Milic and Lynch
[2014] FCCA 2762
•28 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MILIC & LYNCH | [2014] FCCA 2762 |
| Catchwords: FAMILY LAW – Property settlement – de facto relationship – very short relationship – global or asset by asset approach – referral to Centrelink. |
| Legislation: Family Law Act 1975, ss.75(1), 75(2), 79, 79(4), 90RD, 90RG, 90SB, 90SF, 90SF(1) 90SF(3), 90SM, 90SM(3), 90SM(4) |
| Cases cited: Bevan & Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FLC 93-545; [2013] FamCAFC 116 In the Marriage of Hickey (2003) 30 Fam LR 355; (2003) FLC 93-143; [2003] FamCA 395 In the Marriage of J G and H J McMahon (1995) 19 Fam LR 99; (1995) FLC 92-606 In the Marriage of Quinn (1979) 37 FLR 168; (1979) FLC 90-677 Stanford v Stanford (2012) 247 CLR 108; (2012) 87 ALJR 74; (2012) 47 Fam LR 481; (2012) FLC 93-518; (2012) 293 ALR 70; [2012] HCA 52 |
| Applicant: | MR MILIC |
| Respondent: | MS LYNCH |
| File Number: | MLC 1763 of 2014 |
| Judgment of: | Judge Riley |
| Hearing dates: | 24 September and 10 and 14 October 2014 |
| Date of last submission: | 27 October 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 28 November 2014 |
REPRESENTATION
| Advocate for the Applicant: | Mr Reichman |
| Solicitors for the Applicant: | Reichman & Co |
| Counsel for the Respondent: | Mr Dunlop |
| Solicitors for the Respondent: | Geelong Family Lawyers |
DECLARATION:
Pursuant to s.90RD of the Family Law Act 1975, the husband and wife were in a de facto relationship from 1 April 2012 until 6 March 2013.
ORDERS:
The wife pay to the husband the sum of $48,861 (“the payment”) no later than 60 days from the date of these orders (“the date”).
Contemporaneously with the payment:
(a)the parties do all such acts and things and sign all necessary documents so as to discharge the mortgage on the real property situated at Property W, in the State of Victoria, being the whole of the land more particularly described in the certificate of title volume [omitted] (“the real property”) and replace it with a mortgage to the wife alone;
(b)the husband provide a withdrawal of caveat [omitted]; and
(c)the husband forever relinquish any claim, right, title and/or interest in the real property.
In the event the payment is not made by the date:
(a)the real property be listed for sale by auction with such real estate agent or agents as may be agreed between the parties (“the selling agent”) and failing agreement within 14 days after the date the real estate agent be nominated by the President of the Real Estate Institute of Victoria;
(b)the contract of sale for the real property provide for a settlement period of no more than 90 days from the date of the contract;
(c)the reserve price be an amount agreed to by the parties or failing agreement within 14 days after the date, the value as nominated by the Executive Officer of the Australia Property Institute, Victorian Branch;
(d)the parties cooperate in every way with the appointed selling agents in relation to the marketing of the sale of the real property including allowing inspection of the real property at all reasonable times requested by the agent and ensuring that the real property is clean, neat and in good order and condition at the time of inspection by any prospective buyer;
(e)if the real property is not sold by auction as provided for in order 3(a) the parties shall continue to engage the selling agent and offer the real property for sale by private treaty;
(f)the respondent be entitled to occupy the real property pending sale and during such right of occupation the respondent be responsible for all mortgage payments, rates and outgoings of the real property as they fall due up to and including the settlement date; and
(g)the proceeds of the sale of the real property be applied as follows:
(i)to pay all costs and commissions of the sale;
(ii)to discharge the mortgage and any other encumbrance affecting the real property;
(iii)an amount to the husband that will result in him receiving 42% of the parties’ combined assets, after taking account of the items the husband is to retain pursuant to these orders; and
(iv)the balance to the wife.
The husband be liable for and indemnify the wife against any loan owed to the husband’s grandmother, Ms M.
Unless otherwise specified in these orders, and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other property, including choses-in-action and motor vehicles, in the possession of such party as at the date of these orders with the household chattels at 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 owned by the other;
(c)insurance policies remain the sole property of the owner named thereon;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(e)each party be solely liable for and indemnify the other against any liabilities and/or debts in their respective names; and
(f)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
All extant applications be otherwise dismissed.
The Principal Registrar provide a copy of these orders and the reasons for judgment in this matter to the Chief Executive of Centrelink.
The legal representatives for the Chief Executive of Centrelink be at liberty to inspect the court file and obtain copies of any documents relevant to their enquiries.
IT IS NOTED that publication of this judgment under the pseudonym Milic & Lynch is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 1763 of 2014
| MR MILIC |
Applicant
And
| MS LYNCH |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application under s.90SM of the Family Law Act 1975 (“the Act”) for a de facto property settlement. The parties were in a relationship of 11 months, on the husband’s case, or seven months, on the wife’s case. There are no children of the relationship. The wife has a son from a previous relationship who is nine years old and who has some special needs.
The legislation
Section 90RD of the Act permits the court to make a declaration that a de facto relationship existed between two persons. Under s.90RG of the Act, the court is only permitted to make such a declaration if it is satisfied that one or both of the persons were ordinarily resident in a participating jurisdiction when the primary proceedings commenced. There was no dispute about this issue. On the material before the court, I am satisfied that the applicant and the respondent were both ordinarily resident in a participating jurisdiction, namely, Victoria, when the primary proceedings commenced.
Under s.90SB of the Act, the court may only make an order under s.90SM if the court is satisfied that:
a)the period or the total periods of the de facto relationship were at least two years; or
b)there is a child of the de facto relationship; or
c)the applicant made substantial contributions of the kind mentioned in s.90SM(4)(a), (b) or (c) of the Act and a failure to make an order under s.90SM would result in serious injustice to the applicant; or
d)the relationship is or was registered under a prescribed law of a State or Territory.
In the present case, it was common ground that:
a)the relationship lasted less than one year;
b)there were no children of the relationship;
c)the applicant made substantial contributions of the kind mentioned in s.90SM(4)(a), (b) or (c) of the Act; and
d)the relationship was not registered under a prescribed law of the State or Territory.
The only remaining question is whether a failure to make an order under s.90SM of the Act would result in serious injustice to the applicant. I consider that it would. The principal asset of the parties is the former matrimonial home. It is registered in the sole name of the wife, although the parties were content to treat it as a joint asset, presumably on the basis that the husband has an equitable interest in it. For the reasons discussed below, I consider that it would be just and equitable to give the husband a share of the value of that property. The wife did not dispute that, although there was argument about how much the husband should receive.
Section 90SM of the Act gives the court power to alter the interests of the parties to a de facto relationship in the property of those parties following the breakdown of their relationship. Sub-section 90SM(3) of the Act provides that:
The court must 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 90SM(4) of the Act sets out the matters the court must take into account when considering what orders, if any, should be made for the alteration of the interests of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii)otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i)to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii)otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them; and
(c)the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and
(e)the matters referred to in subsection 90SF(3) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.
The matters to be taken into account under s.90SF(3) of the Act are:
(a)the age and state of health of each of the parties to the de facto relationship …; and
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c)whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g)a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(i)the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k)the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party's role as a parent; and
(m)if either party is cohabiting with another person – the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 90SM in relation to:
(i)the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party; and
(o)the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i)a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii)a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(p)the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i)a party to the subject de facto relationship; or
(ii)a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(q)any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
(r)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(s)the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
(t)the terms of any financial agreement that is binding on a party to the subject de facto relationship.
The approach to applications under s.90SM
In Stanford v Stanford (2012) 247 CLR 108; (2012) 87 ALJR 74; (2012) 47 Fam LR 481; (2012) FLC 93-518; (2012) 293 ALR 70; [2012] HCA 52, the High Court explained the proper approach to an application under s.79 of the Act. Section 90SM mirrors s.79, except that it applies to de facto relationships. Accordingly, Stanford is applicable to the present proceedings. In Stanford, the High Court said the following:
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. … The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order. (emphasis added)
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs "as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion”. …(footnotes omitted)
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered. (emphasis added)(footnotes omitted)
40.Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act. (emphasis added)(footnotes omitted)
…
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4). (emphases added)(footnotes omitted)
In Stanford, the critical fact was that the parties had not separated.
The wife had suffered a stroke and had moved into a nursing home, but the parties’ marriage was intact. It was the wife’s case guardian, a daughter from an earlier marriage, who sought the alteration of property interests.
The wife died while the judgment of the Full Court of the Family Court was reserved. Consequently, when the Full Court of the Family Court came to re-exercise the discretion, the wife had no future needs, but the husband did. The High Court noted at [47] that the courts below had not adequately considered the consequences for the husband of the orders made, namely, that his home would have to be sold.
Against that backdrop, the High Court emphasised that the just and equitable requirement of s.90SM(3) of the Act is not necessarily satisfied merely by a consideration of the contributions of the parties as described in s.90SM(4) of the Act. However, in the usual case before this court, where the parties have separated, the High Court acknowledged at [42] that the just and equitable requirement would be “readily satisfied”.
Following Stanford, it is no longer appropriate to think of “contribution based entitlements” or the “adjustment” based on future factors. Rather, the court is required to take into account all the relevant matters and then determine what order, if any, is just and equitable. It is also no longer appropriate to think of a pool of assets.[1]
[1] Parkinson, Patrick Family Property Law and the Three Fundamental Propositions in Stanford v Stanford (2013) 3 Fam L Rev 80 at 88.
Additionally, the High Court emphasised that marriage, at common law, does not create a community of ownership: [39]. The rights a person might have in his or her partner’s property and income arise from the Act, notably s.90SM(4) and s.90SF(1) respectively.
In relation to income, s.90SF(1) of the Act provides that:
In exercising jurisdiction under section 90SE (after being satisfied of the matters in subsections 44(5) and (6) and sections 90SB and 90SD), the court must apply the principle that a party to a de facto relationship must maintain the other party to the de facto relationship:
(a)only to the extent that the first-mentioned party is reasonably able to do so; and
(b)only if the second-mentioned party is unable to support himself or herself adequately whether:
(i)by reason of having the care and control of a child of the de facto relationship who has not attained the age of 18 years; or
(ii)by reason of age or physical or mental incapacity for appropriate gainful employment; or
(iii)for any other adequate reason.
In other words, there is not an absolute right to share equally in the income of a partner. Rather, such a right only arises where a person is not able to adequately support himself or herself and the other party is reasonably able to support the first-mentioned party. Consequently, there is no obligation to contribute all of one’s earnings to the matrimonial endeavour. However, if one party to a marriage spends a substantial part of his or her income on extraneous pursuits, it will obviously have an effect on that person’s contributions to the parties’ assets.
Stanford requires the following matters to be determined in applications brought under s.79 of the Act:
a)whether the parties have separated;
b)the assets and liabilities of each party;
c)the contributions of each party;
d)the future needs of each party;
e)bearing in mind all of the foregoing matters, whether it is just and equitable to make any orders altering the interests of the parties in their property; and
f)what orders, if any, are just and equitable in all the circumstances of the case.
Stanford does not require these matters to be addressed in any particular order. In most cases, it would seem rational to consider them in the order set out above. It does not seem to me to be possible to determine whether it is just and equitable to make an order altering the parties’ interests in their property without the other matters mentioned above having been previously determined. That seems to be clear from the opening words of s.79(4) of the Act, which are that:
In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account [the various matters set out in s.79(4)] … .
The approach outlined above is consistent with the decision of the Full Court of the Family Court in Bevan v Bevan (2013) 279 FLR 1; (2013) 49 Fam LR 387; [2013] FLC 93-545; [2013] FamCAFC 116. I note that in that case, the Full Court said at [89]:
In our view, it will be less likely that the separate issues arising under s 79(2) and (4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order.
I also note that, in Bevan, at [79] the Full Court said, in relation to addbacks:
We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amendable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
The four step approach
In In the Marriage of Hickey (2003) 30 Fam LR 355; (2003) FLC 93-143; [2003] FamCA 395 at [39], the Full Court of the Family Court described the preferred four step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. First, the court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Second, the court should identify and assess the contributions of the parties within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Third, the court should identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of
s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourth, the court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
In the light of the High Court’s decision in Stanford, it seems that the basic steps stated in Hickey remain correct. That is, the court is required to:
a)identify the assets owned by the parties, jointly or separately, and the liabilities to which the parties are subject, jointly or separately;
b)take into account the contributions made by each party;
c)take into account the so called “future factors”; and then
d)determine what order, if any is just and equitable.
However, following Stanford, it is no longer appropriate to think of “contribution based entitlements” or the “adjustment” based on future factors. Rather, the court is required to take into account all the relevant matters, consider the matter holistically, and then determine what order, if any, is just and equitable.
Short relationship cases and s.90SF(3)
Some of the husband’s arguments were difficult to follow. However, he seemed to argue that the s.75(2) factors (or, in this case, the s.90SF(3) factors) did not need to be considered unless s.75(1) (or, in this case, s.90SF(1)) is satisfied. That is plainly wrong. Section 90SM(4) of the Act provides that the matters referred to in s.90SF(3) must be considered in so far as they are relevant.
The husband also argued that the so-called short marriage cases are authority for the proposition that the s.75(2) (or s.90SF(3)) factors do not need to be considered in such cases. The husband referred to, for example, In the Marriage of Quinn (1979) 37 FLR 168; (1979) FLC 90-677. In that case, the Chief Justice said:
Speaking for myself, I do not necessarily subscribe to the view that one should do mathematical calculations in determining the appropriate property order to make under s.79. … His Honour has certainly attempted, with some precision, to determine the precise financial contributions of each party, but I think when one tries to be too precise about these matters, it can sometimes happen that one forgets about the indirect and non-financial contributions.
Nevertheless, … the marriage was of short duration and there are circumstances in this case, which give some validity to looking at the exact amounts of capital and of income put in by each party. (emphasis added)
…
Nevertheless, one must look at the value of the property at the hearing date and consider, in the light of that value, what would be a just and equitable order to make in light of the contributions and in light of the factors relevant to the court’s decision under s.75(2).
The husband emphasised the passage set out in bold above but did not mention the passage that follows (at page 173 of the Family Law Reports). Clearly, the Chief Justice acknowledged that it is necessary to consider the s.75(2) factors even in a short marriage case. That is obviously what the legislation requires.
The husband also argued that in short marriage cases the court should deal with the matter on an asset by asset approach rather than on a global approach. The Full Court of the Family Court considered this question in In the Marriage of J G and H J McMahon (1995) 19
Fam LR 99; (1995) FLC 92-606 and said:
In our view, the particular circumstances of this case made an asset by asset approach preferable to a global approach.
The short duration of and the unhappy nature of the marriage, coupled with the parties’ strict division of assets and their method of dealing with them lent itself to an asset by asset approach, particularly where they had separately identified another group of assets as joint.
We are conscious of the remarks of Mason CJ and Deane J in In the Marriage of Norbis (1986) 161 CLR 513 at 523; 10 Fam LR 819 at 824; [1986] FLC 91-712 at 75,168, where their Honours indicated that in most cases the global approach is more convenient.
However, it should be remembered that they stressed that they were not to be understood as denying the legitimacy of the trial judge's ascertainment in the first instance of the financial contributions of the parties by reference to particular assets.
Had the trial judge done this in the present case, he would inevitably have had to conclude that neither party made any contribution to the other's separately held assets, but that they had made an equal contribution to the joint assets. If he had done this, given the agreement about equality of contribution during the period of cohabitation, the simplest and most obvious course would have been to make no order affecting the separately held assets and an equal division of the jointly held assets, subject to any appropriate allowance for s 75(2) factors, if that was thought proper.
One of the reasons why their Honours expressed a preference for the global approach is because it is natural to assess the contribution by a spouse as a homemaker and parent, either by reference to the whole of the parties’ property, or to some part of that property as distinct from individual assets.
However, this is not a case where the homemaker and parent contribution looms large and, having regard to the parties’ agreement that it should be regarded as equal for the period of the marriage, this presented no obstacle to the adoption of the asset by asset approach in this case.
We consider that this is a case which falls conveniently into the class of cases referred to by Wilson and Dawson JJ in Norbis at CLR 532-3; Fam LR 831; FLC 75,173-4 when they said:
If the parties’ interests in specific items of property differ or they have made differing contributions, it may be desirable to proceed upon an item by item basis in the division of property between them. In such a case, justice and equity may best be served by treating the items separately for the purpose of determining the proportions in which they are to be divided, particularly if the overall division is to be effected by the transfer or retention of interests in individual assets, as was convenient in this case.
Clearly, it was not simply the short duration of the marriage that made an asset by asset approach appropriate in McMahon. There was also the fact that the parties in that case had made a strict division of their assets and dealt with them in a particular way. I will address the question of whether an asset by asset or global approach is preferable in the present case, after identifying the particular circumstances of the case.
The wife’s credibility: Centrelink
The wife’s credibility was seriously undermined by her continuing to receive means tested Centrelink payments during the relationship without notifying Centrelink of her changed financial situation, namely, being in a domestic relationship with a man who was earning about $85,000 per year.
This matter was raised on the first day of the hearing. On the last day of the hearing, the wife conceded that during the relationship she had been paid the carer’s payment and the education allowance and conceded that she had not been entitled to them.[2]
[2] Transcript page 192 lines 38 and 47
The wife claimed that, between the first and second days of the hearing, she had told Centrelink that she had been overpaid. In support of her claim, she produced what appeared to be a print out of the carer’s payments (or pension) that she had received between August 2012 and June 2013.[3] The amounts for August 2012 to February 2013 were highlighted on the print out and total $10,444.54. The wife told the court that she would be repaying the overpayment, which she calculated at $11,070, to Centrelink.
[3] Exhibit 6
The wife conceded that she did not tell Centrelink about the overpayment of the education allowance.[4] She said:
And they didn’t pick that up when I went into Centrelink.[5]
[4] Transcript page 234 line 5
[5] Transcript page 192 line 42
Presumably, in addition to the $10,444.54 carer’s payment that was overpaid, the wife will also have to repay the overpaid educational allowance. There was a suggestion that the wife might also be liable for interest and penalties. However, there was no evidence about how much they might be, so I do not take that matter any further. In any event, the husband and the wife both asked that the wife’s liability to Centrelink be excluded from the pool. That course seems to me to be appropriate, in all the circumstances.
The wife claimed, in effect, that her overpayment from Centrelink was not indicative of dishonesty on her part because she had not realised that the carer’s payment and the educational allowance were means tested.
In support of that contention, the wife initially claimed that, after lodging her application with Centrelink, she did not receive any communications from them.[6] However, later, the wife conceded that she had received quarterly letters from Centrelink.[7] The wife then claimed that she had not read the letters.[8]
[6] Transcript page 184 lines 24 to 33
[7] Transcript page 186 lines 19 to 27
[8] Transcript page 186 lines 30 to 38
It beggars belief that the wife did not know that she had to notify Centrelink of any change in her financial circumstances. It is a matter of common knowledge that:
a)many Centrelink payments are means tested;
b)in such cases, it is a requirement to promptly notify Centrelink of any change in financial circumstances; and
c)in such cases, Centrelink letters and forms make it very clear, on even a cursory reading, that it is a requirement to notify Centrelink of changes in financial circumstances and there are penalties for failing to do so.
In view of that common knowledge, and in view of the wife’s shifting evidence about whether she had received communications from Centrelink, and in view of the wife not, even now, notifying Centrelink about the overpayment of the educational allowance, I do not accept that the wife did not know that she had to notify Centrelink of her change in financial circumstances. I consider that the wife’s continued receipt of the carer’s payment and educational allowance when she was not entitled to them is indicative of serious financial dishonesty.
I consider that the wife’s financial dishonesty also extends to this proceeding, where her dishonesty could make a significant difference to her financial position.
I am also not convinced that the wife has notified Centrelink of the overpayment of carer’s payment. The document the wife produced (exhibit 6) does not contain any indication that Centrelink is aware of the overpayment of carer’s payment. The document is simply a statement of all the carer’s payments the wife received in a certain period. Anyone could have highlighted the overpaid amounts. In all the circumstances, I consider it to be proper to refer the matter to Centrelink for investigation and will do so.
The duration of the relationship
The husband claimed that the de facto relationship commenced on
1 April 2012 and ended on 6 March 2013. The wife claimed in her written material that the de facto relationship commenced in August 2012 and ended in February 2013. However, in oral evidence she said that it ended on 6 March 2013.[9]
[9] Transcript page 187 line 15.
On the other hand, the wife exhibited to her affidavit sworn on
14 April 2014 a copy of an application for an intervention order. It is dated 23 April 2013. It describes the husband as the wife’s former partner. It recounts two occasions, one on 12 February 2013 and one on 16 February 2013, when the police were called because the husband was behaving badly. It is not clear whether the parties were already separated at the time the police were called. As these incidents and dates are entirely verifiable, I accept that the incidents occurred on the dates claimed. However, in view of the wife’s concession that separation occurred on 6 March 2013, I accept that that was the date of separation.
In relation to the commencement of the de facto relationship, there was no corroborative evidence supporting either party’s position. However, I prefer the husband’s evidence on this matter, in view of my findings about the wife’s financial dishonesty.
All in all, the relationship lasted about 11 months.
STEP 1: Whether the parties have separated
The parties agreed that they had separated and I so find.
STEP 2: The assets and liabilities
The parties agreed that their assets and liabilities at the time of trial included the following:
| Joint assets | Value |
| Property W | $460,000 |
| (registered in wife’s sole name) | |
| Total joint assets | $460,000 |
| Joint liabilities | |
| mortgage on Property W | $326,669[10] |
| Total joint liabilities | $326,669 |
| Total joint assets less liabilities | $133,331 |
| Husband’s individual assets | |
| [A] car | $13,100 |
| motorcycle | $6,000[11] |
| boat | $6,000 |
| money in bank account | $1,400 |
| household contents | $10,000 |
| Husband’s total individual assets | $36,500 |
| Husband’s individual liabilities | |
| loan from Ms M (husband’s grandmother) | $10,000 |
| Husband’s total individual liabilities | $10,000 |
| Husband’s total individual assets less liabilities | $26,500 |
| Wife’s individual assets | |
| [M] car | $9,100 |
| money in bank account | $1,000 |
| household contents | $10,000 |
| Wife’s total individual assets | $20,100 |
| Wife’s individual liabilities | |
| Go Mastercard | $500 |
| Wife’s total individual liabilities | $500 |
| Wife’s total individual assets less liabilities | $19,600 |
| Total combined assets less liabilities | $179,431 |
| Husband’s Superannuation | $100,017 |
| Wife’s superannuation | $900 |
| Total combined assets less liabilities plus superannuation | $280,348 |
[10] The wife actually said that the mortgage was $326,000, but I assume the husband’s figure is correct because it seems more precise.
[11] The husband did not include his motorbike in his assets in his final submissions, but I assume that was an oversight as he had previously agreed to his ownership of it and its value.
Disputed matter
The parties were in dispute about whether the wife had a loan of $25,000 owing to her mother. The husband said it was a gift.
The wife’s mother, Ms L, gave evidence. She said that she lent the wife $15,000 on 1 June 2005, a further $2,000 on 9 June 2009, $50 on 2 February 2012 and $10,500 on 13 March 2013. Ms L said that she kept an Excel spreadsheet of the loans and repayments which she began on 1 June 2005. A copy of the alleged spreadsheet was attached to her affidavit.
The document contains arithmetic errors. The arithmetic errors indicate that the spreadsheet was not a document that was added to over the years. If it had been, it is beyond belief that the arithmetic errors would not have been noticed and corrected long ago.
To explain more fully, the spreadsheet indicates that the repayments were made towards the $2,000 loan as follows:
a)$400 on 5 August 2009, leaving a balance of $1,600, which is correct;
b)$150 on 1 September 2009, leaving a balance of $1,200, which is incorrect;
c)$300 on 30 October 2010, leaving a balance of $1,050, which is incorrect;
d)$120 on 7 March 2011, leaving a balance of $750, which is incorrect.
The spreadsheet goes on in a similar vein. However, I consider that these arithmetic errors are indicative of a document that was created recently for the purposes of this proceeding. I accept the husband’s contention that it is a recent invention. I find that the wife and her mother concocted the spreadsheet for the purposes of this proceeding. I do not accept that any monies advanced by the wife’s mother to the wife were loans. I consider that any such monies were gifts. As such they are not repayable and are not a liability of the wife.
Accordingly, the list of assets and liabilities set out above is accurate, except for any money that the wife owes the Commonwealth because of the Centrelink overpayments. As mentioned above, both parties asked that that liability be disregarded and I will do so.
Contributions
a. Initial contributions
Husband
The parties agreed that the husband contributed $44,500 to the purchase of the Property W property. The husband initially claimed that he contributed a further $30,000 to the purchase of that property. He appeared to concede, correctly, during the course of the hearing, that, because he borrowed the $30,000 from his grandmother, and it had to be repaid, it could not be accepted as a contribution. It is in the same category as money borrowed from the bank. Although the borrowing from the grandmother may have reduced the interest that would otherwise have been payable on the mortgage, it is insignificant in the overall scheme of things. The husband might later have sought to resile from his concession. However, even if he did, I do not accept that the $30,000 can be treated as a contribution.
Leaving aside the $30,000, the parties agreed that the husband contributed at the commencement of the relationship:
a)$44,500 to the Property W property;
b)a Jeep worth about $10,000;
c)a Norton motorcycle worth $8,000;
d)a racing car worth $6,000;
e)a boat; and
f)a credit card debt of $10,000.
The husband said the boat was worth $13,000 and the wife said it was worth $6,000. There was no expert evidence either way. In the circumstances, all I can do is treat the wife’s estimate as a concession. Consequently, I find that the boat was worth $6,000.
The husband also claimed through his counsel that he contributed $10,000 at the commencement of the relationship in the form of cash in the bank. He did not include that claim in his affidavit material and did provide any documentary evidence in support of it. The wife disputed that claim. In the circumstances, there is no proper basis on which to accept that the husband did contribute a further $10,000 in the form of cash in the bank.
Consequently, the husband’s initial contributions total $64,500.
Wife
The parties agreed that the wife contributed $84,575 to the purchase of the Property W property and a car worth $6,000.
The wife also claimed that there was an additional $5,679 from the proceeds of sale of her previous property that she contributed to the relationship. Of that sum, the wife claimed that $3,000 was used to reduce the husband’s credit card and $2,679 was used for the parties’ general living expenses. The husband may have disputed that the wife contributed an additional $5,679, though it is difficult to know because his position changed during the course of the hearing.
The court is not in a position to conduct an audit of the parties’ accounts, not least because they have not all been put into evidence.
It seems to me to be plausible that the wife did contribute the additional $5,679 and I so find.
The wife also claimed that she had a debt to her mother at the commencement of the relationship. However, for the reasons given above, I have rejected that claim.
Consequently, the wife’s initial contributions total $96,254.
Relative initial contributions
The parties’ initial contributions total $160,754. Of that sum, the wife’s contributions represent 59.87%, rounded up to 60%.
b. Contributions during the relationship
Husband
The husband earned about $4,500 net per month, totalling about $49,500 net during the 11 months of the relationship. There is no reason to doubt that the husband contributed all of his earnings to the relationship and I so find.
Wife
The wife worked part time during the relationship and also received carer’s pension (or payment), carer’s allowance, education allowance, Family Tax Benefits A and B and child support. In total, the wife received about $4,400 net per month, or $48,400 during the relationship.
The husband argued that the amounts that the wife spent on her son from a previous relationship should not be counted as a contribution to the relationship. The son has high functioning autism. The wife said that, during the relationship, she spent a “very minimal” amount on her son because he was only diagnosed during the course of the relationship.[12] The wife said that she spent $1,500 on the diagnosis during the relationship. She initially said that she now spends about $300 per week on her son, as he now has additional therapeutic expenses.[13] However, on the next day of the trial, she attempted to correct her evidence and said that she now spends $50 per week on her son.[14] Apart from saying that she spent a “very minimal” amount on her son, and apart from the $1,500, the wife did not say how much she spent on him during the relationship.
[12] Transcript page 164 lines 20 to 21
[13] Transcript page 165 line 4
[14] Transcript page 207 line 32
During the relationship, the wife received about $1,350 per month in child support. The amounts paid for child support do not only cover food, clothes, extracurricular activities, medical costs, educational costs and so on that are expended directly on the child. The sums paid for child support also include amounts referable to accommodation expenses and utility expenses. That is, some of the child support in this case has presumably been used to acquire the former matrimonial home.
In all the circumstances of this case, making a judicial estimate,
I consider that, during the relationship, the wife was probably spending about $200 per week directly on her son. That amounts to about $8,800 during the 11 months of the relationship. In addition, the wife spent $1,500 on the diagnosis. Those two amounts total $10,300.
I consider that the $10,300 should not be included as an amount that the wife contributed to the relationship. It was for her son, who is not a child of the relationship. I have no reason to doubt that the other amounts that the wife received during the relationship were contributed to the relationship. Consequently, the wife’s direct financial contribution during the relationship was $48,400 less $10,300, which equals $38,100.
Relative financial contributions
The husband’s direct financial contribution during the relationship was $49,500. The wife’s was $38,100. That makes a total of $87,600.
Of that sum, the wife contributed 43.5% and the husband contributed 56.5%.
Both parties spent a lot of time and effort attempting to prove that they paid for this item or that item. However, the reality of a domestic relationship, where both parties are earning, is that, generally speaking, one party might pay for the television but the other might pay for the electricity to run it, and buy food and so on. That appears to be what happened in this case.
The husband invited the court to examine the minutiae of the financial affairs of the parties, and make findings about how much each contributed to the purchase of items now in the possession of the wife. The wife strenuously challenged the husband’s assertions, including by producing the receipts for various items he claimed to have purchased.
However, the court is not able to conduct an audit of the parties’ financial affairs. If the husband wanted that degree of analysis, he should have engaged a forensic accountant and provided expert evidence to the court. As the matter stands, there was clearly some double counting on the husband’s part, for example, in relation to monies that were expended via credit card and then counted again when money was taken from a savings account to pay off the credit card.
Having said that, one item of note was the [A], which was bought for $28,000 during the relationship by drawing down on the mortgage. It is now in the husband’s possession.
Neither party sought to rely on any non-financial contributions, save that the wife argued that she made a contribution by caring for her son. As he was not a child of the relationship, I consider that that contribution should be excluded.
c. Contributions post separation
Husband
At around the time of separation, the husband was considered to be responsible for an accident at work, in which “he nearly killed a few men”[15]. He was [omitted]. He had a breakdown, and was on Work Cover for six months, then received a redundancy payment. He has not worked since, partly because he has not been able to get a reference from his former employer. In August this year, the husband received his first Centrelink payment.
[15] Transcript page 139 line 30
After separation, the husband lived in rented accommodation, paying rent of $320 per week, or about $1,300 per month.
The husband claimed that he received $59,000 in April 2013 from the sale of a property that he had owned with his previous wife. He said he had paid her $12,000 as a separation payment. He said he gave $10,000 to his grandmother, even though he still owed her $10,000. He said he paid $9,712 on his credit card, some of which related to expenses incurred during the relationship and some post separation.
The husband said he had spent $28,000 on legal costs. He said he had spent the remaining $8,000 on living costs. The husband said those sums added up to $59,000. In fact, those sums add up to $67,712.
This is all very puzzling. I find it difficult to believe that the husband would have given his grandmother $10,000 when he owed her that amount. The $10,000 he provided to her should have discharged the loan. Nevertheless, the wife did not challenge the husband on this, so
I accept it. The husband did not provide detail about the alleged discharge of credit card debt arising from the relationship so it is not possible to make findings about it. In any event, none of the proceeds of the property the husband owned with his former wife are left.
The husband received a redundancy payment of $45,000 in November 2013 and an annual leave payout of $10,000 in January 2014. From the redundancy payment, the husband initially said that he had repaid $20,000 to his grandmother, but later said he had repaid $10,000.
The husband said that he had used the rest of the redundancy payment on living expenses. The husband said he had used all of the $10,000 for accrued leave on living expenses. The wife did not dispute any of this. She accepted that the husband had repaid $20,000 to his grandmother post separation.
However, the wife did claim that the husband took $8,000 cash from the Property W property at separation. The husband conceded in cross examination that he took $2,500 at that time. Because of the absence of corroborating evidence, and because of my doubts about the wife’s credibility, I accept the husband’s evidence on this matter.
The wife also said that, at separation, the husband took certain chattels, including a lounge suite that he had bought for $3,000 and a dining table that he had bought for $1,000 as well as his personal effects. The husband did not dispute that evidence and I accept it. Obviously, as second hand items, the lounge suite and dining table would not have been worth the full purchase price at the time of separation.
The parties agreed that the husband has acquired since separation household effects which are agreed to be worth $10,000.
Wife
Following separation, the wife remained in the Property W property. The wife made the mortgage repayments, capital and interest,
of $1,840 per month.
The mortgage of $326,669 included $28,000 borrowed for the [A] that the husband drives. Essentially, the wife has been paying for the husband’s car since separation. The borrowing for the car represents about one twelfth of the mortgage repayments, or about $153 per month.
The wife continued to work and receive payments similar to those she had received during the relationship.
The s.90SM(4)(d), (e), (f) and (g) and the s.90SF(3) factors
Husband
The husband previously earned about $85,000 per annum. He is presently unemployed. Since the accident at work, the husband has not found other employment. However, he hopes to be able be find comparable work offshore.
The husband also claimed that he had some psychiatric impediments but did not produce any expert evidence regarding them.
Otherwise, the husband did not submit that any of the s.90SF(3) factors were relevant.
Wife
The wife sought a 5% adjustment for future needs.
The wife has the care and control of her son from a previous relationship. He is nine years old and has high functioning autism.
The wife receives various government benefits for that reason and also child support from the child’s father. The wife works part time, earning about $600 net per week. She said that she cannot work full time because of her son’s special needs. I accept that.
The wife submitted, in connection with her future needs, that she had debts to Centrelink, but elsewhere she asked the court to disregard them. The wife also submitted that she had a debt to her mother. However, I have found that the monies advanced by the wife’s mother were gifts. The wife also submitted that she had the mortgage to repay. However, that is not a future factor as such. If the wife cannot afford her existing accommodation, she will have to find alternative accommodation.
The wife also noted that she has less than $1,000 in superannuation, as against the husband’s $100,017.
Otherwise, the wife did not suggest that any of the s.90SF(3) factors were relevant.
Whether it is just and equitable to alter the parties’ property interests
The parties agreed that it would be just and equitable to alter their property interests in this case. In view of paragraph 42 of Stanford, the fact that the parties are no longer living in a marital relationship and the various findings made above in relation to contributions and future needs, I also consider that it would be just and equitable to alter the parties’ property interests in this case.
More particularly, I consider that it is just and equitable to alter the parties’ property interests in this case because the parties’ major asset is the Property W property which is entirely in the wife’s name.
What order is just and equitable
The husband proposed that the Property W property be sold and that the proceeds of sale be divided 65:35 in his favour. He said that there should be an $8,000 adjustment for his contribution to the chattel’s in the wife’s possession. From the specific orders proposed by the husband, it appears that he included the $8,000 in the 65%.
The wife sought a 60:40 split in her favour. She sought an opportunity to buy out the husband’s claim to the Property W property by the payment of $35,540 within 90 days. In default of payment, the wife sought orders for the property to be sold, the amount of $35,540 to be paid to the husband and the balance to be paid to her.
Otherwise, each party proposed that they each keep their own superannuation and the chattels in their possession.
The husband argued that that he had contributed 65% of the money at the commencement of and during the relationship so he should get 65% of the Property W property. He submitted that there should be no adjustment for future factors.
In fact, the husband contributed $64,500 initially and $49,500 during the relationship. That totals $114,000.
The wife contributed $96,254 initially and $38,100 during the relationship. That totals $134,354.
The total contribution of both parties, at the commencement of and during the relationship, was $248,354. The husband’s contribution represented 45.9% of that. Obviously, a good deal of that money went on day to day living expenses. Contrary to much of the husband’s case, he cannot expect to get it back.
The initial contributions were worth relatively more than the contributions during the relationship, because the initial contributions were not partially expended on living costs.
The contributions post separation are more complex. Since separation, the wife has continued to earn much the same amount of money as during the relationship. She has continued to pay the mortgage, capital and interest since separation, about 18 months ago. As part of the mortgage, the wife has also been paying for the husband’s [A].
The husband, on the other hand, has lost his job and used the proceeds of the sale of his former house and his work payout, to a large extent, on living costs. He has acquired some household chattels, but otherwise has not added to the property pool.
The husband urged the court to adopt an asset by asset approach.
The wife urged the court to adopt a global approach. I consider that a global approach is preferable in this case. It was a very short relationship. However, the evidence does not indicate that the parties kept their finances and assets separate. There was considerable intermingling. In addition, some of the assets that the husband brought to the relationship have been sold and replaced with other assets.
Having said that, neither party sought a super split. Therefore, that asset, at least, will be treated separately, in that each party will retain their own superannuation. Additionally, the parties were in at least tacit agreement that they should each keep the items currently in their possession.
In the exercise of my very broad discretion, taking into account all of the aforementioned matters, I consider that an appropriate division in the case is 58:42 in the wife’s favour. That division is appropriate in view particularly of:
a)the wife’s greater initial direct financial contribution;
b)the husband’s greater direct financial contribution during the course of the relationship; and
c)the husband having much greater superannuation entitlements than the wife.
However, I do not give substantial weight to the disparity in superannuation entitlements because the relationship was so short.
The calculation is as follows. The net assets are worth $179,431. Forty-two per cent of that is $75,361. The husband already has net assets worth $26,500. That sum should be taken from the $75,361. That leaves $48,861 which the wife should pay the husband.
The wife sought 90 days in which to do so. However, 60 days should be sufficient for the purpose.
The wife also sought that the husband receive a particular sum in the event of a sale. However, I consider that it is fairer to divide the proceeds of sale on a percentage basis, so that both parties share the benefit or detriment of any change in the value of the property.
There will be orders accordingly.
Costs
The wife sought against the husband an order for costs of $2,200 for the hearing on 24 September 2014. The basis of the argument was that the day was wasted because the husband’s advocate was not properly prepared and because the husband’s case kept changing. The husband opposed that order.
In my view, if anyone should have to pay the costs of that day it is the husband’s solicitor. If the wife wishes to pursue the matter, she should file the appropriate application.
I certify that the preceding one hundred and thirteen (113) paragraphs are a true copy of the reasons for judgment of Judge Riley
Associate:
Date: 28 November 2014
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Remedies
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Costs
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Appeal
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Statutory Construction
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