Morcomb and Lennox

[2016] FCCA 485

FEDERAL CIRCUIT COURT OF AUSTRALIA

MORCOMB & LENNOX [2016] FCCA 485

Catchwords:
FAMILY LAW – Property division – relevance of the applicant’s terminal illness.

Legislation:

Family Law Act 1975,ss.79, 90SF(3), 90SM

Burke & Burke (1993) FLC 92-356
JCVB & SKK [2005] FamCA 853 and [2010] FamCAFC 157
Tasmanian Trustees Ltd & Gleeson (1990) FLC 92-156
Re Parrott v Public Trustee of NSW (1994) FLC 92-473
Lawrie & Lawrie (1981) FLC 91-102
Menzies and Evans and Evans (1988) FLC 91-969

Applicant: MR MORCOMB

Respondent: MS LENNOX

File Number: SYC 1963 of 2013

Judgment of: Judge Brewster

Hearing dates: 26 and 27 November 2015

Date of Last Submission: 27 November 2015

Delivered at: Canberra

Delivered on: 16 March 2016

REPRESENTATION

Counsel for the Applicant: Mr Batey

Solicitors for the Applicant: Vizzone Ruggero Twigg Lawyers

Counsel for the Respondent: Ms Kennedy

Solicitors for the Respondent: Tsolakis Solicitors

ORDERS

1. That within 60 days the respondent pay to the applicant the sum of $500,000.

2. That upon payment of that sum the parties take all steps to:

   (a)Transfer to the respondent the applicant’s interest in the property known as Property V (“the property”).

   (b)Cause the applicant to be released from all liability on the mortgage on the property.

3. That if the respondent is unable or unwilling to pay this amount the parties are to take all steps necessary to sell the property and to divide the net proceeds between them in the proportions 33% to the applicant and 67% to the respondent.

4. That as against the other each party be entitled to the chattels in his or her possession and the choses in action in his or her name.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 1963 of 2013

MR MORCOMB

Applicant

And

MS LENNOX

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter involves an application by Mr Morcomb for division of property. The parties lived together in a de facto relationship but never married. The case therefore falls to be resolved under Part VIIIAB of the Family Law Act.

2. The application is for an order altering the interests of the parties in their property. Section 90SM(1) of the Act gives the court the power to make such an order. That section is in basically the same terms as section 79 of the Act which applies where parties are or have been married. Section 79 will be referred to in the authorities I shall discuss in this judgment. Reference will also be made in some of those cases to section 75(2). The equivalent section which applies in the present case is section 90SF(3).

Background

1. The applicant was born on (omitted) 1956 and is therefore aged 60.  The respondent was born on (omitted) 1959 and is therefore aged 56.  The parties commenced to live together in 1984 (according to the applicant) or about 1985 (according to the respondent).  Nothing now hangs on this.  They separated under the one roof in about March 2012 and they physically separated completely about the middle of 2014.  I say completely because from about February that year the applicant stayed most of the time away from the home.  There are two children of the parties’ relationship X who was born on (omitted) 1995 and is therefore aged 20 and Y who was born on (omitted) 1998 and is therefore aged 17.

Discussion

1. In this matter I shall adopt a four stage process. The first stage involves making findings as to the pool of assets. The second stage involves a consideration of contributions of various types made by or on behalf of the parties. The third stage involves a consideration of such matters set out in section 90SF(3) of the Act that may be relevant. I shall make adjustments in the parties’ property interests at each of the second and third stages. The fourth stage will involve a consideration of whether the result derived from those adjustments is, in the circumstances just and equitable.

2. The competing applications are applications for alteration of the parties’ property interests pursuant to section 90SM of the Act. Notwithstanding that each party seeks orders altering their interests in the non superannuation property I am precluded from making orders under this section unless I am satisfied that it is just and equitable to do so. Having regard to the length of the parties’ relationship, the fact that there are two children of that relationship, the financial dealings of the parties and the matters relevant under section 90SF(3) I am satisfied that it is just and equitable to make orders under that section insofar as the parties’ non superannuation assets are concerned. I will discuss their superannuation later in this judgment.

The Pool

1. The principal asset apart from superannuation is the parties’ former residence at Property V.  There was originally a dispute as to its value but the parties have now agreed on a value of $1,875,000.  It was subject to a mortgage of $365,433 at the date of the hearing so I will ascribe to it a rounded off amount of $365,000.  This results in an equity of $1,510,000.

2. The applicant had at the date of the hearing savings and shares valued at $9,264.  He also has a 2001 Hyundai which the parties agree should be valued at $1,200.  He has a wine collection, musical equipment and artworks which he values at $2,000 and the respondent at $5,000.  There is no valuation from a qualified person.  Given that these are comparatively small amounts and their value is not agreed I propose to disregard them.  The respondent has a small amount of savings, less than $1,000.  I ignore this for obvious reasons.  She has furniture and household contents but their value is not agreed and again there is no valuation from a qualified person.  I propose to disregard these also.  As I understand it the parties ultimately conceded that this should occur.  In the end I have decided that I will not include any asset in the pool other than the Property V property.  The applicant’s savings and car amount to less than one percent of the value of the Property V property.  The exercise upon which I am engaged is not a precise accounting exercise.

3. The parties agree that an amount of $4,997 should be deducted from the pool as “adjustment for credit card balances at separation.”  I do not propose to do this.  The comments in the previous paragraph apply.

4. The parties ultimately agreed that their present debts should not be taken into account.

5. The non superannuation pool is therefore $1,510,000.

6. Each party has superannuation.  The applicant’s is valued at $273,947 and the respondent’s at $174,222.

Contributions

1. When the parties commenced to live together the respondent owned a unit in Property R.  She says that it had a value then of about $80,000 and was subject to a mortgage of about $50,000.  It was sold in 1988 and she says that the net proceeds were some $49,000.  In the same year the parties purchased a property in Property C, NSW, for $130,000.  They borrowed $100,000 and the balance came from the proceeds of sale of the respondent’s Property R property.  The Property C property was sold in 1993 and the parties purchased the Property V property in the same year.

2. The applicant, in effect, claims that he made a specific and special contribution in the form of a lump sum workers compensation payment received in 1991.  The injury occurred prior to the relationship.  After deducting legal costs this totalled $57,500.  It is not clear if this was a “table of maims” payment or a lump sum representing periodic workers compensation payments with respect to his loss of income prior to being accepted as eligible for compensation.  If it was the former then it could be considered a special contribution made by him.  If it were the latter then there is no real difference between this and the periodic receipt of wages and it assumes no particular significance.  The applicant says that his injury was a severed Achilles tendon.  This would indicate that it was likely to be a lump sum repayment in respect of unpaid wages.  Of course if those wages accrued prior to the relationship then the lump sum would have significance as, in effect, an initial contribution.  But the applicant does not tell us when the accident occurred.  If the applicant wishes this lump sum, which it must be recalled was received some 25 years ago, to be taken into account today he should at least give the court some guidance by indicating the nature of the payment.  He has not done so.  I do not take the workers compensation payment into account.

3. Various lump sums received by the respondent are claimed by her as being special contributions.  In 1993 she received a redundancy payment of $30,000 from (employer omitted).  She was working for (employer omitted) when the parties commenced to live together.  In 1996 she received a further redundancy payment of $30,000 again from (employer omitted).  She also received a redundancy in 2001 from (employer omitted) of $22,121 and a further payment from (employer omitted) in 2002 of $6,591.

4. There is nothing special about a redundancy lump sum if the employment that gave rise to it was confined to the period of the relationship.  See Burke & Burke (1993) FLC 92-356. The employment with (employer omitted) commenced in 1993 so there is no “special contribution” in relation to the redundancy payments from this source. The same is not the case in relation to the first of the (employer omitted) redundancy payments. However it is not possible to isolate the part of the payment that may have been attributable to the respondent’s pre relationship employment. This plus the fact that some 23 years have elapsed since the payment was received, causes me to ignore this aspect of the case.

5. Apart from the Property C and Property V properties the parties have purchased and sold two properties in Property Y and Property B.  It is not necessary to discuss these.  The proceeds of the sales of those properties were used to reduce the Property V mortgage and there is no particular contribution issue in relation to any of those properties.

6. Apart from periods when the respondent was on maternity leave she was in paid employment.  The applicant was in paid employment at all times.  Early in the relationship the respondent’s salary exceeded that of the applicant but from about 1994 their incomes were more or less the same.  I do not make any adjustment in this respect.

7. Each party maximises his or her non financial contributions and seeks to minimise those of the other.  It is not uncommon for parties to view the events of a relationship through a subjective prism and it is not possible for me to make findings as to this.

8. Each of the parties’ fathers assisted with renovations to the Property V property.  Again each maximises the contributions of his or her father and discounts the contributions of the other.  Again I am unable to make any finding as to this.

9. The respondent would have me take into account the fact that the applicant spent a good deal of money on three overseas (hobby omitted) trips.  From time to time I deal with cases where one of the parties has a hobby which costs money.  I recall some of these: a husband who spent over $40,000 over 20 years in membership fees for his golf club;  a husband who went away with his friends on fishing expeditions two or three times a year which over time added up to a significant cost; and a wife who owned a horse and travelled to dressage competitions -  with agistment costs, fodder, vet bills and travel costs this was not a trivial expense.  It has not been my practice to take such matters into account.  A marriage or a de facto relationship does not have to involve sharing in every activity.  In this case the money spent did not consist of many comparatively modest sums but three large sums.  The test I apply is to make an assessment of whether or not the expenditure was reasonable.  If the trips had been frequent or regular the applicant may not have passed that test.  This was not the case here.

10. Post separation the respondent has had the care of the children.  They are estranged from the applicant.  The respondent applied for and received child support for the period when the parties were separated under the one roof.  From July 2013 to April 2014 the applicant paid a total of $4,163 by way of child support.  In her Financial Statement filed 19 June 2015 the respondent stated that the child support being paid was $138 a week.  X attended a (omitted) school and the respondent has had to pay the fees up until 2013.

11. Post separation the applicant continued to pay the mortgage instalments up until March 2013.  Since then they have been paid by way of a re-draw facility, the payments having been put in credit by a lump sum from the sale of the Property Y and Property B properties.

12. I summarise the contribution issues as follows:

    (a)Whilst the respondent’s initial contribution by way of the proceeds of the sale of her Property R property was made some 28 years ago I still attach some significance to it.  It enabled the parties to acquire the Property C property and this in turn enabled the parties to buy the Property V property.  And it must be recalled that the proceeds of the sale were a significant sum at the time.  According to the Reserve Bank inflation calculator it is the equivalent of a little over $100,000 today.

    (b)I do not give one party’s contributions overall either as a breadwinner or homemaker and parent any greater significance than that of the other.

    (c)I have regard to the respondent’s post separation contributions as a parent.

13. When making a percentage adjustment it is important to recognise what this means in dollar terms.  The pool is about $1.5 million.  A one percent adjustment equates to about $15,000 which in turn equates to a differential in the parties’ entitlements of about $30,000.

14. I make a two percent adjustment in favour of the respondent.

Section 90SF(3)

1. Each party is in paid employment. The respondent’s salary is greater than that of the applicant but not enough to justify any adjustment.

2. The respondent has the care of Y but he is almost 18.

3. I take account of the fact that the respondent has had the benefit of occupying the Property V property since the parties physically separated in 2014.

4. A significant issue in this case involves the applicant’s health. He suffers from lung cancer. Whilst at present this has not prevented him from pursuing his employment and as things presently stand his illness would have no impact on section 90SF(3) factors a significant aspect of this case is the impact that his prognosis should have on those factors. It is the respondent’s case that the court could conclude that the applicant has a limited life expectancy. As such it is submitted that his future needs are, perforce, limited. The respondent argues that her life expectancy is not compromised by any health issues and in consequence she has long term needs.

5. There is a degree of irony about the way this issue developed.  It was arranged that I should hear the matter in Sydney as a matter of some urgency.  I am based in Canberra.  The reason for this was that the court had been told that the applicant was terminally ill and that it was important that the matter be heard whilst he was still able to give evidence.  There was no Sydney judge available to hear the matter at short notice.  At the hearing however the applicant presented a somewhat “upbeat” picture of his condition and would have me accept that his condition is not as serious as was originally presented.  In the circumstances I propose to rely solely on the medical evidence that has been adduced rather than the applicant’s evidence.

6. The most up-to-date medical report in relation to the applicant is a report dated 17 June 2015 from Dr C.  His report states as follows:

   1.  Diagnosis
   Mr Morcomb has recurrent adenocarcinoma of the right lung. This was first diagnosed in February 2014. At that time CT scan of his cheat demonstrated a mass at the right lung hilum with distal collapse of the right middle lobe. There was a prominence of the subcarinal lymph nodes. PET scan confirmed uptake in the region of the right hllum and subcarinal lymphadenopathy. Tissue biopsy was obtained at bronchoscopy on 25 February 2014, confirming the diagnosis of adenocarcinoma of primary lung origin.

   He was treated with concurrent radiation and chemotherapy, delivered with curative intent. This treatment was completed in May 2014.

   In April 2015 follow-up CT scan of his chest and subsequent PET scan confirmed disease progression with a mass in the right lung upper lobe and progressive subcarinal lymphadenopathy. The PET scan did not demonstrate any evidence of distant metastatic disease. Therefore, at this time, he has recurrent adenocarcinoms of lung, restricted at this time to locoregional progression.

   2.  Recommended treatment plan
   Mr Morcomb has commenced palliative chemotherapy with the combination of carboplatin and pemetrexed. He has just received his fourth cycle. Repeat CT scan of the chest earlier this week has shown a reduction in the size of the right lung recurrence. The subcarinal lymphadenopathy is stable. Based on this scan result his cancer is currently responding to treatment. Provided he continues to respond to this treatment he will receive a total of six cycles of the current treatment and then will continue with maintenance chemotherapy with pemetrexed. This treatment will continue indefinitely until disease progression.
   3. The effect and likely success or otherwise of treatment
   Mr Morcomb has advanced lung cancer which has progressed after concurrent chemoradiation. In the setting of relapse, his cancer is now incurable. His predicted survival ranges from as poor as 6 months to up to 24 months. Most cancer specialists would quote a median survival of around 12 months.
   4.  Any further diagnosis as to his condition
   Mr Morcomb is otherwise well with no other significant medical illnesses. He is tolerating the treatment very well and his current quality of life is good. He continues to work around his treatment days.
   5. Any changes as to or progression of his condition
   As already mentioned his cancer has progressed after concurrent chemoradiation. He is currently receiving first-line chemotherapy for recurrent disease. There was no evidence of any distant metastatic disease outside his chest.
   

   !

    

   6.  Future treatment plans

   He will continue on the current treatment program. Once he has completed six cycles of the doublet combination he will switch to maintenance single agent pemetrexed. This will continue as long as he is tolerating treatment without toxicity and his scans show no evidence of progression. The likelihood is that his disease will progress at some stage in the next 12 months. At that time consideration will be given to further systemic treatment.
   7.  Mr Morcomb's recovery
   This patient has incurable cancer with limited prognosis. His wish is to continue treatment for as long as possible and also to continue to work as long as it is medically possible,
   8.  The effect of his condition on life expectancy
   This cancer is incurable. Expected prognosis has already been clearly stated. This lung cancer will shorten Mr Morcomb's life expectancy.

7. It goes without saying that it is quite distasteful to contemplate reducing a party’s entitlement to a share of property because he suffers from a terminal illness.  However the matter has to be approached in a dispassionate way.

8. At the hearing I was referred to two Full Court cases both involving the same parties.  These were the decisions in JCVB & SKK. The first is dated 6 September 2005. Its citation is [2005] FamCA 853. The second was delivered on 24 September 2008. Its citation is [2010] FamCAFC 157. The first of these involved an appeal from the decision of Purdy J. That appeal was allowed. The matter was remitted for re-hearing and came before Stevenson J. Her Honour’s judgment was also appealed but that appeal was dismissed. At the hearing before Purdy J the wife was still alive but had a terminal illness. By the time the matter came before the Full Court the wife had died. Her estate was substituted as a party before the Full Court and also before Stevenson J and the Full Court in the re-hearing and second appeal.

1. In JCVB & SKK reference was made to two other Full Court decisions, Tasmanian Trustees Ltd & Gleeson (1990) FLC 92-156 and Re Parrott v Public Trustee of NSW (1994) FLC 92-473. In both those cases one of the parties had died before the hearing at first instance. I shall discuss those cases later in this judgment.

2. The only decision of which I am aware in which the Full Court was confronted with a situation where a party was still living but had a terminal illness was Lawrie & Lawrie (1981) FLC 91-102. I shall commence this aspect to the case by discussing that authority.

3. In Lawrie the husband, at the date of the hearing before the trial Judge had a life expectancy of about six months.  The only substantial property of the parties was a jointly owned home.  The trial Judge made an order that provided for the husband to occupy the home until his death and that upon his death the property be sold and the proceeds divided 65% to the wife and 35% to the husband’s estate.  There was in existence an order that the husband pay spousal maintenance of $35 a week to the wife and the trial Judge continued that order until the sale of the home.

4. The husband appealed.  His issue with the result was not the fact that he could continue to occupy the home but with the fact that his estate was deprived of the share of the parties’ property to which his contributions should have entitled it to.

5. In the Full Court Fogarty J, at page 76,749 said as follows

   Applications under sec. 79 involve in varying degrees the dual aspects of past contribution and future needs …….  Here it seems to me that the following facts or conclusions are established:

   1.  The past contribution to the property and marriage generally should be treated as equal.  The husband’s occupation of the home since separation and payment of the mortgage and outgoings was treated by his Honour as broadly equalised by the payment of the maintenance, and neither counsel challenged this aspect.

   2.  The only asset available for distribution between the parties is of relatively small value, that is, just under $50,000.  One half would not provide either with a substantial or indeed sufficient sum in ordinary circumstances.

   3.  The future financial needs of the wife (as to which see sec. 75(2)(d)) are substantial even if assessed on a modest scale, having regard to her age, state of health and present financial circumstances.

   4.  However difficult it may be to say, the fact is that the future financial needs of the husband are very limited. The uniqueness of this case is that that circumstance is not the subject of controversy as it would be in most cases.  If that were not so then there would have been no justification for diverging from the ordinary 50/50 situation, a circumstance which his Honour himself clearly recognised.

   It is appropriate and, in my view, necessary to consider the relative future needs of the parties in determining what is a just and equitable order under sec. 79.  Where there is a significant disparity that would ordinarily be reflected in the orders.  This is frequently a result in cases of a more usual type.  Further, where in any case it is clearly established that the future financial needs of a party will terminate (or perhaps significantly diminish) upon the happening of a definite future event, it is proper to take that into account.  A number of examples of that readily spring to mind.  The weight to be given to that will obviously vary from case to case.

6. His Honour then went on to say that in the circumstances of the case “the property orders made by his Honour grappled as well as may be with the unique circumstances of this case.  I consider them to be proper and sensible orders and consequently would dismiss the appeal in relation to the property aspect”.

7. The only other detailed judgment in the Full Court was that of Gee J.  He also referred to the “special facts” of the case.

8. The appeal was dismissed.  It can be seen however that this case is of limited guidance.  In the present case there is no application that the husband be given the right to occupy the property of the parties until his death.

9. The case of Tasmanian Trustees Ltd & Gleeson is also of limited relevance. In that case the parties were the joint proprietors of a home and the husband died between the date of the hearing before the trial Judge and the date of delivery of the judgment. The trial Judge thereupon declined to deliver judgment and re-heard the matter after Tasmanian Trustees Ltd, the executor of the husband’s estate, was substituted as a party to the proceedings. The effect of the death of the husband was that the whole of the parties’ home vested in the wife by reason of survivorship and that unless an order were made under section 79 altering her interest there would be effectively no property in the husband’s estate. The Judge refused to make an order under section 79.

10. Tasmanian Trustees Ltd appealed this decision.  The Full Court dismissed the appeal.  The leading judgment was delivered by Nygh J.  His Honour cited with approval the single Judge decision of Smithers J in Menzies and Evans and Evans (1988) FLC 91-969 where his Honour pointed out that the most obvious difference in the case where one party is deceased is that party no longer has any section 75(2) needs for the future whilst the survivor continues to have such needs. Nygh J commented that it would be a rare case where the estate of the deceased party would be denied any share of the parties’ property given that the factors under section 75(2) are only one aspect of the case and an important issue is that of contributions. However his Honour considered that as the property pool was very small in the particular circumstances of the case there was no error in refusing to make an order under section 79.

11. His Honour pointed out that in Menzies, where Smithers J had made an order in favour of the estate of the deceased party, the property pool was much greater than in the case before him.

12. It is not necessary to dilate on ReParrott.  In that case also the husband had died by the time the case was heard at first instance.  The Full Court agreed that the death of a party has a significant impact on section 75(2) factors.  It approved Menzies and Tasmanian Trustees as authority for the proposition that where the property pool is small an order which deprives the estate of the deceased party of any share of the property pool may be justified.

13. Menzies itself is of little assistance.  Not only was the wife already dead but the husband was aged 84, was suffering from dementia and was in poor physical health.

14. To summarise there is no clear authority indicating the appropriate approach where both parties are still living but one party has a terminal illness.  The only comparable case of which I am aware is Lawrie and in that case the judge made orders of a type not available to me. However the judgment of Fogarty J in that case provides some guidance. I distil from this judgment the proposition that where it is established that a party has a limited life expectancy that fact indicates that an allowance should be made in favour of the other party under section 90SF(3) to reflect that party’s greater long term needs. In fairness the standard of proof as to the terminal nature of the illness would need to be at the upper level of what is sometimes called the Briginshaw standard (it will be recalled that Fogarty J used the term “clearly established”) but I am satisfied that this standard has been met.  As I have said, taking such an approach is distasteful and I do so with reluctance but, as I have also said, the exercise must be approached in a dispassionate way.

15. However this issue to a degree cuts both ways.  It may be that the applicant’s condition may at some stage prevent him from continuing his employment and there may be a period when he continues to have needs (perhaps substantial needs) but no salary.

16. I make a fifteen percent adjustment in favour of the respondent.

Superannuation

1. The applicant sought that there be a superannuation split whereby the respondent would receive a share of his superannuation.  He sought a sale of the Property V property and an equal division of the proceeds. I assume that his position was part of a “package deal” calculated to provide for an overall equal division of all assets.  I assume he would oppose any split having regard to the orders I have made.  The respondent did not seek a split.  She sought an order that she pay the applicant $300,948 which was calculated to represent thirty percent of the non superannuation pool. Of course this has not been the outcome either.

2. I refer to what I have said in paragraph 5.  I do not believe that the criteria I referred to in that paragraph have been met and I will not order a split.

Conclusion

1. The result will be that the applicant will receive thirty three percent of the parties’ property.  That equates to $498,300.  I have rounded this off to $500,000.  It goes without saying that the exercise upon which I am embarked is not akin to a precise scientific experiment.  The extra $1,700 brings the applicant’s share of the pool to about 33.1 percent.  I have ordered accordingly.

2. If the respondent is unable to pay this amount the Property V property will have to be sold.  If this occurs the applicant is to receive thirty three percent of the net proceeds.

1. Is this just and equitable?  The heart says no.  The head says yes.  With great reluctance I feel I must be guided by my head.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Brewster

Date: 16 March 2016