MAHOUB & MAHOUB

[2013] FamCA 848

FAMILY COURT OF AUSTRALIA

MAHOUB & MAHOUB [2013] FamCA 848

FAMILY LAW – PROPERTY SETTLEMENT – Consideration of Bevan & Bevan [2013] FamCAFC 116 - Contributions - Determination of discreet issues as to contribution – Determination of appropriate section 75(2) adjustment – Consideration of prospective capital gains tax liabilities – Husband’s paid legal costs reflected in section 75(2)(o) adjustment.

Family Law Act 1975 (Cth) ss. 75, 79

Stanford v Stanford [2012] HCA 52
Bevan & Bevan [2013] FamCAFC 116
Russell and Russell (1999) FLC 92-877
Teal & Teal [2010] FamCAFC 120
Rosati and Rosati (1998) FLC 92-804
IABH & HRBH  [2010] FamCA 110
Omacini and Omacini [2005] FamCA 195
Gollings v Scott [2007] FamCA 397

APPLICANT: Mr Mahoub

RESPONDENT: Ms Mahoub

FILE NUMBER: PAC1721 Of 2012

DATE DELIVERED: 19 August 2013

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 12, 13, 14 and 15 August 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Christie

SOLICITOR FOR THE APPLICANT: Watts McCray Lawyers

COUNSEL FOR THE RESPONDENT: Mr Lethbridge SC with Ms Barnett

SOLICITOR FOR THE RESPONDENT: Lough & Wells Lawyers

Amended pursuant to rule 17.02 of the Family Law Rules 2004

Orders

1. That each party shall do all things necessary within 21 days of the date of these orders to cause the properties situated at and known as:

   a)B Street, C Town in the State of New South Wales (“the C Town property”) being the whole of the land contained in folio identifier …;

   b)Property D, E Street, Melbourne in the State of Victoria ("Property D") being the whole of the land contained in folio identifier …; and

   c)F Street, Melbourne in the State of Victoria ("the F Street property") being the whole of the land contained in folio identifier … 

   (collectively referred to as "the properties") to be placed on the market for sale by private treaty.

2. That, for the purposes of Order 1 above, the Real Estate Agent to act in respect of the sale shall be as agreed by the parties and, failing agreement within seven (7) days of the date of these Orders, then shall be a Real Estate Agent appointed by the President of the Real Estate Institute of New South Wales or his/her nominee for the property situated in New South Wales and the President of the Real Estate Institute of Victoria or his/her nominee for the properties situated in Victoria.

3. That, for the purposes of Order 1 above, the sale price for the properties shall be as agreed between the parties and, failing agreement within seven (7) days of the date of these Orders, then shall be at a price determined by the President of the New South Wales Division of the Australian Property Institute or his/her nominee, for the property situated in New South Wales and by the President of the Victorian Division of the Australian Property Institute or his/her nominee for the properties situated in Victoria.

4. That the proceeds of sale of the C Town property to be disbursed as follows and in that priority:

   a)In payment of agents commission and advertising expenses and legal expenses of the sale;

   b)In payment of costs incurred in relation to the nomination of a real estate agent (if any), in payment of costs incurred in relation to the nomination of a solicitor (if any) and in payment of costs in relation to determination of value or selling price by the President of the New South Wales Division of the Australian Property Institute or his/her nominee (if any);

   c)Discharge of all mortgages secured on title of the property; and

   d)In payment of the balance as to 55 per cent less $71,227 to the Wife, and 45 per cent plus $71,227 to the Husband.

5. That the proceeds of sale of Property D property to be disbursed as follows and in that priority:

   a)In payment of agents commission and advertising expenses and legal expenses of the sale;

   b)In payment of costs incurred in relation to the nomination of a real estate agent (if any), in payment of costs incurred in relation to the nomination of a solicitor (if any) and in payment of costs in relation to determination of value or selling price by the President of the Victorian Division of the Australian Property Institute or his/her nominee (if any);

   c)Discharge of all mortgages secured on title of the property;

   d)In payment of the sum of $85,000 into an interest bearing Controlled Monies Account in the name of the Husband and the Wife administered by the parties’ lawyers and the said sum be held in the Controlled Monies Account to be used for the purpose of meeting the Husband’s anticipated additional tax liability arising from the capital gain realised on the sale of the said property; and

   e)The net balance of proceeds on sale then to be paid as to 55 per cent to the Wife and 45 per cent to the Husband;

   f)That for the purposes of this order the Husband shall do all acts and things and sign all documents necessary to lodge his tax return for the financial year in which the sale of the said property occurs, by no later than 30 September after the end of the financial year in which the sale of the said property occurs; 

   g)That for the purpose of this order each party shall do all things necessary forthwith including but not limited to signing all documents requested of them and giving all consents to cause the monies including interest contained in the Controlled Monies Account to be paid out within 14 days of the Husband receiving his Notice of Assessment from the Australian Taxation Office in payment of the Husband’s additional tax liability arising from the capital gain realised on the sale of the said property and the balance then divided between the parties as to 55 per cent to the Wife and 45 per cent to the Husband;

   h)If there is a shortfall from the sum of $85,000 and interest invested in the Controlled Monies Account to pay the Husband’s additional tax liability arising from the capital gain realised on the sale of the said property then from their own resources the parties shall each pay such shortfall as to 55 per cent by the Husband and 45 per cent by the Wife.

6. That the proceeds of sale of the F Street property to be disbursed as follows and in that priority:

   a)In payment of agents commission and advertising expenses and legal expenses of the sale;

   b)In payment of costs incurred in relation to the nomination of a real estate agent (if any), in payment of costs incurred in relation to the nomination of a solicitor (if any) and in payment of costs in relation to determination of value or selling price by the President of the Victorian Division of the Australian Property Institute or his/her nominee (if any);

   c)Discharge of all mortgages secured on title of the property;

   d)In payment of the sum of $50,000 into an interest bearing Controlled Monies Account in the name of the Husband and the Wife administered by the parties lawyers and the said sum held in the Controlled Monies Account and interest to be used for the purpose of meeting the Husband and Wife's additional tax liability arising from the capital gain realised on the sale of the said property; and

   e)The net balance then to be paid as to 55 per cent to the Wife and 45 per cent to the Husband;

   f)That for the purposes of this order the Husband and the Wife shall do all acts and things and sign all documents necessary to lodge their tax returns for the financial year in which the sale of the F Street property occurs, by no later than 30 September after the end of such financial year in which the sale of the F Street property occurs; 

   g)That for the purpose of Order 6(d) herein, each party shall do all things necessary forthwith including but not limited to signing all documents requested of them and giving all consents to cause the monies including interest contained in the Controlled Monies Account to be used to pay the Husband and Wife's additional tax liability arising from the capital gain realised on the sale of the said property.

7. That for the purposes of these orders the Husband and Wife shall cooperate with one another and provide sufficient information to the other for the proper completion of their respective taxation returns regarding all matters relevant to the calculation of capital gains tax properly payable by the parties after all relevant deductions, including copies of one another's draft taxation returns for the relevant year or years.

8. That, as between the parties, the Wife is hereby declared solely entitled to the following properties:

   a)The unit at City I being G Street, Suburb H, Country J;

   b)The ‘summerhouse’ in Country J, City I region, K district, house number .., Country J ("K Property") and the Wife is hereby declared to hold the said property on trust for the child of the parties L

   and the Wife shall indemnify and shall keep indemnified the Husband in relation to all mortgage payments, statutory rates and charges, other expenses and liabilities in relation to the said properties whenever and however arising.

9. That, as between the parties, the Husband is hereby declared solely entitled to the property situated at and known as M Street, N Town being the whole of the land contained in folio identifier … (“the M Street property”) and the Husband shall indemnify and shall keep indemnified the Wife in relation to all mortgage payments, statutory rates and charges, other expenses and liabilities in relation to the said property whenever and however arising.

10. That within seven (7) days from the date of these Orders, the Wife do all things necessary and sign all necessary documents to transfer to the Husband her interest in the St George Bank offset account number …, Citibank account number …, and the St George Bank offset account for the M Street property and all monies contained in those accounts to the Husband and the Husband shall be at liberty should he wish to forthwith withdraw all funds from those accounts.

11. That within two (2) months from the date of these Orders the Husband and Wife will do all acts and things and sign all documents necessary to transfer, at the expense of the Wife, the following properties into the Wife’s sole name:

    a)O Street, Sydney “Property O” being the whole of the land contained in folio identifier … (“Property O property”);

    b)P Street, Suburb Q, being the whole of the land contained in folio identifier … (“the Suburb Q property”); and

    c)R Street, Suburb S being the whole of the land contained in folio identifier … (“the Suburb S property”).

    and simultaneously with the transfer of each of the properties the Husband and Wife do all acts and things and sign all documents so as to facilitate the Wife refinancing the present mortgages secured over the said properties into her name and the Wife shall as and from the date of these orders indemnify the Husband from all or any liability arising from the mortgages presently secured over the said properties and all and any outgoings in regard to same and for the purposes of this order the Husband and Wife shall do all necessary things and sign all necessary documents within seven (7) days from this date so as to authorise and direct that rental payments in respect of the said properties be paid to such account as is nominated by the Wife and further do all necessary things and sign all necessary documents so as to authorise and direct the mortgagee banks to deduct mortgage payments in relation to the said properties from such account as is nominated by the Wife within seven (7) days from this date.

12. That, as between the parties, and subject to the above Orders each party shall respectively retain all interest in and entitlement to all personal property now in his/her respective possession or control, all shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his/her sole name respectively, all interests in life insurance policies and superannuation funds standing in his or her sole name respectively.

13. That the parties are granted leave on seven (7) days notice to the Court and to the other party to re-list the matter as to implementation or enforcement of these Orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Mahoub & Mahoub has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC1721/2012

Mr Mahoub

Applicant

And

Ms Mahoub

Respondent

REASONS FOR JUDGMENT

THe Proceedings

1. These are property proceedings between the Applicant Husband and the Respondent Wife.

2. At trial the Applicant Husband sought final orders as to property as more fully set out in the proposed minute of order admitted into evidence as Exhibit N.

3. In summary the Applicant Husband sought orders as follows:

   a)That the properties at B Street, C Town, P Street Suburb Q, R Street Suburb S, O Street, Sydney, E Street, Melbourne, and F Street Melbourne be sold and that the net proceeds of sale after discharge of secured mortgages be divided equally save for the reservation of specific sums as necessary to meet anticipated capital gains tax liabilities;

   b)That otherwise the Wife be declared solely entitled to a home unit property in City I and to the summerhouse known as the “K Property” in the City I region of the Country J;

   c)That the Husband be declared solely entitled to the home unit property at M Street N Town;

   d)That the investment properties at O Street, Sydney, P Street, Suburb Q and R Street Suburb S be transferred to the Wife and that upon transfer she refinance the mortgage liabilities secured against those properties;

   e)That money standing to the credit of the St George bank offset accounts … and … be divided equally and that the accounts be closed;

   f)That money standing to the credit of the Citibank account … be divided equally;

   g)That certain items of personalty remaining in the matrimonial home being property of his parents be made available by the Wife for collection by him; and

   h)That otherwise he and the Wife retain such other property or entitlements as are in their respective possession or entitlement.

4. At trial the Wife sought final orders as to property in terms of the document marked into evidence as Exhibit C.

5. In summary those orders sought were as follows:

   a)That the Wife be declared solely entitled to the home unit property in City I;

   b)That the Wife be declared solely entitled to K Property and that she hold that property on trust for the child of the marriage Ms L and as soon as practicable do all things necessary at the Wife’s expense to effect a transfer of that property to the child Ms L;

   c)That the property at B Street, C Town be sold and that the net proceeds of sale be divided as to 70 per cent to the Wife and 30 per cent to the Husband;

   d)That the Husband transfer to the Wife his interest in the properties at O Street Sydney, P Street, Suburb Q and R Street, Suburb S and that upon transfer the Wife refinance the mortgage encumbrances thereon into her name;

   e)That the Wife transfer to the Husband her interest in the properties at M Street N Town, F Street Melbourne and E Street, Melbourne and that upon transfer the Husband refinance the mortgage encumbrances thereon into his name;

   f)That the Wife receive the sum of $389,694 being funds in Citibank account … and St George Bank offset accounts … and …;

   g)That the Husband transfer his interest in the European motor vehicle registered number … to the child L;

   h)That otherwise she and the Husband retain such other property or entitlements as are in their respective possession or entitlement.

Documents Relied on

1. At trial the Applicant Husband relied upon the following documents:

   a)Application filed on 26 April 2012;

   b)Financial statement filed on 29 May 2013;

   c)Husband’s affidavit filed on 22 April 2013;

   d)Husband’s affidavit filed on 29 May 2013;

   e)Affidavit of Dr T filed on 22 April 2013; and

   f)Affidavit of Dr U filed on 6 August 2013.

2. At trial the Respondent Wife relied upon the following documents:

   a)Amended Response filed on 26 June 2013;

   b)Financial Statement filed on 11 June 2013;

   c)Wife’s affidavit filed on 5 June 2013;

   d)Affidavit of Ms V filed on 12 June 2013;

   e)Affidavit of Dr W filed on 10 May 2013;

   f)Affidavit of Ms V psychologist filed on 10 May 2013; and

   g)Affidavit of Dr Y filed on 10 May 2013.

Credit

1. During the course of the trial the Court had the opportunity of observing both the Applicant and the Respondent give oral evidence particularly in cross-examination. The nature of the cross-examination of the Husband was such that the Wife took issue with various transactions undertaken by the Husband in relation to the joint financial affairs post separation or professed a lack of knowledge in relation to those transactions and that the Husband had failed to make proper disclosure.

2. The Husband exhibited to his trial affidavit sworn on 22 April 2013 a significant number of financial documents that represented virtually a complete history of the party’s finances both jointly and separately post separation. Many of the transactions that were impugned by the Wife are referred to in detail in his affidavit and his cross-examination focused almost exclusively as to financial transactions on the documents exhibited to his affidavit. In that circumstance it is difficult to come to any conclusion that there has been any lack of disclosure by the Husband or any unwillingness by him to provide details as to his post separation financial circumstances.

3. Much was made in cross-examination as to the transfer of funds from the parties’ Z Pty Ltd investment account to a secondary St George Bank offset account relating to the M Street investment property standing in the name of the Husband alone. It was the Wife’s contention that she did not sign the document authorising the transfer   of such funds and that the Husband had in some fashion fabricated her signature. The Court is not satisfied that the Wife’s assertions were substantiated and indeed such was the evidence that the Court is not in a position to make a particular factual finding as to this assertion.

4. However overall the Court is satisfied that the Husband notwithstanding that much of his oral evidence was given in an excitable and over-responsive manner that he was giving evidence to the best of his recollection and where documents were available to verify his assertions as to various transactions those documents, affirmed his oral evidence.

5. The Wife gave oral evidence in a much quieter fashion than did the Husband in all probability as a consequence of her underlying medical conditions referred to later in this judgement. She made concessions where appropriate and the Court is satisfied that she was giving evidence to the best of her ability in circumstances where her clear evidence is that during the cohabitation the Husband managed their joint finances for both of them and that her knowledge of many transactions particularly post separation was negligible.

6. In all of the circumstances the Court does not prefer the evidence of one party against the other but where documents are available to support either party’s contention then reliance would be placed upon those documents.

Background

1. The Husband was born in Country AA and is presently 48 years of age. The Wife was born in Country J and is presently 46 years of age.

2. The parties were married in 1988 and did not live together prior to marriage.

1. There is one child of the marriage Ms L presently aged 24 years.

2. The parties separated on or about 26 September 2010 and were divorced on 4 May 2013.

3. At the commencement of cohabitation neither party had any assets of significance. Both parties were students studying medicine. At the time of marriage the parties resided in University accommodation.

4. In 1991 the parties purchased a unit in the Wife’s name in City I. As the Husband was not a Country J citizen the property was not able to be purchased in his name. The home unit property was purchased with funds advanced by the father’s parents which were repaid by the parties.

5. The parties resided in the home unit property until they relocated to Australia in 1992. Upon relocating to Australia the Wife’s mother’s was authorised to lease out the home unit and collect the rent.

6. Subsequently on various trips back to the Country J the parties received and used accumulated rent which was accounted to them by the Wife’s mother.

7. At the time of marriage the Wife’s parents owned a parcel of land in the City I region of the Country J. Sometime after the parties’ marriage the Wife’s parents constructed on the land a holiday house or “summerhouse”. On 19 November 2004 K Property was transferred to the Wife by her parents.

8. Subsequent to relocating to Australia in 1992 the parties resided with the Husband’s parents for a period. Thereafter they rented home unit premises. The Husband was unable to obtain employment in Australia until October 1993 at which time he obtained his first position at the BB Hospital. In late 1993 the parties with their young child relocated to reside in Tasmania where the Wife obtained employment in a regional hospital in February 1994.

9. Subsequently in December 1996 the parties relocated from Tasmania to Suburb CC, New South Wales. Both parties undertook the health professional training program and subsequently the Husband obtained employment at the N Town Hospital and the Town DD Hospital. The Wife obtained employment at the Suburb CC Hospital.

10. In 2008 the parties commenced work at the N Town Centre, with the Wife working on a part-time basis four days per week. The Husband worked both at the Centre and at the Town DD Hospital. The Husband also obtained part time employment at the University of N Town in the graduate school.

11. Subsequent to separation the Husband asserts he commenced to cut back his general practice work at the N Town Centre for reasons of health and to avoid contact with the Wife at the Centre.

12. Over the period of the parties’ cohabitation they bought and sold various properties and as at the date of trial held a significant real property portfolio in addition to the matrimonial home. Otherwise during cohabitation the parties accumulated at various times differing investment portfolios.

13. It is common ground between the parties that during cohabitation that their combined incomes from their practice of medicine was significant.

Concessions

1. During the course of the trial concessions were made by each party as to contributions during the period of cohabitation to the date of separation. On behalf of the Husband it was conceded by his counsel that the Court could regard contributions by each of the parties to the date of trial as equal. On behalf of the Respondent Wife there was a similar concession by her counsel save for the discrete issue as to K Property that was gifted to the Wife by her parents in about 2004 and now stands in the Wife’s name.

2. As to K Property the Wife sought an order that that property remain outside the pool for division and that there be a declaration that she holds that property on trust for the adult child of the marriage.

3. As a consequence of the concessions quite properly made by each of the parties during the trial as to contributions to the date of separation the various contributions made by the parties during that period need not be examined by the Court.

Post Separation

1. The parties separated on 26 September 2010. The Wife has remained in occupation of the former matrimonial home at C Town. That property has an agreed value of $950,000.

2. In the financial years following separation the parties continued to work as health professionals. In 2011 the Wife’s taxable income was $146,268, in 2012 it was $122,772 and in 2013 her gross income from practice was in the sum of approximately $130,457.

3. Following separation the Husband’s taxable income in 2011 was $424,778, in 2012, $365,773 and in 2013, $238,773.

4. At the time of separation the parties held funds in a joint St George Bank offset account number 4651 2005 in the sum of about $220,842. Subsequent to separation the Husband continued to deposit into that account income earned by him through the N Town Centre until January 2011. By reason of a series of withdrawals over a period the Husband withdrew from that account subsequent to separation the sum of approximately $60,000.

5. Otherwise the parties’ respective income subsequent to separation was deposited to their own accounts.

6. From the St George Bank offset account there continued to be paid mortgage payments in respect to the parties’ various investment properties by way of bank deduction and the Husband also by way of payment from that account continued to pay various outgoings in relation to the investment properties. Some of the outgoings in relation to the investment properties were paid by him on his personal credit card and to reimburse himself he transferred monies from the St George Bank offset account to his personal CBA account and then paid those funds into his credit card.

7. Subsequent to separation and in December 2010 the Husband moved in to occupy the parties’ investment home unit property at M Street N Town. This property had been purchased in the Husband’s sole name in August 2009 and subsequent to purchase had been tenanted at a rental of approximately $1800 per month. The rental income as with the other investment properties was deposited into the parties’ St George Bank offset account and mortgage payments deducted by bank authority from that account.

8. Subsequent to separation funds in the sum of $140,000 were transferred from one of the parties’ joint investment accounts with Z Pty Ltd to a St George Bank offset account number … with interest that would otherwise have been paid on this deposit being offset by the bank as against interest on the loan secured against the M Street property. The effect of this transaction was to reduce interest payments by about $1000 per month. The Husband asserts that the reason for this transaction was to reduce interest payments on the M Street and loan as once he occupied the property the interest payments became non-deductible in terms of income tax.

9. Once the Husband ceased paying his income into the primary St George Bank offset account from which various mortgage payments were deducted and property outgoings paid the effect was a further gradual diminution of the balance in that account. The Husband asserts that from monies standing to the credit of that primary offset account at separation various payments totalling approximately $71,000 were paid by him in relation to property outgoings either by direct payment from the account or by way of reimbursing his credit card for payments made by him in relation to the investment properties.

10. The effect of the transactions referred to above is that the balance of the joint offset account had reduced by January 2013 to the sum of $81,545 with the balance of the account being $84,925 at the date of trial.

11. As a consequence the Husband retained for his own use and benefit effectively the entirety of his income earned post separation.

The Law

1. The approach to the determination of an application under s 79 of the Act is set out in Stanford v Stanford [2012] HCA 52 and that decision was the subject of detailed consideration by the Full Court in Bevan & Bevan [2013] FamCAFC 116.

2. As was stated by the Full Court in Bevan:

   68.      ….It appears to have been routinely assumed by litigants, certainly in more recent times, that justice requires the Court to assess their claims by reference to s 79(4), even if one contends that the outcome of that assessment will be an order leaving existing property interests intact. 

   69.      The reason for this is likely to be found in this passage from Stanford ….:

   “42.     In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the Husband and Wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be Property O use of property by the Husband and Wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the Court make a property settlement order …”

   70.      In our experience, the circumstances described in the paragraph above encapsulate the vast majority of cases.  Hence, the reminder in Stanford of the pivotal role of s 79(2) is unlikely to have any impact in most cases, although it will serve as a reminder to trial judges that the precondition to making any order is a finding that it is just and equitable to do so.

   71.      Stanford will also serve as a reminder that the four step process “merely illuminates the path to the ultimate result”.  Any future restatement of that process should incorporate acceptance of the fact that the power to make any order adjusting property interests is conditioned upon the Court finding that it is just and equitable to make an order. 

   72.      It follows that judges would be well advised to avoid what we consider to be arid discussion of the “stage in the process” at which “adjustments” are permissible.  Such discussion tends to elevate the four step process to the status of a statutory edict, when in fact it is no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so. 

   73.      The High Court in Stanford has laid down three “fundamental propositions” which will provide useful guidance to trial judges in approaching the task under s 79.  These were recited above, and could be summarised thus: 

   1.        Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);

   2.        The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity; 

   3.        A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.

1. As the Full Court (Bryant CJ and Thackray J) said in Bevan at [81-84]:

   81.      The third “fundamental proposition” demands separate consideration of the preliminary question of whether it is just and equitable to make any order altering property interests before the need arises to consider the extent to which existing interests are to be altered and the manner in which that is to be done.   

   82.      As we have noted, in many cases the preliminary question is effectively answered in the affirmative by the way the parties present their cases.  Nevertheless, it is still necessary for it to be shown that the trial judge has expressly, or by clear implication, answered that question in the affirmative before making an order altering existing interests in the keep ducking back property. 

   83.      Answering this preliminary question clearly involves the exercise of judicial discretion since, as was said in Stanford at [36]:

   “The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations.  It does not admit of exhaustive definition.  It is not possible to chart its metes and bounds.”

   84.      Just as the expression “just and equitable” does not admit of exhaustive definition, it is not possible to catalogue the “range of potentially competing considerations” that may be taken into account in determining whether it is just and equitable to make an order altering property interests.  However, in our view, it would be a fundamental misunderstanding to read Stanford as suggesting that the matters referred to in s 79(4) should be ignored in coming to that decision.  Indeed, such a reading would ignore the plain words of s 79(4), which make clear that in considering “what order (if any)” to make, the Court must take into account the matters referred to in that subsection (emphasis added). 

   85.      This requirement to consider the s 79(4) matters in determining whether it is just and equitable to make any order provides fertile ground for potential conflation of the two different issues, which the High Court has warned against.  However, this potential will not be realised in many cases because of what the plurality said at [42] about the “just and equitable” requirement being “readily satisfied”.  But there will be a range of cases, of which arguably the present is a good example, where determining whether it is just and equitable to make any order altering property interests will not be so clear cut and will therefore require not only separate but very careful deliberation.

and as observed by Finn J. in Bevan at [166-169]:

166.    The point in the decision making process at which the question of whether it is just and equitable to alter property interests of either party is to be addressed must depend on the circumstances of each particular case. There can be no hard and fast rule.

167.    However, as a general rule, it will, in my view, be useful to identify at a very early point in a judgment what are the existing property interests of the parties and what are the orders that each party is seeking in relation to those interests.

168.    As already suggested, where both parties are seeking alterations of interests in one or other’s property, the question as to whether or not it is just and equitable to make any order, will be more easily answered.

169.    Findings of fact concerning the parties’ financial history (i.e. their contributions) and their present circumstances and future prospects made in the context of s 79(4) will also assist, but such findings cannot (according to Stanford) be conclusive in determining whether or not it is just and equitable to make an order altering any particular property interest.

1. Thus the process ordinarily involves a staged process, but that “process” merely illuminates the path to the ultimate result. 

2. The Court should:

   a)As a starting point must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing; and then

   b)Consider whether it is just and equitable to make a property settlement order.  As set out in Stanford, such a consideration should not be guided by an assumption that the parties’ rights to or interests in property are or should be different from those that then exist. The question is whether those rights and interests should be altered. There is no presumption that one or other party has the right to have the property of the parties divided between them or a right to an interest in marital property that is fixed by reference to the various matters in s 79(4). This consideration addresses the prohibition in s 79(2) of the Act. The Court needs to conclude that it would be unjust or unfair to leave property rights intact. In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and thus, for example, Property O ownership or use of property by Husband and Wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship. In particular such a circumstance arises where both parties seek adjustive orders but are unable to agree as to same;

   c)Once the s 79(2) prohibition is overcome the Court can then consider the contributions made by the parties as defined in section 79(4)(a) to (c);

   d)Then consider the subjective considerations as to the parties by having regard to the provisions of section 75(2) in so far as they are relevant. Such a consideration can include arguments as to asserted add backs, alleged waste by a party or other financial resources that it is contended should be added to the actual pool as notional property or liabilities;

   e)In the light of the reconsideration of the role of s 79(2) as a threshold question it would be appropriate for the Court then to consider the “justice and equity” of the actual orders to be made (see Russell and Russell (1999) FLC 92-877, Teal & Teal [2010] FamCAFC 120) in the context of the Court’s obligation to make “appropriate orders” as provided for in s 79(1) of the Act.

The Property Interests of the Parties

1. At trial the parties were in substantial agreement as to their property interests and save for several discrete issues, the agreed property interests of the parties were as follows:

   Assets:

   Joint               C Town home  $950,000

   Joint               F Street Melbourne  $390,000

   Husband         E Street Melbourne  $725,000

   Joint               P Street Suburb Q  $675,000

   Husband         R Street Suburb S  $875,000

   Joint               O Street Sydney  $810,000

   Husband         M Street N Town  $475,000

   Wife               Home unit in City I, Country J                    $  95,000

   Wife               K Property, City I region Country J           $  40,000

   Joint               Citibank account …  $117,527

   Husband         CBA investment account 2623                   $        82

   Husband         CBA cash management account 479          $      422

   Joint               St George Bank offset account 555           $  84,925

   Joint               St George Bank Market St account $201,081

   Wife               CBA cash management account 494          $    5,468

   Husband         2010 Audi motor vehicle  $  55,000

   Husband         1999 BMW motor vehicle  $          0

   Wife               2009 Audi motor vehicle  $  55,000

   Total:             $5,554,505

   Liabilities:

   Husband         St George Bank mortgage (E St)     $311,514

   Joint               St George Bank mortgage (F St)     $191,724

   Joint               St George Bank mortgage (Suburb Q)        $395,367

   Husband         St George Bank mortgage (Suburb S)        $511,164

   Joint               St George Bank mortgage (O St)     $589,035

   Husband         St George Bank mortgage (M St)    $353,205

   Total:             $2,352,009

   
     

   Net:                $3,202,496

   Superannuation:

   Husband         First State Super  $327,711

   Husband         Uni Super  $  21,060

   Husband         RBF Superannuation   $  21,217

   Wife               Hesta Superannuation  $275,335

   Wife               First State Superannuation  $    5,320

   Wife               RBF Superannuation  $  19,839

   Total:             $670,482

   Overall Total: $3,872,978

1. There were otherwise discrete issues for determination as between the parties in summary as follows:

   a)As to whether K Property was to remain in the asset pool for division or to be retained by the Wife to be held on trust for the adult child of the parties and thus be excluded from the pool;

   b)The incidence and obligations of the parties in relation to capital gains tax relevant to properties to be sold by agreement and properties to be retained by the Wife;

   c)The Husband’s use of the parties’ primary St George Bank offset account post separation; and

   d)Consideration and treatment of question of the party’s legal fees both paid and unpaid.

The Primary Issue: s 79(2)

1. Over the period of the parties’ relationship which was for some 22 years the parties accumulated significant community property and property in their respective names. The strong inference being that such assets were accumulated for the common purpose of providing for their life into the future and in all probability ultimately for their adult child.

2. As a consequence of the parties’ separation and the commencement of proceedings as to property settlement in respect to which both parties seek disparate adjustive orders the Court is comfortably satisfied that it is just and equitable to make orders as to property adjustment under section 79 of the Act.

Contributions

1. Having regard to the nature of the concessions made by the parties as to contributions during the course of the trial the questions for determination by the Court as to contribution have fallen discreetly as follows:

   a)Whether the K Property should be included in the pool of assets for division having regard to the circumstances of its acquisition and if so  whether the inclusion of the property in the pool is thereby recognised by an adjustment as to contributions in favour of the Wife:

   The agreed value of this property as at the date of trial was $40,000. There is no evidence as to the value of the property as at the date of its acquisition by the Wife, nor indeed is there any evidence as to any contributions made to the property by the Wife or the Husband. The property was at all times owned by the Wife’s parents and was gifted to the Wife in 2004. In all of the circumstances particularly having regard to the value of the property as against the overall value of the other assets of the parties the Court is comfortably satisfied that it is appropriate in the circumstances of the acquisition of this property to omit the property from the pool of assets for division and to accede to the Wife’s request that she be declared to hold that property in trust for the adult child of the marriage. In those circumstances the parties are then in agreement that contributions by each of them during cohabitation and until separation should be regarded as equal.

   b)Whether in the period post separation the Husband’s use and application of funds from the parties’ primary St George Bank offset account would result in an adjustment in relation to post separation contributions in favour role of the Wife:

   It is noted in the context of this issue that it is the contention of the Husband that post separation contributions should be regarded as equal. In this regard it is the Husband’s submission that notwithstanding the diminution of funds in the St George Bank offset account post separation those funds were used primarily to meet payments and outgoings relating to the investment properties of the parties whether jointly owned or owned by the Husband. It is further contended by the Husband that the Wife has otherwise since separation in September 2010 had the use and benefit of the continuing occupation of the unencumbered matrimonial home at C Town.

   The Wife contends that the diminution in capital in the offset account from $221,000 at separation to about $85,000 at trial should be brought to account. The evidence is that subsequent to separation the account continued to be used for the payment of mortgages paid by bank authority and outgoings in relation to the parties’ investment portfolio. Subsequent to separation the Husband deposited into that account approximately $32,000 of his income later withdrawing $60,000 for his own purposes. In that transaction he removed some $28,000 of the parties joint capital in that account for his own purposes.

   Otherwise the Husband transferred from this primary offset account sums totalling approximately $57,000 to the St George Bank M Street offset account later reimbursing to the primary offset account the sum of $20,000.

   The balance of the diminution in the primary St George offset account was as a result of the ongoing payment of outgoings in relation to the various investment properties from that account without contribution to the account by either party from their respective incomes post separation. The effect of this circumstance is that the parties met investment property outgoings equally from the capital of the account post separation.

   The ultimate effect of the Husband’s dealings with the primary St George offset account post separation is that he effected a withdrawal of $20,000 from that account that sum representing joint funds and otherwise he was relieved of the obligation to meet investment property outgoings from his income, portion of which he had previously deposited to that offset account.

   This freeing up of the Husband’s post separation income was further assisted by his dealings with the Z Pty Ltd investment funds, $140,000 of which were deposited to the secondary offset account relating to the M Street property which together with the net sum of $37,000 deposited to the same account from the primary offset account reduced mortgage payments in relation to the M Street property by about $1000 per month. The Husband’s explanation for these transactions was that it reduced the payment of interest on the M Street loan, in circumstances where he having commenced to occupy that property, interest was not then deductible against his income.

   The Court can understand the common sense of this transaction but the circumstance that is clearly evidenced by the documents exhibited to the Husband’s affidavit sworn on 19 April 2002 and marked “CM2” is that mortgage payments in relation to the M Street property continued to be deducted from the St George Bank primary offset account that held the parties’ capital at the date of separation. This also freed up the Husband’s post separation income in that the parties were jointly contributing to his accommodation at M Street at least in relation to mortgage payments from the joint capital.

   Overall the Court is not satisfied that there should be any adjustment as between the parties in relation to the post separation period as to contributions. However the circumstances referred to above will be seen to be relevant in considerations touching upon other issues.

2. The Court is thus satisfied that overall the contributions of the parties should be seen to be equal.

Capital Gains Tax

1. During submissions the parties were in substantial agreement as to the prospective liability that presently attached to the various investment properties by way of capital gains tax at the agreed values. In relation to the various properties in the position was as follows:

   a)F Street Melbourne: approximately $21,763 with this property to be sold;

   b)O Street Sydney: in a range between $26,470 and $33,981 with this property to be transferred to the Wife;

   c)P Street, Suburb Q: in a range between $61,339 and $78,745 with this property to be transferred to the Wife;

   d)E Street, Melbourne: approximately $84,223 with that this property to be sold; and

   e)R Street, Suburb S: in a range between $55,000 and $61,985 with this property be transferred to the Wife.

2. There was no issue between the parties that in relation to the properties to be sold that the relevant capital gains tax should be brought to account in terms of the orders for sale.

3. The parties were in disagreement as to the treatment of capital gains tax in relation to the three investment properties to be retained by the Wife.

4. It was the Husband’s contention that there was no evidence from the Wife as to any intention to dispose of any or all of the properties to be retained by her and in such a circumstance the Court should not give consideration to the question of the Wife’s prospective capital gains tax liability being brought directly into account. It was conceded during submissions on behalf of the Husband that it was open to the Court to have regard to the Wife’s prospective liability when considering relevant section 75(2) factors provided that the Court was mindful as to the various mitigating factors such as the risk that there would ultimately be no sale of any or all of the properties or that the Wife’s income circumstances at the time of any sale may be such that any capital gains tax liability would be assessed at a lower rate than considered by the parties in the figures set out above. It was thus contended that the Court could take an estimate of the present primary liability of the Wife and bring to account under section 75(2) at best half of that liability.

5. It was contended on behalf of the Wife that her prospective liability should not be taken into account as a specific amount especially having regard to the differing marginal tax rates that may apply depending on the Wife’s income at the time. However the Court should have regard to her overall notional liability which the Wife contended was approximately $120,000 and make some adjustment under section 75(2) in the range of one half to two thirds of that notional liability.

6. It was contended on behalf of the Wife that it was appropriate to have regard to capital gains tax as these properties historically have been and remain “investment properties” comprising part of the matrimonial pool. It was further contended that as it was agreed between the parties that the matrimonial home was to be sold there was a prospect that the Wife may have on the course by way of sale of one or more of the investment properties to provide accommodation for herself. Regrettably there was no evidence in support of this latter contention.

7. As to how in proceedings under section 79 the Court should deal with capital gains tax the Full Court stated in Rosati and Rosati (1998) FLC 92-804:-

   It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a Court in proceedings under s.79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:-

   1)Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.

   2)If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.

   3)If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid-term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.

   4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset.  In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.

1. The evidence before the Court is clear that the properties to be retained by the Wife represent part of the parties’ investment portfolio. There is a concession by both parties that these properties have a clear and present liability attached to them in terms of capital gains tax in the event that at present values the properties or any one of them were realised.

2. However in the absence of evidence as to any intention by the Wife to sell the subject properties in the immediate future the Court is not persuaded that her prospective capital gains tax should be brought to account in the asset pool as a finite sum.

3. An adjustment for the future under s 79(4) (d)-(g) FLA is an imprecise exercise.  Senior counsel for the Husband has urged that there should be some transparency in the Court’s reasoning about the basis upon which capital gains tax and tax on retained earnings is being treated.  This introduces some artificiality into the overall assessment of these factors.  The Full Court on a number of occasions have warned that an assessment under s 79 FLA is “not generally an accounting exercise nor is it analogous to an award of damages or compensation which might call for a division into component parts” but rather “It is an adjustment….after identifying and balancing the matters to be considered” (Brandt & Brandt (1997) FLC 92-758 at 84,336 and 84,343; see also Robb & Robb (1995) FLC 92-555).  In Tomasetti & Tomasetti (2000) FLC 93-023, the Full Court at paragraphs 113 and 114 warned that “the whole is not necessarily the sum of its component parts” and the process of adding up individual factors under s 75(2) to which a particular percentage has been assigned is flawed in principle. Nonetheless, I accept that it is appropriate, in the circumstances of this case, to approach the s 79(4)(d)-(g) FLA analysis on the basis that all matters excluding capital gains tax, sale costs and tax on retained earnings be considered and weighed and that the tax and costs be separately assessed.” (per Watts J. IABH & HRBH  [2010] FamCA 110) This Court is mindful of the approach adopted by His Honour.

4. In accordance with the commonality in the contentions on behalf of both the Husband and the Wife the Court is satisfied that it is appropriate to have regard to a significantly discounted sum in relation to the Wife’s prospective capital gains tax liability in considering relevant section 75(2) adjustments.

Section 79(4)(d)-(g) Factors

1. The Court is required to have regard to the effect of any proposed orders upon the earning capacity of either party to the marriage, any other order made under this Act affecting a party to the marriage or a child of the marriage and any child support 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. None of these considerations are relevant in this matter.

Section 75(2) Factors

1. The Court is otherwise required to have regard to the matters referred to in subsection 75 (2). The relevant matters for consideration are set out below.

Age and Health

1. The Husband is aged 48 and the Wife aged 46. Both are practising health professionals.

2. Both parties have adduced evidence as to their underlying health circumstances.

3. The Husband suffers from some psychological distress with his symptoms related to his various spinal pathologies and the pain syndromes but, as opined by his general practitioner Dr T, mainly to his separation from the Wife.

4. The Husband otherwise suffers from cervical, thoracic and lumbar back pain with some functional impairment and after undergoing a surgical procedure is reported by his general practitioner to be in the recovery phase. The Husband otherwise has multilevel spinal discal disease and spondylosis, motor agitation secondary to his psychological distress and tongue bruxism directly related to his psychological distress. The Husband’s general practitioner notes that the Husband has been working intermittently full time with interruptions due to his medical circumstances and is reliant upon flexibility afforded by his university position to assist with his coping. The Husband is on a regime of medication.

5. As to his prognosis the Husband’s general practitioner observes that the Husband remains predisposed to spinal discogenic dysfunction with a consequent local, radiating and referred pain and is likely to require further neurological procedures into the future together with ongoing analgesic and anti-neuritic medication. It is expected that the Husband’s component of his psychological condition relating to the separation from his Wife may ease in the intermediate term but he will remain subject to secondary distress from his otherwise physical symptoms and will require some ongoing intervention for depression and pain management.

6. The Husband’s consultant psychiatrist Dr U observes that the Husband pre-morbidly is somewhat perfectionist and obsessional. It is further observed that these personality traits had made it difficult to him to get over the injustice of his current situation where he is having to constantly justify his financial actions in the past and defend himself in regards to these decisions.

7. Dr U opines:

   diagnostically I felt he presents with a somatisation disorder not otherwise specified, that had been precipitated by the stress of the legal wrangles between he and his ex-Wife. These symptoms have impacted on his ability to work full time and affected his relationships particularly with his girlfriend….. [Dr Mahoub’s] symptoms continue to significantly impact on his day to day life..... The ongoing pressures of the Court case had begun to affect his mood and exacerbated his anxiety. This had significantly impacted on his ability to work and he was contemplating cutting down his hours so we could cope.

1. Dr U expresses the view that the Husband’s prognosis is guarded and that despite him being high functioning and intelligent the ongoing stressors and protracted legal wrangling have worn him down and significantly weakened his psychological resilience.

2. It is apparent that the resolution of these present proceedings may well see the Husband on the path to some recovery.

3. The Wife’s consultant psychiatrist Dr W describes a history of a major depressive episode in mid-2009 and observes that the Wife’s psychiatric illness had occurred in the context of the breakdown of her marriage relationship and significant physical problems. Her physical problems have included a benign fibroma in her throat resulting in burning mouth syndrome and a breast lump in 2009. Historically the Wife has been on antidepressant medications and other medications to assist with her sleep patterns. Dr W observes in his report dated 3 April 2013 that the Wife remains markedly depressed most of the time and that energy levels remain very low such that she is only able to work four hours a day two days a week. Her diagnosis is one of major depressive episode, severe, with melancholic features.

4. Dr W observes that the Wife’s condition has a very significant impact on her capacity to work. She has a vulnerability to further episodes of depression and an inability to work in the future. She will require ongoing treatment until her symptoms have resolved or at least significantly improved.

1. The observations and opinions of Dr W are supported by the report of the Wife’s treating psychologist Ms V.

2. The Wife relied upon a report from Dr Y, consultant neurosurgeon. The Wife suffers from cervical spondylosis historically. Her symptoms are such that they do not warrant any invasive treatment but the gradual progression of the disease is indicative of perhaps cortisone injections being required at some future time. Dr Y opines that her cervical symptoms have impacted upon her stamina and ability to provide full service as required by a busy health professional and this circumstance will in all probability deteriorate into the future where she would be unable to work eight hours a day five days a week.

3. A consideration of this factor favours the Wife.

Income and Property

1. The property of the parties is referred to above.

2. During the course of the trial there was a significant issue as to the earnings of both the Husband and the Wife.

3. By reason of the parties ongoing health circumstances it is of some utility in the Court looking at their historical taxable incomes and forming a view as to present capacity by reason of averaging. Both parties contended that they had no issue with the income capacity of the other on the basis that they were both working to capacity within the constraints of their present health circumstances.

4. Whilst the parties respective taxable incomes is to some extent affected by negative gearing arrangements in relation to their investment properties the net taxable income is a reasonable reflection of their incomes historically.

5. The Wife’s taxable incomes for the financial years ended 30 June 2007 to 30 June 2012 are as follows:

   2007              $157,135

   2008              $131,801

   2009              $  74,393

   2010              $141,647

   2011              $146,268

   2012              $122,772

   Total:  $774,016

   Otherwise in the financial year ended 30 June 2013 the Wife received  gross income in her employment as a health professional in the sum of $130,457, making a total of $904,473.

6. An average of these figures over a period of seven years provides an average income of approximately $129,210.

7. The Husband’s taxable incomes for the financial years ended 30 June 2007 to 30 June 2013 are as follows:

   2007              $264,757

   2008              $203,184

   2009              $151,332

   2010              $317,793

   2011              $424,778

   2012              $365,773

   2013              $238,773

   Total:  $1,966,390

8. The Husband’s income averaged over the previous seven years is in the sum of $280,913.

9. It was contended on behalf of the Husband that the Court would regard his income capacity to be in the order of about double that of the Wife. It was contended on behalf of the Wife that the Court would regard to the Husband’s income to be somewhere between two and three times that of the Wife.

10. It appears that the present income capacity of the Wife as asserted by her reflects her historical average. In the context of her ongoing health circumstances the Court is satisfied that the Wife is presently working to capacity.

11. As to the Husband his 2013 income is somewhat below his historical average. This appears to be as a consequence of his lesser paid work at the University of N Town and the reduction of his working hours as a health professional. As was properly contended by the Wife should the Husband work as a health professional the hours that he otherwise works at the University then his income capacity would in all probability reflect historical average. The Court accepts this submission.

12. A consideration of this factor in terms of the disparity in income and the parties’ respective capacities for appropriate gainful employment favour the Wife.

Responsibility to support any other person

1. The Wife contends that she has a prospective obligation to provide some indeterminate future support for her elderly mother who presently resides in the Country J and her brother who suffers from some disability. The Husband also contends for a similar obligation.

2. These prospective obligations are so nebulous and so indeterminate that the Court considers whatever the parties’ moral obligations may be that they are not obligations that should in any way be reflected in the Court’s consideration of financial matters between the parties to these proceedings.

3. Both parties have an ongoing obligation in relation to their adult child. However that child, Ms L, is now 24 years of age and whilst there was some evidence as to funds provided to the child by the Husband and support by the Wife there was little or no evidence as to the child’s particular financial circumstances or indeed a need for such support other than the generosity of one parent or the other.

4. The Court considers this circumstance to have no relevance to the Court’s present considerations.

Superannuation

1. No superannuation split was sought by either party. Both parties contended that the Court could comfortably deal with the superannuation and non-superannuation assets in the one pool by reason of the parties’ respective concessions in relation to contributions and the discrete issues as to contributions that remained to be determined. The Court is comfortably satisfied that this was a proper approach to be adopted.

2. Both parties have accumulating superannuation entitlements as referred to above. There is no doubt that the Husband will continue to accumulate superannuation at a faster rate than that of the Wife by reason of his ongoing earning capacity being at least double that of the Wife.

3. However that is an incidence of earning capacity which the Court has considered above and a separate consideration of the parties’ respective superannuation and their prospects in relation to superannuation does not call for any further adjustment in favour of either party.

Any other fact or circumstance: Capital Gains Tax

1. There are no other relevant circumstances under section 75(2) contended for by either of the parties save for the issues of the Wife’s prospective capital gains tax liability in relation to the investment properties to be retained by her and the question of legal fees.

2. The liability for capital gains tax inherent in the investment properties to be retained by the Wife taking a mid-range approach in the figures adopted by both the Husband and the Wife sees the Wife with a prospective liability on present value of about $150,000. For the reasons referred to above the Court considers that it is appropriate on a section 75(2) adjustment basis to discount this figure by 50 per cent to the sum of approximately $75,000. The Court will have regard to this figure in considering an overall section 75(2) adjustment.

3. At the conclusion of the trial both parties provided to the Court documents that now comprise Exhibit I as to their legal fees.

4. The Wife has paid only a small proportion of her legal fees and has outstanding and prospective legal fees in the sum of approximately $196,700.

5. The Husband has legal fees to conclusion of the trial of $162,358, of which he has paid $143,415 in payments commencing on 28 September 2011.

6. In Omacini and Omacini [2005] FamCA 195 the Full Court identified three clear categories of cases where it was appropriate to notionally add back to the pool assets which were said by the Full Court to “no longer exist”. Those three categories were:

   a)monies spent on legal fees:

   b)monies disbursed by way of premature distribution of matrimonial assets; and

   c)monies lost by one party either during or after the marriage as a result of a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or as a result of reckless negligent or wanton behaviours which had the effect of reducing or minimising the value of assets.

7. As the Full Court said in Gollings v Scott [2007] FamCA 397:

   68. As a general rule once the parties have separated, subject to obligations of maintenance and support, and subject to the type of considerations described in Kowaliw (1981) FLC 91-092 relating to waste, each party is entitled to get on with his or her life independent of the other… It would not normally be appropriate some years after separation to require each of the parties to account for any monies they had spent post-separation so as to determine whether or not that expenditure was reasonably necessary for their own self-support, and to the extent that it was not, to determine whether it would be proper to add it back into the pool of assets available for division between the parties.

   69. In C & C (1998) FamCA 143 the Full Court (coram: Nicholson CJ, Ellis and Kay JJ) when examining some small add-backs into a pool of $3 million said:

   45. … The cases which deal with notional add-backs are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account. (See Kowaliw (1981) 7 Fam LR 13; [1981] FLC 91-092, esp at FLC 76,645; Townsend (1994) 18 Fam LR 505; [1995] FLC 92-569; Farnell, (1995) 20 Fam LR 513 (expenditure on legal costs notionally added back because of s117).

   46.      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.  Providing modest support for their adult children or taking not inappropriate holidays for themselves seems to fit comfortably within that description.

8. The circumstances as to the Husband’s dealings with the parties’ investment account and primary St George Bank offset account post separation have been set out above in detail. The way in which those funds were applied resulted in the Husband having little call if any on his post separation income in relation to payment of outgoings for the parties’ investment property portfolio, with ongoing payments diminishing the parties’ capital that existed at separation.

9. The Court is of the view that having regard to those circumstances and the consequent freeing up of the Husband’s post separation income that in all of the circumstances it is appropriate to make an adjustment in favour of the Wife under section 75(2) having regard to the totality of the Husband’s paid legal fees.

Overall s 75(2)

1. The overall asset pool of the parties is in the sum of $3,872,978. Excluding K Property from the asset pool as proposed above the available pool for distribution between the parties is in the sum of approximately $3,832,978. That sum does not take into account what ultimately will be the selling costs in relation to the properties to be sold and the capital gains tax liabilities to be paid out of the proceeds of sale of two of those properties.

2. The Court is conscious of the fact that each 5 per cent adjustment in favour of the Wife will be reflective of a sum of about $191,000 not allowing for the figures not taken into account as referred to above. Such an adjustment would create a disparity between the parties of about $382,000.

3. In all of the circumstances the Court is satisfied that having regard to the relevant matters considered under section 75(2) that an adjustment in favour of the Wife of 5 per cent is called for.

Conclusion

1. Having regard to the Court’s findings in relation to contributions above then the overall pool is to be apportioned as between the parties as to 55 per cent to the Wife and 45 per cent to the Husband.

Appropriate Orders

1. The parties are in agreement that the three of the properties being the former matrimonial home at C Town, the investment property at E Street, Melbourne and the investment property at F Street Melbourne will be sold.  They also agree that the M Street N Town property be retained by the Husband and that the three remaining investment properties be transferred to the Wife.

2. Accordingly the Court will make discreet orders as to the sale of each of those properties with the net proceeds of sale allowing a provision for expected capital gains tax to be divided as to 55 per cent to the Wife and 45 per cent to the Husband.

3. The remaining assets in the matrimonial pool have a net value of $2,271,216. The Wife’s 55 per cent of this figure is in the sum of $1,249,169 and the Husband’s 45 per cent is in the sum of 1,022,047.

4. Assets to be retained by the Wife are as follows:

   Property at City I  $  95,000

   P Street, Suburb Q net equity  $279,633

   R Street, Suburb S net equity  $363,836

   O Street, Sydney net equity  $220,965

   CBA account  $    5,468

   Motor vehicle  $  55,000

   Superannuation  $300,494

   Total:             $1,320,396

5. Accordingly the Wife will be required to pay to the Husband an adjustive payment in the sum of $71,227. Such payment can be made by the Wife to the Husband from her share of the net proceeds of sale of the former matrimonial home at C Town.

6. Assets to be retained by the Husband are as follows:

   M Street, N Town net equity  $121,795

   Joint Citibank account  $117,527

   CBA account 2623  $        82

   CBA account 479  $      422

   Joint St George Bank offset account …  $  84,925

   Joint St George M Street offset account …  $201,081

   Motor vehicle  $  55,000

   Superannuation  $369,988

   Total:             $950,820

   Plus adjustive payment from the Wife  $  71,227

   Total:             $1,022,047   

7. The Court considers that orders to give effect to the division of the parties’ property pool as set out above are appropriate and orders will be made accordingly.

I certify that the preceding one hundred and nineteen (119) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 23 August 2013

Associate: 

Date:  23 August 2013