MCKAY & MCKAY

[2015] FCCA 2821

FEDERAL CIRCUIT COURT OF AUSTRALIA

MCKAY & MCKAY [2015] FCCA 2821

Catchwords:
FAMILY LAW – Property – 20 year relationship – s.75(2) factors.

Legislation:

Family Law Act 1975, ss.75, 79, 4

Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143
Stanford & Stanford [2012] HCA 52

Applicant: MS MCKAY

Respondent: MR MCKAY

File Number: MLC 10446 of 2014

Judgment of: Judge Harland

Hearing date: 28 September 2015

Date of Last Submission: 28 September 2015

Delivered at: Melbourne

Delivered on: 22 October 2015

REPRESENTATION

Counsel for the Applicant: Ms Gordon

Solicitors for the Applicant: Slater & Gordon

Counsel for the Respondent: Mr Williams

Solicitors for the Respondent: Pearsons Lawyers

ORDERS

1. That within 60 days from the date of these orders being approved by the Court (“the date”) the applicant wife pay to the respondent husband $411,149.26 (“the payment”).

2. That contemporaneously with the payment:-

   (a)The wife do all such acts and things and sign all such documents as may be required to transfer to the husband at the husband’s expense all of her right, title and interest in the real property situate at and known as Property S (“the Property S property”); and

   (b)The husband shall discharge the mortgage secured against the Property S property and refinance the mortgage into his sole name and otherwise indemnify the wife against all payments and liability pursuant to the mortgage and all rates, taxes, and outgoings of or with respect to the Property S property of whatsoever nature and kind.

   (c)The wife do all such acts and things and sign all such documents as may be required to transfer to the husband at the husband’s expense all of her right, title and interest in the real properties situate at and known as Property D, (“the Property D property”).

   (d)The husband shall discharge the mortgage secured against the Property D property, refinance the mortgages into his sole name and otherwise indemnify the wife against all payments and liability pursuant to the mortgage and all rates, taxes, and outgoings of or with respect to the Property D property of whatsoever nature and kind.

   (e)The husband do all such acts and things and sign all such documents as may be required to transfer to the wife at the wife’s expense all of his right title and interest in the real properties situate at and known as Property H, (“the Property H property”).

   (f)The wife shall discharge the mortgage secured against the Property H property, refinance the mortgages into his sole name and otherwise indemnify the husband against all payments and liability pursuant to the mortgage and all rates, taxes, and outgoings of or with respect to the Property H property of whatsoever nature and kind.

   (g)The wife do all such acts and things and sign all such documents as may be required to transfer to the Husband at the Husband’s expense all of her right title and interest in the (business omitted).

3. That the husband shall retain for his sole and exclusive use, enjoyment and benefit all other items of property (both real and personal and including choses-in-action and financial resources) in his name possession and/or control including but not limited to:

   (a)(business omitted);

   (b)The Toyota Hilux;

   (c)(motorbike omitted); and

   (d)The Mercedes motor vehicle.

4. That the husband shall be solely liable for and indemnify the wife in relation to all debts and liabilities in his name or attaching to any item of property which he is to retain pursuant to these Orders.

5. That the wife shall retain for her sole and exclusive use, enjoyment and benefit all other items of property (both real and personal and including choses-in-action and financial resources) in her name possession and/or control including but not limited to:

   (a)Her interest in the property at Property A.

6. That the wife shall be solely liable for and indemnify the husband in relation to all debts and liabilities in her name or attaching to any item of property which she is to retain pursuant to these Orders.

7. That in the event the whole of the payment has not been made by the date the property situate at and known as Property H be forthwith sold altogether out of Court (“the sale”) and upon completion of the sale the proceeds be applied as follows:

   (a)Firstly to pay all costs, commissions and expenses of the sale;

   (b)Secondly to discharge the mortgage and any other encumbrance affecting the real properties; and

   (c)Thirdly to pay to the husband such amount of the payment as is outstanding; and

   (d)Fourthly, the balance be divided equally between the parties.

8. That within 30 days the parties do all acts and things and sign any such documents as may be required to dissolve the partnership known as ‘(omitted)’ (“the partnership”) at their joint expense.

9. That upon dissolution of the partnership:

   (a)The wife shall relinquish all of her interest in the (business omitted);

   (b)The husband shall indemnify the wife and keep her indemnified from all liabilities of the partnership.

10. That within 7 days the wife deliver to the husband the key and accessories, including the picnic basket, to the Mercedes Benz motor vehicle in the husband’s name and possession.

11. That within 14 days the wife remove herself as administrator of the (business omitted) Facebook page and do all things and sign all documents required to make the husband the administrator of the (business omitted) Facebook page.

12. That within 24 hours the wife do all acts and things necessary to enable the Husband to gain access to the Facebook account for the (business omitted) and that the husband have sole and exclusive administration of that account thereafter.

13. That paragraphs 14 to 16 inclusive of these Orders are binding on (omitted) (“the Trustee”) of (omitted) Super (“the Superannuation Fund”) member Ms McKay born (omitted) 1965.

14. That pursuant to s.90MT(1)(a) of the Family Law Act 1975 (“the Act”) whenever a splittable payment becomes payable in respect of the wife’s interest in the Superannuation Fund, the husband shall be entitled to be paid an amount calculated in accordance with Pt 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using the base amount of $79,442.52 and there be a corresponding reduction in the entitlement of the wife to whom the splittable payment would have been made but for these Orders.

15. That Order 14 has effect from the operative time and that the operative time for such Order be four (4) business days after the service of a sealed copy of these Orders made by the Court on the Trustee of the Superannuation Fund.

16. That the Trustee of the Superannuation Fund, in accordance with the obligations set out under the Act and the Regulations, do all such acts and things and sign all such documents as may be necessary to calculate the entitlement of the wife and make payment to the wife in accordance with these Orders and to give effect to these Orders.

NOTATION:

Please note that Orders 13 and 15 have been amended pursuant to
sub-rule 16.05(2)(e) of the Federal Circuit Court Rules (2001).

IT IS NOTED that publication of this judgment under the pseudonym McKay & McKay is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 10446 of 2014

MS MCKAY

Applicant

And

MR MCKAY

Respondent

REASONS FOR JUDGMENT

1. By the time final submissions were made in this matter, the parties’ respective positions had narrowed considerably.

2. The wife seeks an adjustment of the non-superannuation assets of 60% in her favour. The husband seeks an adjustment of 55% in the wife’s favour of the non-superannuation assets.

3. The parties agree that their superannuation interests should be equally divided.

4. The parties are also agreed about which properties they will retain.

5. The parties were in a relationship from 1993 until 2013. The parties have two children, X aged 20 and Y aged 15. Both children live with the wife. X works for the husband at one of the (businesses omitted). The husband contributes to the children’s expenses.

6. The wife is employed as a (occupation omitted). She earns $97,000 a year. The husband owns two (businesses omitted).

7. The wife salary sacrifices part of her income. She has had that arrangement in place as a benefit of her employment for several years. The wife has a poor understanding of what that means. She was not able to say how much salary she sacrifices and that is placed into her superannuation although that is likely to be the case. There is nothing wrong with salary sacrificing. People do this for sound reasons. In this case, the wife has been doing this long before the parties separated. The only reason it is relevant in this case is that the wife complains that post separation she had to borrow funds to keep the investment properties going. The investment properties run at a loss. The wife receives a tax benefit from this. The wife received $10,000 back on her last tax return because of negative gearing. She said she claimed 50% so the husband can claim the other 50% on his tax.

8. The husband locked the wife out of the (business omitted) in March 2014. The wife complains about this and complains about not receiving profits from the business since then.

9. It is rare that couples who have proceedings before this Court are able to keep working in a business together post separation.  It was logical for the husband to take over running the (business omitted) solely. The wife has a separate career and income.

10. The wife manages the parties’ investment properties. They are rented out through agents.

11. It is clear on the evidence that both parties worked hard during the relationship and contributed to the relationship to the best of their respective abilities. It is not necessary to detail the various contributions the parties made and the properties the parties bought and sold. I find that the parties’ contributions during the marriage were equal.

12. The husband operates two (businesses omitted). The parties established (business omitted) during the marriage. The wife sought to rely on a valuation which was only available the morning of the hearing. Fortunately, the husband agreed to two figures in the valuation. If the (business omitted) has a lease, it is valued at $210,000. If there is no lease it is valued at $31,000. Currently, the husband does not have a lease on the (business omitted) because he neglected to sign the renewal on time. He says he overlooked it because of the stress of the proceedings. He intends to negotiate a new lease after these proceedings are concluded. I accept that the husband did not deliberately let the lease lapse but it leaves the Court in a difficult position with respect to the appropriate value to adopt for the value of the (business omitted). It would not be fair to the wife to adopt the value of the business without a lease at $31,000. This is because it is likely that the husband will be able to negotiate a new lease. He did have long term options on the old lease. It is speculation as to what will be involved in that negotiation. The husband says it would be harsh to adopt the full valuation of $210,000. The difficulty is that the Court has no other information to enable it to adopt another figure. It would be an arbitrary exercise. It is something that is relevant to take into account pursuant to s.75(2)(o) of the Act.

13. The other asset in dispute is the value of the motor bike. The husband obtained a red book valuation. The wife obtained a valuation from a valuer. The red book valuation for a private sale is $10,180. The wife’s valuation is annexed to the wife’s affidavit affirmed on 17 September 2015.  The value for a private sale is $17,000. The valuation the wife obtained was by a motor vehicle valuer who inspected the motor bike. A red book valuation is obtained online and relies on the information entered by the person seeking the valuation. The valuation that the wife obtained is more accurate and in those circumstances I adopt her figure.

14. The assets and liabilities of the parties are largely agreed. The main areas of dispute relate to the businesses of the parties and motor vehicles. The assets and liabilities of the parties are as follows:

ASSET			CURRENT OWNERSHIP		VALUE
a)	Property H		Joint		E $1,262,500
b)	Property D		Joint		E $450,000
c)	Property A		The wife and her mother equally		E $160,000
d)	Property S (business omitted)		Joint		E $550,000
e)	The business known as the (business omitted)		Husband		Nil
f)	The business known as the (business omitted)		Joint		E $210,000
g)	Toyota Hilux motor vehicle		Husband		E $35,000
h)	Mercedes motor vehicle		Husband		E $45,000
i)		(motorbike omitted)		Husband		E $17,000
SUBTOTAL		E $2,729,500

LIABILITY		OWNERSHIP	VALUE
a)	(omitted) bank mortgage over Property H	Joint	E $362,792
b)	(omitted) bank mortgage over Property D	Joint	E $277,201
c)	(omitted) bank mortgage over Property A	Wife and wife’s mother	E $25,816
d)	Mortgage over Property S	Joint	E $644,497
e)	Loans in respect of the business known as the (business omitted)	Husband	E $104,485
f)	(omitted) bank liability remaining from sale of Property D	Husband	E $10,500
g)	Loan for Toyota Hilux motor vehicle with (omitted) Finance	Husband	E $44,742.82
h)	Loan for Mercedes motor vehicle with (omitted) Finance	Husband	E $61,884
SUBTOTAL	E $1,531,917.82

Net assets:   $1,197,582.18

Wife’s superannuation:        $238,549.00

Husband’s superannuation  $90,052.00

1. The wife seeks a greater adjustment in her favour because she has the greater care of Y and because she manages the investment properties. Y is 15 years old. A minor adjustment should be made for this factor. The husband acknowledges this. The wife provided little detail about what she does to manage the investment properties. She has employed agents to manage the properties. They carry out the day to day management of the properties. There should only be a minor adjustment for this factor.

2. The wife complains that the husband has not paid her half the profits from the business since she was removed from it. Her argument was completely misconceived. What was clear from the husband’s evidence was that the business had earnt income of approximately $60,000 in the financial year ending 30 June 2014. That is not the profit. The husband pays for his living expenses from the business as it is his only income. This is what he did before the parties separated. It is what many small business owners do. It was unreasonable for the wife to criticise the husband for it post separation. In real terms the wife earns more than the husband and this is a factor which requires a minor adjustment in the husband’s favour. During final submissions, the wife’s counsel tried to submit that in addition to the $210,000 value, there is $189,000 in goodwill. This came entirely out of the blue and was completely misconceived. It was clear that the wife and her counsel have a poor grasp of the business.

3. I accept the husband’s evidence that the property at Property D sold for a loss which the husband has taken on and that was in the sum of $10,500. That should be included in the parties’ assets and liabilities. That figure is a lesser sum than the amount owing because the husband has not been making interest payments. He properly conceded that the lesser amount should be included.

4. The husband set up the second (business omitted) post separation. He borrowed money from his brother to purchase that business. His brother gave evidence that he has advanced the husband $240,000. I accept his evidence. The husband’s brother gave evidence that he understands he will lose his investment if the business does not make a profit. He extended his mortgage to make the investment. He paid the money by lump sum instalments as his brother requested it.

5. The husband did have a buyer arranged for the (business omitted) but the sale fell through when they discovered a problem with the lease associated with the (business omitted) and discovered that 60% of the outside area for the (business omitted) is not covered by a lease. That is another issue the husband is trying to sort out. Until he does, he will not be able to sell that business. The (business omitted) has been operating for less than 12 months. It does not make a profit. I find that the (business omitted) does not have a value.

Legal Principles

1. Part VIII of the Family Law Act1975 is the part of the Act dealing with property, spousal maintenance and maintenance agreement. The major provisions relating to marital property division are contained in ss.79(1); 79(2); 79(4); & 75(2) of the Act.

2. Pursuant to s.79(1) the Court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a marriage in relevant property.

3. The expression “property” is defined in s.4(1) of the Act in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”

4. Pursuant to s.79(2) of the Act, the Court is actively prevented from making such an order unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitory words “shall not” in the relevant section.

5. Section 79(4) provides the mechanics of how a Court is to make an order altering marital property interests.

6. Paragraphs (a); (b); and (c) categorise contributions made by marital partners, which are relevant.  Paragraph (d) directs the Court to take into account of any order regarding the earning capacity of either party to the marriage concerned. 

7. Paragraph (e) directs the Court to consider a list of matters contained in s.75(2), which are germane to spousal maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs. Finally, paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.

8. Until recently, the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39].

9. The High Court has recently considered the operation of s.79 in the matter of Stanford & Stanford [2012] HCA 52.In this case, the majority stated at [35]-[36] that:

   “It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.

   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.” [Footnotes omitted]

1. The High Court found that three fundamental propositions with respect to the application of s.79, which can be summarised as follows:

   1.Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The High Court emphasised the word existing.

   2.Secondly, although section 79 gives the court a broad power to make property settlement orders it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.

   3.Thirdly, when considering whether making a property settlement order is just and equitable the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to section 79(2) in addition the matters referred to section 79(4).

2. In Stanford & Stanford the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of s.79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation.

3. The High Court also pointed out that what is just and equitable is different in every case.

4. Stanford & Stanford casts doubt on the correctness of adding back notional amounts to the pool for the purposes of property settlement.

5. I am satisfied that it is just and equitable to make a property adjustment in this case. The parties have separated and both wish to separate their financial affairs.

6. I am satisfied that the parties’ contributions during the relationship were equal.

7. I am further satisfied that the s.75(2) factors discussed above require an adjustment in the wife’s favour of 3% of the non–superannuation, bearing in mind that there are also s.75(2) factors favouring the husband.

8. The parties have agreed about which assets they will retain.

9. The wife will need to make a cash payment to the husband of $411,149.26 to achieve this split.

10. The husband seeks to collect various items of furniture from the former matrimonial home. The wife seeks an order that each keep what they have in their possession.

11. Both parties address the issue of furniture in their affidavits. The husband saying he did not take any furniture with him when he left. The wife says he took many items of furniture and took more items in May 2015. Neither counsel chose to cross-examine on this topic. I am unable therefore to make a finding of fact. In those circumstances, I am not able to make a specific order dividing the furniture.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Harland

Associate: 

Date:  22 October 2015