Molloy and Molloy

[2016] FCCA 2400

FEDERAL CIRCUIT COURT OF AUSTRALIA

MOLLOY & MOLLOY [2016] FCCA 2400

Catchwords:
FAMILY LAW – Property – significant contributions by one party post-separation.

Legislation:

Evidence Act 1995, ss.50-60
Family Law Act 1975, s.75(2)

Cases cited:

Ferraro & Ferraro (1993) FLC 92-335

Fields & Smith (2015) FLC 93-638

Pierce v Pierce [1998] FamCA 74

Mallet v Mallet [1984] HCA 21

Applicant: MR MOLLOY

Respondent: MS MOLLOY

File Number: SYC 3838 of 2014

Judgment of: Judge Henderson

Hearing dates: 5-6 September 2016

Date of Last Submission: 6 September 2016

Delivered at: Sydney

Delivered on: 22 September 2016

REPRESENTATION

Counsel for the Applicant: Mr Watkins

Solicitors for the Applicant: GA Lawyers

Solicitors for the Respondent: Marsdens Law Group

ORDERS

1. That within 90 days the husband to pay to the wife the sum of $372,320. Interest shall accrue on this sum if not paid in accordance with this order.

2. Simultaneously with payment of this the wife to transfer all her right title and interest in the property at Property D to the husband.

3. Any transfer of the wife’s interest in the property to the husband is subject to the husband discharging the wife’s current liability to the (omitted) bank in respect of the two existing mortgages over the property.

4. In the event this sum is not paid within the time set out in order 1 the parties are to do all acts and things to place the property at Property D on the market for sale as agreed between the parties with an agent and at a price as agreed between the parties.

5. The net proceeds of sale be disbursed as follows;

   (a)Payment of agent fees and usual sale and conveyancing costs;

   (b)Discharge of all mortgages;

   (c)42.5% of the net proceeds of sale together with interest accrued pursuant to order 1 to the wife and;

   (d)The balance to the husband.

6. Otherwise the parties retain all other items currently in their possession including monies in bank accounts, superannuation funds and personalty.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 3838 of 2014

MR MOLLOY

Applicant

And

MS MOLLOY

Respondent

REASONS FOR JUDGMENT

1. The matter of Molloy & Molloy is a property application heard on 5 and 6 September 2016. Mr Watkins of Counsel represented the applicant husband and Mr Reeve, solicitor, the respondent wife.

2. The evidence for the parties was as follows:

   a)The husband’s initiating application filed 24 June 2014;

   b)The husband’s affidavit filed 25 July 2016;

   c)The husband’s financial statement filed 25 July 2016;

   d)The wife’s response to an application in a case filed 9 October 2014;

   e)The wife’s affidavit filed 15 August 2016;

   f)The wife’s financial statement filed 15 August 2016;

   g)The affidavit of the single expert, Mr G, filed 1 September 2016, who valued the former matrimonial home (joint valuation);

   h)Joint valuation by (omitted) dated 25 January 2015 to value plant and machinery that were at the former matrimonial home;

   i)Joint balance sheet marked Court exhibit 1;

   j)Joint property valuation with colour photographs as opposed to that which had been filed marked Court exhibit 2;

3. The husband’s tenders were:

   a)Husband’s exhibit 1: a s.50 to s.60 of the Evidence Act 1995 summary of the husband’s payments on the mortgage both as to principal and interest post-separation; and

   b)Husband’s exhibit 2: the husband’s cross-examination bundle referred to by Mr Watkins and used when cross-examining the wife.

4. The wife’s tenders were:

   a)Wife’s exhibit 1: a letter from Shanahan Solicitors to the wife’s then lawyers dated 10 June 2009;

   b)Wife’s exhibit 2: a letter from New South Wales Fair Trading in relation to a rental bond the wife took out in April 2007;

   c)Wife’s exhibit 3: a statement of claim in relation to proceedings brought against the husband and wife post-separation for non-payment of mortgage;

   d)Wife’s exhibit 4: two letters from Gadens Solicitors who were then representing the (omitted) Bank to the husband in relation to arrears of mortgage;

   e)Wife’s exhibit 5: bundle of (omitted) Bank loan documents in both the husband and wife’s name (only the first page of that document was referred to);

   f)Wife’s exhibit 6: seven photographs taken by the wife of the former matrimonial home in 2010 to 2013;

   g)Wife’s exhibit 7: husband’s tax returns from 2010 to 2015, some of which had financials attached;

   h)Wife’s exhibit 8: a valuation report of the machinery at the former matrimonial home dated 24 January 2015.

5. Only the husband and wife were cross-examined, there were no other witnesses.

6. The matter was run economically, courteously and sensibly. This is a difficult matter for the factual situation has caused some difficulty. It is now eight years since the parties separated.

7. The husband contended that the parties separated in 2006. He ultimately agreed that separation was in May 2007 when the youngest child was then aged 17 years of age and not 2006 as he had contended. The wife was in all respects a more accurate historian than the husband. The length of time since separation has added a degree of complexity to what otherwise may have been a rather more simple property application in a marriage which is at today’s date some 28 years and separation some 22 years. At separation the husband remained in the matrimonial home and the wife left.

8. The short relevant chronology is as follows:

   a)The husband is 56 years of age.

   b)The wife is 51.

   c)The wife migrated to Australia in 1970 and the husband in 1971.

   d)The parties commenced a relationship in 1982 and married in 1983.

   e)Their first daughter, Ms K was born in 1984. It is clear that throughout the marriage, the wife was the primary carer of the children. There was no contest other than that these parties carried out a traditional role in that the wife was the primary carer of the children although she worked part-time and at times full-time but the husband was clearly the main income earner throughout the marriage up to separation.

   f)The parties purchased a property at (omitted) in 1986 and the husband borrowed some moneys to commence his (omitted) business and purchased a truck and bobcat. His business was as a sole trader under the business name of Mr Molloy.

   g)Their second child, Ms C, was born on (omitted) 1986.

   h)Their third child Ms J was born on (omitted) 1989.

   i)The parties moved to (country omitted) in 1990 and returned to Australia a year later.

   j)The parties sold the (omitted) property and other items of plant and equipment in 1993 when they again moved to (country omitted) in 1993.

   k)The wife commenced full-time work with an (employer omitted) company in 1993. The wife was offered a position to work in the (employer omitted) head office in 1996, which she took up and the family moved to (country omitted).

   l)The family returned to Australia in 1999 and they purchased the former matrimonial home at Property D on 11 September 2001.

   m)In 2001 Ms K was diagnosed with a benign bone cancer. This caused the child and parents’ extreme anxiety and the wife’s role as a parent and homemaker increased substantially at that time. Ms K was in severe pain and the wife had the two younger children to care for as well as a child suffering from a very serious and concerning condition.

   n)In addition to the initial mortgage over Property D, in 2002 they borrowed a further sum of $120,000 to commence renovations on the property. This is called the supplementary loan.

   o)The parties commenced renovation on the former matrimonial home before separation. At separation the renovations were not complete. The renovations consisted of a kitchen, family room, a laundry still incomplete and converting what was a garage into a games room family room. That room is incomplete as at today’s date.

   p)Ms K’s tumour returned in 2003, causing further distress to the child and again making the wife’s parenting and homemaking role even harder. The wife left the former matrimonial home on 19 May 2006 and the husband and children remained in the home. All the children save Ms J who was 17.5 years were adults at that time.

9. It is clear from the evidence that for 12 months after separation the wife’s modest income of about $1,000 a week was paid into the joint account from which mortgage payments were made and she drew down a modest amount of money to support herself in outside rental. The wife also continued to support the children by cooking meals for them and bringing them home, which the husband agreed with and otherwise continued to assist her children with their university studies, relationship issues collecting them after attending parties and discos and the like as she was living at that time in the (omitted) area in private rental accommodation.

10. The husband agreed under cross-examination that he lost the plot after separation and really was not focused on much at all. That included not being focused on whether there was sufficient monies to pay the mortgage and there was not in 2008. Letter’s regarding arrears of mortgage were sent to the matrimonial home and the wife was not aware of the parlous state the home loan was in. It became known to the wife that the mortgage was in substantial arrears when the (omitted) Bank took taken action against the parties in the Supreme Court.

11. It was the wife who ensured that this matter was resolved to a point whereby the mortgage was brought up to its pre-separation amount by the husband depositing monies into that account from his income.

12. Since that time and it is an agreed fact that only the husband has made payments in respect of the mortgage and the additional loan. From husband’s exhibit 1, he has paid $195,752 post separation towards interest accrued on behalf of both parties in relation to the (omitted) Bank home loan. The husband has also paid $72,076 towards interest in relation to the additional loan. Together with those interest payments he has managed to reduce the mortgage by something in the order of $200,000 to what it was at separation.

Assets and Liabilities

Assets
Property D	Joint	$1,100,000
(omitted) truck	Husband	$25,000
(omitted) Semi trailer	Husband	$7,500
Bobcat	Husband	$2,500
Mini Excavator	Husband	$2,500
Harley Davidson	Husband	$15,000
Ford	Husband	$500
Unregistered Ford	Husband	$700
Total		$1,153,700

Liabilities
(omitted) Bank mortgage	Joint	$153,814
(omitted) Bank supplementary loan	Joint	$69,918
ATO Debt	Husband	$7,010
HECS Debt	Wife	$17,680
Total		$248,422

1. I will disallow the wife’s HECS debt and husbands tax debt as matrimonial debts. In reality the wife alone has received the benefit of her higher education and the tax debt is clearly the husbands given the length of separation.

2. Thus total debts are $223,732.

3. This results in a net equity to divide of $929,960

4. The husband says that up to separation the parties’ contribution-based entitlement was equal. Post-separation, he has made a superior financial contribution to the current asset base in four respects.

   a)First, he has reduced the mortgage on the property by $200,000 by way of principal.

   b)Secondly, he has paid all the interest payments, including that share of the wife’s interest payments on the former matrimonial home, she being a joint borrower with him.

   c)Thirdly, he has renovated the property post-separation and increased, according to his reading of Mr G’s valuation, the property’s value by some $200,000.

   d)Fourthly, he provided a home for the parties’ adult children. He says his contribution-based entitlement post-separation would give him an entitlement of some 70 per cent today having regard to all his contributions pre and post separation.

5. However, he concedes that his income-earning capacity is greater than the wife’s and she should be allowed a seven per cent adjustment, giving him 63 per cent and the wife 37 per cent.

6. The wife says the parties’ contribution-based entitlement must be looked at through the whole of the marriage and not broken up into specific periods of time. To that end it was submitted by Mr Reeve that the decision of Fields & Smith[1] of the Full Court is relevant where their Honours refer to the case law in matters such as Pierce & Pierce[2] and Ferraro & Ferraro[3] concerning assessment of contributions of one party over and above another pre and post-separation. Their Honours refer at paragraph 169 of their judgment how to assess post-separation contributions. Their Honours found that the gravamen of the issue in their matter was the husband’s assertion of his superior contribution to the business – a jointly-run business of the parties post-separation. The trial judge found that the husband’s contribution to that business was greater than the wife’s post separation and made an adjustment of 60/40 in the husband’s favour. On appeal the husband contended for 70% adjustment in his favour and the wife an equal division. The appeal was dismissed.

   [1] Fields & Smith (2015) FLC 93-638

   [2] Pierce v Pierce [1998] FamCA 74

   [3] Ferraro & Ferraro (1993) FLC 92-335

7. The Full Court said[4]:

   “These parties made significant contributions in differing but intersecting spheres. In our view, there is no basis for differentiating between them. In Mallet the High Court said that equality was not the starting point, that much can be readily accepted. That is not to prevent equality from being the conclusion once contributions and other relevant factors have been evaluated. Here the parties had organised their financial affairs in a manner which strongly pointed to a joint endeavour, at least during the continuance of the marriage and up until their separation. All their financial dealings were consistent with that position.”

   [4] Fields & Smith (2015) FLC 93-638, para 172.

8. That is clearly the case here. These parents conducted a joint endeavour caring for the family. The husband’s primary role was providing income for the family. The wife carried out both parenting and homemaking roles and provision of income at times being part time and full-time when she was able.

9. Their Honours go on to say[5]:

   “Were this a case to be determined at the time of separation, we would have found an equal contribution by the parties.”

   [5] Ibid, para 173.

10. That is clearly the position in this case. Neither party contended for anything other than an equal contribution as at separation. Their Honours go on to say[6]:

    “173. Whilst the exercise is a holistic one and the contributions are to be considered up until the time of trial, it is important to give appropriate weight to the contributions made by the wife in all of the spheres, including to the welfare of the family.

    174. Following separation there were changes to the contributions by both parties. The trial judge did not detail in his reasons what these were. However, they are apparent from the unchallenged evidence in the parties' affidavits which we now set out.”

    175. However, they were apparent from the unchallenged evidence in the parties’ affidavits. The parties continued to live together under the one roof for a period, while the home was completed and, when it was near completion, the husband moved to that property. At the time the husband commenced a relationship with his new wife and he began spending time in that country travelling. The husband continued in his role as the primary income earner.”

    [6] Ibid.

11. Their Honours state at paragraph 184:

    “Whist it is true that the wife's contributions after separation changed, due to the fact that she was no longer contributing to the welfare of the family constituted by herself, the husband and the children, as we have indicated, the husband's contribution also changed. His involvement in the company, at least in the physical sense, diminished considerably and he accumulated other assets with his new wife and new family.”

12. Assessing these parties’ contributions in light of this authority I find what has occurred is thus.

13. The wife left the former matrimonial home when, effectively, her children were adults. She and the husband have each contributed to continuing to providing a home for the children by allowing the children at various times being all or some of them or, as is now the case, Ms J, her husband and two children, to live in the former matrimonial home and that post-separation contribution is equal for each of them.

14. The husband has made a superior financial contribution to the wife in that he continued to pay down the mortgage, not merely the interest component of the mortgage and he has significantly reduced what was the debt level when the wife left the home.

15. In relation to his payment of the interest that included payment of his share and the wife’s share of interest. However this is the contribution to the assets of each of them that he should have made given his exclusive occupational and use of the joint matrimonial home

16. It could be regarded as his occupation fee, for want of a better use of word, in living in the former matrimonial home to the exclusion of the wife.

17. The wife was required to fund her own accommodation by means of her own income. The wife sought no spousal maintenance from the husband, although the husband’s income-earning capacity, as I will demonstrate later, is clearly superior to that of the wife. The wife permitted the use of her equity in that property by the husband and her children which continues today.

18. Additionally, the husband continued to run his business from the home and store his plant and equipment at the home and yet he retained all the income he earnt. This is also a contribution by the wife.

19. Thus, I do not see that the husband’s payment of the wife’s share of interest on any loan is superior to that of the wife in relation to the wife’s contribution in permitting the husband sole occupation of the home to her exclusion.

20. The renovations carried out by the husband to the home caused me some concern as there is a significant error in Mr G’s report and I cannot cut across that error. The error is this: Mr G says he was asked to value the home presently and he gives a value of $1.1 million and there is no dispute of this figure. In addition he was asked to value the home as set out in the letter of instruction from the husband’s solicitors to him:

    “You are required to include in your report your opinion as to the following:

    1. The current market value of the property in its current state, which includes renovations

    2. The current market value of the property if such renovations had not been completed.

    The renovations referred to are:

    1. Completion of the top floor veranda with the glass balustrading and roof and lights; and

    2. Landscaping of the front of the property and removing all trees.”

21. The letter of instruction failed to specify what renovations the parties had carried out before separation and Mr G was not made aware of this.

22. Renovations that the parties carried out prior to separation were: increasing the size of the kitchen and the family room, an incomplete laundry and a partial completion of the garage to a family children’s retreat. Importantly the home was a four bedroom home at the time the wife left the property.

23. What the husband has done since that time is complete a veranda at the back of the property on the upstairs level, including completing balustrading which his son, Mr D, in the main, paid for.

24. When Mr G carried out his valuation he valued the property as “should no renovations or alterations have taken place”. This was not what he was asked to do. He was asked to value the property as if the specified renovations had not been carried out.

1. He described the property with no renovations as a three bedrooms, one bathroom, kitchen, family room and an additional bathroom, the laundry would have been external, there was no garaging and valued it at $900,000.

2. However, the property was a four bedroom home with incomplete partial renovations and an internal laundry albeit incomplete as at the date of separation in May 2006 and not a 3 bedroom home.

3. The husband says his renovations have increased the property’s value by $200,000 from $900,000 to $1.1 million. However, Mr G valued the home as a 3 bedroom home with an external laundry when it has an internal laundry albeit incomplete as to tiling and the like and 4 bedrooms, not 3 bedrooms.

4. Mr G was not called to explain these errors I am at a loss to understand what I can do with the husband’s assertion as to an increase in value by his efforts alone.

5. Mr Watkins said that this was merely an error by Mr G and what he really meant to say it was a 3 bedroom home pre-renovation. Given he was not cross-examined by Mr Watkins or Mr Reeve, I can only rely upon what the document tells me: There is a clear error in this document.

6. Having said that, I accept that the husband did carry out these renovations to the property and did put a balustrade and glass veranda on the top veranda completing that part of the renovation that the parties had commenced to carry out before separation. As to ascribing a specific value in Mr G’s report of $200,000, I am less inclined to ascribe a specific value due to the error in Mr G’s report, however, I accept that those renovations have increased at some level the value of the property.

7. The wife’s position is she has, effectively, lived like a gypsy; she has moved 11 times since separation. I accept neither she nor the husband is in a bona fide domestic relationship whereby they have partners who are a financial resource to them. I accept the wife has a relationship with a Mr C, however, he does not provide her with economic support; they keep their finances separate, she is not living with him, she comes in and out of his life, he comes in and out of her life. The wife left his home to take up her current position in Brisbane and she is two and a half hours away from where he lives at (omitted). The husband has a girlfriend at best.

8. I accept that there was some disquiet and difficulty caused by the wife’s solicitor’s failure, for reasons I am unable to explain, to correct an error in the wife’s material that her boyfriend’s name was Mr L, when his name was Mr C. However, that does not lay at the feet of the wife; she was honest in her cross-examination.

9. The husband has had the benefit of sole occupation of the home, being able to use that home to run his business, leave his machinery there and continue his life as it was before separation whereas the wife has moved serially.

10. The wife did not abandon the children as the husband would have me believe. She continued to collect them from nightclubs when they went out, being involved in their parenting, their schooling, when they were still at school, at university and she helped the husband with his books post-separation a position the husband agreed with.

11. It was not until 2011, when the wife formed a relationship with Mr C, and she lived with him at (omitted) that she was absent from the children and that was four years post-separation when the youngest child was 21 years of age. Therefore, I find the wife continued to make her contributions to the welfare of the family as she had done prior to separation.

12. The question for me is the husband’s paying down of the principal of the mortgage and renovations of such weight that he should be accorded a post-separation contribution? I find it is. I find that this superior contribution together with the increase in value of the property due to his renovations is 10 per cent. This would result in a 60/40 split in the husband’s favour.

13. Is there to be an adjustment to either party under 75(2) of the Act[7].

    [7] Family Law Act 1975, s.75(2)

14. The husband clearly receives more benefit from his business than the $52,000 he declares.

15. That he was able to pay down his mortgage and continue to do so is due to his income. If he only earnt $52,893 per annum it would be an impossibility to continue to pay down the mortgage as he has done, inclusive of interest, amounting to some $30,000 to $35,000 per annum and pay all other necessary living expenses.

16. Looking at the aide-mémoire prepared from Mr Reeve in relation to the husband’s income there are some real discrepancies. He has been claiming since 2010 approximately $23,000 and now in 2015, $19,000 in interest. There is simply no debt or finance for any assets of the business referable to that interest claim disclosed in his financial statement or any document tendered. He has claimed since 2012, $14,000 in lease costs. There is no asset that he has described that could possibly be referrable to a lease of that amount in his business.

17. He has claimed depreciation from 2013 to 2015: in 2013 $14,000, now $17,000 in 2015 for an asset that either does not exist or that he has not disclosed. I take from this evidence two things: the husband has not disclosed the assets his business has or the business provides more income to him than the $52,000 disclosed.

18. The husband could not explain any of these discrepancies. I find his income is clearly more than $52,000 and the business provides for his fuel, telephone and perhaps some component of the interest on the home loans given he runs his business from the premises. Thus I find he has a far superior income earning capacity to that of the wife who as a PAYE taxpayer earns $69,000 per annum.

19. I find that the husband’s superior financial position would lead me to the view that the wife is entitled to a 5% per cent adjustment in her favour due to his superior income-earning capacity. However, that is not the end of this issue.

20. The wife is a PAYE taxpayer, has some $64,000 in superannuation and has between 10 and 13 years to work. I do not propose to split this superannuation and no order is sought for this.

21. The husband is aged 56, doing manual work and he may well be retiring at aged 60. He has no superannuation whatsoever. He has no capacity to create any superannuation given the modest amount people of his age are able to put towards superannuation due to the change of the law. He no doubt paid the mortgage down as part of his retirement plan. The wife’s superannuation will continue to increase and grow as she continues to work and earn income.

22. In those circumstances, I will allow him a 5% adjustment as he will not have any superannuation at retirement. The wife may be seized of superannuation approaching perhaps $200,000 in 10 to 13 years’ time.

23. This would result in a split of the parties’ property of 60 per cent to the husband and 40 per cent to the wife.

24. The amount available for division is $929,960. A 20% adjustment to the husband is $186,000 a figure approaching the reduction in principal he made towards the mortgage post separation.

25. A split of 60/40 is $372,320 to the wife plus her superannuation of $64,000 and $558,480 to the husband.

26. The wife has no matrimonial assets. Thus in order to retain the home the husband will be required to pay her $372,320. I will give him 90 days to do this otherwise the home is to be sold.

27. In order to do justice to the parties if the home is sold for more or less than the agreed valuation I will determine what $372,320 is as a percentage of the matrimonial home for the husband has other assets in his possession.

28. The net equity to divide is $929,960 of which the husband has $51,300 in other assets. This results in that part of the matrimonial assets that are referrable to the net agreed value of the home at $878,660. $372,320 being the wife’s share of that equity expressed percentage is some 42.5 % of the net agreed value of the home. Thus if a sale is to occur the wife will receive 42.5% of the net proceeds of sale and the husband the balance.

29. I find these orders are just and equitable in all the circumstances and I will so order.

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Henderson.

Date: 21 September 2016