Morris and Rawlings - [2010] FMCAfam 1252

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MORRIS & RAWLINGS

[2010] FMCAfam 1252

FAMILY LAW – Short marriage – significantly greater contribution by wife – greater future needs of wife – substantial renovation works by husband – increase in price of home not possible to disaggregate – consideration of just and equitable outcome.

Family Law Act 1975, s.72(2)

Applicant:

MS MORRIS

Respondent:

MR RAWLINGS

File Number:

MLC 3322 of 2010

Judgment of:

Burchardt FM

Hearing dates:

29 September & 4 October 2010

Date of Last Submission:

4 October 2010

Delivered at:

Melbourne

Delivered on:

26 November 2010

REPRESENTATION

Counsel for the Applicant:

Ms C. Ben-Simon

Solicitors for the Applicant:

Plaza Legal

Counsel for the Respondent:

Mr A. Robinson

Solicitors for the Respondent:

Anthony Raso & Associates

THE COURT ORDERS THAT:

Within 90 days the wife pay to the husband the sum of $150,000.00 (“the payment”).
Contemporaneously with the payment the husband withdraw the caveat registered to the property at Property E at his expense.
Within 14 days the husband collect the following chattels at a mutually suitable and agreed date and time from the property at Property S:
(a)The television;
(b)the DVD player;
(c)the couch;
(d)the double bed;
(e)the bedside table;
(f)the dressing table;
(g)the double bed and mattress;
(h)two armchairs;
(i)the outdoor furniture;
(j)the coffee table;
(k)the barbecue;
(l)the television cabinet;
(m)the washing machine;
(n)the dryer; and
(o)the stereo system.
Otherwise the parties retain all property both real and personal including choses in action in their possession.
There be no Order as to costs.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLC 3322 of 2010

MS MORRIS

Applicant

And

MR RAWLINGS

Respondent

REASONS FOR JUDGMENT

This is a property dispute in which in a very real sense there is not enough money to go around. It has been characterised by a tenacious series of arguments with mutual and very clear distrust between the parties.
For the reasons that follow, I am going to order that each party retain various chattels, and that the pool be split as to $150,000 to the husband and the remainder to the wife, with each party retaining their superannuation.

Agreed Facts

The respondent husband, Mr Rawlings, was born [in] 1966 and has been all of his working life a [omitted]. The wife was born [in] 1966 and is a [occupation omitted].
The wife has two children. [X], born [in] 1994 and [Y], born [in] 1998. Clearly she will be responsible for them for some years to come.
The husband has a daughter by a previous relationship, [Z], who is now aged 14 and in respect of whom he pays $221 per week as child support (see financial statement filed 30 April 2010).
The parties married [in] 2006. There was some measure of controversy as to when they first got together, but I am satisfied that they started cohabitation in about December 2005.
The parties separated on 27 January 2010, although the husband continued to live under the same roof for some time thereafter.
At the commencement of the relationship the wife owned the matrimonial home, which forms the substantive issue of dispute as it is the parties’ most significant asset. The home, in Property E, has an agreed value at the commencement of the relationship of $325,000 and, at that time, there was a mortgage of $40,000 in respect of it.
Although there is some difference as to the date, it is clear that the parties left their home in July 2006 to enable renovation of the Property E property. Preliminary works probably started before that time.
The husband sold his former home after the commencement of the relationship and achieved a net sale figure of $170,000, of which $23,000 was applied to the credit card debts that he had at the commencement of the relationship.
The parties continued to stay in rental accommodation until the renovations were completed in November 2007.
The husband is employed by [omitted]. There was dispute about the quantum of his wages to which I shall return, but it is clear that he earns $64,800 as a guaranteed annual wage, together with bonuses.

The Size of the Pool

The primary asset in the relationship is the family home in [E] with an agreed value of $600,000. It is subject to two mortgages, one presently of $38,765 and the second loan of $10,187 outstanding.
The husband has a Holden Rodeo car worth $4,000 and the wife has a Mazda, now agreed in value as $5,000.
The wife’s superannuation is now worth $54,143 in total, and that of the husband, according to his financial statement, is worth $27,000.
At separation, in January 2010, the wife had $42,000 in savings.
Leaving aside sundry chattels, the only other matters that might form part of the pool are the contents of a storage unit at [omitted] rented by the husband where he keeps a number of possessions, including his collection of model vehicles. Having heard the husband’s evidence, I accept that these possessions have no value even though some, such as the model vehicles, clearly cost a lot of money.
Additionally, the husband, very late in the proceeding, raised the question of some of his furniture apparently stored at the holiday home of the wife’s parents, which he has requested be returned.
I will return later to the cars, the chattels and the husband’s furniture.

Contributions

This was the area of major conflict between the parties. I have already referred to the mutual distrust between the husband and wife. This is well illustrated by the following two matters:
(a)The husband asserted in one of his earlier affidavits that the wife’s valuation of the house was wildly undervalued and that it was worth $750,000. That assertion falls to be considered against the agreed value of $600,000 now accepted.
(b)The wife refused to accept that the husband’s superannuation could be as low as $27,000. By a process of calculation, she had worked out that he must have far more than that. As I find, it is clear that the husband did not work for his present employer between about 1996 and 2003. During that period he was self-employed and his superannuation contributions were presumably, (given the ultimate total asserted), nil. Furthermore, the wife’s calculations failed to appreciate that the Superannuation Guarantee Fund Act, which was introduced in 1992, has not always had the level of the required contribution at 9 per cent. Her mistrust of him in this regard was misplaced.
I have set out these two examples because they illustrate, in a summary way, the general air of distrust and bitterness between the parties, which was patent in every aspect of the way the case was presented.
Both sides sought to approach the matters in dispute between them as a kind of audit. Both parties, perhaps more particularly the wife, had obviously spent very substantial periods of time going through the very extensive bank and credit card records and other records available with a view to seeking to prove or disprove each other’s points.
As I made clear during the running of the trial, this is not, in my view, an appropriate way to approach this particular case. There are instances, of course, where a detailed accounting audit is necessary but, as I hope will become clear, this is not one of them.
The wife, as I say, had a house worth $325,000 with a mortgage of $40,000 at the time the relationship started.
Shortly after the commencement of the relationship the husband sold his former home and cleared $170,000, as I have said, of which $23,000 was applied to his credit card debts.
At the commencement of the relationship, as best one is able to say, the husband’s superannuation was about $15,000 and the wife’s about $35,000. The wife had cash savings of about $15,000 at that time.
The husband’s wage was at all times during the relationship greater than that of the wife. He earned something in excess of $64,000 throughout, although from November 2007 until January 2010 the husband diverted $400 gross per week ($300 after tax) of his income to the wife.
The husband’s earlier assertions made on affidavit that his salary was only $44,000 a year do him no credit. He rapidly had to concede under cross-examination that in truth the $20,800 diverted to his wife was indeed his own income and has been reinstated, so to speak, since January 2010.
Additionally, it emerged that the husband’s so-called bonuses were in fact a profit share. The husband worked for himself between 1996 and 2003. When he rejoined his employer he brought his clients with him and in exchange he was paid 20 per cent of the net profit of his employer. Although he does not check the figures, it appears that his relationship with his employer is sufficiently imbued with trust that he is satisfied he does indeed receive what he ought.
This satisfaction is not unreasonable. The figures of bonuses he apparently received are relevantly as follows: 2006 – $10,250; 2006 to 2007 – $21,305; 2007 to 2008 – $25,460; 2008 to 2009 – $17,000; 2009 to 2010 – $21,300.
These figures are, of course, net figures, and when notionally grossed up for tax it is clear that the wife’s assertion that the husband earns about $100,000 a year is entirely correct. The husband said he does not know whether his bonuses will continue and that the business is not now travelling so well, but the historical evidence does not appear to support that assertion.
The wife’s earnings throughout (leaving aside the $20,000 given to her by the husband) were clearly always very substantially less than the husband’s.
The real issue that obsessed the parties was how much they contributed to the day-to-day living expenses of the family, and more particularly, how much money the husband had in fact put to the renovation of the property.
The husband said that effectively it was all of the $150,000 he received from the sale of his house together with a further $50,000 which they were required to borrow in June 2007 to complete the renovations.
The wife, having scoured through all the available records in great detail, put the total figure at approximately $80,000.
It is readily apparent that in the scheme of things the differences between the parties are not nearly as great as they think and it is a pity that the parties were not able to resolve this matter by negotiation.
The wife’s case was that the husband had dissipated substantial amounts of money on his hobby of model vehicles. The husband conceded that he spent about an average of $12,000 per year on this hobby.
Both parties asserted that they had paid more of the day-to-day living expenses of the parties. This debate strikes me as being arid and unprofitable. It is clear on the evidence as a whole that both of them contributed a vast bulk of their earnings to the general family expenses.
What is also clear is that the husband, who has practical skills relevant to renovation, worked at the renovation for a very long time for very long hours. The husband’s assertion that he was working till 2 in the morning, every morning, made in an earlier affidavit, is in my view a ridiculous piece of hyperbole. The wife, however, conceded in her own evidence before the Court that he worked most days to at least 11 o’clock at night on the renovations.
It is not necessary for me to make a formal finding as to how many hours the husband worked on the renovation, nor in the circumstances is it possible to do so. Nonetheless, it is quite clear that the husband put in many hours of very hard work on the renovation. And this is not a contribution that should be assessed at zero. That, however, is somewhat the effect of the methodology that the mother seeks to adopt. The husband was not paid anything for the work that he did and plainly something, and a considerable something at that, has to be taken into account in this regard.
A further difficulty is that tradesmen had to be engaged to complete the renovation and as is so notoriously the case, they insisted on being paid in cash. I do not think it is possible to disaggregate the parties’ banking records to work out exactly how much was paid to tradesmen, but in the ordinary way of things, it is clear that there would have been substantial payments.
Having studied the exhibited material and bearing in mind the inherent probabilities of the circumstances of the renovation, I think it is clear that the vast bulk of the $150,000 net figure that the husband received was committed to the renovation together with the vast bulk of the additional $50,000 borrowed.
One piece of evidence I found particularly telling was the husband’s expressed disappointment upon seeing that the wife had amassed substantial savings about which he had not known at the time he was under great stress as to the finances of the renovation. That evidence had the ring of truth about it.
The parties never intermingled their finances and each accused the other of being evasive and secretive. It would have been preferable had they known more about each other’s finances because they might not have had the distrust that they clearly so much now do.
Given the husband’s tendency to exaggeration already referred to, I think it is more probable than otherwise that he spent more than $12,000 a year on his hobby. It is not possible to say how much but I do not think it would have run into tens of thousands of dollars.
The reason I have not gone into further detail is because I have formed a very clear view about the issue of contribution to the renovations. Even if the wife were wholly accurate as to her assertions as to how much money was spent on the renovations, i.e. $80,000, and even if she is correct that the husband spent the remainder on himself (a total of approximately $70,000 or if one adds the $50,000, $120,000) the husband’s enormous amount of labour would, in my view, make up a substantial proportion of the difference.
The picture I get is a vivid one. This man worked for many months, almost all the free time he had, on this property. That was a major contribution but unfortunately it is not clear that it generated any particular quantifiable increase in the value of the property.
Nonetheless, I do not think that the husband dissipated $70,000 or up to $120,000. There is no suggestion that he had some form of addiction, whether as to drink, drugs, or gambling or the like, that would be likely to have taken up expenditure of that order. Indeed, he had precious little time to indulge in such activities, at least during the period that the renovation was underway.
It is far more probable, bearing in mind the ordinary probabilities of every day affairs, that the vast majority of the funds that he brought to the relationship, and the $50,000 that was borrowed, were indeed committed either to the renovations or to household expenses.
I note that the wife’s father contributes to school fees and the health insurance of the wife. He also apparently paid $5,000 for an operation the wife had to have in recent times.
The wife purported to repay $15,000 owing to the father in January 2010 out of the $42,000 that she had managed to save.
The wife’s explanation was that the $42,000 was supposed to be committed to building a shed on the former matrimonial property. She gave evidence that when it was apparent that the shed would not be built she felt it proper to repay her father. I do not accept that assertion. There is no objective evidence to support the characterisation of the wife’s father’s advances as loans, and the father was not called to give evidence. The repayment of the $15,000 in January 2010 was in my view opportunistic and an endeavour to alienate funds. Her father does not need that money and I have been informed by the wife that he stands ready to assist her in buying the husband’s interest in the matrimonial home.
It should be noted that the wife is a good saver. She amassed $42,000 between 2006 and 2010 which is a large sum on any view, especially bearing in mind that, as she puts it, she paid all the household utilities and bills and living expenses.
The wife’s counsel submitted that the value of the house in [E] would have gone up, in any event, between 2006 and 2010, and he further submitted that the possession of that house formed a springboard for such value as it now has. Both those submissions are probably correct but it is not possible to say to what extent they impact upon the outcome.
That is because there is no admissible evidence as to the quantum of price increases in [E] over the relevant time and, more particularly, in the particular part of it where the matrimonial home is.
It should be noted that each side adopted a methodology towards contribution and outcome that was very much self-serving. The wife’s case was that she should have the value of the property as at the time of the commencement of the relationship and that the remaining equity be split evenly between the parties. That would give her $285,000 plus half of the net increase of up to $550,000, from which she sought the reduction of $50,000 to the husband for sums of money dissipated by him. The husband would on this proposal receive about $85,000. The wife’s formal position is that he should receive $90,000.
The husband’s position, articulated by counsel, was simply that he wanted out what he had put in. He wanted $170,000. His position was later, however, asserted to be a 50/50 split.
Of course, if one takes the $170,000 from the $550,000 net value of the house, the wife would get approximately $100,000 of the increase in price.
Contrary to the positions contended for by the parties, these are not areas of arithmetical precision. It is a matter of balancing a whole series of contributions, many of which are not made in cash, including the work performed by the husband on the renovations and, of course, the very important role played by the wife as the mother and primary keeper of the household. After all, she had to look after the children and the household while the husband was working. In crude terms, the wife’s initial financial contribution was approximately twice that of the husband, i.e. $285,000 in the house plus $15,000 in savings (a total of $300,000) whereas the husband contributed about $150,000.
In all the circumstances (including the “springboard” effect relied on by counsel for the wife), I think that there should be a 15 per cent loading in favour of the wife under the heading of Contribution. Her initial cash input was substantially greater than that of the husband, notwithstanding his greater earnings and the efforts that he put into the renovation (the results of which, I repeat, are not capable of precise quantification).

Section 75(2) Factors – Future Needs

The husband is in good health and appears to have secure and long-term employment. He will have to continue paying child support for [Z] for about another four years.
The wife is in generally good health, although she has a condition that will require an operation at some point in the future. Otherwise her health is apparently good. As a [occupation omitted], she appears to be able to obtain as much work as she wants. I note that she said she would obtain more work were it necessary to do so to pay the husband out in this case. She will have the care of her two children for some years to come and in particular that of [Y] for another six years until she turns 18.
The wife has, however, the unspecified but very real assistance of her own father should she require it.

The husband’s earnings will always be substantially greater than those of the wife and appear to amount to something in the order of double, although it should be noted that the wife has the considerable benefit of being able to salary-sacrifice $592 per fortnight free of tax to meet her payments on the mortgage. The value of the mortgages is steadily decreasing and I note that the mother has a surplus of income over expenditure as things stand, which will continue at least as long as she receives family tax child care benefits.
In all the circumstances, in my opinion, it is appropriate that there be a further adjustment of some 10 per cent in favour of the wife in this regard.

Just and Equitable

This was a relatively short marriage. The pity of it is that the roughly $200,000 or so committed to the renovation achieved relatively little in the way of positive increase in value. The house only went from $325,000 to $600,000 over the four or five years. In retrospect, they may better have been served by not having renovated at all.
Notwithstanding the extensive cross-examination of both of the parties as to the substantial amounts of money moving to and from their bank accounts, I accept the explanations given by the parties as to what these payments were. In my view, nobody dissipated funds in any significant fashion, although the husband’s expenditure on models was greater than he admits.
The husband’s suggestion that the ultimate outcome should be a 50/50 split is, in my view, utterly unrealistic. The contribution and s.75(2) factors make such an outcome repugnant.
The value of the parties’ cars is now so close together as to be immaterial; they should simply retain the ones they possess. Each party should retain chattels in their possession, save that the husband’s chattels at the wife’s parents’ home should be returned to him. I will grant liberty to apply in this regard. The husband’s possessions in the storage unit have, as I find, no value.
This, therefore, leaves a pool of:
a)Net value of matrimonial home        $550,000
b)Funds retained by wife  $42,000
c)Superannuation  $81,000
(Figures rounded off) TOTAL  $673,000.
A total of 25 per cent would give the husband $168,250 of which $27,000 is superannuation (neither party sought a splitting order).
This would not in my opinion be just and equitable. The husband put in $150,000 and substantial labour, in addition to his contribution as a homemaker (the latter albeit limited). The property has gone up $265,000 in net value and $275,000 in gross value.
Leaving aside the wife’s argument that the husband dissipated $50,000, which I have rejected, the wife’s proposal is that the husband receive $140,000. The husband says he wants a 50/50 split, or alternatively as I understand it, his $170,000 back. On one view there is but little between the parties’ positions.
I think the just and equitable outcome is that the husband be paid $150,000 and retain his $27,000 superannuation. This is the net sum he contributed and in addition he retains his superannuation. I will direct the parties to bring in Minutes to give effect to these Reasons for Judgment. There will no doubt be practical issues arising about which they will need to confer.

I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Date: 26 November 2010