Maddox and Eastley
[2007] FMCAfam 741
•20 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MADDOX & EASTLEY | [2007] FMCAfam 741 |
| FAMILY LAW – PROPERTY – Six year relationship – no children – status of “agreement” reached at separation – husband’s injury and damages award – assets and liabilities at the time of the hearing – superannuation – neither seeking a splitting order – contributions – disparity in earning capacities – just and equitable. |
| Family Law Act 1975 (Cth), ss.75, 79 Family Law (Superannuation) Regulations 2001 Federal Magistrates Act 1999 (Cth), Div. 5 Federal Magistrate’s Court Rules 2001, r.21.02(1)(b) |
| Lee Steere (1985) FLC 91-626 Ferraro (1993) FLC 92-335 Clauson (1995) FLC 92-595 Hickey (2003) FLC 93-143 Coghlan and Coghlan (2005) FLC 93-220 Russell v Russell (1999) FLC 92-877 Naughton and Naughton (1983) FLC 91-327 Garrett and Garrett (1984) FLC 91-539 Wilde & Wilde, Appeal No. EA33 of 2005 (6 September 2007) Chorn & Hopkins (2004) FLC 93-204 Cerini [1998] FamCA 143 (8 October 1998) Norbis v Norbis (1986) FLC 91-712 Hayne and Hayne (1977) FLC 90-265 Aleksovski v Aleksovski (1996) FLC 92-705 DJ & AJ [2006] FamCA 961 Best and Best (1993) FLC 92-418 |
| Applicant: | PETER MATTHEW MADDOX |
| Respondent: | PATRICIA ANNE EASTLEY |
| File number: | TVM2317 of 2003 |
| Judgment of: | Roberts FM |
| Hearing dates: | 6 & 7 February 2007 |
| Date of last submission: | 20 March 2007 |
| Delivered at: | Launceston |
| Delivered on: | 20 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr P McVeity |
| Solicitors for the Applicant: | McVeity & Associates |
| Counsel for the Respondent: | Mr W Ayliffe |
| Solicitors for the Respondent: | Doolan and Brothers |
ORDERS
That within sixty days PATRICIA ANNE EASTLEY (“the Wife”) is to pay to PETER MATTHEW MADDOX (“the Husband”) the sum of seventy thousand dollars ($70,000) by way of adjustment of property interests between the parties.
That except as provided in Order No. 1 hereof the Husband and the Wife are each declared to have no further interest in the items of property in the possession or control of the other.
That save as to costs all applications are otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT LAUNCESTON |
TVM2317 of 2003
| PETER MATTHEW MADDOX |
Applicant
And
| PATRICIA ANNE EASTLEY |
Respondent
REASONS FOR JUDGMENT
PETER MATTHEW MADDOX (“the Husband) had a dream of running a successful dairy farm. After he and PATRICIA ANNE EASTLEY (“the Wife”) started their relationship, she adopted that dream willingly and both worked towards bringing it to fruition. That dream was unfortunately shattered by an industrial accident and its effect upon the Husband’s health. The aftermath was the parties’ separation and divorce. They subsequently failed to legally conclude a settlement of their property interests, so this case has ended up in this Court as a result of the unfortunate shattering of the joint dream that they once held.
Brief history
The Husband is aged 55 years and the Wife is aged 56 years. They commenced cohabitation in late 1994 and separated in late 2000, so their period of cohabitation lasted for approximately six years. There are no children of the relationship.
At the start of their relationship, the Wife moved in with the Husband on his farming property of approximately 100 acres. The Husband was a boilermaker and the Wife was a nurse.
In late 1996 the Husband was injured in an industrial accident which subsequently affected his ability to work, both in his occupation as a boilermaker and as a dairy farmer. He subsequently took legal action against his employer to recover damages arising from that accident.
The parties married in January 1997.
In mid-1997 the parties purchased the adjoining farm by borrowing from a Credit Union. They then worked the larger farming property (a little more than 200 acres) that resulted from the amalgamation of the Husband’s original property and the adjoining property that they had acquired. However, they both continued to work away from the farm as well.
In 1998 the Husband was unemployed for a short time, during which their irrigation pump broke down. The Husband then travelled to Western Australia to obtain work. He was away from Tasmania for nearly a year. During that period he was sending money back to the Wife and she was running the farm and working full time as a nurse.
The Husband’s injuries required him to have surgery in 1999. It appears that the surgery was not particularly successful.
Primarily because of the Husband’s injury, the parties were not able to properly work the farm and they sold it in early 2000. They realised a net sum in excess of $77,000. Also at about that time the Federal Government paid to the Husband a sum of $45,000 as a “Farm Help Re-establishment Grant”, which was paid into their joint account. Stock and farming equipment was also sold.
The parties purchased a caravan and travelled on the Australian mainland between March and September 2000.
In September 2000, when the parties were in Queensland, the Husband provided the Wife with a cheque for $85,000, drawn on their joint account. When she returned to Tasmania after a trip to India, she used some of that money to purchase a home in her sole name in Devonport. The parties agree that that home now has a net value of $228,000.
The parties’ divorce became absolute in April 2002 and the Husband filed the originating application in this matter in Townsville in April 2003. The proceedings were subsequently transferred to Tasmania.
In 2006 the Husband received a damages payment in relation to the industrial accident in the sum of $303,000. However, after payment of all costs and expenses, he received approximately $287,000.
The Husband has remained living in Queensland and the Wife continues to live in Tasmania.
The Applications
The Husband’s originating application sought a 75% distribution of the parties’ property to him.
At the time of the final hearing the Husband was seeking a 70% division in his favour. The Wife was seeking a dismissal of his application, because it was her position that the parties had already had a fair division of assets at the time of their separation.
Neither party was seeking a split of any superannuation interests.
Relevant Law
The Court’s approach to the determination of an application for the adjustment of property interests has been well established by authority[1]. It is essentially a multi-step process to:
·firstly, identify the property, liabilities and financial resources of the parties (usually at the time of the hearing);
·secondly, evaluate the contributions made by the parties as defined in section 79(4)(a) to (c) of the Family Law Act 1975 (“the Act”); and
·thirdly, consider the matters referred to in section 75(2) of the Act, if they are relevant
[1] See Lee Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and Coghlan (2005) FLC 93-220.
In determining what orders the Court should make under section 79, the Court must also be satisfied that it is just and equitable in all the circumstances to do so.[2] This is often referred to as the fourth step and has been described by one commentator as “the overriding caveat”[3].
[2] See section 79(2) and Russell v Russell (1999) FLC 92-877.
[3] See Australian Family Law & Practice, Vol. 2 at ¶37-640
The “Agreement” in 2000
As mentioned above, the Wife seeks a dismissal of the Husband’s application. Part of her reason is that she believed the provision to her of a cheque for $85,000 from their joint account was a final settlement. In my view, that aspect needs to be dealt with, at least in principle, before proceeding any further.
In my opinion, the only ways in which a person can have any confidence that a property settlement agreement with a spouse is final is either by:
·obtaining final consent order of this Court or the Family Court of Australia; or
·entering into a binding financial agreement under Part VIIIA of the Act.
It is perfectly clear that the parties did neither in this case, so there was nothing to prevent the Husband from making his application.
It is precisely because separating couples often make inappropriate agreements at times of high emotion and without the benefit of proper legal advice, that they should have the opportunity to have such agreements tested in Court[4].
[4] See Naughton and Naughton (1983) FLC 91-327 and Garrett and Garrett (1984) FLC 91-539
However, it is my view that if I come to the conclusion that the agreement was just and equitable at that time, that could be a factor to consider under section 75(2) or section 79(2).
Assets and Liabilities
The parties were not able to agree upon a settled list of assets and liabilities, and in my view, the approach taken by each in relation to deciding the asset pool was flawed.
While it is sometimes convenient during negotiations to revert to the time that parties separated, that is not the general approach adopted by the Court. The Court needs to take account the assets and liabilities at or about the time of the hearing. This is especially so when there is a reasonably significant period between separation and the hearing. I note that in this case that period was approximately six and a half years.
It also seemed to me that to some degree both parties appeared to favour adding back in certain assets or sums of money that no longer exist. For example, in the Wife’s Case Summary Document the assets include the net proceeds from the sale of the farm at approximately $95,000 and a number of other assets that have clearly been disposed of, while also including the current value of the property purchased by the Wife in Tasmania. That results in a significant “double dipping”, whereby that document suggests that the total net value of the assets exceeds $800,000 when that is quite clearly not the case.
Similarly, the Husband’s Summary of Argument listed assets that have long since been disposed of and the proceeds are no longer clearly identifiable.
In a recent decision of the Full Court of the Family Court[5], Bryant CJ, Finn and Boland JJ said:
The question of constructing a notional pool of property for division between parties in proceedings under s 79 is not without difficulty and has been the subject of a number of decisions each dealing with differing factual situations. (See Townsend and Townsend (1995) FLC 92-569; C and C [1998] FamCA 143; Chorn and Hopkins (supra); Omacini and Omacini (2005) FLC 93-218 and Gollings and Scott [2007] FamCA 397).
[5] Wilde & Wilde, Appeal No. EA33 of 2005, delivered 6 September 2007
Their Honours referred to Chorn & Hopkins[6]. In that case Finn, Kay and May JJ appear to have endorsed the remarks of Nicholson CJ, Ellis, Kay JJ in the unreported decision of Cerini[7], when they quoted paragraph 46 as follows:
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
[6] (2004) FLC 93-204
[7] [1998] FamCA 143 (8 October 1998)
With the possible exception of the Husband’s $12,000 holiday to Antarctica (paid from his damages settlement), I see no evidence that the parties have been wasteful of their funds post-separation. However, when one considers that holiday in the light of the fact that the Wife had three overseas holidays on her own during her relationship with the Husband, I consider that it would be unjust to add that sum of $12,000 back in to create a notionally greater asset pool.
In the circumstances, it is my view that the best way of determining the assets and their current values is to look at the parties’ financial statements which were sworn immediately prior to the hearing. This is consistent with what is set out at paragraph 18 above.
The Husband’s financial statement shows that he has the following:
Bank accounts
$22,000
Building Society account
$215,000
Mitsibishi Triton
$4,600
Yamaha 650
$7,000
Domestic chattels
$500
TOTAL
$249,100
In addition to this the Husband has no less than seven superannuation interests which are set out in paragraph 63 of his affidavit. They total approximately $25,650.
The Wife’s financial statement reveals that she has the following assets:
Wife’s home (net agreed)
$228,000
2 motor vehicles
$14,000
Savings
$1,000
Domestic chattels
$1,500
TOTAL
$244,500
A document filed with the Court by consent after the hearing on 20 March 2007 shows that the Wife’s superannuation interests were worth $215,308 at the time of the hearing.
Contributions
In this matter I propose to deal with the non-superannuation and superannuation assets separately. In my view that is consistent with both Norbis v Norbis[8] and Coghlan and Coghlan[9].
[8] (1986) FLC 91-712
[9] (2005) FLC 93-220
Non-superannuation assets
At the start of the relationship the Husband had his interest in the first farming property. Initially, he claimed that that was unencumbered. However, during a cross-examination exceeding five hours, he conceded that there had been a Defence Service loan with a balance of approximately $20,000 still outstanding at the time that he and the Wife purchased the second property. The Defence Service loan balance was paid out with part of the funds they borrowed to fund the purchase of that second property.
Unfortunately, I was provided with no evidence of the value of the Husband’s first farming property at the time that the parties commenced their relationship. All I know is that the parties purchased a property of similar acreage almost three years later for $200,000. The first property also included a home, even if it required some repairs and renovation, so I conclude that the Husband’s equity in the first property was of some significance. However, I am not able to quantify that significance.
In her affidavit the Wife claimed that, when she moved to the Husband’s property, she had $20,000 from the sale of land that she had owned on Tasmania’s east coast. The Husband denied having any knowledge of those funds, but was unable to refute her claim. Consequently, I find that I must accept the Wife’s evidence about that initial contribution.
The Wife also had an entitlement to a family law property settlement. When that money was received in August 1998 it amounted to nearly $23,500. She used some of that to pay off the loan in relation to the Mitsubishi Triton that the Husband retains.
The assessment of financial contributions is not an exercise of mathematical precision. As long ago as 1977, Pawley J said:
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.[10]
[10] Hayne and Hayne (1977) FLC 90-265 at p. 76,415
That statement is still true today and while I find that the value of the Husband’s assets at the start of the relationship was significantly more than the value of the Wife’s assets, it is not possible to say precisely how much more valuable his assets were.
During the initial stages of their cohabitation, the parties both worked extremely hard on the farm and each continued to work off the farm.
It is clear from the evidence (and the numerous photographs that the Wife submitted as exhibits) that the farming property and the home were improved and made more attractive. However, it seems to me that much of that was the result of the parties’ joint efforts.
As has been mentioned above, the Husband was unemployed for a short period in 1998. Their irrigation pump broke down and the Husband sought some employment in Western Australia in order to earn money to fund farming equipment purchases. I accept that his decision was of necessity made hastily but it was clear that both parties agreed with that decision. The Wife visited him there and they had a holiday together.
The Husband was away in Western Australia for a little less than a year. During that time the Wife worked extremely hard managing the farm on her own as well as holding down a full time job as a nurse. I accept her evidence as to how hard she worked, which is confirmed by the evidence of her friend, who describes her as having “worked like a dog both as a nurse and on the farm”.
However, the Wife concedes that Husband sent most of his earnings home from Western Australia and “that money went back into the farm”.
The Wife says that even after the Husband returned from Western Australia in 1999 she was still working extremely hard on the farm. She says that the Husband had started “drinking a great deal and attempted to hide this. A lot of his money was spent on alcohol and he seemed to loose all interest in the farm.”
The Wife’s evidence about that is corroborated by a psychologist’s report dated 7 March 2000 that the Husband had relied upon in his action for damages in the Supreme Court of Tasmania. That document reveals that in early 2000 the Husband was consuming significant quantities of alcohol to relieve his pain. The report said “he drinks a four litre wine cask over two days”.
The report went on to say that at the time of the assessment the Husband “was a broken man and believed that he had lost all his assets, his dream of dairy farming, his marriage, his health, and his capacity to do any sort of work that he was reasonable trained and experienced to do. He was depressed and binge-drinking to cope with his pain.”
Despite having that part of the report put to him during his lengthy cross examination, the Husband persisted, somewhat incredulously, with his assertion that his alcohol consumption had not been a problem.
I find therefore that the Wife was working as hard, if not harder, in 1999 after his return than she was when the Husband was in Western Australia.
It was clear from the evidence that throughout the relationship the farm was a loss making enterprise. Although the farming business name suggested that it was a partnership, the losses were solely attributed to the Husband for tax purposes and it is clear that both parties were funding those losses from their off farm incomes. In this regard, the Wife’s taxable income in the relevant years appears to have been consistently higher than that of the Husband. However, that may be attributable to the offsetting of those farm losses against his off farm income, rather than to a lower off farm income.
The Wife used most of the $85,000 that the Husband “gave” her by way of a cheque in September 2000 to purchase the home that she now owns.
She purchased that home for $95,000 and it now has an agreed net value of $228,000. Clearly, it has increased significantly in value. She says that she has effected some improvements to that property which include fence repairs, installation of down pipes, repairs to windows, installing an oven in the garden, a new toilet bowl, tinted glass windows and polishing of floor boards. Unfortunately, I have no evidence of whether or not those “improvements” contributed to the increase in value. However, I am of the opinion that it is more likely than not that the significant increase in value has largely been the result of upward trends in the Tasmanian real estate market. Having said that, it is clear that the Wife’s “investment” of the funds from the joint account in real estate has returned a significant dividend and the Husband played no part in her decision to purchase that property.
The non-superannuation assets currently in the Husband’s possession are very largely attributable to his damages award. However, they still form part of the property pool for purposes of the exercise that the court must perform.
Baker and Rowlands JJ said in Aleksovski v Aleksovski[11]:
In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution by the party who suffered the injury.
[11] (1996) FLC 92-705 at p 83,437
However, it is clear that the court must weigh the contributions carefully. I accept the Wife’s evidence that she spent a significant amount of time and effort assisting the husband with the paperwork for his claim and kept the farm running when he was devoting all his energies to that claim. I note that she also provided information to the psychologist referred to above to assist him with the claim.
Looking globally at the non-superannuation assets, while I find that both parties made significant contributions, I assess them overall at 55% in favour of the Husband and 45% in favour of the Wife.
Superannuation
It is clear that the Wife has a much more significant superannuation interest than the Husband.
The document filed on behalf of the Wife on 20 March 2007 is an actuarial valuation of her superannuation in accordance with Family Law (Superannuation) Regulations 2001. Her solicitors had requested valuations of her superannuation entitlements as at the date of cohabitation, the date of separation and the date of the hearing. The actuary was not able to perform calculations for those exact dates, so he calculated the values at the nearest available dates. They were:
31 December 1994
$28,406
31 December 2000
$73,664
10 February 2007
$215,308
Clearly, the Husband can claim no contribution to the value of the Wife’s superannuation up to the date of cohabitation. However, her superannuation appears to have increased in value by approximately $45,000 during their six year cohabitation and that increase is likely to have been caused by:
·possible growth in the fund itself; and
·contributions on the part of the Wife and her employer.
The Husband can claim only an indirect contribution to that increase over that six year period[12].
[12] See DJ & AJ [2006] FamCA 961 at paragraphs 53 and 54.
There has also been a fairly dramatic increase of more than $140,000 in the value of the Wife’s superannuation entitlement in the period following the parties’ separation. It would appear that that has come about because of the following:
a)general growth in the fund;
b)increased contributions by the employer;
c)a salary sacrifice into superannuation on the part of the Wife; and
d)a possible “quirk” in the valuation method prescribed by the Regulations.
While the Husband can claim an indirect contribution only in relation to some the increase referred to at subparagraph a) above, that must be somewhat insignificant in relation to the total.
The Husband’s superannuation is relatively modest and is spread over seven difference funds. Unfortunately, I have no details of the values of his superannuation interests at the time of cohabitation or the time of separation. However, any contribution that could be claimed by the Wife is likely to be so insignificant as to be hardly worth mentioning.
Section 75(2) factor
As mentioned above, the Husband is aged 55 years and the Wife is 56 years old.
Although the Wife claims to suffer from arthritis which she said may force her into early retirement, she produced no medical evidence to support that and she continues to work as a nurse.
On the other hand, the Husband has suffered an injury which has restricted his employment opportunities. A medical report dated 14 March 2006 admitted by consent states:
At the present time he is not suitable for any employment activities where he is required to use the right upper limb with any loading, lifting or range of motion above shoulder height. There is considerable risk of further deterioration in the status of his shoulder should he undertake these duties.
At the time of the hearing the Wife was employed as a nurse and her salary package was worth $68,451 per annum. On the other hand, the Husband was unemployed at the time of the hearing. However, he has been employed from time to time since separation, but in occupations that clearly do not pay as well as the Wife’s occupation.
In Clauson and Clauson, Barblett DCJ, Fogarty and Mushin JJ said[13]:
[13] (1995) FLC 92-595 at 81,911
It has long been recognized that in most cases the most valuable “asset” which a party can take out of the marriage is a substantial, reliable, income-earning capacity: see Best and Best (1993) FLC 92-418 at 80,295
Clearly, the Wife has a much better earning capacity than the Husband, but I concede that the disparity is nowhere near as significant as it was in Best and Best.
Husband’s earning capacity was effected by the accident that occurred during the parties’ relationship but it was not the relationship or the marriage that affected his earning capacity. Consequently, I do not believe that paragraph (k) of section 75(2) has any relevance.
Although paragraph (p) of section 75(2) requires the Court to take into account the terms of any binding financial agreement, I have indicated above that the agreement between the parties at the time of separation was not a binding agreement. However, it is my view that I can take the parties agreement into account under paragraph (o) of section 75(2).
Although the Husband sought to deny that there was any such agreement, his evidence was far from convincing and I accept the Wife’s evidence that when the Husband gave her the cheque for $85,000 he indicated that:
·she deserved that money because it was what she had “put in” by way of effort; and
·he would be getting his damages award before very long.
The Wife’s evidence in relation to this was corroborated by the evidence of her friend and I have no hesitation in accepting their evidence as being more reliable than that of the Husband in relation to whether or not there was an agreement between the parties when they separated.
However, if I had been asked to make consent orders in those terms at that time, I am not convinced that I would have come to a conclusion that they were just and equitable. That is primarily because of:
·the disparity in the parties’ earning capacities;
·the fact that the quantum of the Husband’s damages award was then unknown; and
·the Wife was to receive the lion’s share of the available non-superannuation assets.
On the basis of the relevant section 75(2) factors generally, it is my view that there should be a further 10% adjustment in relation to the value of the non-superannuation assets in favour of the Husband.
I refer to the superannuation assets in my conclusions below.
Conclusions
I repeat that neither party is seeking a superannuation splitting order. In my opinion, that is appropriate.
The majority in Coghlan[14] determined that superannuation is a species of asset that is different from other property and in this case the contribution on behalf of the Husband towards the Wife’s superannuation has been relatively insignificant. Consequently, I am of the view that each party should retain his or her superannuation without any adjustment by the Court, and the only adjustment of property interests should be in relation to non-superannuation assets.
[14] (2005) FLC 93-220
The adjustments referred to in paragraphs 60 and 76 above mean that there would be a division of the non-superannuation assets of 65% to the Husband 35% to the Wife.
The Husband’s non-superannuation assets are worth $249,100 and the Wife’s are worth $244,500, making a total of $493,600. Sixty five percent of that is $320,840. Consequently, the Husband should receive an additional $71,740 if he is to receive sixty five percent of the value of the non-superannuation assets.
Is it just and equitable?
As suggested above, adjusting separated parties’ property under the Family Law Act is very rarely a precise mathematical exercise.
Although the Husband appears to have changed his mind, the parties agreed upon a settlement that they thought was appropriate at the time that they separated. In paragraph 75 above, I have indicated that I probably would not have considered that agreement to be just and equitable at that time.
However, it is the Wife who invested the funds she received in a home and that investment has turned out to be a good investment. Certainly, the return would have been significantly less if she had simply left the money in an interest bearing account
Notwithstanding that, it would be unjust and inequitable to accede to the Wife’s request to make no adjustment in favour of the Husband. Although the marriage was not particularly long, he now is in a worse financial position overall than the Wife, whereas I have found that he was in a somewhat better financial position than the Wife at the start of the relationship.
In the circumstances, I consider that a division of approximately 65% of the party’s non-superannuation assets in favour of the Husband is just and equitable. I conclude that an appropriate sum for the Wife to pay the Husband is $70,000.
Because the Wife has a significantly better income than the Husband and she has her home against which she could secure further borrowings, I am of the view that she could borrow $70,000 and pay that to the Husband within 60 days. I shall make Orders to give effect to this.
Procedure
I heard this matter in Devonport but I will be delivering this decision in Launceston. I will therefore make arrangements for my Associate to provide copies to the parties’ solicitors by fax or email.
If either party’s application for costs is to be pursued, that can be done within twenty-eight days in accordance with Rule 21.02(1)(b) of the Federal Magistrate’s Court Rules 2001 by contacting my Associate to arrange for a further listing of the matter. I also point out that, if necessary, any such application could be heard by telephone link in accordance with Division 5 of the Federal Magistrates Act 1999 (Cth).
I certify that the preceding eighty nine (89) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date:
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