Mather and Mather
[2016] FCCA 2082
•31 August 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MATHER & MATHER | [2016] FCCA 2082 |
| Catchwords: FAMILY LAW – Property Settlement – which party retains former matrimonial home – consideration of husband’s greater initial financial contribution – valuation of (omitted) business. |
| Legislation: Family Law Act 1975 (Cth) ss.79, 75(2) |
| Cases cited: Williams & Williams [2007] FamCA 313 |
| Applicant: | MS MATHER |
| Respondent: | MR MATHER |
| File Number: | HBC 359 of 2015 |
| Judgment of: | Judge McGuire |
| Hearing dates: | 25 & 26 July 2016 |
| Date of Last Submission: | 26 July 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 31 August 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Turnbull |
| Solicitors for the Applicant: | Ogilvie Jennings |
| Counsel for the Respondent: | Mr Trezise |
| Solicitors for the Respondent: | Dobson Mitchell Allport |
ORDERS
(A)That within 28 days of the date of these orders the applicant shall:
(1)Transfer and/or vest all her right, title and interest to the husband absolutely:
(i)The company and business (omitted);
(ii)The Toyota Kluger motor vehicle;
(iii)All personalty, chattels, balances of bank accounts and like and investments in the possession or under the control of the husband as of the date of these orders.
(2)Be personally responsible for and indemnify the husband in respect of the following liabilities:
(i)Any and all liabilities attached to any asset to be retained by the wife pursuant to these orders including but not limited to the mortgage secured by the property situate at Property L in Tasmania and in this respect the wife is to make her best endeavours to refinance that mortgage and provide a Release to the husband of his obligations under the mortgage;
(ii)The (omitted) line of credit for the wife’s visa cards;
(iii)Any and all liabilities incurred by the wife since separation in either joint names or her name alone but subject to these orders.
(B)That the husband shall contemporaneously with the transfer orders in (A) above:
(1)pay to the wife a lump sum of $14,192.00;
(2)transfer and/or vest all his right, title and interest in the following to the wife absolutely:
(i)The property situate at Property L in Tasmania;
(ii)The (omitted) Scooter;
(iii)All personalty, chattels, motor vehicles and balances of any bank accounts or like investments in the name of or under the control of the wife as of the date of these orders.
(3)Be solely responsible for and indemnify the wife in respect of the following liabilities:
(i)Any and all liabilities attached to any of the assets to be retained by the husband pursuant to these orders including but not limited to the (omitted) Loan and, if applicable, the husband should make his best endeavours to provide the wife with any Release in respect to any of her obligations under this loan;
(ii)The husband’s credit cards;
(iii)Any and all liabilities incurred by the husband since separation in either joint names or in his name alone.
(C)(1) That pursuant to s90MT(4) of the Family Law Act 1975 (as amended) a base amount of $11,602.00 be allocated to the applicant wife, Ms Mather out of the interest of the respondent husband, Mr Mather in the (omitted) Super – Member No (omitted).
(2)The following order has effect from the operative time.
(3)That pursuant to s.90MT(i)(a) of the Family Law Act 1975, whenever the Trustee of the (omitted) Super – Member No: (omitted) makes a splittable payment in respect of the respondent’s superannuation interest in (omitted) Super – Member No (omitted) (“the Fund”) the applicant shall be entitled to be paid by the Trustee the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 and that there be a corresponding reduction in the entitlement in which the Respondent would have had in the Fund but for this order.
(4)That having being accorded procedural fairness in relation to the making of this order, this order binds the Trustee of the (omitted) Super – Member No (omitted).
(5)That the operative time for this order is 4 days from the date of these orders.
(6)That the parties agree that the gross value of the respondent’s accumulation interest in his (omitted) Super – Member No (omitted) is $47,343.00 and that value has been calculated in accordance with the Family Law (Superannuation) Regulations 2001.
IT IS NOTED that publication of this judgment under the pseudonym Mather & Mather is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
HBC 359 of 2015
| MS MATHER |
Applicant
And
| MR MATHER |
Respondent
REASONS FOR JUDGMENT
Property matters remain alive between these parties. Parenting issues were agreed by consent prior to the taking of evidence and the children X born (omitted) 2003 (aged 12 years) and Y born (omitted) 2005 (aged 10 years) will live in an equal-time arrangement between the parents.
The remaining issues can be summarised as follows:
i)Each of the parties seeks 55% of the net tangible asset pool with an agreement that their combined superannuation entitlements be split 50/50 to each;
ii)Each of the parties desires to retain the former matrimonial home as part of his/her entitlement;
iii)How the Court should deal with the value of the husband’s (omitted) business and in particular, the weight, if any, given under s75(2) of the Family Law Act 1975 (“the Act”) in respect of his ongoing income from that business.
The applicant wife is 40 years of age. The respondent husband is 37 years old.
The parties commenced cohabitation in 1999. They married on (omitted) 2001. Separation occurred in March or May 2015 when the respondent moved out of the former matrimonial home. The applicant wife remains in residence in the home.
The applicant works as an (occupation omitted) with an income of approximately $60,000 per annum. She has re-partnered with Mr G. Mr G gave evidence on affidavit and was cross examined. His evidence was somewhat vague as to his intentions with respect to his own property settlement with his former wife and as to his intentions with respect to his own home. However, on the balance of probabilities, I find that the applicant and Mr G prefer to live together in the property at Property L. Mr G has two children who spend substantial and significant time with him. He is self employed as a (occupation omitted).
The respondent has re-partnered but that relationship is not yet of a stage where he and his partner live together. The respondent also lives in (omitted) but in an apartment owned by his parents and which he apparently benefits from being rent-free although his evidence was that he has provided some of the jointly owned chattels to his parents in lieu of rent. On the balance of probabilities his evidence suggests that this accommodation is temporary only and he would prefer to return to the former matrimonial home or, alternatively, obtain accommodation more suitable for his equal-time arrangement with the children.
The Relevant Law
Section 79 of the Act provides the framework for the altering of property interests. I am satisfied pursuant to s79(2) that it is just and equitable to alter the legal and equitable interests of these parties. The marriage is of a medium duration. They jointly own real property and the evidence suggests that their marriage has irretrievably broken down.
I am required, therefore, to establish the legal and equitable interests of the parties as at the date of the hearing and inclusive of assets, liabilities and financial resources and for these purposes superannuation is to be treated as property. The Court is to attribute value to each item of property and hence to the property pool itself.
In altering the property interests of the parties on a just and equitable basis I am to consider the contributions of the parties, be they directly financial, indirectly financial or non-financial to the attaining, maintaining and improvement of the contents of the property pool. The Court must then consider any relevant matters under s75(2) of the Act in determining whether any further adjustment of the distribution of the property pool is proper.
The property pool
In his financial statement sworn 3 May 2016 the husband references an X-Trail motor vehicle valued at $10,000. His evidence in Court was that he sold it to a car dealer for $5,000. There was no evidence of consultation on the sale. There was no evidence of any attempt to sell the vehicle privately at market value on the assumption that a car dealer would pay less than the market value so as to achieve a profit. Nevertheless, Counsel for the wife in his final submissions was accepting of a sum $5,000 to be included in the property pool.
The husband also volunteered from the witness box that the $5,000 proceeds of sale of that motor vehicle had been used on “living expenses”. This revelation seemed of some surprise to his own Counsel. The husband has had the ongoing benefit of his (omitted) business, albeit perhaps not to its optimum return or potential. He has been living rent free in accommodation owned by his own parents. His evidence as to disbursement of the monies was not particularised. As such, I do not accept that those proceeds have been disbursed by reason of necessity. I intend to “add back” the sum of $5,000 to property pool.
The parties negotiated, with professional assistance, the value of the husband’s (omitted) business during the course of the hearing. They have obtained what is known as BOLR valuation from (omitted) at $516,000. This apparently equates to a notational buy-back price at last resort. The figures are calculated on a multiplier. No other valuation of the practice was before me in proper form although the husband gave unsatisfactory evidence of one partisan offer of considerably less value. Both parties are prepared to accept the value of the practice at $516,000 although Counsel’s submissions were more with the s75(2) considerations in respect of how the Court should deal with the ongoing income benefit to the husband of that business given, firstly, possibilities of sale which would remove such income and secondly, a likely restrictive covenant which would accompany any sale which would also impact negatively on the husband’s earning capacity. If the business was to be sold then a “notice of sell” activates a 12 month period before the sale is finalised. Initially, the purchase price is guaranteed at 80% with the remaining 20% dependent upon certain performance targets in the relevant year towards settlement.
Initially, the husband was equivocal in his evidence as to whether he could or wished to retain the (omitted) business. He also made claims in respect of maintaining the other asset of value which is the former matrimonial home. However, in the witness box he conceded that his borrowing capacity was limited and the likelihood of his retaining both assets was slim and when pressed he expressed a preference to retain the business. On the balance of probabilities, I am satisfied he will retain the (omitted) business which, of course, will give him an income. I have no alternative valuations and, whilst mindful of the vagaries of the BOLR valuation, I propose to allocate a value of $516,000. In doing so, I note that the current value of the business represents its most recent turnover which is considerably less than that achieved by the husband in the year prior to separation and therefore demonstrates its potential. Put simply, the BOLR valuation with its base amount and multiplier would have been considerably higher if it had been carried out in the year prior to separation.
There was some issue between the parties as to whether bank account balances should be included in the pool of property. The husband has a bank account balance at a relevant time of $8,000 but this apparently includes the $5,000 from the sale of the X-Trail motor vehicle. The wife also gave evidence as to the transfer of monies between her bank accounts in respect of a post separation overseas trip. In all of the circumstances, the amounts are not significant when standing against the values of the former matrimonial home and the (omitted) business. Each of the parties has utilised their bank accounts for various reasons and, I infer, partly for the benefit of the children. In all of those circumstances and without forensic evidence of any precision, I do not intend to include bank account balances in the pool of the property.
The parties are otherwise in fundamental agreement as to their property and I am satisfied that I can find the contents and value of the property pool inclusive of superannuation to comprise the following:
Assets
Property at Property L $350,000
Nissan X-Trial motor vehicle $5,000
Kluger motor vehicle $23,000
(omitted) Scooter $2,500
(omitted) business $516,000
Total assets $896,500
Liabilities
Mortgage – (omitted) $ 63,223
(omitted) Loan $ 357,000
Line of Credit $ 172,500
Husband’s credit cards $ 18,000
Wife’s credit cards $4,290
Total liabilities $615,013
Net tangible assets $281,487
Superannuation entitlements
Husband’s superannuation policies $58,832
Wife’s superannuation entitlement $36,244
Total$95,076
Contributions
At the commencement of cohabitation the husband had recently purchased an apartment for $35,000. He had provided initial equity of approximately $13,000. That property was sold in 2010 for $185,000. It was positively geared during the relationship and therefore suffering no financial impost on the parties and was used as co-security for the purchase of the former matrimonial home at Property L.
Counsel for the husband argues on the basis of Williams & Williams [2007] FamCA 313 and Pierce & Pierce (1999) FLC 92-844, that the husband should be given some recognition for the importance of this contribution relevant to its sale price in 2010 rather than his equity at the commencement of cohabitation.
The husband’s unchallenged affidavit evidence is that he also had managed funds of $10,000 at the time of the commencement of cohabitation.
Counsel for the husband argues there should be an adjustment of 5% in the husband’s favour on account of contributions.
Counsel for the wife alerts the Court to a $10,000 inheritance received by the wife in 2011 with the implication being that the receipt of these monies late in the marriage is of such weight relatively so as to negate the weight of the husband’s greater initial contribution. The evidence also suggests that the parties contributed directly and indirectly generally throughout the marriage and to the apartment where they lived until the purchase of the Property L property.
On reflection, I find some merit in the argument for the husband.
The property pool here is not of substantial value. Whilst the equity held by the husband at the commencement of the relationship may have only been $13,000, the property had far greater later benefit for the parties. It was positively geared and provided an income. It was not a situation where the wife was required either directly or indirectly to contribute to a mortgage. It allowed or assisted with the Property L property purchase. The ultimate sale price was some five times the purchase price. The significance of this purchase and retention of that property is clearly evident in the current value of the property pool. In all of those circumstances and considering all contributions, I accept the submissions of Counsel for the husband that a division of the property pool on account of contributions as to 55% to the husband and 45% to the wife would be appropriate, just and equitable.
Section 75(2) factors
The children now live in an equal-time arrangement between their parents.
The wife is employed with an income of approximately $60,000 per annum. She is in a relationship with Mr G who is self-employed.
I am satisfied, despite equivocacy, that the husband intends to retain the (omitted) business. His more recent income has been approximately $40,000 per annum. Prior to separation that income exceeded $70,000. I am satisfied generally that, given an end to these family law children’s and property proceedings the husband will return to more productive attendance on his business.
Counsel for the husband mounted an argument to the effect that for the wife to rely on any income discrepancy in a situation where the BOLR valuation of the business is effectively based on its income would be to “have her cake and eat it too”. However, I am of the view that the facts in the matter before me can be distinguished from those in Nettler v Nettler referred to and relied on by Counsel. I have before me one valuation albeit one conducted on a basis of gross earnings and a multiplier. I am also satisfied, after hearing the husband’s evidence, that he has no current intention of disposing of the business and will continue to conduct it for his income for the foreseeable future. The Full Court in Nettler was obliged to consider a situation where a sale of the business may be likely and which would necessarily impact negatively on or perhaps extinguish the income and would impose restraint of trade restrictions. I am not satisfied that any such consequences would be ignited here. Rather, I am satisfied that these parties w generally have the realistic benefit of similar incomes whilst sharing the costs for their children.
Counsel for the wife urges me to consider under s75(2)(o) the withdrawing by the husband of $15,000 from joint funds post separation. The husband admits that he did draw those funds.
His unchallenged evidence at [186] of his trial affidavit is:
I did with draw funds from our line of credit in approximately August 2015. I used these funds of part maintaining of some of our (Ms Mather and mine) joint bills. (i.e. all three debts on Property L house insurance etc) and for establishing a separate household for my daughters and I Ms Mather’s aggressive nature around finances resulted in me not disclosing this in advance. Additional examples of this are refusing to pay half of school fees; consistently altering/complaining about child support (inflating my income) while not disclosing the additional $20,000 to her own income for child support purposes. This amount was not sufficient to partially refurnish a separate residence and I was lent money from my parents and my grandmother, $6,598 from my parents; and $7,500 from my grandmother.
This evidence is unchallenged. The husband’s consistent evidence is that he used the $15,000 for living expenses and to benefit the children. I note the husband’s evidence as to his reduced income during the period following separation due to him taking a greater hands on role for the children. I note that the wife remained in the former matrimonial home and that the husband established himself in alternative accommodation albeit provided rent free by his parents. In all of these circumstances, on the balance of probabilities, I accept the husband’s evidence that the $15,000 was expended on necessary living expenses and for the children.[1]
[1] Omacini & Omacini (2005) FLC 93-218
At this stage, I therefore, I find no reason to make any adjustment for either party on account of the considerations under s75(2) of the Act.
It is appropriate, now however, to turn to the question of who should retain the former matrimonial home.
The husband ideally would like to retain the two major assets of the business and the former matrimonial home. When pressured in cross examination he conceded that, on a choice, his preference would be to retain the business. That same evidence caused him to doubt his ability to retain both valuable assets and make any proper cash adjustments accordingly on the wife. In answer to a question in cross examination the husband responded “I would like not to live in that house”.
He argues, the wife has a viable alternative namely the house owned by Mr G which in his evidence he claimed that he wished to retain in his own property settlement.
The wife also lays claim to the Property L property. The status quo is that she has possession of the house and the children spend their time with her at that home. She does not realistically have the “choice” of the other valuable asset known as the (omitted) business. On consideration and a fine balance, I prefer that the wife retain the Property L property. This, however, raises a further argument for consideration under s75(2)(o) of the Act. On my calculations the wife retaining the home but with a settlement in favour of the husband of 55% of the net tangible assets would oblige the husband to a cash adjustment of $14,192.00. Counsel for the husband refers me to a decision of the Full Court in Phillips & Phillips[2] in urging the Court to find under consideration of s75(2)(o) and justice and equity generally that any such cash adjustment mathematically calculated should be “waived”. Counsel argues a cash adjustment is a small one. He says that the wife has the benefit of retaining the former matrimonial home whereas realistically the husband will look to re-establish himself in accommodation suitable for the equal shared care of the children and in doing so will attract stamp duty and other costs on the purchase whereas the wife will have the benefit of a stamp duty exemption on the transfer of the Property L property to her.
[2] [2002] FLC 93-104
Counsel for the wife argues against any such consideration on s75(2)(o). He says that the husband himself retains an asset of value and one that produces income. He says that the property pool is not of significant value and that a payment of $14,192.00 represents some 5% of the value of net tangible assets. He notes that the husband’s evidence suggests that he has the potential to earn slightly more income than the wife.
I am not persuaded by the argument of the husband’s Counsel.
In Phillips (supra) there was a real discrepancy in the income of the parties and a situation where the wife had the primary responsibility for the support and accommodation of the children where the mathematical calculations would have obliged a small payment by that wife to the husband. I accept that the property pool here is of relatively low value in the matter now before me and that payment of $14,192.00 therefore achieves some significance to the wife. In this sense I am satisfied that orders whereby the husband retains the business and the wife retains the home with a consequent cash adjustment by the husband and the wife achieves the justice and equity contemplated by s75(2) of the Act.
I note that the parties agree that there will be a “split” from the husband’s superannuation entitlements so as to achieve equality of superannuation entitlements.
Finally, the during final submissions, the parties’ Counsel agree that the child support issues which no longer prevailed should be best evidenced by a Child Support Agreement.
I certify that the preceding thirty four (34) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 31 August 2016
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Family Law
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Equity & Trusts
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Remedies
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Procedural Fairness
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