would have made an order for property settlement if the deceased party had not died and

   ·    that it is still appropriate to make an order with respect to property

   (section 79(8)(b)(i) and (ii)).

   It is sufficient that the court would have made some order as to property settlement.  It is not necessary to identify the precise order which would have been made:  see, for example, In the Marriage of North [1987] 11 FamLR 735.

2. The court then adopts the following approach, if persuaded that the requirements of section 79(8)(b)(i) and (ii) are satisfied:

   ·    firstly, the assets, liabilities and financial resources of the surviving spouse and the estate are determined

   ·    secondly, the contributions, within the meaning of paragraphs (a) to (c) of section 79(4), are identified and weighed against each other

   ·    thirdly, the factors in paragraphs (d) to (g) of section 79(4) must be considered

   ·    finally, an order under section 79 must not be made unless the court is satisfied that, in all of the circumstances, it is just and equitable to do so.

3. I am satisfied that an order for property settlement would have been made if the husband had not died.  It is not necessary that I identify precisely what order would have been made.

4. The marriage was of approximately 36 years duration, during which period the husband and the wife made various contributions.  After the separation the husband sold two real properties and retained the whole of the proceeds for his own benefit.  He owned the most valuable piece of real estate, the Sydney property, which was unencumbered and worth $697,500.  He had a superannuation benefit valued at almost $1million.  There thus was a very substantial imbalance in the financial positions of the husband and the wife.  These considerations comfortably satisfy me that an order for property settlement would have been made, if the husband had not died.

5. I am also satisfied that it is still appropriate to make an order with respect to property.  It was conceded on behalf of the estate that there should be a payment to the wife, with the submission being that the net assets be divided equally. 

The Assets

1. It was agreed that the list of assets should include the following:

1.	Sydney property (Estate)	$697,500
2.	29 R Street (Estate)	$575,000
3.	37 R Street (Wife)	$295,000
4.	Proceeds of sale of 31 R Street (Wife)	$553,750
5.	Proceeds of sale of S property retained by husband (Estate)	$51,500
6.	Proceeds of sale of B property retained by husband (Estate)	$17,247
7.	1/7th interest in Q property net of GST (Estate)	$34,139
8.	Proceeds of sale of shares (Estate)	$11,912
9.	Dividends paid on shares (Estate)	$3,730
10.	Rental income from Sydney property (Estate)	$99,569
11.	Rental income from 29 R Street (Estate)	$18,736
12.	Rental income from Q property (Estate)	$2,000
13.	Motor vehicles (Estate)	$36,000

1. The Executor conceded that the estate currently possesses or has had the benefit of the following assets:

1.	Illawarra Credit Union account	$11,144
2.	AMP Super	$5,562
3.	Refund on credit card	$468
4.	Office of State Revenue (unclaimed money)	$152
5.	Taxation refund	$39,528
6.	Leave entitlements	$88,791
7.	Royalty payment	$697

1. It was submitted that the wife could have made no contributions to these items, all of which were acquired by the husband after the separation, thus they should be excluded from the list of assets.  I accept this submission.  The result is that these assets will not be included in the pool of property. 

2. In my view the amount of $68,000 paid to Mrs K from the estate falls into a different category.  There was no evidence as to the source of these funds, thus there is a real prospect of unfairness to the wife if this money is treated as after-acquired property.  I will thus add back to the list of assets an amount of $68,000. 

3. Accordingly, I find the assets to be as follows:

1.	Sydney property (Estate)	$697,500
2.	29 R Street (Estate)	$575,000
3.	37 R Street (Wife)	$295,000
4.	Proceeds of sale of 31 R Street (Wife)	$553,750
5.	Proceeds of sale of S property retained by husband (Estate)	$51,500
6.	Proceeds of sale of B property retained by husband (Estate)	$17,247
7.	1/7th interest in Q property net of GST (Estate)	$34,139
8.	Proceeds of sale of shares (Estate)	$11,912
9.	Dividends paid on shares (Estate)	$3,730
10.	Rental income from Sydney property (Estate)	$99,569
11.	Rental income from 29 R Street (Estate)	$18,736
12.	Rental income from Q property	$2,000
13.	Motor vehicles (Estate)	$36,000
14.	Money paid to Mrs K from the estate (Estate)	$68,000
$2,464,083

The Liabilities

1. The wife has incurred substantial liabilities since the separation.  Properly, she did not seek to include these debts for the purposes of determining the value of the net pool of property.  None of these liabilities had any connection whatsoever with the husband.  These debts comprise borrowings which she has made for scantily described international business transactions. 

2. Most of the liabilities which the executor sought to include were disputed by the wife. The executor disputed the debt allegedly owed by the estate to Mrs Wu.

3. The executor claimed that the estate paid a total of $129,857 for “outgoings” on the Sydney and R Street properties.  He annexed to his affidavit a detailed breakdown of these expenses, which consisted almost entirely of rates, strata levies and BAS payments.  If the income generated by these properties is treated as an asset, it seems proper for these liabilities to be taken into account.  Appropriately, the asset then would be the net rental income generated by these properties.  The balance sheet handed up in final submissions on behalf of the wife indicates that she made a concession to this effect.  I will thus include an amount of $129,857 as a liability.

4. The executor claimed as a liability professional fees of $26,396 due to Lord & Partners (a legal firm in which he is a principal) in relation to the grant of probate.  It seems to me that this debt can legitimately be taken into account.  The grant of probate was a necessary step in the finalisation of the proceedings for settlement of property.

5. I take a similar view in relation to fees paid by the executor to an accounting firm known as P Accountants.  The administration of the estate would inevitably require the input of an accountant.  I will treat as a liability the amount of $4,576 paid to this firm by the executor. 

6. The taxation debt of $11,962 presumably was that of the husband and related to an unknown period.  I will not include in the balance sheet a liability about which I have so little information.

7. The executor claimed as a liability a sum of $2,000 owed or paid to L & Partners in respect of “sale of [R Street] properties”.  The wife said, and I accept, that she gave no instructions in relation to the sale of these properties.  The only property in R Street which has been sold is 31 R Street, following the wife’s default on the mortgage. I consider it inappropriate to include as a liability any legal fees incurred by the husband in relation to a proposed sale of these properties, without the wife’s knowledge or consent. 

8. The remaining liabilities asserted by the executor, being an American Express credit card debt of $1,099 and the sum of $27 owing to Vodafone, are clearly post-separation personal debts of the husband.  These liabilities will not be included in the calculation of the value of the net pool of property.

9. Evidence as to the capital gains tax payable on the sale of the remaining real estate was given by Mr L, who is a chartered accountant.  He estimated that the following tax would be payable:

1.	Sydney property	$83,119
2.	37 R Street	$39,516
3.	29 R Street	$101,138

1. Mr D Lord, who is a solicitor, gave evidence that capital gains tax would be payable by the wife if the properties at 29 and 37 R Street are transferred to her.  Obviously, capital gains tax will be incurred if the Sydney property is sold.  It thus seems to me that capital gains tax should be included as a liability.

2. The remaining contested liability was the alleged debt of $70,000 to Mrs Wu. Her claim was made in reliance on section 90AE of the Family Law Act.  Inter alia, the court must be satisfied that it is just and equitable for an order to be made pursuant to that section.

3. On behalf of the executor it was submitted that Mrs Wu’s claim is statute barred, having arisen more than six years ago.  It was emphasised that she made no claim against the estate and that she only decided to seek payment of $70,000 in these proceedings, after the wife prompted her to do so in May 2008.

4. In my view, the substantial delay by Mrs Wu is a relevant consideration in assessing whether an order in her favour would be just and equitable.  It is not my view that her claim is statute barred, as it arises pursuant to the Family Law Act and section 90AE imposes no time limits.

5. Mrs Wu allowed approximately eleven years to elapse before she took any legal action to recover her share of the proceeds of sale of the H property or the $15,000 which she claimed to have advanced to Lord and Associates.  Her only explanation for this delay was that she “repeatedly” asked her sister for this money.

6. In cross-examination Mrs Wu said:  “[the wife] told me last year that I had a claim for the [H] property against [the husband’s] estate”.  She also said that she was with the husband, at a hospital, when he died.  It thus seems to me that Mrs Wu may never have made her claim, if the wife had not prompted her to do so. I was left with the impression that Mrs Wu’s claim was actually an augmentation of the wife’s application for property settlement.

7. For these reasons, I am not satisfied that an order in favour of Mrs Wu would be just and equitable for the purposes of section 90AE. Her application will thus be dismissed and no debt to Mrs Wu will be included as a liability.

8. I thus find the liabilities to be as follows:

1.	Outgoings paid by the estate on the Sydney and R Street properties	$129,857
2.	Legal fees in respect of the grant of probate	$26,395
3.	Accountancy fees incurred in the administration of the estate	$4,576
4.	Capital gains tax on the Sydney property	$83,119
5.	Capital gains tax on 37 R Street	$39,536
6.	Capital gains tax on 29 R Street	$101,138
Total:	$384,621

Financial Resources

1. There are no financial resources.

Contribution

1. It was agreed that contributions should be found to be equal.  I was grateful for this agreement and reached the same conclusion, after having heard all of the evidence and submissions.  I thus find that the contributions made by the husband and the wife were equal.

Section 75(2) Factors

1. The wife sought an adjustment of 30% in her favour on account of section 75(2) factors.  The submission on behalf of the executor was that there should be no adjustment in favour of the wife.  If it is found that some adjustment is warranted, the executor maintained that the maximum should be 5%.

2. I have carefully considered all of the factors set out in section 75(2).  It can be assumed that I am of the view that any factor to which there is no reference is irrelevant to these proceedings.

   Section 75(2)(a): the age and state of health of each of the parties;

3. The wife is 67 years old and has suffered from cancer in the past.  There was no expert evidence as to her current state of health.

   Section 75(2)(b): the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;

4. The wife has very substantial debts which may total in excess of $1,000,000.  She took out a number of loans after the separation, in an attempt to establish international businesses in trading and brokerage. 

5. The wife’s income, and in fact her overall financial position, remained unclear at the conclusion of the hearing.  It was my view that her evidence as to her financial position was incomplete and unsatisfactory.  For example she claimed to have no bank accounts whatsoever, yet she said that she travels overseas for purposes of her business.  Further, she has remitted money to one Mr E in Nigeria pursuant to some unspecified business arrangement which allegedly did not involve a contract. 

1. I was at a loss to understand how the wife could conduct businesses, travel internationally and borrow funds from financial institutions without a bank account.  It was my impression that she chose not to reveal information about the operation of her businesses and her income.  It defies reason and logic that she has ‘nil’ income, as she swore in her Financial Statement dated 16 March 2009.

   Section 75(2)(d): commitments of each of the parties that are necessary to enable the party to support:

   (i)       himself or herself; and

   (ii)a child or another person that the party has a duty to maintain;

2. For the same reasons, it was impossible to discern what commitments the wife has to support herself.  She claimed to have “no fixed address” and she set out no recurrent expenses in her Financial Statement.

   Section 75(2)(o):       any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;

3. It was submitted on behalf of the wife that a relevant factor in her favour is that the husband’s superannuation, amounting to almost $1,000,000, did not vest in the estate and she is thus unable to take any share in this money.  The husband’s death meant that the superannuation fund vested and could not be made the subject of a splitting order pursuant to Part VIIB.  A sum of approximately $1million thus became beyond the court’s jurisdiction.

Conclusion As To Section 75(2) Factors

1. In my opinion an adjustment in favour of the wife, on account of section 75(2) factors, is warranted.  She is 67 years old and has suffered from health problems in the past.  On any reasonable view, her future financial prospects are bleak.  She has no superannuation and her age must mean that her future working life will be of very limited duration.

2. I take into account the fact that the death of the husband, prior to the conclusion of the proceedings, resulted in his superannuation being insulated from a splitting order in favour of the wife.  The length of the marriage and the ages of the husband and the wife mean that a splitting order would have been a real prospect. 

3. These considerations lead me to the conclusion that an adjustment of 15% in favour of the wife is warranted.  I have had regard to these matters, and not to her self-generated post-separation substantial debt, in making this finding.

Result

1. The result is that I find that the net pool of property should be divided in the ratio of 65% to the wife and 35% to the estate.  I have found that the assets have a total value of $2,464,083 and the liabilities amount to $384,621.  The net pool of property thus has a value of $2,079,462.

2. The wife sought a transfer to her of the properties at 29 and 37 R Street.  No argument was advanced by the executor against this proposal.  I can think of no basis for refusing this application.  I will thus order that the executor transfer these two properties to the wife.

3. 65% of $2,079,462 equals $1,351,650 and 35% equals $727,812.  The wife has received $553,750 and will take the two R Street properties, which means that she will hold assets with a gross value of $1,423,750.  She will assume a capital gains tax liability of $140,674 in respect of the properties in R Street, which leaves her with net assets valued at $1,283,076.  This sum falls $68,574 short of her entitlement.

4. The estate will hold assets to the value of $1,040,333 and take liabilities totalling $243,947, which equates to net property worth $796,386.  This sum exceeds the estate’s entitlement by $68,574.

5. It is thus necessary for the estate to pay to the wife an amount of $68,574 to bring about a division of the net assets in a 65%/35% ratio.  I will allow the estate two calendar months to make this payment.

6. This outcome creates a differential of $486,690 in favour of the wife.  At first glance, this discrepancy may seem to be overly large.  The fact is, however, that the wife has substantial future needs even without taking into account her level of debt.  I have not lost sight of the unsatisfactory state of her evidence as to her financial position.  The inescapable reality, however, is that the estate has no future needs.  For these reasons, I regard this result as just and equitable.

I certify that the preceding sixty nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson

Associate:                 

Date:              27 April 2009