Martino and Lochhead - [2007] FMCAfam 423

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MARTINO & LOCHHEAD

[2007] FMCAfam 423

FAMILY LAW – Property – “loan” from husband’s parents found to be wholly intended for benefit of husband – just and equitable for husband to retain former matrimonial home – s.75(2) factors give rise to 20 per cent adjustment in favour of husband – parties directed to draft minutes giving effect to reasons for decision.

Family Law Act 1975 (Cth), s.75(2)

Kessey v Kessey (1994) FLC 92-495

Applicant:

JOANNE MARTINO

Respondent:

JOHN KEVIN LOCHHEAD

File number:

MLM 7769 of 2005

Judgment of:

Burchardt FM

Hearing date:

18 June 2007

Date of last submission:

18 June 2007

Delivered at:

Melbourne

Delivered on:

17 August 2007

REPRESENTATION

Counsel for the Applicant:

Mr C. Fatouros

Solicitors for the Applicant:

McMahon & Treby Solicitors

Counsel for the Respondent:

Ms C.J. Jenkins

Solicitors for the Respondent:

Kempsons Lawyers

ORDERS

(a)the wife forthwith do all such acts and things and sign all such documents as may be required to transfer to the husband at the expense of the husband all of her right, title and interest in the real property situate at and known as 5 LAW COURT, SOUTH MORANG, VICTORIA 3752 being the whole of the land more particularly described in Certificate of Title Volume 10052 Folio 376 (“the real property”);
(b)the husband indemnify the wife against all payments and liability pursuant to any mortgage over the real property and all apportionable rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind and transfer any such mortgage into his name alone.
The wife provide to the husband a Withdrawal of Caveat in registrable form.
Pending completion of the transfer:
(a)the husband have the sole right to occupy the real property;
(b)the parties hold their respective interests in the real property upon trust pursuant to these orders;
(c)neither party encumber the real property without the consent in writing of the other party.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders;
(b)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(c)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
Any submissions by the Respondent as to costs be filed and served on or before 4 September 2007.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 7769 of 2005

JOANNE MARTINO

Applicant

And

JOHN KEVIN LOCHHEAD

Respondent

REASONS FOR JUDGMENT

This is a property dispute. On 13 September 2005 the husband filed an application for divorce.
On 12 October 2006 the wife filed an application in this Court seeking orders that the former matrimonial home at 5 Law Court, South Morang be sold and that the residual balance following payment of the usual costs be divided equally between the parties and a further order that the parties otherwise keep all assets in their own possession.
By way of response filed on 22 November 2006 the husband sought that the matrimonial home be transferred wholly to himself, and that each party retain the assets in their possession.
There was a rather cryptically expressed order 4 in the husband’s response that, "The sum of $300 per week or alternatively a lump sum capitalised payment in lieu of periodical payments in such amount as is deemed appropriate by this Honourable Court" was sought. One might infer that the husband sought that that money be paid to him rather than the other way around, but that matter has not been pursued before me and is not necessary to make any finding about it.
Given the confusion about who is the Applicant and who is the Respondent, it is more convenient to refer to the parties as husband and wife in these reasons for judgment.
The husband was born on 21 March 1965 in New Zealand. He is employed in customer service with Telstra Ltd.
The wife was born on 30 January 1966 and is employed at the Austin Hospital as a courier.
The parties married on 11 January 1998 and separated on 31 March 2003. The wife presently earns $789.00 per week and has been living with her partner Neville Kelly since October 2004 in rental accommodation.
The husband is paid $615.00 per week and continues to live in the former matrimonial home.
In opening the case counsel for the wife indicated that there were deficiencies in the husband's declarations as to his superannuation.

He confirmed that the wife seeks a payment to her of $40,000.00.

He confirmed that the husband had paid the mortgage and other outgoings on the former matrimonial home since separation.
It emerged that a significant issue in the case is an alleged $82,000.00 loan from the husband's parents which together with interest presently stands at a sum of $102,000.00.
I invited an opening submission from counsel for the husband prior to evidence, and she indicated that her client sought to keep the car in his possession, and that so far as the husband was concerned, superannuation was not an issue in this case insofar as it was simply sought that each party retain the superannuation presently accrued to their benefit in the relevant trust funds.
It should be noted that the husband became paraplegic in 1982, that his injury took place in New Zealand, that he is not in receipt of any statutory benefits from any Australian agency, and is not likely to be so at least insofar as his accident is concerned. He may of course

be capable of accessing a disability pension.
The former matrimonial home has an agreed value of $260,000.00 less a mortgage now in the sum of $134,535.00.
I should interpolate that the assets of the parties such as their cars, household contents and the like are not in issue between the parties and are as set out in the wife's outline of case document. The only substantive issues between the parties are the matrimonial home and their superannuation.
The wife gave evidence that she had been employed at the

Austin Hospital from 1985 not 1988 (as set out in para.3 of her most recent affidavit filed on 15 June 2007). She deposed that she had paid for the wedding between the parties in the sum of $17,000.00

in total. She deposed that a personal loan from Pulse Credit Union of $12,000.00 had been for a Ford Futura motor vehicle bought because of the husband's needs as a paraplegic. She deposed that at the end of the marriage she had traded that for a smaller car and that the loan was now $8,000.00.
The wife deposed that her hospital superannuation had been about $11,000.00 before she married, whereas it is now worth in excess

of $69,000.00.
The wife deposed in evidence‑in‑chief that her Health Superannuation was worth about $25,000.00 in 2002 and $28,000.00 in 2003.
The wife tendered through her counsel a superannuation form (exhibit A1) showing her superannuation in 1997 as $11,273.00 and

in 1998 of $14,087.00.
Exhibit A2 shows the wife's superannuation as being worth $25,950.00 on 30 June 2002 and $28,474.00 as at 30 June 2003.
I will return to the apparently substantial increase in the wife's Heath Super superannuation in due course.
Under cross‑examination the wife said that following separation she had rented in Reservoir and that she'd been living with her current partner for about three and a half years. She said her current partner's income was about $36,000.00 per year from labouring at the hospital and that she - the wife - paid rent in the sum of $390.00 per month being half the rent for the two bedroom unit in which they lived.
She said that the husband bought a Nissan motor vehicle with redundancy money in 2000 at a cost of $28,000.00. She said she did not know $6,000.00 of that money came from the husband's father.
Although closely cross‑examined about the costs of the wedding,

I found the wife's evidence in this regard compelling. I accept that she paid $17,000.00 for the wedding. She pointed to a particular receipt for the hire of the reception centre in value of $7,000.00, and the other ancillary costs placed at $10,000.00 are well within the range for such ceremonies. It is more probable than not in my view that she herself paid for all the costs of the wedding.
The wife confirmed that the husband had been in hospital a number of times and said that he was employed by the Australian Quarantine Service (“AQAS”) or Telstra Ltd (“Telstra”) for most of the time. She confirmed that the husband had been on sick leave when he was in hospital. She said that she paid the bills and he paid the mortgage.
She agreed that the husband's parents had advanced $82,000.00 in 2002 which had been applied to reduce the mortgage on the former matrimonial home. She denied that she had ever seen any loan agreement and thought that this was an advance on inheritance.
She said that the bathroom in the matrimonial home was not finished when they moved in but a substantial amount of other work had been done before that happened.
The husband tendered through counsel a loan document dated 23 February 2002. That is exhibit R1.
That document is curiously phrased. It is headed "TO WHOM IT MAY CONCERN" and goes on to say:
We, Robin Andrew and Lola Thora Lochhead have loaned to Kevin John Lochhead the sum of $100,000 (NZ) to assist in the purchase of a house at 5 Law Court, St Morang Melbourne:
Interest at 5 per cent per annum to be added to principal
The principal plus interest to be repaid on either the death of John Kevin Lochhead or the said house at 5 Law Court St. Morang 3752 Melbourne is sold or vacated by Kevin John Lochhead.
The husband gave sworn oral evidence that he signed this document and that his parents signed it in his presence in New Zealand,

so accordingly in my view it was admissible.
The husband further said in evidence that he worked for 15 months for AQAS as a casual and that he had worked for TNT before that.

He said he had no idea what superannuation he had from either of those jobs and would not know where to begin to find out. He said that the Futura motor vehicle was bought in 1999 and that he thought it was paid off when the wife cashed in her AMP shares in 2001.
Under cross‑examination the husband confirmed that no payments were compelled pursuant to the alleged loan agreement unless he died or the house was sold; that he had worked for eight and a half of the last 13 years and been in his current job since 2000.
The husband has said that Telstra only allows so much sick leave following which medical retirement is compelled but did say that he had not been told that he was on his last chance. He said that paraplegia was his main health problem but not the only one.
He said that it had taken him six months to get his AQAS job, and took him 12 months to get the job with Telstra.
He said that relevantly he paid only small amounts at present for personal care at home.
In submissions, counsel for the husband said there were two areas in dispute. She said firstly that the $82,000.00 plus interest ($82,000.00 being an agreed transposition of the $NZ100,000.00 referred to in the loan agreement) should not be included in the pool. Alternatively, she said that it should be assessed as being a substantial contribution by the husband's parents.
She submitted that the day to day contributions of the parties were roughly equal because the husband paid the mortgage and the wife paid the bills.
She submitted that the husband had brought some $28,000.00 to $30,000.00 into the pool from his redundancy pay, whereas the wife's contribution had been $17,000.00 for the marriage. She submitted that the wife had at that time a motor vehicle and credit card debts. She submitted that a 5 per cent adjustment should be made to the husband in respect of initial contributions.
She said that if the $82,000.00 were included in the pool, then

the husband's contribution should be assessed at an extra 20 per cent.
Turning to the question of future needs, counsel submitted factors under s.75(2) of the Family Law Act 1975 (“the Act”) strongly favoured the husband. A doctor's report from a Dr Hill, filed

15 June 2007, had not been challenged. That report suggests that were the husband to lose his present job he would no longer be employable. She submitted that employment to age fifty-five was the best possible outcome for the husband, and that in any event he faced a number of

difficulties arising from his disability. Any motor vehicles would certainly have to be modified for him. She submitted that the wife by way of contrast had re-partnered, her partner had roughly the same income as herself and she had the benefits thereof.
She submitted that it would be difficult from any view for the husband to re-partner. She submitted that a 20 per cent adjustment in respect of s.75(2) factors was appropriate.
She submitted that it was just and equitable that the husband keep the house, and that any adjustment should be reflected in some adjustment in superannuation by way of a splitting order.
Counsel for the wife confirmed that she sought a $40,000.00 payment to her. He submitted that this could in part be addressed by a splitting order in superannuation.
Counsel conceded that $82,000.00 had been advanced by the husband's parents. He submitted that the wife put an initial contribution

of $17,000.00 and pointed out that some $10,000.00 committed towards the purchase of furniture was in fact conceded. He submitted that the wife had done all the home making.
He conceded that the s.75(2) factors assisted the husband, in the context of their five year relationship. He submitted this should give rise to no more than a five per cent adjustment, and that the adjustment in respect to contributions should be 60:40 thus leaving her 65:35 split in the property, giving rise to the $40,000.00 payment to the wife.
In my view the $82,000.00 plus the interest thereon amounting to

a total of $102,000.00 should not be excised from the pool. It was contributed to the parties during the currency of the marriage and has given rise to a significant diminution in the mortgage applicable to the former matrimonial home.
Nonetheless, the sum was applied by the parents wholly to the benefit of their son. Exhibit R1 is executed between the husband and his parents. I accept that the wife had not seen it at any stage prior to these proceedings.
I would interpolate that I found both the husband and the wife to be truthful witnesses who gave their evidence in a clear, direct and honest way.
The husband said that the $82,000.00 was a loan. He said that his parents could not afford to give him that sort of money.
Notwithstanding that this evidence was given with palpable honesty, he is plainly wrong. The husband's parents advanced him the sum of $82,000.00 in 2002 on the footing that there was no necessity for repayment until either the husband died or the house was sold.
Notwithstanding that the husband's health problems make any prognosis as to his future life uncertain, it is plain that the parents have been able to subsist for the last five years without any benefit from the loan that they gave to their son. Plainly they can manage without this money. They have done so. It is not open to them to call up the debt, at least in the foreseeable future.
The loan document is not as I find a fraud or a forgery. Such a finding would be a serious matter and I am not prepared to make it, not least because I wholly believe the husband when he says this document was executed in his parent's presence.
Nonetheless, should the husband live longer than his parents, the benefit of the loan will fall presumably to the parents’ estate.

The husband informed me that he has one sibling who it appears has also received some financial assistance, and it is at least possible that the parents will in fact leave all their property and possessions to their two children.
On any view the position in respect to the repayment of the loan is so clouded by uncertainty that I am not prepared to find that there is any kind of enforceable liability in respect for it. I think it is more probable than not that the loan agreement (exhibit R1) was drafted as a belt and braces operation designed to cover circumstances when the husband might unexpectedly predecease his parents. It is far more probable than otherwise to me that while the loan is genuine in the sense that it has been executed, it means what it says and it will not be enforced in the foreseeable future.
Against this, however, on the authority of Kessey v Kessey (1994)

FLC 92-495 the loan is taken wholly to be intended to benefit the husband. In that case, the Full Court said:
In other words, a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.
There is no evidence here that the husband’s parents did not intend to benefit only their son. Indeed the loan agreement strongly suggests the contrary. In the circumstance, the loan funds (in which I would include the accrued interest) must be credited/debited solely to the husband.

In other words, the credit of the advance is wholly in favour of the husband, but he is wholly liable to discharge it.
Once one takes the $102,000.00 now owing out of the pool, there is only a very small amount of money available for actual distribution. The mortgage on the property is over $134,000.00 and its total value is $260,000.00. If one adds in the $102,000.00 the total is $236,535.00 leaving a balance of just under $24,000.00.
I do not accept the criticisms advanced of the husband's superannuation disclosure. While I accept that he must have received superannuation from TNT and even indeed from AQAS, the amount is not likely to have been very great. It would have accrued during the relatively early years of the superannuation guarantee fund obligations, and is unlikely greatly to alter the overall picture which is that the wife's superannuation, (and I accept her assertion that she has made voluntary contributions only into her AMP superannuation) is in excess of $85,000.00 whereas the husband's is, with Telstra, $22,153.00 and some undisclosed amount but not likely to be of any great size with TNT and AQAS.
The truth is that the s.75(2) factors greatly favour the husband.

Very regrettably the prognosis as to his health is poor. It is all set out in the report of Dr Hill which has not been the subject of challenge and which I accept.
The husband has undertaken all debts in respect of the matrimonial home since separation. It is easy to see that it would be very difficult for him, not to say expensive, to find anywhere else to live. He has not re-partnered and his chances of doing so must be said to be uncertain at best given his health problems.
I would assess the s.75(2) factors as giving rise to a 20 per cent adjustment in the husband’s favour.
There is only an equity of $24,000.00 in the matrimonial home to divide even if I was minded to do so.
Albeit that the wife's superannuation has accrued very substantially in recent years post-separation, the fact is that that increase took place because of the earlier building years during which, at least in part, the relationship subsisted.
In all the circumstances it would not be just and equitable to require the husband to pay anything to the wife by way of superannuation splitting or otherwise. In my opinion the husband should retain the former matrimonial home and its burdens in their entirety and each party should retain their chattels and their possessions.

The parties will be requested to bring in minutes to give effect to these reasons for decision.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Deputy Associate: Ann Pretty

Date: 17 August 2007