Moritzen and Moritzen
[2018] FCCA 1073
•14 May 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MORITZEN & MORITZEN | [2018] FCCA 1073 |
| Catchwords: FAMILY LAW – Property – contributions – where the parties have been married for 33 years – where the husband asserts his parents made significant contributions at the commencement and during the relationship. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 79 |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 |
| Applicant: | MS MORITZEN |
| Respondent: | MR MORITZEN |
| File Number: | SYC 1435 of 2016 |
| Judgment of: | Judge Harper |
| Hearing dates: | 19 & 20 October 2017 |
| Date of Last Submission: | 23 April 2018 |
| Delivered at: | Sydney |
| Delivered on: | 14 May 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Othen |
| Solicitors for the Applicant: | Watkins Tapsell Solicitors & Barristers |
| Counsel for the Respondent: | Mr Johnson |
| Solicitors for the Respondent: | MCW Lawyers |
ORDERS
By no later than 4.00 pm on the date 14 days from the date of these orders the parties are to submit to chambers an agreed minute of proposed orders in accordance with these reasons, and if appropriate such orders may be made in chambers.
Such orders are to deal with the question of costs.
In the event the parties are unable to agree on a minute of orders, the applicant is to contact chambers to seek to have the matter relisted, with notice to the respondent.
IT IS NOTED that publication of this judgment under the pseudonym Moritzen & Moritzen is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 1435 of 2016
| MS MORITZEN |
Applicant
And
| MR MORITZEN |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property proceedings between the applicant wife Ms Moritzen (“the wife”) and the respondent husband Mr Moritzen (“the husband”) whereby each party is seeking orders for property distribution after the break down of their marriage.
The parties were in agreement that a property adjustment would be just and equitable in this case. As will become apparent, in broad summary, the central issues revolved around the treatment of the initial contribution of the husband of the former matrimonial home, the contributions of both parties, but particularly the wife, during the relationship, the likelihood of the wife receiving an inheritance in the near future, and whether orders can be made which permit the husband to retain the former matrimonial home, whilst giving the wife her entitlement.
At the final hearing the wife was represented by Mr Othen of counsel and the husband was represented by Mr Johnston of counsel.
Procedural history
The wife initiated proceedings on the 11 March 2016 by filing an Initiating Application, Affidavit and Financial Statement. The Husband then filed a Response, Affidavit and Financial Statement on 8 June 2016.
The matter first came before the Federal Circuit Court in a duty list, before Her Honour Judge Boyle, on 14 June 2016. On that date orders were made by consent for the parties to arrange to attend mediation with the Law Society of NSW under the Family Law Settlement Service. However, the matter did not settle. The matter was adjourned to 29 September 2016 for mention.
On 29 September 2016 the matter was listed into a call over on 10 November 2016 for the purpose of allocating hearing dates.
On 10 November 2017 the matter was further listed into another call over on 11 April 2017 for the purpose of allocating hearing dates. However, before the 11 April 2017 the matter was transferred to my docket.
On 23 February 2017 the matter was listed before me for mention and was set down for final hearing on 18 and 19 October 2017.
Owing to judicial illness and the pressures of the judicial calendar, delivery of these reasons has been unfortunately delayed.
Material relied upon
The wife relied upon:
a)Initiating Application filed 11 March 2016;
b)Her Financial Statement sworn 12 September 2017 and filed 14 September 2017;
c)Her Affidavit sworn 12 September 2017 and filed 14 September 2017 (“the wife’s Trial Affidavit”)
d)Affidavit of single joint expert real property valuer Mr J sworn 14 September 2017 and filed 14 September 2017.
e)Affidavit of Dr A sworn on 8 September 2017 and filed 14 September 2017
f)Affidavit of Mr N sworn on 31 August 2017 and filed 14 September 2017
g)Affidavit of Mr L sworn 19 June 2017 and filed 14 September 2017
The wife was cross-examined.
The husband relied upon:
a)His Amended Response filed 31 May 2017;
b)His Amended Financial Statement filed 7 August 2017;
c)His Affidavit affirmed 4 August 2017 and filed 7 August 2017; and (“the husband’s Trial Affidavit”)
d)The Affidavit of Mr D, the husband’s father (“Mr D”) sworn and filed 30 March 2017.
The husband and Mr D were cross-examined.
The following documents were tendered and placed into evidence:
Exhibit Label
Document
Tendered by
A
Agreed balance sheet
Wife
B
Agreed Schedule of Public Company Shares
Wife
1
Portfolio Report: account … as at 30.9.2017
Husband
Competing proposals
The wife sought orders that she receive up to 60% of the asset pool.
A central point of contention is whether the husband can retain the former matrimonial home. He designed and built the home and has lived there for 47 years. The wife submitted that on the balance sheet, even if she received the proceeds of sale of the two Town E properties, the entire superannuation fund and all the shares, she would still require a substantial lump sum from the husband in order for the outcome to be just and equitable. Therefore, she argued, since the husband was 70 years old and there was no other sources of funds, it was inevitable that the Property F property would have to be sold.
The husband sought orders that, contributions being equal, on an equal division of assets he receive between 5% and 10% adjustment in his favour for s.75(2) factors, or spousal maintenance.
During the course of cross examination the wife conceded that a “sensible resolution” would be for the husband to retain the Property F property, receive $100,000 in superannuation and his paid legal fees and she would receive the balance of the assets. I adjourned briefly to enable the wife to take advice after giving this evidence. After a short adjournment the wife indicated she wished to carry on with the hearing. The husband then made an open offer to the same effect, including forgoing any claim to spousal maintenance. The wife did not accept this offer.
The wife’s position remained that she would prefer more than 55% of the available assets.
The husband contended in written submissions that he was not bound by his open offer. He submitted that, his open offer being rejected, it was open to him to pursue the relief in his Amended Response. I agree. The wife did not contend otherwise.
The Law
Part VIII of the Family Law Act 1975 (Cth) (“the Act”) sets out the legislative provisions relating to property orders that may be sought when parties are or were married. Section 79 of the Act, in particular, gives the Court power to make such orders for alteration of property interests as it considers appropriate, taking into account a number of considerations as set out in that section (these will be discussed below).
The approach to be taken
Prior to the High Court of Australia’s decision of Stanford & Stanford [2012] HCA 52, parties generally relied upon the “4 step process” set forth in Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 in the determination of an application under s.79, as follows:
1. Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
2. Identify and assess the contributions of the parties as referred to in s.79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3. Identify and assess the other factors relevant including, the matters referred to in s.75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
The Full Court of the Family Court of Australia in Bevan & Bevan [2013] FamCAFC 116 has held that the decision in Stanford (supra) has not overruled the 4 step approach. Rather Stanford (supra) serves as a reminder that the 4 step process “merely illuminates the path to the ultimate result” being “no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.”[1]
[1] Bevan & Bevan [2013] FamCAFC 116 at paragraphs 71 & 72.
The Full Court in Bevan (supra) emphasised that although the pre-condition to making any order for property adjustment is a finding that it is just and equitable to do so in accordance with s.79(2) of the Act, such a finding does not form a threshold issue nor must the requirements of s.79 be followed in a particular order.
In Bevan (supra) the Court summarised three “fundamental propositions” laid down by the High Court of Australia to provide “useful guidance to trial judges in approaching the task under s79” as follows:
a)Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
b)The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
c)A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4) and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.[2]
[2] Bevan (supra) at paragraph 73.
The decision of the Full Court of the Family Court of Australia in Hearne & Hearne [2015] FamCAFC 178[3] confirmed, following Bevan, that a positive finding that alteration of property interests is just and equitable is not necessary as a threshold issue, and also made clear that satisfaction of the s.79(2) requirement can be inferred, at least in part, from the issues joined, and importantly, not joined, between the parties, and a finding that may arise by necessary implication from the totality of the trial judge’s reasons for judgment: at [71], [72] (per Strickland J).
[3] Per Strickland, Ryan & Austin JJ (delivered September 2015).
The ‘four step approach’ in conjunction with the relevant legislative framework will be discussed below in light of the facts of this case.
The parties
The parties commenced living together in … 1979. They married on … 1980 and permanently separated on 20 September 2013.
The marriage lasted therefore some 33 years.
There are two adult children of the relationship.
Both parties were cross examined. I formed the view that each of them endeavoured to give frank answers. I am satisfied both parties were generally honest and truthful and gave their best recollection of events over the 33 year period of their relationship, and since separation, although at times their recollections were unclear
Mr L, the wife’s brother, was also cross examined. He impressed me as clear and honest in his answers. I generally accept his evidence.
Assets, liabilities and financial resources at the date of the hearing
As noted above, the first step in the 4 step Hickey (supra) approach requires identification of parties’ property, liabilities and financial resources at the date of the hearing. The High Court of Australia made clear in Stanford (supra) at [39], the question whether it is just and equitable to make an order “is not to be answered by assuming that the parties’ rights or interests in marital property are or should be different from those that then exist”.
The asset pool at final hearing can be summarised in the table set out below. This replicates the agreed joint balance sheet which became Exhibit A.
It was common ground that the parties each received $50,000 by way of partial property settlement prior to the hearing. These funds were paid from the proceeds of sale of a property at Property H, (“Property H”) which were being held in the trust account of the solicitors for the wife. I discuss this property further below. These payments will be treated as an “add-back.” The balance of the proceeds held in the wife’s solicitor’s trust account is therefore $56,886.
I note that in his evidence the husband asserted that at separation the wife retained an extensive jewellery collection. The wife gave evidence that she was the victim of a robbery in … 2013 during which all her jewellery was stolen. She received an insurance payment of $23,800. The husband appeared to dispute this. He gave evidence that the wife told him about the robbery in … 2016, but he asserts the robbery did not happen. However, no submissions were ultimately directed to the jewellery, and there was no item on the agreed balance sheet for jewellery. It is not necessary to consider this further.
As to superannuation, the Full Court of the Family Court of Australia’s decision in C & C (2005) FLC 93-220 requires the Court, in the majority of cases, to consider the parties’ superannuation interest as a separate species of property, unless the parties consent to it not being treated separately. It is open to the Court to decide whether to treat superannuation interests as a separate list of assets, or as part of one asset list. The majority of the Full Court in C & C (2005) FLC 93-220 said there is no binding principle as to the exercise of the Court’s discretion in deciding whether a one list or a two list approach should be adopted. No submissions were made on this question. The parties included superannuation as a separate item of property on the balance sheet of all assets. I will include the superannuation entitlements of both parties in the one pool of assets.
The parties’ superannuation interests were comprised of the wife’s interest in an accumulation fund held with Australian Super, and the parties’ joint self-managed superannuation fund called “Moritzen SMSF”.
Therefore, the assets and liabilities of the parties at the date of hearing are, as follows:
Assets
W/J/H
Value $
Non-superannuation
Property F (“Property F property”)
H
1,000,000
Proceeds Property H
J
56,886
40. Proceeds Property E
J
175,107
41. Share portfolio
J
331,607
CBA # …
J
6,783
CBA # …
J
632
Total
1,571,015
Superannuation
Moritzen SMSF
J
453,703
Australian Super
W
6,684
Total
460,387
Addbacks
Paid Legals
42. H
35,269
Paid Legals
43. W
100,574
Partial Property Settlement
44. J
100,000
Total
$235,843
Total Assets
$2,267,245
Percentages of net assets at hearing
Consequently, if there was no property adjustment, the wife would hold 29.5% of the parties’ net assets and the husband 70.5%. Having regard to my assessment of contributions below, I am not satisfied such a result would be just and equitable. Both parties accepted that a property adjustment would be just and equitable.
I turn now to consider the application of Part VIII of the Act and the factors set forth in ss.79 & 75(2).
Contributions under section 79
I will deal first with s.79 of the Act. Section 79(4) of the Act sets out the considerations to be taken into account by the Court in considering what order (if any) should be made under s.79 of the Act in property settlement proceedings.
Neither party submitted an asset by asset approach should be taken in assessing contributions. I take a global approach to the assessing the financial contributions of the parties: Norbis v Norbis (1986) 161 CLR 513.
In accordance with s.79(4) of the Act, the Court must consider all the contributions, both financial and non-financial to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family during cohabitation and after separation. Assumptions about equality of contributions should not be made. Separate assessment of matters occurring after separation is not necessary in arriving at an assessment of contributions: S & S [2004] FamCA 201. The Court must consider the contributions in an overall sense: Norman & Norman [2010] FamCAFC 66; Hickey (supra); Kowalski and Kowalski (1993) FLC 92-342; G & G [2000] FamCA 1075. A broad approach is preferred, rather than reference to precise mathematical calculations: In the Marriage of Burke (1981) FLC 91-055 although an evaluation of each party’s respective contributions is necessary: JEL & DDF (2001) FLC 93,075. This broad approach was affirmed in Petruski & Balewa [2013] FamCAFC 15 where the Full Court said at [49]:
The task of assessing contributions under s 79 of the Act is an holistic one; what is required is to evaluate the extent of the contributions of all types made by each of the parties in the context of their particular relationship (Dickons & Dickons [2012] FamCAFC 154). As was also said by the Full Court in Lovine & Connor and Anor [2012] FamCAFC 168, at paragraphs 40 and 41 such an evaluation “inevitably involves value judgments and matters of impression”, and accordingly it cannot be treated as “a mathematical exercise”.
Below is a discussion of the evidence and my findings in relation to the relevant contributions under s.79(4) of the Act.
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage
Initial contributions
The wife gave evidence that at the commencement of the relationship she had $11,000 in savings and a share portfolio worth $104,221. This evidence was not disputed.
According to her evidence, the wife also had interests as a discretionary object of two discretionary family trusts (“L family discretionary trusts”). The L family is the wife’s family. The High Court in Kennon v Spry [2008] HCA 56; 238 CLR 366; 83 ALJR 145 confirmed that a beneficiary of a non-exhaustive discretionary trust has the right to compel the trustee to consider whether or not to make a distribution to him or her and a right to the proper administration of the trust. These rights are “property”, under the Act, in the nature of equitable choses in action. In Kennon (supra) French CJ at [77] and [78] said “it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust” though “a valuation might not be beyond the actuarial arts in relation to the right to due consideration.”
However, there was no evidence from the wife, such as trust deeds, which would permit the formation of any view about the precise nature of the trust, or the value of her equitable choses in action as discretionary beneficiary at the date of commencement of the relationship. The distributions made in the wife’s favour during the marriage, detailed later in these reasons, suggest these choses in action had some, through indeterminate, value.
The wife also held 10 C class preference shares in a company called Company M Pty Ltd. According to the evidence of Mr N, the former accountant for the wife’s family, Company M was the investment company of the wife’s parents, used to hold “L family investments.” There was no evidence permitting a value to be attributed to these preference shares at the commencement of the relationship.
There is no dispute that at the commencement of the relationship the husband owned the Property F property. He gave evidence that at that time it was worth “at least $90,000” and was subject to a mortgage from … Building Society. The amount owing as at … 1980 was not clear. However, the husband annexed to his Affidavit a bank statement from … Savings Bank Limited for the period … 1988 to … 1989 which showed an opening debit balance of $5,938.52. The exact relationship between … Building Society and … Savings Bank Limited was not explained. In any event, there was no clear evidence of the debit balance 8 years earlier at the commencement of the relationship. I accept there was some equity in the Property F property at the commencement of the relationship.
Neither party had any superannuation.
I accept the husband’s assets were probably greater in value than the wife’s at the commencement of the relationship. It is not possible to be precise about the difference in value.
The use made of an initial contribution is relevant but it also has to be weighed against all other relevant contributions made by the parties or on their behalf (Pierce v Pierce (1999) FLC 92-844 at [28]).
I turn to consider those now.
Financial contributions during the relationship
The parties acknowledged that the husband was the primary breadwinner during the majority of the relationship while the wife was the primary homemaker. This appeared to be common ground.
Employment
At the start of the relationship the wife was employed as clerk of Employer. She stopped working in 1983 before the birth of the first child and returned to part time employment in health care work in 1989 when the daughter was 4 years old.
In 1999 the wife commenced working full time as a customer service officer for Employer until 2004. She ceased full time work in 2004 when the parties’ daughter Ms K became unwell. Thereafter she worked part time in customer service until she was retrenched in 2014.
At the start of the relationship, the husband worked at the Employer. He was made redundant in 1981 and received a redundancy payout of $34,000 gross. From 1982 to 1991 the husband was employed by Employer. He received severance of $45,600 gross when this employment ceased. From 1991 to 1996 the husband worked as a professional for Employer. He received a redundancy payout of $49,000 gross when this employment ceased.
Between 1996 and 1999 the husband had no permanent employment but worked on contract. Between 2000 and 2003 he obtained permanent employment at Employer, but was made redundant in … 2003 receiving a redundancy payout of $51,000 gross.
According to the husband’s evidence, he used the redundancy from the Employer to pay off a loan to the ANZ bank secured against his parents’ home (paragraph 7 of his Trial Affidavit). The redundancy payment from Employer was used by the husband to discharge the mortgage over the Property F property in favour of … Building Society (paragraph 12 of his Trial Affidavit). Otherwise, it appears he deposited his various other redundancy payments, discussed above, into a Macquarie Bank account (paragraph 19 of his Trial Affidavit). When the Moritzen SMSF was established in 1997, the husband gave evidence that he deposited $98,000 from the Macquarie Bank account into the Moritzen SMSF. The wife did not dispute this.
Between 2003 and 2009, the husband gave evidence that he sought and found contract work. However, according to his evidence he has not found much gainfully employed work since 2008. He has had some casual work and community work. He is now retired and looks after grandchildren 2 days a week. He gives evidence that he proposes to apply for the full aged pension once these proceedings are concluded.
I accept both parties applied their employment income for their joint benefit and for purposes of the family.
Gifts from the Wife’s Mother
According to the wife, she received between 1979 and 2002 a number of gifts from her mother which totalled $452,000. The treatment of the gifts comprising this figure was one area of debate in two respects.
First, the husband disputed the total amount. He argued that it should be reduced by $100,000. The wife set out an extensive list of gifts from her mother at paragraph 41 of her affidavit. These included an alleged gift of $100,000 “put towards remodelling our kitchen and other alterations to our Property F house.” The husband disputes this gift. In cross examination the wife conceded that she relied on her memory in relation to that gift. She agreed the date could be wrong, accepting 2005, not 2002, as possible. Annexure “C” to her Affidavit is a copy of a handwritten list of gifts prepared by her mother up to June 2004. The wife gave evidence that her mother was “an excellent record keeper.” There is no reference to an amount of $100,000 in Annexure “C”. If it was paid in 2005 it would not fall within the period covered by Annexure “C”. The wife also gave evidence that her mother was “scrupulously fair” in treating each of her children equally.
Apart from the wife’s statement in cross examination, there is no evidence supporting a date in 2005 for a $100,000 gift. Moreover, a gift at that date would have been made after the wind up of Company M and the L family discretionary trusts in 2004, discussed further below. There is no plausible evidence as to why the wife’s mother would have made a gift of $100,000 at that point in time. I do not accept 2005 as a possible date for a gift of $100,000.
Mr L, the wife’s brother, gave evidence in her case. He had no recollection of receiving $100,000 in 2002. He agreed that it appeared none of the children received $100,000 in 2002. He agreed his mother treated all her children equally.
On balance I am not satisfied the wife received any gift of $100,000 in 2002.
Second, the husband relied upon Kessey & Kessey (1994) FLC 92-495; 18 FamLR 149 for the proposition that these sums were clearly gifts from the mother to both parties, and therefore they should be treated as equal contributions. However, the wife contended that Kessey (supra) stood for the proposition that a contribution of a parent of a party to a marriage will be taken as a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child: see 18 FamLR 149 at 181. There is no direct evidence of the intention of the wife’s mother regarding these gifts. There is no other sufficient evidence from which inferences about the mother’s intention regarding these gifts could be safely inferred. I am not satisfied that there is evidence which establishes it was not the intention of the mother to benefit only the wife.
I am satisfied that the wife contributed $352,000 through gifts from her mother.
Property G Property
In 1994 the parties purchased Property G (“Property G property”). The property was held in the name of the wife, but in her evidence she treats this property as a joint asset. The purchase price was $115,000. This was paid by a deposit cheque for $11,500 drawn from the parties’ personal savings and a loan of $113,000 from Company M. The husband gave evidence that this loan was repaid in … 1997.
The husband gave evidence that in 2009-2010 he carried out the complete renovation and restoration of the Property G property, including reconstructing walls in the bathroom, re-tiling, installing a new toilet, and renovating the kitchen. The details are set out in paragraph 51 of his Affidavit. The wife did not dispute this evidence of the husband on the Property G property.
The Property G property was sold either in 2011 for $330,000, according to the husband or 2007 or 2008 for $360,000, according to the wife. I return to this below.
Contributions in 2004
In 2003 and 2004 the wife received shares and cash with a total value of $1,047,000 from the wind up of Company M and the L family discretionary trusts. Mr N described these as distributions in cash and “in specie” made in a manner to minimise tax and gave evidence that the wife and her siblings were treated equally. The wife gave evidence that she received $325,000 in cash and shares “in specie” valued at $724,770. The husband accepted that these amounts should be considered as contributions of the wife. Some were paid into the Moritzen SMSF and others were received by the wife in her own name. The wife estimated that by the time of separation she had sold shares to a value of $130,000, the proceeds of which were partly spent on travel and partly distributed as gifts to the parties’ children.
According to the husband’s evidence he received an inheritance from his mother of $200,000. He says this was in 2004. The wife gave evidence that it was received in 2000. The exact year does not seem material to me in the circumstances of this case. I accept the husband’s date is more likely. The wife accepts this money was used to fund household and living expenses. The husband gave evidence that these included a trip to Country O.
The husband also received an inheritance from his cousin in 2004, which was in the form of a large clock valued at $19,800.
Town E Properties
In 2004 the parties purchased two properties in Town E, Property H and Property E. The purchase price for Property H was $155,000 and it purchased using $15,500 deposit from the parties’ savings and the balance was lent by Company M. The purchase price for Property E was $315,000. The husband gave evidence that part of the purchase price came from Company M and the balance was paid by a mortgage from the Commonwealth Bank in the sum of $282,150. The wife agrees that there was a mortgage of $282,150 but asserts the balance of the purchase price of both properties came from the parties’ savings. On balance it seems more likely to me that the husband is correct.
As noted above, the Property G property was sold either in 2011 for $330,000 according to the husband, or 2007 or 2008 for $360,000, according to the wife. The proceeds of sale were applied to the outstanding mortgage over Property H and Property E, which was discharged in … 2011. For this reason, I accept that the husband’s evidence is more likely to be correct concerning the date and sale price of the Property G property.
Financial contributions post-separation
The parties both gave evidence that from 2011 to date, they have lived off income from the Town E properties, share dividends, interest in joint accounts, the wife’s salary income and drawdowns from the Moritzen SMSF.
After the parties separated in September 2013 the husband continued to live in the Property F property, which by then was unencumbered. It was common ground that he paid the rates and insurances for that property.
The wife rented a property and pays $475 per week. According to her evidence, she has been receiving $300 per fortnight from the parties’ joint account which has remained operative.
At the time of separation the wife was working two days a week for Employer and was semi-retired. After separation she has worked either three or four days per week. The wife then started full time work with Employer in … 2014. She currently works three days per week. She looks after grandchildren two days a week.
The wife gave evidence that she has problems with her neck and shoulder with chronic pain. This has caused her to reduce her work load. There was medical evidence from Dr A that the wife suffers from neck muscle stiffness, thoracic kyphosis and reduced cervical movement and tenderness. The wife also has osteopenia.
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage
There was undisputed evidence that the husband undertook regular maintenance to the various properties owned by the parties.
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent
As already noted it was common ground that the wife was the primary caregiver for the children and primary homemaker. It was common ground that she had the assistance of a housekeeper on a regular basis.
The daughter, Ms K, was afflicted by seriously health issues between 2004 and 2010. The wife gave up full time work in this period to care for Ms K, as well as the wife’s sister who suffered liver cancer in the same period.
The husband asserts that he regularly did housework, particularly during the period when he was unemployed or retired. The wife agreed that the husband occasionally assisted with homemaker duties, but asserted that his work commitments prevented him from providing any substantial assistance to her in this regard.
The husband also gave evidence that he paid approximately $26,000 per annum for each child for private school fees and other costs and expenses. This was undisputed.
I am satisfied both parents made contributions as carers and homemakers but the wife’s contribution in this regard was far greater.
It was common ground that the wife’s family trusts owned a property at Town P and at Suburb Q in Sydney. The wife’s mother lived in the Suburb Q property. The Town P property was used by the parties, their children and the wife’s extended family as a holiday destination. The husband gave evidence, with which the wife and Mr L agreed, that he spent considerable time and effort maintaining and improving the Suburb Q property. I refer to this again below.
(d) the effect of any proposed order upon the earning capacity of either party to the marriage
The proposed orders will not directly affect the earning capacity of either party.
(g) any child support provided
This is not relevant on the facts of this case.
Assessment of contributions
The wife submitted that the contribution based entitlements favour her significantly, being up to 65% of the assets. She accepted that the parties made equal contributions from exertion during the relationship. However, she submitted that her financial contributions during the relationship dwarfed those of the husband, and the court should look at not only the dollar value, but the value to the relationship.
The husband submitted the contribution based entitlements should be assessed as equal.
I accept that the initial contribution of the Property F property by the husband has allowed the general pool of assets of the parties to grow with the value of the property, and it gave the parties a residence. However, the wife submitted that her income helped pay off the mortgage secured against the Property F property, so it should not be attributed to the husband alone as a contribution. I accept this argument to the extent that it appears undisputed that the Property F property was subject to the … Building Society mortgage until the redundancy payment from Employer in 1991. This means it had to be serviced for the first 11 years of the marriage. There is no evidence of the quantum of such payments.
Moreover, the husband’s argument for treating the contributions as equal relied in part on a conclusion that the gifts of money by the wife’s mother should be treated as gifts to both parties. I considered this argument above and rejected it.
I am not persuaded this is an equal contributions case. I am satisfied that the wife made the greater overall contribution, including financial contribution, during the relationship, for the reasons discussed above.
I accept that the parties’ contributions post separation were equal.
Taking account of all the above considerations, I assess the wife’s contribution entitlement at 58% and the husband’s at 42%.
I now turn to the s.75(2) factors.
Section 75(2) adjustment
The Act requires me to take into account the matters referred to in s.75(2) of the Act, so far as they are relevant, when considering what orders should be made in these proceedings. The relevant matters to be so taken into account on these facts are as follows.
(a) the age and state of health of each of the parties
The wife is currently 66 years old. In her Affidavit she says she is in good health, although she gives evidence that she suffers arthritis in her neck and suffers constantly when sitting at her desk at work.
The husband is now 70 years of age. He gave evidence that he is in good health.
(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;
In Hall v Hall [2016] HCA 23 in the context of discussing spouse maintenance, the High Court made the following statements at [53] to [55] about the ambit of the concept of financial resources in s.75(2)(b):
[53] The matters referred to in s 75(2)(b) are matters which bear on the practical ability of one party to support the other, and of the other party to support himself or herself. Hence the concluding reference is to the matter of "the physical and mental capacity of each of them for appropriate gainful employment". Hence also the opening reference to the matter of "the income, property and financial resources of each of the parties" cannot be confined to the present legal entitlements of the parties.
[54] The reference to "financial resources" in the context of s 75(2)(b) has long been correctly interpreted by the Family Court to refer to "a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency"[19]. The requirement that the financial resource be that "of" a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee's discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
[55] Whether a potential source of financial support amounts to a financial resource of a party turns in most cases on a factual inquiry as to whether or not support from that source could reasonably be expected to be forthcoming were the party to call on it.
[footnotes omitted]
The choses in action enjoyed by the wife under the L family discretionary trusts would, according to Hall, be considered financial resources of the wife. However, those trusts were wound up and final distributions made many years ago. They can no longer be considered a financial resource.
The wife works part time. I refer to my discussion of her income and financial current resources earlier in these reasons. She gave evidence that she continues to work in order to pay her rent. She also gave evidence that upon completion of the court proceedings she will permanently retire from the workforce. I accept the wife has the capacity for several more years of gainful employment.
The husband is retired. I refer to my discussion of his income and financial current resources earlier in these reasons.
(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;
The wife currently rents accommodation. She gave evidence that she currently pays $475.00 per week in rent. The wife wishes to purchase accommodation once these proceedings are finalised.
The husband remains living in the Property F property, which is unencumbered. If the property is not retained by him he will need to find alternative accommodation.
Neither party has any other liabilities.
(f) subject to subsection (3), 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;
At present neither party receives any government pension, allowance or benefit.
The details of superannuation have already been discussed above.
As already noted, the husband intends to apply for the full aged pension once these proceedings are finalised.
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
The evidence of both parties is consistent that they enjoyed a reasonably affluent standard of living during the relationship.
Both parties will need accommodation in the future.
On the evidence neither party will be or remain in the work force after the finalisation of these proceedings.
The outcome proposed later in these reasons will enable both parties to maintain a reasonable standard of living within the limitations of the circumstances of this case.
(j) the extent to which a party has contributed to the income, earning capacity, property and financial resources of the other party;
I refer to my earlier discussion of the contributions of the parties. Both parties worked during the marriage.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of a party;
The parties were in a relationship for over 33 years.
I accept that the wife’s overall contribution as a homemaker affected her ability to progress career choices.
I accept that overall the wife’s contribution as homemaker enabled the husband to carry out his work commitments.
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
I have considered the terms of the orders proposed under s.79 of the Act in relation to the property of the parties. I refer to the discussion below.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
The wife accepted that although the husband had a girlfriend or companion, the evidence was they were not marrying and there was no immediate prospect of living together. Therefore it was accepted this was not a consideration available under s.75(2)(o).
The husband argued that the wife was likely to inherit from her mother in the near future and this expectancy of inheritance should be taken into account under s.75(2)(o).
The relevant facts are not contentious. The wife’s mother is presently 99 years of age. According to the wife’s description in cross examination, her mother’s health is very fragile, she is immobile, suffers from anxiety and may have suffered a return of cancer. Her will to live varies. Mr L, the wife’s brother, agreed with these observations.
The wife argued that there was no evidence of the testamentary intention of the wife’s mother. It is true that there is no direct evidence of the mother’s testamentary intention. However, in cross examination the wife agreed it was likely that she and her siblings would inherit her mother’s estate equally, and her mother was unlikely to change her will. This is some evidence of the mother’s testamentary intention. The wife in submissions contended this was no more than speculation. I do not agree. It is an opinion formed clearly based in the wife’s lifetime experience of her mother, and her mother’s treatment of all her children. In light of the clear evidence from the wife, and Mr L, that her mother treated her children with scrupulous equality during her lifetime, I accept as likely that the wife will receive an equal share of her mother’s estate with her siblings.
A number of authorities provide assistance in identifying the relevance and proper treatment of a potential inheritance. The husband relied upon White and Tulloch v White (1995) FLC 92-640. In that decision (at page 82,463) the Full Court said:-
“We do not consider there is any absolute rule. The ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process under s 79. An expectancy of inheritance will not be relevant in many s 79 proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case. For example, if the claims were based entirely upon contributions, it could not be suggested that an issue of expectancy could be relevant because no s 75(2) factors would be involved. Where the claim includes s 75(2) factors, the nature or degree of suggested relevance between those specific claims and the expectancy in question would need to be analysed. That is to say, there must be a worthwhile connection between a specific element of the party’s case and the suggested expectancy.”
The Full Court continued (at page 82,464):-
“It is ultimately a question of fact and degree. During the course of argument a number of obvious examples at each end of the spectrum were referred to. In a case where the testator had already made a will favourable to the party but no longer had testamentary capacity and there was evidence of his or her likely impending death in circumstances where there may be a significant estate, and where there was a connection to s 75(2) factors, it would be shutting one’s eyes to realities to treat that as irrelevant. On the other hand, the bald assertion that one of the parties has an elderly relative who has property and is or is likely to benefit that party is so speculative that it would be inappropriate to contemplate it as relevant in a s 79 determination, it being too remote to affect the justice and equity of the case in any worthwhile way.”
The facts in De Angelis & De Angelis (2003) FLC 93-133 bear some analogy to the present matter. The Court referred to White & Tulloch (supra) and said at page 78,246:-
“However, we think it important to remember that the Court is required in exercising the jurisdiction under s 79 of the Family Law Act 1975 to accord justice and equity to both parties. The question therefore has to be asked whether, in the present case, it would be just and equitable to the husband for the court to have ignored the probability that, in what could well be [a] very short period of time (given the ages of her aunt and mother), the wife could well be the owner of two properties having a combined value of almost the same amount as the value of the parties’ property currently available for distribution, and particularly in circumstances where the husband had been found to have done substantial improvement and maintenance work on both properties?
The Full Court answered the question by holding it would not be just and equitable to the husband for the likely inheritance to be ignored.
In the present matter there is undisputed evidence that the husband undertook work, over a number of years, which maintained and improved the original Town P property. He also carried out maintenance on the Suburb Q property. The Suburb Q property was sold in 2016. In 2017 the Suburb Q property was sold and another property was purchased in Town P. According to Mr L, the purchase price for the new Town P property was partly paid from the proceeds of sale of the original Town P property and some of the remaining proceeds of sale of the Suburb Q property. The assets in the estate appear likely to comprise an interest in the property at Town P, an accommodation deposit for a unit at Property R, acquired using part of the proceeds of sale of the Suburb Q property, shares and cash on deposit. Thus on the evidence, either properties, or their proceeds of sale, will come to form part of the wife’s mother’s estate.
For these reasons, in my view it would be unrealistic and not just and equitable to ignore the wife’s probable future inheritance, especially in light of her mother’s very advanced age (99 years) and health problems already discussed. I find that it is sufficiently proximate to be taken into account.
The precise size of the likely share cannot be known at present. According to the evidence of the wife, and Mr L, the likely size of the mother’s estate will fall in a range between $2,500,000 and $2,600,000. Accordingly, on the basis of those figures, the wife would be likely to receive a share of her mother’s estate, which on the present evidence could fall in the vicinity of $850,000.
However, although mindful of this undisputed evidence of the specific likely components of the inheritance, I consider it appropriate only to have regard to it in a general way. It is problematic to accept the calculated value submitted by the husband in a mathematical way. Many factors may yet intervene. Real estate markets could fall or rise. Share markets are volatile. There may be significant medical costs for the wife’s mother which may erode the more liquid assets such as cash and shares, or lead to the necessity for the wife’s mother’s interest in the Town P property being sold. There may be other unforeseen calls on the assets potentially comprising the expected estate.
Assessment of section 75(2) factors
The husband submitted that there should be an adjustment in his favour for s.75(2) factors of between 5% and 10%, or he should receive an order for spouse maintenance. The wife submitted that there should be an adjustment for s.75(2) factors which gave her up to 60% of the assets. According to her aide memoire entitled “Table of Contributions” which formed part of her final submissions, the wife also accepted an outcome, which gave her 55% of the assets, was within an appropriate range.
On weighing these factors, I am satisfied the husband should receive an adjustment of 5% in his favour. Accordingly, the assets of the parties will be divided 53% to the wife and 47% to the husband.
The wife presently has net assets of $669,617, inclusive of superannuation and addbacks. She would therefore require an additional $532,023 to receive her entitlement.
The husband presently has net assets of $1,597,628, inclusive of superannuation and addbacks. His current assets would therefore exceed his entitlement by $532,023.
The difficulty then becomes how these entitlements are to be received through orders of the court. The position is complicated because the husband seeks to retain the Property F property, and in submissions both parties agreed the Property F property should be retained if possible. These are issues which bear upon the manner in which the assets should be divided and the justice and equity of the outcome. I turn therefore to consider s.79(2) of the Act.
A just and equitable outcome
Section 79(2) 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.
This subsection creates a statutory requirement separate from s.79(4). I also take account of the caution expressed in Stanford (supra) at [40] that 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”.
The expression “just and equitable” in s.79(2) is inherently broad. The High Court in Stanford (supra) commented at [36] on the meaning of “just and equitable” as follows:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.[4]
[4] Stanford & Stanford [2012] HCA 52 at paragraph 36 .
The Full Court of the Family Court of Australia in Manolis & Manolis (No 2) [2011] FamCAFC 105 considered the relevant provisions of the Act in relation to this fourth step. At paragraphs [65] and [66] the Full Court described the role of s.79(2), and its relationship to ss.79(4) and 75(2) as follows:
It can be seen that power to make orders in regard to property is not exhausted after the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted…The section does however oblige the court to “stand back” from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court’s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2).
In final submissions, the wife provided a series of three indicative calculations or scenarios. All three scenarios assumed the husband retained the Property F property and add-backs of $85,269, and the wife received all other assets including superannuation.
On those assumptions and on the basis of assets totalling $2,267,245:
a)the wife’s first calculation produced the result that the wife received 52%, and the husband 48%, of the assets. The wife contended this percentage split was far too generous to the husband. This outcome does not accord with the 53/47% division reached according to my assessment of contributions and s.75(2) factors set out above;
b)the second indicative calculation by the wife produced an outcome of 55% to the wife and 45% to the husband. The wife conceded this percentage division would lie in the appropriate range. Such an outcome, according to this calculation by the wife, would require a payment by the husband to the wife of $65,000.
c)the third indicative calculation assumed an outcome of a 60/40 division of assets in favour of the wife. The wife calculated that this would require a payment by the husband to her of $180,000.
On the same assumptions, a division of assets on the basis of 53/47% in favour of the wife would require the payment of $19,664 from the husband to the wife.
This exposes the central difficulty in this case. Unless the wife’s entitlement is assessed as 52% or less, there is no outcome which can allow the husband to retain the Property F property, without making some payment to the wife. Bearing in mind his age, and the fact he has no other assets and only the aged pension for income, the husband argues he will be unable to meet any such payment without a sale of the Property F property. For those reasons he submitted an equal division of assets was just and equitable.
In cross examination, the husband agreed he could, if forced, sell the Property F property and live somewhere smaller, but he found the concept of living in a unit “abhorrent”.
I accept he genuinely holds such views. One can feel some sympathy for his desire to retain the Property F property. Indeed, as already noted, both parties agree it would be preferable if the property was retained.
However, in truth, the husband’s case appears to give primacy to retaining the Property F property, rather than to a proper assessment of contributions and the s.75(2) factors.
I note that in his Amended Response, the husband claimed $100,000 of the available superannuation, by way of a splitting order. As I understood it, no final submissions were addressed to this claim. It would not be possible both to make a superannuation splitting order and make orders giving the wife her just and equitable entitlement. No such order will be made.
The husband submitted that the open offer made by him in court, which was not accepted, did not preclude him from seeking the orders set out in his Amended Response. I agree. However, his open offer is a factor of which to take account in assessing the justice and equity of the outcome.
Accordingly, having taken account of the matters considered in these reasons, I propose that the assets of the parties be divided 53% to the wife, and 47% to the husband, with the husband to retain the Property F property and add-backs of $85,269, and the wife received all other assets including superannuation, together with a payment from the husband of $19,664.
Having stood back from my preliminary determination, and considered its impact I am satisfied this is a just and equitable outcome.
On a 53/47 percentage division, the wife and husband will have the assets and liabilities, as set out in the below table.
Assets and liabilities to be retained by the wife
Value ($)
Proceeds Property H
56,886
Proceeds Property E
175,107
Share portfolio
331,607
CBA # …
6,783
CBA # …
632
Moritzen SMSF
453,703
Australian Super
6,684
Paid Legals
100,574
Partial Property Settlement
50,000
Payment from husband
19,664
Total:
$1,201,640.00
Assets and liabilities to be retained by the husband
Property F
1,000,000
Paid Legals
35,269
Partial Property Settlement
50,000
Payment to wife
-19,664
Total
$1,065,605
Spouse Maintenance
In his Amended Response, the husband also made a claim for $578 per week by way of spouse maintenance for a period of 10 years.
In final submissions this claim was put in the alternative to receiving an adjustment for s.75(2) factors of 5-10%. I have found that an adjustment of 5% for such factors should be made in his favour.
In those circumstances I am satisfied the claim for spouse maintenance was not pressed, and it is unnecessary to decide it.
However, the question was the subject of argument. The husband made written submissions in support of this claim. In case the matter goes further, I will express my views.
The husband must meet the threshold in s 72(1) of the Act, namely, that he is unable to support himself adequately, by reason of any of the specified maters in subparagraphs s.72(1)(a), (b) or (c), having regard to any relevant matter referred to in s.75(2) of the Act.
The Full Court of the Family Court of Australia in Mitchell & Mitchell (1995) FLC 92-601 made it clear that the question whether an applicant can support himself “adequately” is not to be determined “by reference to any fixed or absolute standard” or by establishing needs at a “subsistence level” but rather by having regard to the legislative factors.[5] In M & M (2006) 36 FamLR 97 at [31]-[33], upon which the respondent relied, the Full Court of the Family Court of Australia followed Mitchell (supra), stating “adequately” imported “a standard of living reasonably in the circumstances”.
[5] At page 81,995 (per Nicholson CJ, Fogarty and Jordan JJ).
I have considered s.75(2) factors earlier in these reasons. I also set out earlier the judicial comments on the concept of “financial resource” in s.75(2)(b) by the High Court in Hall.
By s.75(2)(n) a relevant matter will be the terms of any order or proposed order made under s. 79 in relation to the parties’ property. I propose to make an order that the husband pay the wife $19,664. If the husband retains the Property F property he will have a capital asset, but he has no other income or assets from which to satisfy this payment. Pursuant to s.75(3) I take no account of the aged pension in considering spouse maintenance. The Property F property is valued at $1,000,000. There is no clear evidence that the husband would be unable to raise $19,664 whether from an arrangement with the wife about time to pay, a borrowing from some source such as a reverse mortgage or even sale of the Property F property, and purchase of a smaller dwelling. For these reasons I would not have been satisfied the husband meets the threshold.
The next question would be the extent to which the wife is “reasonably able to pay” spousal maintenance. The husband argued that the wife was reasonably able to meet the order sought. The orders proposed by him in the Amended Response would require the wife to pay each year for 10 years a total of $30,056 to the husband in after tax income. In final submissions the husband alluded to a lesser proposal, being $500 per week or $26,000 per annum for 4 years.
The wife currently works part time and receives $828 per week in total including investment income. I accept she will likely retire from the work force at the conclusion of these proceedings. On a 53/47% division she will receive $1,201,640 including superannuation. From this she will have to accommodate herself. She may receive an aged pension and whatever investment income is available after she has accommodated herself. The husband, in essence, proposes that the wife should provide him with an income stream while he lives in the Property F property. To do so, the wife would either have to keep working for several more years at least, or compromise on the size and value of any accommodation she wishes to buy, so as to leave a greater amount for investment income, or both. On the evidence in this case, that would be likely to constitute an unreasonable diminishment of her standard of living. . I would not have been satisfied that the wife is reasonably able to pay spouse maintenance as sought by the husband. I would make any order for spouse maintenance in the circumstances of this case.
Orders
The wife submitted that it may be appropriate for my reasons to be handed down and the parties to be given the opportunity to formulate a form of orders to reflect them. In the circumstances of this case I will adopt that course. It will give the parties an opportunity to reach agreement on the best method to facilitate the implementation of the orders. Accordingly, I will make no final orders at this stage and the parties will be directed to submit a minute of a proposed form of agreed orders to reflect these reasons within 14 days.
I certify that the preceding one hundred and sixty-five (165) paragraphs are a true copy of the reasons for judgment of Judge Harper
Date: 14 May 2018
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