McBurney and Reddy
[2013] FCCA 395
•31 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MCBURNEY & REDDY | [2013] FCCA 395 |
| Catchwords: FAMILY LAW — Whether some amounts of money withdrawn by parties from joint bank account should be added back — whether disparity in incomes requiring a substantial adjustment — whether wife should retain matrimonial home subject to discharging the mortgage and the husband retaining all superannuation without further payment. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79, 79(1), 79(2), 79(4) |
| Stanford v Stanford [2012] HCA 52 Hickey [2003] FamCA 395 FLC 93-143 |
| Applicant: | MS MCBURNEY |
| Respondent: | MR REDDY |
| File Number: | DGC 1996 of 2012 |
| Judgment of: | Judge Phipps |
| Hearing dates: | 15 & 17 April 2013 |
| Date of Last Submission: | 22 April 2013 |
| Delivered at: | Dandenong |
| Delivered on: | 31 May 2013 |
REPRESENTATION
| Counsel for the Applicant: | Dr R Ingleby |
| Solicitors for the Applicant: | Macpherson & Kelley Lawyers Pty Ltd |
| Counsel for the Respondent: | Ms M Smallwood |
| Solicitors for the Respondent: | Taussig Cherrie Fildes |
ORDERS
That on or before the 30 July 2013 (the date) the wife refinance the mortgage over Property C, (the real property), and discharge the existing mortgage so that the husband has no further liability under the existing mortgage or any future mortgage.
Upon the wife refinancing the mortgage in accordance with paragraph 1 the husband transfer to the wife all his right title and interest in the real property.
That in the event that the wife does not by the date refinance the mortgage over the real property in accordance with paragraph 1 then the parties do all things necessary to sell the property by an estate agent to be agreed and if not agreed by an estate agent nominated by the President for the time being of the Real Estate Institute of Victoria or his or her nominee. If the parties do not agree on the method of sale the real property be sold in a manner determined by the agreed or appointed real estate agent at a reserve price nominated by the wife. Upon completion of the sale the proceeds of the sale be applied:
(a)firstly to pay all costs, commissions and expenses of the sale;
(b)secondly to discharge the mortgage and any encumbrance affecting the real property;
(c)thirdly the balance to the wife.
The husband will take delivery of and be entitled to retain the following:
(i) (omitted) BBQ with cover;
(ii) garden solar lights;
(iii) fishing tackle and rods;
(iv) extension ladder;
(v) red and silver canvas painting;
(vi) sports memorabilia as follows:
I.two signed footballs;
II.two signed mini cricket bats; and
III.signed cricket ball;
(vii) portable children’s pool.
That unless otherwise specified in these orders:
(a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions and like chattels in the real property being deemed to be in the possession of the wife);
(b)each party forgo any claims they may have to any superannuation benefits belonging to or in the name of the other;
(c)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled to pursuant to these orders.
Otherwise all extant applications are dismissed.
IT IS NOTED that publication of this judgment under the pseudonym McBurney & Reddy is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT DANDENONG |
DGC 1996 of 2012
| MS MCBURNEY |
Applicant
And
| MR REDDY |
Respondent
REASONS FOR JUDGMENT
Introduction
The matrimonial assets of Ms McBurney, the wife and Mr Reddy, the husband are principally their former matrimonial home and superannuation. They have different proposals for distribution. They agree that the value of the former matrimonial home is $547,500 and that the mortgage is $333,000. The wife proposes that she keep the matrimonial home and refinance the mortgage so that the husband has no further liability for it but without any further payment to the husband. If this is done her preferred proposal for superannuation is that it be divided equally. Dr I, who appeared for the wife, said that the wife's primary objective was to keep the former matrimonial home for herself and the children. The wife's position is that she is able to refinance the mortgage, but no more, so that her preferred position is there be no superannuation adjustment if that means that she keeps the home. The husband proposes that the matrimonial assets, except superannuation, be divided 55% to the wife and 45% to the husband. He proposes that superannuation be divided equally.
The wife was born on (omitted) 1974 and is aged 38. The husband was born on (omitted) 1977 and is aged 35. They commenced cohabitation, according to the wife, in (omitted) 1999. According to the husband they commenced cohabitation in (omitted) 1999. They married on (omitted) 2005. They have two children, X born (omitted) 2008 and Y born (omitted) 2009. They separated on 18 April 2012.
For a short time the parties occupied the former matrimonial home on a rotating basis looking after the children. After incidents in May 2012 when each party changed the locks on the house, the wife obtained a family violence interim intervention order on 8 June 2012 since then the wife has occupied the house with the children to the exclusion of the husband. The husband moved first to his parent’s home and then in June 2012 commenced renting a three-bedroom residence in (omitted).
The parties maintained a single bank account in joint names. On 1 May 2012 the husband withdrew $50,000 from the account and the wife then transferred, on the same day, the balance of $44,805.47. How these funds were dealt with subsequently is described later in these reasons.
The wife commenced these proceedings on 4 July 2012. On 14 August 2012 orders were made for the children to live with the husband from 9.00am Thursday until 5.00pm Sunday each alternate week and from 5.00pm Wednesday until 5.00pm Friday in the other week. Otherwise the children were to live with the wife. On 25 September 2012 the orders were varied so that the children lived with the husband from 5.00pm Friday to 5.00pm Sunday each alternate week and from 5.00pm Wednesday until 5.00pm Friday in the other week and otherwise with the wife.
The final hearing was fixed for both parenting and property matters. The parties reached agreement on the parenting matters and on 15 April 2013 I made final children's orders which provided for the parties to have equal shared parental responsibility and for the children to live with the wife.
The parenting orders provide that the children spend time with the father as follows:
a)until X commences school from 6.00pm Wednesday to 6.00pm Friday in week one and from 6.00pm Friday to 6.00pm Sunday in week two, alternate weeks during long summer holidays and half of the equivalent of school term holidays;
b)after X commences school from the conclusion of school or 3.30pm on Wednesday to the commencement of school for 9.00am Friday in week one and from the conclusion of school or 3.30pm Friday to the commencement of school on Monday in week two, half of school term holidays and alternate weeks in summer school holidays.
The orders provide for time with both the wife and the husband on various celebratory occasions and for communication by telephone and for the provision of medical information, current mobile numbers and residential addresses, attendance at schools and kindergartens and the receiving of reports.
Property provisions
Section 79(1) of the Family Law Act 1975 (Cth) provides that in property settlement proceedings the court may make such order as it considers appropriate. The following sub-sections set out the considerations the court is to take into account in deciding what is appropriate. Prior to the decision of the High Court in Stanford v Stanford [2012] HCA 52 this was a four step process. First, determine what are the assets and liabilities of the parties, next consider the parties’ contributions taking into account the matters in s.79(4)(a)-(c), next consider whether an adjustment should be made taking into account the matters referred to in ss.79(4)(d), (f) and (g) and s.75(2) insofar as they are relevant, and finally consider whether in all the circumstances it is just and equitable to make the proposed order[1]. The four step process was usually applied to superannuation and non superannuation assets separately, but there are cases where this may not be appropriate.[2] The decision in Stanford v Stanford means that the four step process must be modified. The court must identify the matrimonial property and the legal and equitable interest of each party in the property applying normal principles. That presents no difficulty in this case because the parties agree on the identity of the property. How some of that property should be treated for the purpose of establishing the property pool for distribution is an issue, but not the identity of the property.
[1] Hickey [2003] FamCA 395, FLC 93-143.
[2] C&C [2005] FamCA 429, FLC 93-220
The court must determine, as required by s.79(2) whether it is satisfied that in all the circumstances it is just and equitable to make an order. In this case the parties have separated, the separation is permanent, they have agreed on final orders for the care of the children and both parties apply for the court to make an order. The basis upon which they lived together with their children in the principle asset, the former matrimonial home, and shared their finances, is gone. It is just and equitable to make an order for division of property in accordance with the provisions of s.79.
The appropriate way then to proceed is to undertake the second and third steps of the four step process, contributions and possible adjustment , and then again consider whether the proposed order is just and equitable. Stanford v Stanford has not affected the earlier decisions concerning the separate treatment of superannuation and non-superannuation property.
Reconsideration of the just and equitable consideration may be necessary in this case because the husband proposes that superannuation be divided equally whereas the wife proposes that there be no division of superannuation and that she receive a greater division of the non-superannuation assets. The decision in Stanford v Standford makes it clear that application of the just and equitable provision cannot alter the substance of what has been decided under the previous steps. Its consideration may be necessary here to determine the form of order to give effect to the substantial conclusion.
Assets and liabilities and proposals
At the conclusion of final submissions I ordered that each party provide in written form the asset pool as proposed in final submissions. In addition each party included their proposed settlement and the agreement reached for chattels.
Wife’s asset pool and proposed settlement
A. Asset Pool
| Asset | Ownership | Value |
| Property C, | Joint | $547,500 |
| H withdrawal from (omitted) Home Loan Saver offset account (Wife affidavit filed 4 July 2012 para.12(f)) | Husband | E$ 50,000 |
| W withdrawal from (omitted) Home Loan Saver offset account | Wife | E$ 17,000 |
| Distribution pursuant to Order made 14 August 2012 (para.9) | Husband | $ 10,000 |
| Distribution pursuant to Order made 14 August 2012 (para.9) | Wife | $ 10,000 |
| Children's trust accounts | Husband | $ 5,400 |
| Add back - (omitted) Shares | Husband | $ 4,000 |
| (omitted) | Husband | $ 3,700 |
| Add back non-payment of mortgage | Husband | $ 10,000 |
| Liabilities | Ownership | Value |
| Property C mortgage | Joint | $333,000 |
| Mazda (omitted) loan probable shortfall | Husband | E$ 5,000 |
| Sub-Total | $319,600 | |
| Superannuation | Ownership | Value |
| Wife's superannuation | Wife | $ 29,867 |
| Husband's Superannuation | Husband | $114,687 |
| Total | $464,154 |
B. Proposed settlement
With no superannuation split
| Wife Asset (omitted) property $547,500 Sub-Total $574,500 Liabilities Sub-Total ($333,000) Total (excluding super) $241,500 Superannuation $29,867 Total (including super) $271,367 | Husband Asset Joint funds utilised by Husband $60,000 Sub-Total $83,100 Liabilities Sub-Total ($5,000) Total (excluding super) $78,100 Superannuation $114,687 Total (including super) $192,787 42% |
With superannuation split
| Wife Asset Property C property $547,500 Sub-Total $574,500 Liabilities Sub-Total ($333,000) Total (excluding super) $241,500 Superannuation $29,867 Total (including super) $313,777 | Husband Asset Joint funds utilised by Husband $60,000 Sub-Total $83,100 Liabilities Sub-Total ($5,000) Total (excluding super) $78,100 Superannuation $114,687 Total (including super) $150,377 32% |
C. Chattel distribution
The Wife agrees that the Husband may take the following items from the Property C property:
(i)(omitted) BBQ with cover;
(ii)Garden solar lights;
(iii)Fishing tackle and rods;
(iv)Extension ladder;
(v)(omitted) painting;
(vi)Sports memorabilia as follows:
a) two signed footballs;
b) two signed mini crickets bats; and
c) signed cricket ball;
(vii)Portable children's pool.
Husband’s asset pool and proposed settlement
ASSETS
Matrimonial home $547,500
BMW (husband) $ 24,850
Bank accounts (children) $ 5,400
(omitted) (trailer) $ 3,700
Net (omitted) share proceeds $ 4,000
Legal fees paid (wife) $ 33,300
Legal fees paid (husband) $ 26,550 (includes other expenses)
Distribution made $ 20,000
TOTAL ASSETS $665,300
LIABILITIES
Mortgage $333,000
Mazda deficit $ 5,100
BMW deficit $ 7,435
Toyota (omitted) loss $ 3,300
Credit card of husband $ 12,000 (portion only of $23,000 debt)
TOTAL LIABILTIES $360,835
NET POOL $304,465
PROPOSED SETTLEMENT
55% = $167,455
If the wife is to retain the home, she receives equity of $214,500, her legal fees paid of $33,300, and $10,000 distribution already made (TOTAL $257,800)
Wife should pay husband $90,345 to effect a 55% / 45% division.
The wife’s car and the debt thereon has been omitted from both the asset and liability lists, as the value is equal to the debt, having been purchased on 1st February 2013.
It is proposed by the husband to split superannuation to effect an equal sharing of that asset.
CHATTELS
The husband consents to retaining the following items from the Property C property:
(i) (omitted) BBQ with cover;
(ii) garden solar lights;
(iii) fishing tackle and rods;
(iv) extension ladder;
(v) (omitted) painting;
(vi) sports memorabilia as follows:
(a) two signed footballs;
(b) two signed mini cricket bats; and
(c) signed cricket ball;
(vii) portable children’s pool.
Issues about the asset pool are:
a)whether the amounts to be added back are $27,000 for the wife and $60,000 for the husband (the wife's position), or $33,300 for the wife and $26,550 for the husband (the husband's position). The amounts the wife contends are the amounts each party received from a joint bank account. The amounts the husband contends are payments the wife has made to the date of the hearing for legal costs and payments he has made for legal and some other costs from the amount of $60,000 he received. He contends he spent the balance of the $60,000 on reasonable living expenses, including for the children;
b)how motor vehicles and motor vehicle debts, past and present, should be treated;
c)whether $10,000 of mortgage payments not paid should be added back against the husband.
After separation both parties received funds from their joint bank account, the (omitted) Bank Home Loan Saver offset account. Prior to separation all of the parties’ funds were paid into this account, including the net proceeds from the sale of an investment property. There is a small amount, $5,400, in children's trust accounts. The parties agree that the husband retain these amounts.
On 1 May 2012 the husband transferred $50,000 from the joint account to one of the children's accounts, which he controlled. The wife, on becoming aware of this, then transferred the balance of the joint account, $44,805.47, to her own account. On 14 August 2012 consent orders provided for the wife to pay the sum of $30,000 back into the joint account and each party then be paid $10,000 from the joint account to be paid to the solicitors for the parties on account of future costs and be taken into account in the adjustment of the parties’ property interests. The wife paid back the amount of $27,233.67, being the remaining balance of the funds withdrawn by her. Each party was paid the amount of $10,000.
A further interim order on 25 September 2012, not by consent, provided for the husband to pay the mortgage payment and be at liberty to apply to the bank for a suspension or reduction in mortgage repayments and for the wife to do all things necessary to allow the application to be made.
The difference between the amount the wife withdrew from the joint account ($44,805.47) and the amount she paid back ($27,233.67) is $17,266.33. The addition of the $10,000 paid by her means that the amount she received from the joint account is $27,266.33.
The husband’s list of assets includes an amount of $10,000 for each party, the distribution to each party under the order of 14 August 2012. That appears to be double counting because the $10,000 each party received is included in the way the husband calculates the amounts for the legal costs of each party.
The wife has been billed $35,660 to date for legal costs and she was paid $31,068. Her solicitor estimates that there is another $30,000 to be billed. The wife acknowledges that all of the amount she received, $27,233.67, has either been spent on legal costs, or should be treated as having been spent on legal costs, and therefore should be added back into the asset pool.
Legal costs paid by one party from funds which accrued in the course of the marriage, and which therefore have been contributed to within the meaning of s.79(4)(a)-(c) by the other party, must be added back into the asset pool, otherwise one party is contributing to the other party’s legal costs. Normally, legal costs paid from income received by a party after separation is not added back. The total amount received by the wife from funds accrued in the course of the marriage is $27,266.33. Any amounts for legal costs paid by her over this amount have been paid from other sources. The wife received after separation, social services payments and child support. Her evidence is that this was the source of the additional funds for legal costs and there is no reason to disbelieve her. Therefore, the amount to be added back from funds received by the wife is $27,266.33.
The order of 14 August 2012 requires each party to account for the use of the money they had received from the joint account. The husband's accounting is contained in a letter dated 3 September 2012 from his solicitors which is annexed to his affidavit affirmed on 21 September 2012. His accounting is:
1/5/2012 $5,000 transferred back to offset account to pay minimum mortgage and car loan repayments.
1/5/2012 $50 payment into account number (omitted) as account is overdrawn.
4/6/2012 $2,000 transferred back to offset account to pay minimum mortgage and car loan repayments.
20/6/2012 $5,140 transferred to account number (omitted) to pay (omitted) Real Estate rent and bond for (omitted) rental property.
2/7/2012 $100 transferred to account number (omitted) as account is overdrawn.
2/7/2012 $3,000 transferred back to offset account to pay minimum mortgage and car loan repayments.
2/7/2012 $16,455 transferred to credit card to meet cost of new furniture and household items for rental property.
12/7/2012 $100 transferred to account number (omitted) as account is overdrawn.
2/7/2012 $3,000 transferred back to offset account to pay minimum mortgage and car loan repayments.
12/7/2012 $8,000 payment to Taussig Cherrie Fildes on account of legal costs.
12/7/2012 $863.12 payment to Taussig Cherrie Fildes on account of legal costs.
1/8/2012 $300 transfer to account number (omitted) as account is overdrawn.
20/8/2012 $5,000 payment to Taussig Cherrie Fildes on account of legal costs.
Total $49,008.12
When a party spends money on reasonably incurred living costs that money is not usually added back to the property pool. In NHC & RCH [2004] FamCA 633 (Finn, Kay and May JJ) at [24] quoted with approval from two earlier Full Court decisions, Marker [1998] FamCA 42, and C&C [1998] FamCA 143
2.11 There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge. (Marker [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ.)
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. (C&C [1998] FamCA 143, 8 October 1998, per Nicholson CJ, Ellis, Kay JJ.)
The wife argues that the husband has spent extravagantly since separation and that the expenditure of the $60,000 from the joint account should be looked at in the context of the husband's overall spending.
The husband was cross-examined about entries in his bank account in the latter part of 2012 and early 2013. He borrowed $65,000 on 14 November 2012. The next day he transferred $49,800 to his lawyers for legal expenses. At this time correspondence was passing between his lawyers and the wife's lawyers about loan payments on the Mazda (omitted) motor vehicle used by the wife. The husband proposed and the wife says she accepted that the husband would pay the monthly payments of $389 in return for that amount being deducted from his child support payment. The agreement was not put into effect, the loan went into default and the finance company repossessed it. The husband was cross-examined why he could not make the payment when he had a credit of $22,000 in his account. The husband says he could not because the funds were borrowed and the wife had already agreed that she would make the payment. He also referred to his living expenses.
There is an agreed residual debt of $5,000 from the car loan. Its relevance to the issue of whether or not the husband's expenditure was unreasonable is that the motor vehicle loan repayments were not met.
The husband acknowledges that since separation he has spent about $7,000 on clothes, $1,400 on shoes for the children, $950 at (omitted) on clothes for the children, and $2,500 on toys for the children. He spent about $9,000 at shops such as Kmart, Best & Less and Target. He said he did this because he left the house without any clothes for himself or for the children or any toys.
It was put to him that between April 2012 and April 2013 he had spent $4,000 at hotels, restaurants and golf clubs. The husband did not directly acknowledge this. He said that he ate maybe once a week at (omitted), presumably a golf club, but he received resident passes and it was cheaper than it would cost to get food at a supermarket. He said he had a gym membership at the (omitted) at a cost of $90 a month.
The husband spends $25 a week maintaining a 1300 telephone number. This was for a business he was planning to set up.
The husband did not dispute that his bank statement shows that expenditure on the types of things discussed in the previous paragraphs was about $48,500. The period during which this took place appears to be between April 2012 and April 2013. This amount is in addition to the amount of $60,000 he received from the joint account.
The separation was fraught with each party changing the locks on the home and the wife then obtaining a family violence intervention order. Once court orders were made the children spent five nights a fortnight with the husband from August to September and then four nights. The husband had to obtain his own residence and was excluded from the matrimonial home. He says that he had to spend money on clothing and shoes for himself and the children and toys because he had none. In the aftermath of the type of fraught separation which had occurred negotiation with the wife about the provision of clothing, including retrieving his own clothes, obviously would have been difficult. The husband's purchasing of clothes, toys and other incidentals could have been done at less cost but I cannot find it was so unreasonable that it should be added back against the husband.
The husband applied for and obtained relief from the mortgage payments on hardship grounds. An extension or different type of hardship relief could have been obtained with the wife's consent, and there was some controversy about this. For a variety of reasons, including the husband saying he could not afford it, mortgage payments have not been made for some time. The wife argues that this should be taken into account in looking at the reasonableness of the husband's expenditure.
The reasonableness of the amount for rent paid by the husband is dealt with later in these reasons. He purchased a car on 26 October 2012 for $33,990, inclusive of on road costs. He said he did this because his existing car was a very heavy user of petrol and he was driving long distances each week collecting and delivering the children. He purchased a more fuel efficient car. The previous car was still under finance and his changing it cannot be described as extravagant.
The other expenses, some included in the $4,000 referred to above, included some discretionary entertainment expenses and the gym membership. None of this was unreasonable in the relevant sense.
The question of how much of the $60,000 received by the husband from the joint account should be added back will be decided on the basis that his other expenditure in the 12 months after separation was reasonable.
The consent order of 14 August 2012 provided for minimum mortgage repayments and repayments on the loans for the parties’ motor vehicles to be paid from the joint account. In those circumstances it is difficult to say that use of such funds by the husband prior to the date of the order was unreasonable. They should not be added back into the property pool.
The payment the husband made for rent and bond for the (omitted) rental property are reasonably incurred living expenses. The parties had separated and the husband needed somewhere else to live. The wife submits that the rent the husband pays, $550 per week, is excessive in the circumstances. The husband says that he needed a three-bedroom residence so that he could accommodate the children while spending time with him. Perhaps the husband could have found suitable accommodation at lower rent, but I cannot say it was excessive or extravagant. The choice he made was, in the words used by the Full Court in C&C [1998] FamCA 143, consistent with properly getting on with his life.
The small amounts paid into overdrawn accounts should not be added back.
The amount of $16,455 used to meet the cost of new furniture and household items for rental property is in a different category. The money was spent and the husband received and retains things of value in exchange. The wife will retain the majority of the furniture and household items in the former matrimonial home. They have not been valued, but they are second-hand, no doubt of varying ages. I consider that I can take judicial knowledge that second-hand appliances and furniture of the sort used in a standard family home such as that of the parties has little value. I consider it unfair to the wife to exclude the money spent by the husband on new furniture and household items. They were purchased by him after separation and at that time their value was the amount he paid. The appropriate way to deal with the amount of $16,455 is to include it as the value of furniture and household items in the possession of the husband.
The wife proposes that motor vehicles and motor vehicle debts, other than the probable shortfall on the Mazda, be excluded from the property pool. The husband proposes the following for motor vehicles:
Asset
BMW (husband) $24,850
Liabilities
Mazda deficit $ 5,000
BMW deficit $ 7,435
Toyota (omitted) loss $ 3,300
At separation the wife retained possession of the Mazda motor vehicle. It was registered in the husband's name and subject to a loan in his name. Repayments were $397 a month. The consent order of 14 August 2012 provided payment from joint funds. In November 2012 the husband proposed that the wife should be responsible for the Mazda repayments. He said he could not afford them. He proposed he would make the loan payments in return for a reduction of an equal amount from child support. Initially the wife was prepared to accept this but in the end she did not because she said she did not believe she could trust the husband to make the payments.
Consequently, neither party made the payments, the loan went into default and the finance company repossessed the Mazda. At the time of hearing the finance company had not yet succeeded in selling the Mazda. The parties agree that the estimated deficit on the loan once the Mazda is sold is $5,000. On 1 February 2013 the wife purchased another vehicle and took out a loan of $20,150. Repayments are $88 a week.
The husband's proposal for the BMW is difficult to understand. At the time of separation the parties had two vehicles, a (omitted) Toyota (omitted) driven by the husband and the Mazda driven by the wife. Both motor vehicles were subject to loans. If they had kept the motor vehicles they would have been included in the matrimonial pool as assets and the loans as liabilities and each would keep their vehicle and be liable for the loan. Now the value of each and the liability under the loans have been crystallized by the sale of one and repossession of the other.
On 24 October 2012 the husband sold his Toyota for $35,000 and the sale proceeds were paid towards the loan. There was a shortfall of $3,302.42 which was transferred into the new contract for the (omitted) BMW sedan he purchased on the same day. He paid a deposit of $1,000 using his credit card and obtained a loan from (omitted) for $36,182.42 which included the $3,302.42 transferred from the previous loan.
The amount of $24,850 the husband proposes to include for the BMW is his estimate of its current value. The amount of $7,434 described as BMW deficit is the difference between the estimated current value of $24,850 and the amount owing on the loan.
If the parties had kept the Toyota and Mazda their values would be included in the matrimonial pool as assets and the loans as liabilities and the probable result would be that each party would keep their own car and be liable for the balance of the loan payments and the motor vehicle and loans may have been ignored for the purpose of a property settlement order. Each party is now in effect in the same position, with a motor vehicle of each party's choice and a loan debt which corresponds with the standard of car the parties selected. The position is not exactly the same because the husband remains liable for the $5,000 shortfall for the Mazda.
If the husband had paid the mortgage instalments the mortgage debt would be $10,000 less. That did not happen. The husband argues he could not afford to make the mortgage payments. The wife’s claim is that he should have made the payments and they should be added back against him. The appropriate way of dealing with these issues is to not include any motor vehicles or motor vehicle debts, except for the agreed $5,000 debt for the Mazda, and not include the $10,000 mortgage payments the wife alleges the husband did not make and take these things into account under the assessment of contributions and any adjustments under s.75(2).
The husband claims as a matrimonial debt $12,000 of his $23,000 credit card debt. There is no clear evidence of his liability on his credit card at the time of separation. His financial statement of 10 August 2012 and affidavit of the same date puts his (omitted) Bank credit card debt at $10,072. His affidavit says that after the wife commenced her full time studies the parties used funds in their joint account to make loan payments and pay living expenses. At separation the joint account had a credit balance over $100,000 so the parties did not need credit card finance prior to separation. The parties separated on 18 April 2012 and the husband commenced living in his rented apartment on 30 June 2012. The husband’s expenditure between April 2012 and April 2013 is discussed earlier in these reasons. I will not allow any of the credit card debt as a liability.
The assets and liabilities are:
ASSETS
Matrimonial home $547,500.00
Bank accounts (children) $ 5,400.00
(omitted) (trailer) $ 3,700.00
Net (omitted) Bank share proceeds $ 4,000.00
Legal fees paid and distribution (wife) $ 27,233.67
Legal fees paid and distribution (husband) $ 26,550.00
Amount paid for husband's house hold chattels $ 16,455.00
TOTAL ASSETS $630,838.67
LIABILITIES
Mortgage $333,000.00
Mazda deficit $ 5,000.00
TOTAL LIABILTIES $338,000.00
NET ASSETS $292,838.67
SUPERANNUATION
Husband $114,687.00
Wife $ 29,867.00
TOTAL $144,554.00
Contributions
The parties commenced cohabitation in 1999. The wife says it was in (omitted) the husband says it was in (omitted). There was a brief separation of a few months in 2002 or 2003. The parties differ about the exact time. At the time they commenced cohabitation the husband was employed by (omitted) and the wife was employed as an (omitted). She ceased working in 2008 shortly before the elder child X was born. Her salary was $66,000. The husband is currently employed as an (omitted) for (omitted) with a salary package of $170,000 per year.
At the commencement of cohabitation the husband had assets of $16,000, the wife had little.
In 2009 the wife commenced studying a (course omitted) by correspondence but then changed to full-time studies at a TAFE. The parties employed a nanny to help care for the children. She has completed the studies and subject to some formalities will be qualified as an (omitted) and she proposes to work two days a week. She says she ceased work and commenced the studies so that she could have employment which enables her to work part time and care for the children. She undertook studies with the agreement of the husband. She anticipates earning about $200 per week by working two days each week.
In 2007 and 2008 the parties purchased land in Property C and built a home. The husband's material refers to two properties which were purchased and renovated and then sold. The proceeds after the sale of the second property were paid into the parties’ joint bank account and used for mortgage payments and the family’s expenses.
The wife submits that contributions are equal. The husband submits that there should be a 2½% allowance in his favour, this for the contribution he made initially.
The approach to initial contributions was described by the Full Court of the Family Court in Pierce & Pierce [1998] FamCA 74. At [28] the Court said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home.
The parties had a 13 year relationship. The husband made the greater financial contribution through working full time and attaining a (omitted) position in a (omitted). The wife worked until shortly before the birth of the first child. Following that she was engaged in caring for the children and homemaking and studying. Her studying was the parties’ combined plan that she should qualify for an occupation which permitted her to combine caring for the children with part time work.
Subsequent to separation the husband continued with his employment and for a time, as already described, made some mortgage payments and payments for the loans for each party’s car. He stopped making those payments so that mortgage loan payments of about $10,000 were not made and both parties have acquired other motor vehicles.
The husband made the greater financial contribution while both parties worked full time but the wife contributed to the extent of her capacity as well as making non financial and homemaker contributions. She stopped working with the birth of the first child and from then on contributed by caring for the children and continued with her non financial and home maker contributions. Her part time study meant that she was not contributing financially and the parties employed a nanny two days each week to help care for the children, an added cost. The purpose of the study was to gain a qualification to enhance her ability to combine part time work with her homemaking and child care role.
After separation the wife remained in the family home with the children. While they spent a substantial amount of time with the husband the greater share of their care was carried out by the wife. The husband paid child support of $1,395 per month. Mortgage and payments on the wife’s car loan were paid until about the end of 2012 but then stopped. Some were paid from the remaining funds in the joint account. The husband's explanation is that he could not afford to pay all of his rent, his own expenses, including supporting the children during the times they were with him, child support, the mortgage payments and the wife’s car loan payments.
Whether the husband managed his finances prudently is not the point. He contributed to the financial preservation of the parties’ main asset, the home, by paying the mortgage for a time following separation and then stopped.
The husband’s initial financial contribution was at the start of a thirteen year relationship. When that is considered with the parties’ various contributions throughout the relationship and what occurred after separation the assessment of contributions is that they are equal.
Section 75(2) matters
The relevant matters are the age and state of health of the parties, their current and future incomes and income earning ability, their financial assets and liabilities, living expenses, care of the children and child support payments. Their standard of living is relevant.
The husband is 35 and the wife 38. Both are in good health.
The husband earns $170,000 per year which is a salary, expected bonus and motor vehicle reimbursement. In his financial statement of 4 April 2013 he gives weekly amounts for his salary of $2,990, bonus $264 and kilometre reimbursement for motor vehicle $264, a yearly amount of $170,000. An affidavit describes his incorporation of a company and purchase of equipment in anticipation of commencing his own business, but the hearing was conducted on the basis that he would remain employed by the (omitted).
The husband will remain liable for the shortfall on the Mazda loan, $5,000. He pays rent of $550 per week, child support of $409 per week, $126 per week for his motor vehicle loan and $264 per week on the $65,000 personal loan with (omitted) Bank that he obtained to pay legal costs. In addition to the loan he has a credit card debt of $23,000. His assets, apart from the former matrimonial home, are his BMW motor vehicle, which he values at less than the loan for its purchase, furniture and household goods. He has superannuation of $114,687.
The wife’s weekly income is $327 parenting payment, $106 Family Tax Benefit and $409 child support payment. She will retain the furniture and household goods in the former matrimonial home. She has a $30,000 debt for legal fees. She estimates that by working two days per week she will earn $200. She has the major share of the care of the two children aged five and three.
There is a large disparity in the parties’ income and future income earning ability. The husband is an (omitted) on a substantial income and may have prospects of promotion, although that was not explored at the hearing. When the children are of an age that the wife can work full time her income will be significantly less than the husband’s. She will be qualified as an (omitted) and so will be able to obtain employment at that level. Her prospects of returning to her former occupation as an (omitted) are doubtful given the time she will have been away from that occupation.
This is a case where the modest size of the asset pool, the disparity in incomes and income earning ability combined with the wife’s care of two young children means that a substantial adjustment in favour of the wife is appropriate. The range is 20% to 25%.
If the non-matrimonial property is distributed 70% to the wife and 30% to the husband and the superannuation divided equally the husband would receive a cash payment of $41,746.60
$292,838.67 × 30% $ 87,851.60
LESS
Bank accounts (children) $ 5,400.00
(omitted) (trailer) $ 3,700.00
Net (omitted) Bank share proceeds $ 4,000.00
Legal fees paid and distribution (husband) $ 16,550.00
Household chattels $ 16,455.00
Total $ 46,105.00
Payment $ 41,746.60
The wife wishes to retain the family home and to that end proposes that there be no division of superannuation. She says that she has approached the NAB and will be able to obtain a loan to refinance the mortgage of $333,000 by having her mother as a co-borrower. The bank requires that her mother be a registered proprietor on the title with the wife and a co-mortgagor. The wife’s mother gave evidence and said that she owns her own residential unit, that she is employed full-time on a salary of $40,000 a year and will assist her daughter if necessary in making repayments. The wife said that with careful management of the income she expects to earn, child support and government payments she will be able to pay the mortgage. If the house is sold she would have to rent a property with enough room for herself and the children and payments would be similar.
If there was an equal division of the husband’s superannuation of $114,687 and the wife's superannuation of $29,867 it would be a splitting order removing $42,410 from the husband’s superannuation and allocating it to the wife. Both parties are in their thirties and so many years from an age when they can access the superannuation. The issue then is whether it is a proper exercise of the discretion given to the court in the assessment of contributions and s.75(2) considerations and whether it is just and equitable to make an order which means that the husband receives no capital sum but retains all his superannuation.
The husband's gross weekly income is $3,265. His fixed commitments of taxation, rent, loan repayments and child support payments are:
Taxation $ 936
Rent $ 550
Car loan $ 126
Personal loan $ 264
Child support $ 409
Total $2,285
He has a credit card debt of $23,000 and so an allowance must be made for its repayment. If an allowance of $100 per week is made for repayment of the credit card debt he has about $900 per week for his other expenses. Prudent financial management should allow him to achieve a capital sum of $40,000 within three or four years. His expenditure over the time since separation shows that he has maintained a higher standard of living than the wife. He has a gym membership and has had meals in restaurants reasonably frequently. They were not expensive restaurants but not something that the wife has enjoyed herself. He has a more expensive car than the wife. The husband's expenditure in the 12 months from April 2012 until April 2013 was not such that they should be added back into the property pool against him, but it does show expenditure on clothes for both himself and the children and general living expenses at a higher rate than the wife could afford.
The husband will have no immediate or even medium-term benefit from retaining an additional $42,410 in his superannuation, but the multiplier effect from investment over the years will mean that eventually he will have a significant benefit that the wife will not have.
If the husband is to receive a capital sum of $41,746.60 it would mean the sale of the house. In that case a percentage division of the proceeds rather than fixed amounts would be the appropriate way to divide the net proceeds. Those net proceeds would be reduced by the selling costs which would reduce the amount for distribution to the parties, a further consideration in deciding whether or not the wife should have the opportunity to retain the home. The order will contain a default provision for the sale of the property and receipt by the wife of the proceeds. She then will bear the risk and cost of the selling expenses.
These matters, combined with using the lower end of the range for s.75(2) adjustment, mean that it is a proper exercise of the discretion I have under s.79 to adjust the parties’ financial affairs by ordering that the wife retain the family home by assuming responsibility for the mortgage by discharging the existing mortgage and refinancing. Apart from financial considerations that I have discussed, she has the greater responsibility for the care of the children and she will retain the family home for them.
One issue argued by the wife needs dealing with. The argument is that the wife intended giving half the home to her mother because her mother is to be on the title. The reason for the title transfer is that the bank requires it as a condition of granting the loan. It does not mean that the wife is giving half the home to her mother. The intention of both the wife and her mother is clear from their evidence. The wife will retain beneficial ownership of the home. Her mother will hold her legal interest in trust for the wife.
I will order that the wife discharge the mortgage and refinance within 60 days and if she does not that the home be sold, the mortgage and other encumbrances be paid and the balance paid to the wife.
I certify that the preceding seventy eight (78) paragraphs are a true copy of the reasons for judgment of Judge Phipps
Date: 31 May 2013
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Equity & Trusts
Legal Concepts
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Remedies
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Injunction
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Costs
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Breach
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Fiduciary Duty
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Constructive Trust
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