M and M - [2002] FMCAfam 84

FEDERAL MAGISTRATES COURT OF AUSTRALIA

M & M

[2002] FMCAfam 84

FAMILY LAW – Alteration of property interests – relevant matters – short marriage – relevance of superannuation benefit in assessing financial resources of the parties – capacity of wife to earn income affected by medical condition following circumstances of separation.

Family Law Act 1975, ss 75(2), 79

Applicant:

K J M

Respondent:

L C M

File No:

ZE 1874 of 2001

Delivered on:

8 March 2002

Delivered at:

Dandenong

Hearing Date:

8 March 2002

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr Pinner

Solicitors for the Applicant:

Hassall & Byrne

Counsel for the Respondent:

Mr Combes

Solicitors for the Respondent:

Macpherson & Kelley

ORDERS

That subject to the parties complying with paragraphs 2(a),(b)(c) and paragraph 3, out of the monies held by Macpherson & Kelley solicitors for the Wife and the monies held by B M Caulfield, the former solicitors for the Husband, there be paid:
(a)To the Wife the sum of $53,000
(b)To the Husband the balance of the accounts and accumulations of interest thereon.
That the Wife do all such acts and things and sign all such documents as may be necessary to:
(a)Resign as a director of K C Pty Ltd and transfer any shares she has in the said company to the Husband at his expense;
(b)Resign as Trustee of the K Superannuation Fund (“the Fund”) and direct the Trustees of the Fund to rollover her entitlements to an approved rollover fund nominated by her;
(c)Transfer to the Husband at his expense the time-share interest under Certificate No. Rb10997 in the property at The Royal Bali Beach Club.
That the Husband be responsible for and indemnify the Wife with respect to the AVCO loan of approximately $2,500.00 and the AGC loan of approximately $1,800.00.
That unless otherwise specified in these Orders and except for the purpose of enforcing the payment of any money due under these or any subsequent Orders;
(a)Each party shall be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at this date.
(b)Money standing to the credit of the parties in any joint bank account is to be paid to the Husband;
(c)Each party hereby forgoes any claim they may have to any superannuation benefits belonging to or earned by the other;
(d)All insurance policies shall become the sole property of the owner named thereon;
(e)Each party 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; and
(f)Any joint tenancy of the parties is hereby expressly severed.
That these orders shall as far as practicable finally determine the financial and other relationships between the parties and avoid further proceedings between the parties.
That all applications be otherwise dismissed and removed from the Pending Cases List.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
DANDENONG

ZE 1874 of 2001

K J M

Applicant

And

L C M

Respondent

REASONS FOR JUDGMENT

This is an application filed by the applicant husband (the husband) on 15 May 2001. In that application the husband seeks order pursuant to Part VIII of the Family Law Act 1975 (the Act). However, for the purpose of this hearing the husband has relied upon a reply which has been filed and served on 7 March 2002 (the reply). The husband relies upon affidavits sworn by him on 14 May 2001 and 4 March 2002, together with additional missing pages to that affidavit which were attached to an affidavit sworn 6 March 2002.
In the reply, omitting some of the formal parts, the husband for his part seeks orders from this Court that from moneys held by solicitors, McPherson & Kelly, solicitors for the wife, and moneys held by B.M. Caulfield, former solicitor for the husband the wife be paid the sum of $30,000 and the balance be paid to the husband. There are other consequential orders sought in that reply relied upon by the husband.
The respondent wife (the wife) has relied upon an amended response. In the amended response filed 28 February 2002 the wife seeks orders, and I quote:
“ 1. That the funds invested in the joint names of the parties by the wife's solicitors, McPherson and Kelley being the net proceeds of sale of the real property situated at and known as 9 C, Rowville, together with any interest thereon, and the further sum invested in the joint names of the parties by the husband's former solicitors, B M Caulfield & Co in the joint names of the parties being the net proceeds of sale of the real property at 46 T Parkdale, together with any interest thereon be paid to the wife by way of settlement of property and lump sum maintenance.
2. That the husband pay to the wife by way of settlement of property and lump sum maintenance, such sum or sums as this Honourable Court deems appropriate”.
There are further consequential orders that are referred to in that document.
The respondent has relied upon affidavits sworn by her on 5 March 2002 and to a lesser extent an affidavit sworn 18 June 2001.
It is clear that in considering the discretion the Court undoubtedly has in relation to an application of this kind, that there are a number of factors which the Court needs to take into account and the factors are well-known.
It is appropriate the Court should in the exercise of its wide discretion assess the extent of the property of the parties and determine the value, consider what contributions have been made by the parties, including direct and indirect contributions of a financial character and non-financial character, and contributions to the welfare of the family, including contributions as homemaker and parent, and consider the circumstances which relate to the present and future needs of the parties, and to their means, resources and earning capacity actual and potential.
It is appropriate in considering applications under Part VIII to consider to the extent it is necessary, particularly in an application of this kind where spousal maintenance is referred to, the matters set out in section 75(2) of the Act.
By way of brief summary it seems to be common ground that in the present case the available pool of funds amounts to approximately $250,000. The proposal by the husband is that the wife be paid $30,000 for settlement of lump sum maintenance and property. That equates to a percentage of approximately 12 per cent.
The wife's proposal is that she be paid the sum of $103,000 for settlement of lump sum maintenance and property, and that amounts to approximately 50 per cent of the available funds. The sum of $103,000 has been calculated on the basis of one half of the available funds, less an adjusted amount of $15,000 for a motor vehicle and part of the drawings of the wife after separation, being $7000 out of a total of $14,000, with the balance said to be by way of spousal maintenance to the date of the hearing.
The husband has asserted that there is another $2000 in drawings which should be added to the total of $14,000 so that the balance would be $101,000 rather than $103,000. I should indicate for the purpose of this judgment I have decided on the material available to me that it is not appropriate to add the two amounts of $1000 suggested by the husband, as in my view there is insufficient evidence to enable me to draw that conclusion against the wife. Hence, in the circumstances, for the purpose of calculations I have relied upon the figures provided by the wife's counsel in this case.
By way of background, the parties met in July 1997. They cohabited from 1 January 1998. They married on 9 August 1998. The husband was born on 13 July 1959 and the wife born on 1 July 1961. The parties separated on 2 April 2001. Therefore, the marriage is what might be described as a marriage, and indeed, relationship of short duration, having as I indicated, just met in July 1997 and cohabited from 1 January 1998, with the marriage, as indicated, in August 1998. There is a marriage of some two years, nine months on my calculations and a period slightly longer than that when the parties cohabited.
I think it is relevant in the present case to take into account the date of the commencement of cohabitation, which is the date I do take into account, namely, 1 January 1998, and I take that into account for reasons which will become apparent in the course of this judgment. Hence, one adds to the total period of time in which the parties cohabited, that period from January through to August is a period of approximately seven months. So that the parties effectively had lived together for three and a half years prior to separation.
It is important to note that prior to the marriage both parties had been previously married and as a result of those previous marriages there are in fact four children, all of whom had resided from the date of cohabitation with the parties. The wife has two children by her former marriage, namely, K D, born 20 November 1984, and C D, born

12 April 1988. The husband has two children of his former marriage, namely, B M, born 21 October 1986, and S M, born 28 May 1988.
In the present case the Court has been assisted by the husband's case outline document. It seems to me that there is not a great deal of dispute about the chronology set out in that document, and I recite to the extent that it is relevant in this application, those parts of that document which may assist in providing background in this application. It should be noted that according to the chronology in that document, on 1 January 1996, prior to the commencement of the relationship between the parties, the husband had borrowed a sum of $120,000 from his parents, A and O M, in order to pay out the mortgage of a property at 15 J C, Rowville, (the J C property), and pay his former wife $90,000 in satisfaction of her property and maintenance entitlements.
A loan agreement, which has been exhibited, was executed on

23 February 1997. As indicated earlier, the parties in fact commenced cohabitation on 1 January 1998 at the J C property. The parties commenced cohabitation in circumstances where the two children of the wife's former relationship moved in with her to the Rowville property and the two children from the husband's former marriage commenced to reside at the property in September 1998.
Hence from that date, September 1998, it would appear that the household constituted the husband and the wife in this application, together with the four children to whom I have referred. It is said that the husband had paid a deposit on land at C C, Rowville (the property) and this occurred in December 1997 just prior to the parties' cohabitation. During 1998 a house was erected upon that land. From

7 December 1978 until 7 April 1999 the husband was employed by Telstra as a senior technical officer earning $1260.85 per fortnight.
The wife, from 1 January 1998, was receiving an income of $945.10 per fortnight, together with the child support income of $162.50 as indicated.
On 31 July 1998 a company, Kelem Constructions Pty Ltd (KC P/L), was incorporated. This was a property development company which was formed, as I understand it, at the instigation of the husband in order to engage in property development with a friend, Mr I T. On

16 December 1998 land at 12 P Street, Beaumaris, (the Beaumaris property), was purchased by K C P/L.
On 7 April 1999 the husband ceased employment with Telstra. It is not in dispute that as a consequence of that cessation of employment the husband received a retrenchment package which comprised $94,384.14, being $27,935.24 for 27 weeks long service leave then due, and a redundancy payment of $68,866.92. A sum of $271,416.23 was paid into the K Superannuation Fund, comprising $16,714.89 and $254,701.34 from the Commonwealth Superannuation Fund. On

3 May 1999 the K Superannuation Fund was established. The husband and the wife are trustees of that fund.
The husband remained unemployed until 6 December 1999, when he then resumed employment with the A H C as a technical officer earning $623 per week. According to the chronology, between

16 December 1998 and October 2000 two units were built at the Beaumaris property and sold by K C P/L. In 2001 the development of the land at 46 T Street, Parkdale, (the Parkdale property), interest was sold to Mr T and the proceeds of sale paid into the trust account of the husband's previous solicitors to which I have referred, namely, Ms Betty Caulfield.
In January 1998 a property at 42 T Lane, Rowville, was purchased by K C P/L as an investment property and that property remained tenanted until 21 October 2001.
In terms of post separation drawings on accounts it seems to be common ground that the parties during the short period after separation, that is the period during the month of April, had both withdrawn funds from a common bank account then operated by the parties with the National Australia Bank.
Doing the best I can on the material before me it would appear that there was a total amount of $54,000 withdrawn from that account, as I understand it, with $20,000 being withdrawn by the husband and $34,000 by the wife. In June 2001 the child, S M, returned to live with her natural mother. The child, B, after separation between the parties, although being a child of the husband, in fact continued to live with the wife, and it is common ground, did so until October 2001.
From April 2001 the husband commenced residing with his current partner, and as I understand it, they now share a dwelling which has been recently purchased by them.
On 23 November 2001 there was settlement of the sale of the property and the proceeds of that sale were invested on behalf of the parties in the wife's solicitor's trust account and the amount, as I have indicated, was $68,728.24.
It is also important to note that it is not in dispute that approximately two weeks prior to separation the husband had requested the wife in her capacity as director of the company to which I have referred, to sign a director's guarantee for a loan of approximately $250,000.
It is also not in dispute in the present case as far as I can tell that throughout the course of the period of incorporation of the company,

K C P/L, the wife had at all material times been a director and had from time to time been involved to the extent that she was required to give director's guarantees to assist in the property development business of that company. It is also not in dispute that throughout the course of the relationship, that is the period of time when the parties cohabited, their salaries were both paid into a joint account.
It is further not in dispute that the method of payment of expenses for the parties was usually one which involved the use of a Visa card in the name of the husband, but for which a second card was issued to the wife, and then upon use of that card to pay expenses the balance then due on a monthly basis was paid out of the joint account into which the salary of both parties was paid. It is not in dispute that up until the date of separation, apart from the period to which I have referred for the husband, namely, a 34 week period of unemployment, both parties were gainfully employed in full time employment.
The parties have prepared for the assistance of the Court a brief summary of their financial circumstances. In particular a statement of assets and liabilities as at 7 March 2002 reveals the moneys held in trust to which I have referred by the solicitors, B.M. Caulfield, and McPherson & Kelly. They are the sums of $44,466.38 as at 6 February 2002 in the B.M. Caulfield account and $68,728.24 in the McPherson & Kelly account as at 5 March 2002. The total, therefore, of the funds kept in those trust accounts is said to be $113,294.62.
In the same document it is said that the property at 42 T Lane has a value of $190,000 with a mortgage to the National Australia Bank of $96,600, leaving an equity of $93,400. Reference is made to a time share asset worth $13,000 and the wife's motor vehicle estimated to be worth $15,000 and it is said in the same document that the husband's motor vehicle is a vehicle in which he has no equity. It is said that the husband has $2000 in a bank account, whilst the wife has $200 in a bank account. No value has been placed on furniture claimed to be owned by the wife.
There is a further indication in terms of the assets of the husband that he has an interest in a property with his current partner said to amount to $14,069. In the summary of the financial circumstances of the parties I have been assisted by details of the resources of the parties and in particular note that the K Superannuation Fund has had placed in it amounts from the husband's superannuation of $205,156.38 and in the same fund it is said from the wife's superannuation there is an amount of $2976.30, making a total of $208,132.62.
Those funds are comprised of share portfolios of $173,116.90, Colonial managed investments of $20,833.05, cash in the bank of $14,182.73, making a total of, as I indicated, $208,132.68. It is suggested in the document that the wife's superannuation over and above the amount I have referred to in the K Superannuation Fund is another amount of $3949.18 as at June 2000 in the Care Super Plan. That information by way of background assists at least in setting the scene of the financial resources of the parties and also the chronology of events.
As I said at the outset it is very clear, and I am mindful of the fact, that this is a fairly short relationship. It is appropriate, however, to also look at the financial resources of the parties before deciding the distribution of property and before deciding the issue of any lump sum maintenance payable by way of spousal maintenance to the wife.
I have considered the issue of the loan which has been referred to by the husband as being a loan from his parents. That loan was the subject of a loan document which, as I have indicated, has been exhibited to the affidavit material. The loan document itself is a document which provides as follows:
That A L M and O M -
and their addresses are referred to –
agreed to advance the sum of $120,000 to the borrower -
that is the husband –
receipt of which the borrower hereby acknowledges.
The agreement further provides:

That the borrower confirms that repayment of the principal sum shall be a first charge on his estate should the borrower die before repayment is effected.

The agreement is dated 23 February 1997, though it is common ground that the amount advanced in the circumstances I have already described, was advanced much earlier. It is also common ground that the husband has paid back to his parents a total sum of approximately $25,000 and that that total sum was paid back up to the date of separation, that is April 2001, without any further payments being made thereafter. It has been submitted by counsel for the husband that I should regard those repayments of that loan as repayments of interest only. That is consistent with the evidence given by the husband, who when asked about the rate of interest and precise details, gave a range of interest rates which might apply, but was otherwise unable to point to any document which referred to interest being payable on the loan or that repayments would be repayments by way of payment of interest.
In my view a proper analysis of the arrangement, and a proper interpretation of the loan agreement to which I have referred, would not enable this Court to make a finding that the repayment of $25,000 was anything other than repayment of principal.
I reject the husband's evidence in relation to the suggestion that that repayment was based upon some understanding with his parents as to interest. To that extent, therefore, it is clear that the balance on that loan agreement is now $95,000. In further analysing the loan agreement I indicated during the course of this hearing that I thought it was at least relevant to take into account that loan agreement when assessing the respective financial resources of the parties. It was clearly relevant as at least a potential means of offsetting what would appear to be a distinct advantage to the husband in terms of his financial resources flowing directly from the significant superannuation amount which he received upon termination of his employment with Telstra.

On closer examination of the facts and the evidence, however, it is my view, and I so find, that the loan to the parents is in fact a loan which is only repayable on demand, that there has not been any demand for repayment at any stage, that the repayments up to April 2001 were voluntary repayments made by the husband to his parents, that his parents reside in an unencumbered property, are aged in their late seventies and that the likelihood of a demand being made on the husband in relation to that loan is in my view very remote.
In my view I am entitled to conclude that that loan, which it has to be remembered in part was money advanced to the husband to settle property interests of a former relationship, is a loan which does not have a term attached to it, and which is a loan, as I have indicated, is only repayable on demand. My view is in the circumstances it is highly unlikely that there will be a demand made in the foreseeable future. Those being the findings in relation to the loan it is clear, therefore, in my view that only a minor alteration can be made in an assessment of the financial circumstances, when I take into account that loan agreement.
That leaves me with the irresistible conclusion that in the present case there is a significant disparity of financial resources between those to which I have already referred of the husband and those which I have set out in relation to the wife. It is clear to me that the husband is a man who has been gainfully employed, and able to be gainfully employed throughout the period of time of cohabitation, and indeed prior to that date. Save for the period of 34 weeks, where there is no evidence to suggest the unemployment was anything other than voluntary, I find that the husband has a capacity to continue to be gainfully employed in full time employment in the foreseeable future.
I have no doubt that he has a capacity to earn income on a continuing basis in the full time employment of his choice. There is no evidence before me to suggest that he is physically or mentally incapable of being gainfully employed. Hence, in assessing the financial resources of the husband it is my concluded view that he is in a strong financial position. He has significant financial resources at his disposal, with few liabilities, save and except for the loan to which I have referred, and has a clear capacity for ongoing employment in full time employment as indicated.
When I look at the financial resources of the wife it is my concluded view that her capacity to earn in full time employment must at this early stage be regarded as doubtful. I accept that she is suffering from a medical condition which has required admission to hospital after the date of separation for psychiatric treatment. I accept that she continues to remain under medication and that that medication is for an accepted diagnosed condition of depression. I further accept that as a consequence of her condition and medication that her capacity for full time employment has been significantly impaired and will be so impaired at least in the foreseeable future.
I would expect, however, that there would be significant improvement, more likely than not after a period of a further two years. Whilst that might seem to be an arbitrary selection of a period of time, it needs to be remembered that separation has occurred less than 12 months ago and occurred in circumstances which can only be described on the evidence before me as traumatic. It ought to be remembered that in a case of this kind culpability on the part of parties, or their conduct, is not relevant. It is not relevant for me to make findings about the behaviour of parties and the way in which they conduct themselves in their social relationships.
It is relevant, however, in my view, to consider the circumstances of separation when considering making a finding as to the capacity for employment, and indeed, then considering the financial resources of parties. I have no doubt that it is appropriate to make a finding in the present case that the separation was a traumatic event which occurred in circumstances where the conduct of the husband can be described, as indicated in exchange with counsel, as a callous indifference to the consequence of that separation.
The consequences of that conduct are the fact that the wife has, of course, sought and received medical treatment, and as a consequence, as indicated, that has had a significant impact upon her employability. The fact remains that since the date of separation, which is not that long ago, the wife has only worked for a period of one week in August 2001 as a receptionist in a medical practice. She has undertaken two months of a full time course in nursing between May and June 2001, which she abandoned because she indicated, and I accept, the course was being stressful with exposure to clinical experience, and she has only recently commenced employment on a casual basis.
In the last three weeks she has worked for five hours per day for two weeks for two days and then it is only in the last week has managed to work 22 hours for one week only. This contrasts with her extensive full time work experience during and prior to the relationship with the applicant. As I have indicated, the circumstances of the separation were traumatic. Just two weeks prior to separation the wife was prevailed upon in the execution of her duties as a director of the company to which I have referred, to sign a guarantee for $250,000.
She then, upon the separation, faced the prospect of managing a home with four children because in the circumstances, as I have indicated, at least till October this year she was required to look after the children of the household to which I have referred. Post separation and after she had been admitted to hospital it is clear that the conduct of the husband was such that the utilities that were then connected to the premises were disconnected, although I am unable to find whether that was for a short or long duration. It occurred, however, just prior to Easter and prior to the discharge from hospital of the wife. It is obvious to any fair minded person that in circumstances of that kind, the effect and impact of a separation compounded by that conduct would necessarily lead to the reaction referred to by the wife in her affidavit. I have no hesitation in accepting that that reaction in the present circumstances has been genuine.
In my view, in the present case, the starting point however for assessing the interest which now should be paid out of the funds to the wife must be the issue of the length of the marriage, and the relationship. It is very clear, as I said to both counsel during the course of submissions, that a significant factor in this case is the short duration of the marriage.
I further find that a significant factor is the disparity in terms of both the capacity to contribute towards acquisition of and retention of the property which has been the subject of the agreed pool of funds to which I have already referred. The husband clearly has made a more significant contribution.
The respondent had asserted that she had $11,500 in savings which had been a deposit paid on a $115,000 house and land package in Werribee with Henley Properties. She claimed to have received a full refund in November 1997 and said the money was later deposited into the applicant’s home loan account for the J C property. No corroborative evidence at all was produced for and on behalf of the respondent whicih might reasonably be expected in relation to transactions of that kind. No bank records of receipts were produced from Henley properties nor did the applicant produce or was required to produce any bank records which may reveal the deposit. Accordingly I reject the respondent’s evidence in relation to the suggestion that she had the amount of $11,500 and or that it was deposited into the applicant’s loan account for the J C property.
However, in the circumstance of this case, on the material before me, I also find that throughout the course of the relationship, whilst the parties cohabited, the wife in fact was the major provider of what might be described as the home-making or parenting role.
I accept that in addition to that, for most of the time the respondent was gainfully employed in full-time employment, and that she contributed significantly to the joint funds of the parties managed in the manner I have already described. In those circumstances, balancing those factors together with the respective financial resources about which I have already made findings, it seems to me that in applying the principles which I must apply as a matter of law, pursuant to Part VIII of the Family Law Act, that an appropriate amount that should be paid to the wife in the present case is an amount of $53,000.
I base that amount on an assessment of approximately 30 per cent of the pool of 250,000, namely 75,000 less 15,000 for a motor vehicle, and less $7000 of the $14,000 net difference in the withdrawals by the parties.
In those circumstances, the orders of the Court will be the orders which have been set out in the reply to which I have referred, save and except that in paragraph 1(a) delete the figure $30,000 and insert the figure $53,000, and I so order. Otherwise, I will order that all other pending applications be taken out of the pending list.
What I have done, in calculating that amount, so that it is clear, is that I have endeavoured, as I indicated when discussing both proposals put by the parties, to incorporate into that amount what I believe to be an appropriate spousal maintenance amount as capitalised. I have given an indication, and it is only an indication, of my expectations in terms of the wife's capacity to resume full-time employment. I have said that that might take anything up to two years from this date onwards. I have done the best I can in making due allowance for that. I do not think I can be more precise in these findings. But certainly, spousal maintenance has been taken into account.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 8 March 2002