MELROSE & WEIR

[2014] FCCA 121

FEDERAL CIRCUIT COURT OF AUSTRALIA

MELROSE & WEIR [2014] FCCA 121

Catchwords:
FAMILY LAW  ̶  Division of debts after breakdown of de facto relationship.

Legislation:  

Family Law Act 1975 (Cth), ss.90SM, 90SF(3)

Applicant: MR MELROSE

Respondent: MS WEIR

File Number: DGC 215 of 2012

Judgment of: Judge Phipps

Hearing dates: 9 & 21 October 2013

Date of Last Submission: 21 October 2013

Delivered at: Dandenong

Delivered on: 31 January 2014

REPRESENTATION

The Applicant: Appearing on his own behalf

The Respondent: Appearing on her own behalf

PROPERTY ORDERS

1. That each party reimburse the other party for half the amount paid by a party after the date of this order in reduction of the following debts:

   (a)Money lent by husband’s parents, Mr M and Mrs M, originally $40,000.

   (b)Amount owing to Commonwealth Bank of Australia or its assignee lent to parties for purchase of Property H, [H].

   (c)Money owing on loans by the husband’s brother Mr E, originally $6,000, and a friend Mr S, originally $4,500.

   (d)Electricity bill Property H, [H] estimated $4,700.

   (e)Amount owing National Australia Bank credit card at 5 September 2011 and interest and charges on that amount.

   (f)Water bill Property H, [H].

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT DANDENONG

DGC 215 of 2012

MR MELROSE

Applicant

And

MS WEIR

Respondent

REASONS FOR JUDGMENT

1. The parties commenced a de facto relationship in 1997 or 1998.  I will refer to them as the husband and the wife.  They separated on 5 September 2011.  The proceeding had a long history mostly about children’s matters which are now resolved.  This judgement is concerned only with property.  The only property is debts.  The parties dispute how responsibility between them for those debts should be divided.

2. There are three children of the relationship, [X] born [in] 2000, [Y] born [in] 2002 and [Z] born [in] 2003.  Orders made on 9 October 2013 by consent provide for the parties to have equal shared parental responsibility for the children to live with the mother and spend time with the father alternate weekends from Thursday at the end of school until Monday at the commencement of school and each alternate Thursday until Friday at the start of school, half holidays and the usual celebratory occasions.

3. In 2003 the parties purchased Property H, [H].  They financed the purchase by a loan from the Commonwealth Bank of Australia and a loan from the father’s parents of $44,000.

4. After separation the mother and the children lived in the property at Property H, [H].  The mortgage went into arrears and in 2012 the property was listed for sale.  It was not sold and the father blames the mother alleging that she did not cooperate.  It seems that the mother makes the same allegation against the father.

5. The mother left the house with the children during 2012.  The house was in very poor condition, damaged and dirty.  The husband worked cleaning it up and doing some repairs but the bank applied in the Supreme Court of Victoria and obtained a Warrant of Possession and the Sheriff posted a notice to vacate the property before 7 September 2012.  The property was then sold by the bank pursuant to its powers under the mortgage.  After payment of the mortgage and all expenses there was a shortfall which, at the time of the hearing, the father put at $18,655.31.

6. The father worked full time to about 2003.  He then became disabled and apart from some compensation payments has been dependent upon a disability pension.  He received two disability payments, $50,000 and $45,000.

7. The wife was largely engaged in caring for the children and the home although she did some part-time work as a [omitted] until 2011.

8. The husband has re-partnered.  His partner has a child.  There is little information about her income but it would appear to be only Social Security and family benefit payments.  The wife’s income is Social Security and family benefit payments.

9. The property claim is pursued by the husband.  He wants an order that the wife pay 100% of the outstanding debt to the bank, now assigned to an agency, 50% of other debts and to reimburse him money he spent cleaning and repairing the property.  He says this is a total of $15,996.51.

10. I attempted to explain to the parties, particularly the husband, that the application was a property application under the De Facto Property Provisions of the Family Law Act 1975 (Cth) and the court could only make orders relating to division of existing property, in this case debts. It could not order reimbursement of money spent in the way the husband sought.

11. The debts alleged by the husband are:

    a)       Husband’s parents, Mr M and Mrs M, $40,453.90.  The wife admits this debt.

    b)     Commonwealth Bank of Australia or its assignee $18,655.31.  The wife admits this debt.

    c)       Money lent by the husband’s brother Mr E, $6,000, and a friend Mr S, $4,500.  The wife disputes the loans. The loan to Mr S has been repaid by the father.

    d)     Electricity bill Property H, [H] estimated at $4,700.

    e)       National Australia Bank credit card estimated at $8,000.

    f)    Water bill Property H, [H] estimated $707.10.

12. The husband’s proposal is that the wife pay 50% of the debts to his parents, his brother and Mr S, two thirds of the electricity bill, half the credit card, the whole of the water bill and the whole of the amount owed to the Commonwealth Bank of Australia.

13. The husband also proposes that the wife reimburse him all the money he spent on cleaning and repairing the house which he estimates at $15,996.51.

14. The property application now seems to be an exercise in futility because neither party has the ability to pay any amounts owing nevertheless, since the husband pursued the application, I must make a determination.

15. The husband’s proposal for the wife to reimburse him cannot be done under the property provisions.  They can be taken into account in assessing contributions.  The husband alleges that the wife did not cooperate in selling Property H, [H] prior to the bank taking possession.  An order I made gave him permission to enter the property to carry out repairs and he was doing this when the bank took possession.  The husband says that if the wife had cooperated earlier the property would have been sold for an amount which meant there would be no bank debt.  This is something to be taken into account in determining contributions but it cannot found a direct order for reimbursement.

16. I accept what the husband says about money being lent by his brother and Mr S.  The parties were obviously in a difficult financial position.  The husband says the money was lent to help with mortgage payments and that is plausible.  Some of the money has been repaid by the husband and between the date of the hearing and judgement more has been repaid.  There is an issue about whether the credit card debt was before separation or after separation.  I will include any amount owing on the credit card at the time of separation.  The evidence does not permit a finding of what that amount was.  Electricity and water bills are not disputed and I will include them.

17. Section 90SM of the Family Law Act 1975 (Cth) sets out how a court considers property settlement orders after the breakdown of a de facto relationship.

18. I have to determine whether it is just and equitable to make an order.  Arguably it is not.  As I have already said, the property case would seem to be an exercise in futility.  I cannot make orders which affect any creditor’s rights.  Except for some small amounts to family members and Mr S, there is no possibility of payment of the debts by either party unless either party receive some money.  The father’s parents own a house and so perhaps there is a possibility of an inheritance.  The father’s mother filed an affidavit in which she said she was born on [omitted] 1940 so she is 73 years old.  One hopes that the father’s possibility of an inheritance is well into the future.

19. On balance I consider that it is just and equitable that order be made.  The parties have debts and the responsibility between them needs to be established.

20. Contributions are equal.  The parties had little assets throughout the relationship.  Even when they purchased a property at Property H, [H] it would seem they had little net equity.  What income they had was principally earned by the father.  The wife gave birth to three children and was principally engaged in their care and the care of the home.  The husband’s financial and other contributions are matched by the wife’s homemaker and childcare contributions.

21. The husband alleges that the wife’s behaviour meant that Property H, [H] was sold at a loss.  He says that there was a buyer at a price which meant that the mortgage to the bank would have been paid.  There was no contract signed and the husband says this was because of the wife’s lack of cooperation.

22. Even if I assume this is correct there is insufficient evidence to make a finding that the wife has caused a loss. There is no evidence by an estate agent or a potential buyer. There is no evidence that a potential buyer had the ability to pay any price as suggested. Therefore I cannot pursuant to s.90SM make a finding that the house could have been sold for more than the amount received at the bank auction.

23. So far as s.90SF(3) matters are concerned each party’s future looks bleak. None are ever likely to have paid employment. They have no superannuation and no assets only debts. The wife has the care of three children but the husband has them five nights a fortnight. There is no adjustment for s.90SF(3) matters.

24. The court cannot make orders ordering that each party pay a certain proportion of an existing debt which will limit a party’s liability for that debt.  The creditor’s right to recover all of the debt from either party cannot be affected.  All I can do is order that each party indemnify the other party for half of any payment made on a debt up to a total of half the total debt.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date:  31 January 2014