MOWERY & MOWERY
[2019] FCCA 2034
•31 July 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOWERY & MOWERY | [2019] FCCA 2034 |
| Catchwords: FAMILY LAW – Property – valuations – contributions – addbacks – inadequate disclosure – future needs. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79, 117 |
| Cases cited: Stanford & Stanford [2012] HCA 52 Lee Steere & Lee Steere (1998) FLC 91-626 In the Marriage of AJO & GRO (2005) 33 Fam LR 134 In the Marriage of DJM and JLM (1998) 23 Fam LR 396 |
| Applicant: | MS MOWERY |
| Respondent: | MR MOWERY |
| File Number: | ADC 2611 of 2017 |
| Judgment of: | Judge Kelly |
| Hearing dates: | 5 and 6 December 2018 |
| Date of Last Submission: | 6 December 2018 |
| Delivered at: | Adelaide |
| Delivered on: | 31 July 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms M Ross |
| Solicitors for the Applicant: | D'Angelo Kavanagh |
| The Respondent: | In Person |
ORDERS
In full and final settlement of the parties’ applications for property settlement:
Within 60 days of the date of these Orders the wife do all things and sign all documents necessary to transfer her interest in the property at B Street, Suburb C, South Australia being the whole of the land described in Certificate of Title Register Book Volume … Folio … (“the former matrimonial home”) to the husband.
Contemporaneously with this transfer the husband shall:
(a)discharge the Commonwealth Bank home loan accounts numbers … and … secured by way of mortgage over the former matrimonial home and indemnify the wife in respect to any claim or liability thereto; and
(b)pay to the wife the sum of FOUR HUNDRED AND THIRTEEN THOUSAND SIX HUNDRED AND EIGHTY ONE DOLLARS ($413,681) (“the settlement sum”).
The husband do retain for his sole use and benefit the following assets:
(a)the Motor Vehicle D;
(b)all shareholdings in his sole name;
(c)all savings and investments in his sole name;
(d)all furniture and household effects in his possession;
(e)all superannuation entitlements and life insurances in his name;
(f)any other personal property in his possession.
The wife do retain for her sole use and benefit the following assets:
(a)the Motor Vehicle E;
(b)any shareholdings in her sole name;
(c)all savings and investments in her sole name;
(d)all furniture and household effects in her possession;
(e)all superannuation entitlements and life insurances in her name;
(f)any other personal property in her possession.
The husband shall retain sole responsibility for all debts and liabilities in his name, including investment loans, personal loans and credit cards and shall indemnify the wife in relation to these debts.
The wife shall retain sole responsibility for all debts and liabilities in her name, including investment loans, personal loans and credit cards and shall indemnify the husband in relation to these debts.
In the event the husband defaults on payment of all or part of the settlement sum due to the wife the following shall apply:
(a)the husband pay interest on the settlement sum outstanding at the rate prescribed in the Federal Circuit Court Rules 2001; and
(b)the former matrimonial home be placed on the market for sale and sold by public auction within 60 days and after payment of commissions, fees and mortgages, the net proceeds of sale be paid as follows:
(i)the settlement sum still outstanding to the wife together with the interest owing on that sum;
(ii)the wife’s costs in accordance with these Orders, if not already paid; and
(iii)the balance then remaining to the husband.
Each party sign all documents and do all things necessary to give effect to these Orders.
In the event a party fails to sign or execute any document within seven (7) days of being requested to do so by the other party, then a Registrar of the Federal Circuit Court is empowered to sign and execute such document on behalf of the defaulting party.
The husband pay the wife’s costs fixed in the sum of $14,969, to be paid to the wife’s solicitors within 60 days.
IT IS NOTED that publication of this judgment under the pseudonym Mowery & Mowery is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 2611 of 2017
| MS MOWERY |
Applicant
And
| MR MOWERY |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Mowery and Mr Mowery separated in February 2016 after a long marriage exceeding 20 years. They have been unable to resolve financial issues arising from the breakdown of their relationship. In those circumstances the Court is satisfied that it is just and equitable to make a property settlement order.
Background
The husband was born on … 1956 and is now 63 years old. The wife was born on … 1960 and is now 59 years old.
The parties married on … 1993. The wife brought savings of approximately $35,000 into the marriage, arising from the sale of a property she had owned jointly with her sister. The husband held significant equity in a property at F Street, Suburb G, (the F Street, Suburb G property) and the parties commenced living together at this property after their marriage.
At the commencement of their married life together the wife was working full time as a customer service officer at Employer K and continued in that role until the birth of the parties’ oldest child Ms L on … 1995. The husband completed his professional qualifications just prior to the marriage and worked full time in various professional capacities as a professional. In addition, he established a small private business and commenced share trading on the stock market as a further source of income.
Following Ms L’s birth the wife took on the role of primary parent and homemaker but resumed part time employment in various positions over the subsequent years, working as a customer service officer and then as a retail worker. The parties’ second child Ms R was born … 1998 and the youngest child Ms S was born … 1999.
In 1997 the husband purchased an investment property at H Street, Suburb J for the sum of $157,600. That property was rented out and eventually the parties sold this property in 2004, for approximately $345,000.
The parties purchased the former matrimonial home at B Street, Suburb C, on … 2007, for the sum of $575,000. They paid a deposit of $300,000 from their savings and took out a mortgage with the Commonwealth Bank for a further $300,000, which was split between two separate home loans in the sum of $150,000 each.
In 2008 the husband left salaried employment and has since continued to operate his businesses. That same year the parties sold the F Street, Suburb G property for the sum of $654,000. The husband says these sale proceeds were directed to various outlays, including as follows:
a)$140,000 was paid in discharge of a CBA home equity loan;
b)approximately $14,000 was directed to renovations and refurnishing the former matrimonial home;
c)approximately $15,000 was paid for installation of solar panels;
d)approximately $60,000 was paid to purchase a Motor Vehicle D;
e)$260,000 was paid into the current home mortgage by way of advanced special payments;
f)$120,000 was invested in a term deposit account.
The wife says she was not consulted about these transactions. She was obviously aware that funds were spent on installing solar panels, renovations and purchasing the Motor Vehicle D, but the husband did not discuss his investment decisions with her.
The husband says the wife was not interested in financial matters, despite his encouragement. Taking into account both parties’ evidence on this topic, I conclude that the husband may have informed the wife about financial decisions from time to time, but he did not consult with her, as he preferred to maintain control of the family finances.
The husband said that “… for the past 10 years I consistently operated the home loan accounts as the primary banking accounts whereby I would make special payments related to my income and investment returns, and in turn withdrawal of those special payments to attend to living expenses, payment of school fees and investment offsets as required.”[1] This confirms that the husband maintained control of the home loan accounts and the family finances generally.
[1] Husband’s trial Affidavit filed 19 July 2018
In … 2015 the husband withdrew the sum of $61,558 from his superannuation entitlements and deposited $60,000 into the CBA home loan account no …. He says this was necessary as the family were living beyond their means, which suggests the husband’s share trading and business was not as successful as he has claimed. In paragraph 16 of his trial Affidavit, the husband says as follows:
”On … 2015 prior to separation I redeemed part of my superannuation following discussions with the wife that our monetary funds were running low as family living expenses had risen significantly and that I had underestimated the financial demands from the then teenage children. All in all the family living expenses were greater than my income. These funds totalling $60,000 that were predominantly required for the youngest child’s private education fees and home mortgage payments, were banked into mortgage account ending … as a special payment to be withdrawn and dispersed in the future as required.”
In paragraph 18 the husband continues:
“… Following separation the Superannuation funds referenced from paragraph 16 were drawn and applied over time to attend to –
- $20,032 Daughter Private Education fees and Mobile expenses
- $23,868 Home Mortgage payments
- $4,409 Wife Personal credit card expenses post separation
- $4,000 General household expenses
- $5,495 Part paid Child Support claimed by the wife as the super redemption was assessable income”.
These expenses may well have been paid by the husband after separation, but it is difficult to attach these payments specifically to the superannuation funds, in my view.
On 1 February 2016, just prior to separation, the husband redeemed the term deposit account and paid the sum of $126,757 into the CBA variable home loan account ending no …, which reduced the balance owing on that home loan account to $12,103.
The parties experienced difficulties within their marital relationship which ultimately led to the wife separating on 7 February 2016. She returned briefly on 16 February 2016 before finally leaving the family home on 14 March 2016, taking with her some personal possessions, kitchen equipment and a Motor Vehicle E. The wife also retained $8,000 in savings and a Family Allowance payment in the sum of $15,000.
The child Ms S moved in with her mother shortly after separation and the two older children moved to live with her on a full time basis a few months later, in June 2016.
At the time of separation, the wife was working part time and continued to do so until … 2018, when she was made redundant. Her health has subsequently deteriorated and she has been unable to continue in the paid workforce.
The husband remained living in the former matrimonial home. He has continued to work on the same basis and appears to earn a modest income as a professional and through his share trading activities. He describes himself as “semi-retired”. The husband continued to draw on the two home loan accounts and those debts increased substantially in the months following separation. This expenditure is a major source of dispute between the parties and will be discussed further in these Reasons.
These proceedings
The wife filed her Initiating Application, Affidavit and Financial Statement on 28 June 2017 and the husband filed his responding documents on 31 July 2017. The matter was first listed on 2 August 2017 and the parties consented to a range of orders in relation to valuations and mutual informal disclosure. They were ordered to attend a Conciliation Conference on 27 November 2017.
The Conciliation Conference proceeded but the wife complained there were difficulties with the husband providing full disclosure and the Conference was adjourned to 2 March 2018. Unfortunately, the parties were unable to reach agreement and on 20 March 2018 the competing applications were listed for a two day trial in December 2018.
The wife continued to complain that the husband failed to provide full disclosure of his financial records and eventually filed subpoenas to the Commonwealth Bank, CommSec and ANZ Bank seeking banking records held in the husband’s name. Surprisingly, the husband objected to the subpoenas and his objection was listed on 10 July 2018. The husband failed to attend the hearing and orders were made for leave to inspect and copy the material. In addition the Court extended the time for the parties to file a Joint Statement of Assets and Liabilities, obtain updated valuations and file their trial Affidavits.
The husband has since advised the Court that he was not notified of the hearing date due to a misunderstanding regarding the requirements of the Commonwealth Courts Portal and I accept his explanation.
The wife filed a further Application in a Case on 15 November 2018 seeking leave to obtain a second independent valuation of the former matrimonial home. The husband filed his Response on 22 November 2018. The interim hearing proceeded on 23 November 2018 and the Court granted the wife leave as sought. The Court further ordered that the two valuers, Mr A of Adelaide Property Valuers and Mr O of P Real Estate, participate in a conference of experts, subject to their availability. Unfortunately, the expert conference did not proceed prior to trial.
The trial
The trial commenced before me on 5 December 2018. The wife relied upon the following documents:
a)Initiating Application filed 28 June 2017;
b)Wife’s trial Affidavit filed 24 October 2018;
c)Wife’s additional Affidavits filed 15 November 2018 and 28 November 2018; and
d)Wife’s Financial Statement filed 3 December 2018.
The wife relied upon the valuation report prepared by Mr O and upon a range of financial documents and records that were tendered during the course of the hearing.
The husband represented himself. He relied upon the following documents:
a)Husband’s trial Affidavit filed 19 October 2018;
b)Husband’s additional Affidavits filed 22 November 2018, 29 November 2018 and 3 December 2018; and
c)Husband’s Financial Statement filed 4 December 2018.
The husband also relied upon a range of financial documents and records that were tendered during the hearing.
In determining this matter I have considered all of the evidence presented before me.
Both parties gave evidence and were cross examined, as was the wife’s expert witness, Mr O. Mr O gave his evidence in a thorough and professional manner and I accept his opinion.
I am satisfied that the wife gave her evidence honestly and to the best of her recollection. She conceded that she was unaware of the precise details of many financial arrangements and transactions during the marriage and much of her evidence regarding the financial history, both pre- and post separation, has emerged from an analysis of the parties’ bank records.
The husband obviously held a more detailed understanding of the parties’ financial arrangements and this was reflected in his evidence. Unfortunately the husband tended to over-emphasise his contributions and minimise the wife’s contributions during the marriage and this affected my assessment of his evidence. His failure to produce all relevant bank records and financial statements also affected my assessment of his evidence, particularly regarding those bank accounts that the wife only located by issuing subpoenas.
Both parties seek a significant adjustment in relation to their final entitlement. The wife proposes that she retain 70% of the net asset pool, and the husband proposes that he retain 77.5% of the net asset pool. Both parties’ proposals were unrealistic and fall well short of a just and equitable settlement, as discussed below.
Relevant legal principles
The relevant legal principles governing any application for property settlement are set out in Part VIII of the Family Law Act. Section 79(1) authorises the Court to make such orders between the parties as it considers appropriate. Section 79(2) makes it clear that the Court cannot make an order for property settlement unless it is just and equitable to do so. The High Court noted in Stanford & Stanford[2] that this condition is generally met where the parties have separated, because “the common use of property” by the parties is no longer viable.
[2] Stanford & Stanford [2012] HCA 52 at para.42
In considering the terms of any such order, s.79(4) requires the Court to take into account the parties’ contribution to the maintenance and acquisition of the asset pool during the marriage, including direct and indirect financial contributions, direct or indirect non-financial contributions and any contribution to the overall welfare of the family, including in the capacity of homemaker or parent.
Section 79(4)(d) directs the Court to consider the impact of any proposed order upon the earning capacity of either party. Section 79(4)(e) refers the Court to the matters set out in s.75(2), factors that generally relate to each party’s future needs.
The High Court in Stanford & Stanford went on to identify three “fundamental propositions” to guide trial Judges determining property settlement proceedings. These propositions were summarised by the Full Court in Bevan & Bevan[3] as follows:
“1. Determination of a just and equitable outcome in an application for property settlement begins with the identification of the existing legal and equitable interests (as determined by common law and equity);
2. 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;
3. The 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.”[4]
[3] Bevan & Bevan [2013] FamCAFC 116
[4] ibid, at para.73
In determining any application for property settlement, the Court is not embarking upon an arithmetical exercise but rather an examination of all the relevant factors set out in s.79(4). As noted by the Full Court in D & D (2003) FamCA 473:
“… the task of the court in proceedings under s.79 is not akin to an accounting exercise. The task is to examine the facts of each case carefully to decide what is appropriate and just and equitable in the circumstances. There cannot be expected to be a universal answer to that question on any given set of facts. It is of the essence of judicial discretion that different minds may comfortably arrive at different conclusions.”
Earlier Full Court authorities have identified a four step process that can assist the Court in reaching a just and equitable decision.[6] Assuming the Court is satisfied that it is just and equitable to make an order for property settlement, the Court must identify the parties’ legal and equitable interests in the assets arising from their relationship, together with their liabilities. The Court should then assess each party’s contributions during the relationship in accordance with s.79(4)(a)-(c).
[6] Lee Steere & Lee Steere (1998) FLC 91-626;
The third step requires the Court to consider the range of factors set out in s.79(4)(d)-(g), including the future needs factors identified in s.75(2). The Court should then consider its findings and, if the Court is satisfied that it is just and equitable to do so, make orders adjusting the parties’ property interests.
The Full Court in Bevan reminded trial Judges that the “four step process” is not legislatively mandated. Rather, it provides a structured process towards the ultimate requirement, which is to ensure that a property settlement order is only made when the Court is satisfied that it is just and equitable to do so and that the terms of the order itself are also just and equitable.[7]
[7] Bevan & Bevan, supra, para.86
Assets and Liabilities
Regarding the relevant matrimonial assets and liabilities, the parties were able to agree certain items but a number of issues remain in dispute, particularly the value of the former matrimonial home. Both parties also seek to account for post separation expenditure that they argue should be added back into the matrimonial asset pool.
Value of former matrimonial home
The value of the former matrimonial home at B Street, Suburb C, has been a matter of controversy for some time. The parties jointly obtained a valuation from Mr A of Adelaide Property Valuers, which was completed on 10 September 2018.[8] Mr A valued the property at $740,000 and the husband relies upon Mr A’s report.
[8] Exhibit H6 Valuation Report from Mr A dated 10 September 2018
The wife was dissatisfied with this valuation as Mr A ignored her request that she or her agent be present during the inspection process. In light of her concerns the wife sought and obtained leave from the Court to obtain a second valuation. The wife then instructed Mr O who completed his report on 29 November 2018 and valued the former matrimonial home at $780,000.[9]
[9] Wife’s Affidavit filed 5 December 2018, Annexure ‘2”. Valuation Report dated 29 November 2018
As noted above, Mr O attended and gave evidence. Mr A did not attend for cross examination and the weight to be placed upon his report is therefore limited.
Mr O confirmed his opinion regarding the valuation of the former matrimonial home. When asked to comment on Mr A’s report, he noted that Mr A underestimated the living space in the property by approximately 30m² and considered that he did not assess the property against an appropriate range of comparable sales. Mr O took the view that these errors led Mr A to undervalue the property.
The husband challenged Mr O’s report, claiming that he had attended at the property for only 20 minutes and that his comparable sales were overvalued. In reply, Mr O was able to justify his consideration of comparable properties. He conceded it was possible that he was present on the premises for approximately 20 minutes, but noted that he was accompanied by an assistant who undertook the measurement process while Mr O inspected the property. He was confident that he conducted a sufficiently thorough inspection of the property to inform his report.
The husband then presented Mr O with a Building Inspection Report in relation to the property. Mr O pointed out that as a valuer he does not undertake that level of structural analysis but assesses the property from the viewpoint of a potential purchaser. At the husband’s request, Mr O scanned the Building Inspection Report briefly. He noted that if the property did require the whole foundation to be underpinned, as stated in the report, that may affect the valuation. However, he considered many of the other repairs mentioned in the report were minor in nature and he did not alter his valuation of $780,000.
The husband did not file the Building Inspection Report nor did he make the report available to the wife. He did not call the report writer as a witness. The mere fact that Mr O was cross examined on this report does not give the report any evidentiary status before me.
To conclude, Mr O was able to explain why the comparable properties that he considered were more relevant to valuing the former matrimonial home. He was able to identify his concerns regarding Mr A’s report. In circumstances where Mr O was the only expert witness who was tested under cross examination, I accept and rely upon Mr O’s evidence and valuation. I find the former matrimonial home is valued at $780,000.
Wine collection
The wife argues that the husband retained a wine collection valued at least $2,500. The husband denies that there was “a collection”, as opposed to wine that was purchased for consumption by the family. There is no evidence before the Court in this regard. The wife has summarised the husband’s expenditure at liquor outlets but that does not translate to an asset with a defined value. I decline to include this item in the asset pool.
The parties’ savings
Both parties have included the other party’s savings at trial in the asset pool. The husband’s Financial Statement discloses savings in the sum of $10,600 at trial. I conclude both of these sums should be included in the asset pool.
The wife’s furnishings and effects
The wife estimated the value of her furnishings and effects in the sum of $1,000. The husband says these items should be valued at $3,000. Neither party placed any evidence before the Court in this regard and I am unable to determine this issue. Accordingly I decline to include the wife’s furnishings and effects in the asset pool. I note the potential value is very modest in any event and does not affect my assessment of a just and equitable outcome between the parties.
The husband’s share holdings
The husband listed the value of his share holdings at $208,565 in his Financial Statement filed 4 December 2018. In the absence of any evidence to challenge this figure, I accept that valuation.
Addbacks
Each party seeks to add back into the asset pool various funds accessed and disposed of by the other party since separation. In a line of authorities including AJO & GRO (2005) FLC93-218, the Full Court has identified three areas where a judge may exercise a discretion to notionally “add back” assets which no longer exist as follows:
·where matrimonial assets have been used to pay a party’s legal fees;[10]
·where there has been a premature distribution of matrimonial assets to a party;[11]
·where a party has acted intentionally or recklessly in such a way as to reduce the available asset pool.[12]
[10] In the Marriage of DJM and JLM (1998) 23 Fam LR 396; NHC & RCH [[2004] FamCA 633
[11] In the Marriage of Townsend (1994) 18 Fam LR 505
[12] Kowaliw & Kowaliw (1981) FLC 91-092 at 76,644
The Full Court has also made it clear that addbacks should be the exception rather than the rule. As discussed recently by the Full Court in Trevi & Trevi [2018] FamCAFC 173:
“Two fundamental premises emerge from AJO & GRO and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in circumstances that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, more technically correct.”[13]
[13] Trevi & Trevi [2018] FamCAFC 173 at para 30
Both parties face the same difficulty in that they are asking the Court to undertake a detailed forensic analysis of the post separation transactions into, and out of the parties’ accounts. With respect, that is not the role of the Court.
The wife’s claimed add backs
The wife argues that the husband has accessed extensive funds from the redraw facility of the parties’ home loans and that his conduct justifies the Court exercising its discretion to add these funds back into the asset pool as a premature distribution of matrimonial assets. In particular, the wife argues that the following amounts should be added back:
a) Redraws from the home loan accounts post separation $21,965
b) Redraws from the home loan accounts to pay the husband’s credit cards post separation $79,897
c) Cash funds withdrawn by the husband shortly after separation $60,000
d) Post separation payment of the husband’s legal fees $11,922
TOTAL
$173,784
Re-draws from the home loan accounts
The husband argues that none of these sums should be added back into the asset pool. He says they were all legitimate withdrawals made by him as he managed his finances in much the same way as he did prior to separation, ie by depositing any excess funds into the home loan accounts as “special repayments” and drawing down on those funds and transferring them to his own accounts as needed, for expenses (including family related expenses such as school fees) or to generate income through his share trading.
The wife argues that these re-draws were used by the husband to meet his expenditure from his personal accounts and she has gone to a great deal of effort to present her analysis of the husband’s expenditure and withdrawals from his credit cards and his Complete Access account, as set out in her trial Affidavit.[14] However, it is one thing to identify expenditure and another thing entirely to claim that such expenditure was in some way inappropriate or should be added back into the asset pool. Parties are not required to enter a “state of suspended economic animation” after separation.[15]
[14] Wife’s Trial Affidavit filed 24 October 2018, annexures M11 & M12
[15] Marker & Marker [1998] FamCAFC 42, para 2.11
It may be that a portion, even a significant portion, of the husband’s expenditure was unjustifiable and unfairly reduced the available asset pool, but the Court must be able to identify a precise sum if any such premature distribution is to be added back. On the evidence as presented at trial, I am unable to identify a precise figure from the husband’s redraws that could or should be added back into the asset pool. I conclude it is more appropriate to deal with this issue pursuant to s.75(2)(o).
Cash funds withdrawn by the husband
Different considerations apply in relation to the $60,000 cash withdrawal. The husband has failed to give any clear explanation as to why he withdrew such a significant sum in cash. Indeed, he failed to mention that he had withdrawn this sum, either in his first Affidavit or in his trial Affidavit.
In the course of cross examination the husband said that he used the cash funds held by him to pay various outstanding expenses, including school fees. His actions in this regard are perplexing, given that he clearly conducts most of his banking and financial arrangements electronically. Even if the Court accepts that the husband made these payments, there is no evidence to demonstrate that these expenses were paid from the $60,000 which he held in cash. With due respect, it is highly unlikely that the husband was making cash payments to Ms S’s school, or cash repayments to the home loan account or the credit cards.
I conclude that the husband withdrew the sum of $60,000 in cash in an effort to hide these funds, or to hide his use of these funds. Accordingly the sum of $60,000 held in cash by the husband should be treated as a premature distribution of matrimonial assets to him and should be added back into the asset pool.
I will discuss the claimed legal fees elsewhere in these Reasons.
The husband’s claimed add backs
The husband also argues that the wife retained funds that should be added back into the asset pool as follows:
a) Lump sum Family Tax Benefit A and B retained by her at separation $15,000
b) Wife’s savings at separation $8,000 c) Wife’s redraw from the mortgage on 6 July 2017 $20,000
TOTAL
$43,000
As discussed above, the wife has utilised the funds she held at separation to meet expenditure for herself and the children and she was no more expected to enter a state of “suspended economic animation” than was the husband. I decline to add back those sums to the asset pool and will address this issue further pursuant to s.75(2)(o).
The parties’ legal fees
The wife concedes that she withdrew the sum of $20,000 and these funds were directed towards her legal fees and expenses. Accordingly she agrees these funds should appropriately be added back into the asset pool, as they fall within one of the recognised categories of expenditure that is generally added back.
The husband does not dispute that he spent the sum of $11,922 on his own legal fees, but argues that these payments were made from his own post separation earnings, not from any pre-separation assets and should not be added back. The difficulty with this argument is that the husband has continued to operate his finances through the same accounting structure as was in place prior to separation. Given that his legal fees were paid from accounts that included regular transfers from the joint redraw facility, I am not satisfied that this distinction is now open to the husband. Accordingly I will include the husband’s legal fees as an additional addback, in the sum of $11,922.
The remaining assets and liabilities have been agreed, as identified in each party’s written submissions. Accordingly, I find the matrimonial asset pool as follows:
Tangible Asset Pool
Ownership
Value
Former matrimonial home, B Street, Suburb C Joint $780,000 Furnishings and effects in former matrimonial home Joint $9,000 Shareholdings Husband $208,565 Motor Vehicle D Husband $25,000 Motor Vehicle E Wife $4,000 Savings Husband $10,600 Savings (ANZ Pensioner Advantage account) Wife $18,960 Total tangible assets
$1,056,125
Add backs
Wife’s legal fees Wife $20,000 Husband’s cash withdrawal Husband $60,000 Husband’s legal fees Husband $11,922 Total asset pool
$1,148,047
Liabilities
Home loan account … Joint ($76,522) Home loan account … Joint ($134,910) Investment loan Husband ($107,723) Personal loan from wife’s sister Wife ($20,000) Total liabilities
($339,155)
Net Asset Pool
$808,892
Superannuation
Super Fund N 6/12/2018[16] Husband $138,476 Super Fund M[17] Wife $15,163 Super Fund N[18] Wife $112,683 Total Superannuation Pool
$266,322
Total Asset Pool
$1,075,214
[16] Exhibit H7
[17] Exhibit W2
[18] Exhibit W2
The parties’ superannuation entitlements are substantial. I have considered whether to adopt a two pool approach, but I note that their superannuation entitlements are of similar value and both parties are relatively close to being able to access their superannuation. Indeed, the husband has already done so. This is not a situation where their superannuation is a distant financial resource. In the circumstances I will proceed on the basis of a combined asset pool.
Contributions
Both parties brought significant assets into the marriage. The wife brought into the marriage savings of approximately $35,000. These funds were directed to the family finances and represent a direct financial contribution by the wife.
The husband held his equity in the F Street, Suburb G property which he estimates exceeded $170,000.[19] The husband says this estimate is based on appraisals of the property he had obtained just prior to the marriage. None of that evidence has been placed before me, but I accept the mortgage outstanding was modest and the property would have increased in value between the time it was purchased and the date of marriage. I cannot allocate a precise figure to the husband’s equity in the F Street, Suburb G property, however I accept that it represents a substantial direct financial contribution by him.
[19] Husband’s trial Affidavit filed 19 October 2018 at para.6
In 2008 the F Street, Suburb G property was sold, with net proceeds remaining of $654,000. From the net proceeds of sale, $260,000 was directed to the current home loans as advance special payments and the sum of $120,000 was invested in a term deposit account. The wife also agrees that sale proceeds were spent on other items, including renovations and improvements to the former matrimonial home.
In the context of a lengthy marriage, the Court must consider the weight to be attached to the parties’ initial financial contributions within the context of all of their contributions overall.[20] In Dickons & Dickons [2012] FamCAFC 154 the Full Court said:
There can be little doubt that the classification of contributions by reference to terms such as “initial contributions”, “contributions during the relationship”, and “post-separation contributions”, can be helpful as a convenient means of giving coherent expression to the evidence in a s 79 case and to giving coherence to the nature, form and extent of the parties’ respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79 itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “...giving over-zealous attention to the ascertainment of the parties’ contributions...” (Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 524) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the Court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided (emphasis added).[21]
[20] Pierce & Pierce [1998] FamCA 74
[21] Dickons & Dickons [2012] FamCAFC 154, paras 24-26
In the recent decision of Jabour & Jabour [2019] FamCAFC 78 the Full Court discussed the relevant authorities in relation to contributions generally and initial financial contributions in particular. In the course of this discussion the Full Court said:
“Again, consistent with the authorities set out above and those which we discuss below, the import of Pierce is that the weight to be attached to an initial contribution must be assessed against the rubric of all the contributions, both financial and non financial, made by the parties over the course of their relationship.”[22]
[22] Jabour & Jabour [2019] FamCAFC 78, para 55
The parties were married for 23 years and they both made significant and ongoing contributions to their family life and financial circumstances throughout the marriage. The wife continued in full time employment until the birth of the oldest child and then took on the role of primary parent and homemaker for the remainder of their married life. She returned to regular part time paid employment in 2006, when the youngest child Ms S commenced at primary school.
The husband took on the role of primary income earner and worked in the private sector as a professional until 2009. The husband also engaged in share trading, as discussed above. Inevitably, the husband’s paid employment and his share trading activities affected his availability to participate in parenting responsibilities, but I accept that he regularly cared for the children whilst the wife was working.
I conclude that both parties devoted all of their efforts during the marriage to the benefit of the family and while their contributions may have been different in nature, they each made an equal contribution during their married life together.
The wife continued in the role of primary caregiver to the child Ms S after separation. The husband was assessed to pay child support for Ms S, but that obligation ceased when she turned eighteen on … 2017. Ms S now attends University and continues to live with the wife.
The husband has continued to meet the outgoings on the former matrimonial home but he has also enjoyed the benefit of residing in this property. Further, a proportion of those expenses have in fact been paid by funds drawn down from the home loans. Insofar as the husband relied on the jointly owned redraw facility through the home loan accounts to meet mortgage repayments and other expenditure, the wife has been indirectly contributing to these payments.
Taking into account all of the above discussion, the parties’ contributions during the marriage and subsequently should be assessed as equal. The only point of differentiation arises in relation to their initial direct financial contributions brought into the marriage. The husband’s direct financial contribution was significantly greater than the wife’s contribution of $35,000, albeit the Court cannot make a definitive finding as to the actual quantum of his initial contribution.
Taking into account the length of the parties’ marriage, the uncertainty regarding the quantum of the husband’s initial direct financial contribution, and the extent of their contributions during the marriage, I conclude that the parties’ contributions, both direct and indirect, financial and non-financial, should be represented with a differential of 10%. I assess the husband’s overall contribution at 55% and the wife’s overall contribution at 45%. In reaching this conclusion I remind the parties that the Court’s consideration of contributions is not an arithmetical exercise, as the parties’ contributions are different in nature and must be assessed holistically.[23]
[23] Dickons & Dickons (supra), para 21
Section 75(2) factors and future needs
(a) the age and state of health of each of the parties
The wife is 59 years old. She has been diagnosed with lymphedema and more recently, anxiety and depression and has provided limited medical evidence in support of these diagnoses.[24]
[24] Wife’s trial Affidavit filed 24 October 2018, Annexure M1, GP report and Centrelink Medical Certificates
The husband is 63 years old. In his Closing Submissions he informs the Court that he suffers from hearing loss and sight loss but he has not provided any medical evidence to support this claim.
(b) the income, property and financial resources of each party and their physical and mental capacity for appropriate gainful employment
Both parties will retain the identified assets allocated to them pursuant to this judgment, including their superannuation entitlements.
I am satisfied that the wife is presently unable to undertake paid employment. According to her general practitioner, Dr Q, her health issues surrounding the diagnosis of lymphoedema have restricted the wife to part time employment in the past.[25] The medical evidence indicates that she was unfit for any employment at the time of trial. In the Centrelink Medical Certificate dated 28 September 2018, Dr Q noted that her lymphoedema symptoms are likely to persist but there is potential for improvement in her depression and anxiety symptoms, particularly once the stress of these proceedings has abated.
[25] Ibid
The husband does not consider the wife’s medical conditions are as significant as she claims and he emphasised that the medical evidence indicates that the wife’s anxiety and depression may improve with time. That is indeed Dr Q’s opinion, but at the present time, I am satisfied the wife is unable to return to the paid workforce in any capacity. Hopefully she will be able to resume part time employment in the future.
The husband is now 63 years old. It is clear that he enjoys share trading and he is likely to continue earning an income in this field for some years yet. The husband tells the Court that he works on a “semi-retired” basis operating a modest business and relies on his Income Tax Returns for the financial years ending 30 June 2014 – 30 June 2017, as proof of his income earning capacity.[26] It appears the husband earns a modest income but as a self-employed professional working from home, his available income is not limited solely to his taxable income. The husband is entitled to claim a range of legitimate and proper deductions that have the effect of reducing his taxable income.
[26] Exhibit W7, as cited by husband on p.15 of his Closing Written Submissions presented 1 February 2019
The wife alleges that the husband has failed to disclose all of the income he receives from his private clients. I am unable to make this precise finding but there remain a number of unanswered questions regarding the husband’s financial circumstances and resources. The bank statements show a number of cash deposits into his Complete Access account that were unexplained. [27] In addition, the husband failed to disclose various bank accounts with the Commonwealth Bank, ANZ Bank and other financial institutions, as outlined in the wife’s additional Affidavit filed 28 November 2018.
[27] Exhibit W6, Statements for the husband’s Commonwealth Bank Complete Access account no 06 5129 10043201
The transactions on the husband’s ANZ Cash Investment Account … were concerning, as they disclose a pattern of credits and withdrawals relating to undisclosed share trading through ANZ.[28] The husband was cross-examined in relation to these undisclosed accounts but his evidence did little to clarify the situation. He was unable to explain why he had not disclosed these accounts, nor was he able to identify the source funds for various transactions in these accounts.
[28] Wife’s Affidavit filed 28 November 2018, para. 9; Annexure “ANZ2”
Given the husband’s professional background, it is difficult to accept that he simply overlooked these records. I conclude that the husband has not disclosed all of his available financial resources and this raises considerable uncertainty about the husband’s overall financial circumstances. The authorities are clear that a party should not be permitted to benefit from their deliberate non disclosure[29] and this is a significant factor in my determinations.
(c) whether either party has the care of a child under 18 years
[29] Weir & Weir (1993) FLC 92-338; Harris & Dewell & Harris [2018] FamCAFC 94
The parties’ youngest child Ms S turned 18 in … 2017 and this factor is no longer relevant.
(d) commitments of each of the parties that are necessary for their own support, or to support a child or another person they have a duty to maintain; and
(e) the responsibilities of either party to support any other person
Neither party has a duty to support any other person in the strict legal sense. No doubt the wife provides financial assistance to the children, by indirectly subsidising their accommodation and outgoings, but that is a responsibility she assumes out of love and affection for the three girls.
(f) the eligibility of either party for a pension, allowance or benefit
The wife receives Centrelink benefits in the sum of $350 per week. In his Closing Submissions the husband points out that the wife may receive other Centrelink benefits by way of concession entitlements, but these benefits are very modest indeed.
(g) the parties’ standard of living
The parties enjoyed a comfortable standard of living prior to separation and it would appear that the husband’s standard of living has continued in a similar vein.
By contrast, the wife’s standard of living has decreased, as her rental commitments are significant. She has been able to maintain her savings, which may reflect assistance provided to her by family, such as the loan from her sister. It also demonstrates that she is living within her means.
(j) the extent to which the wife has contributed to the husband’s earning capacity; and
(k) the duration of the marriage
The parties were married for over 20 years. During that time the husband was able to continue his professional career as a professional with the wife’s support, and to pursue a career path of his choice as a share trader in the latter years. By contrast, the wife has been limited to part time employment in the retail sector throughout the marriage and has not been in a position to acquire further qualifications.
The husband’s income from share trading arises from assets acquired by the parties during the marriage, but the value of the shares has already been taken into account in the asset pool and the Court must be careful not to “double count” the share portfolio at this stage of consideration.
(o) any other matters that are relevant to the justice of the case
Both parties accessed marital funds after separation, but there is a substantial difference in the circumstances in which they did so. The wife retained two identified sums at separation – her savings and the Family Tax refund – to a total value of $23,000 (excluding the sum of $20,000 withdrawn by the wife in 2017, which has been added back into the asset pool).
By contrast, the husband has withdrawn or transferred over $170,000 from the parties’ special repayments redraw facility in the home loan accounts.[30] He drew on these home loan accounts whenever he chose, moving funds between accounts, including his personal bank account, his Commsec account and, as the wife discovered, depositing funds into other bank accounts that he had not disclosed.
[30] See para. 54, above
The Court has added back the husband’s cash withdrawal of $60,000 as a premature distribution of the matrimonial assets to him, together with his legal fees of $11,922, but withdrawals of approximately $100,000 remain to be considered. The Court accepts that a significant portion of these monies would have been properly expended by the husband, but there is considerable uncertainty in relation to the husband’s use of the totality of these funds. This is a factor relevant to determining a just and equitable outcome between the parties.
Taking into account all of the above, particularly the wife’s much more limited earning capacity, the uncertainty surrounding the husband’s income and financial resources and the s.75(2)(o) discussion, I conclude that an adjustment of 7.5% in the wife’s favour is appropriate.
Conclusion
On the basis of these findings, the applicant wife will retain 52.5% of the net identified asset pool and the husband will retain 47.5%. The asset pool has been identified with a net value of $1,075,214 and accordingly this will result in the wife retaining assets to the value of $564,487 and the husband retaining assets to the value of $510,727. The parties’ superannuation interests are relatively close in value and I conclude that a just and equitable outcome can be achieved without a superannuation splitting order.
The wife holds, or has received the benefit of property and addbacks to the value of $150,806 and therefore requires an additional settlement sum of $413,681 as follows:
Motor vehicle $4,000 Savings $18,960 Super Fund M $15,163 Super Fund N $112,683 Legal fees added back $20,000
$170,806 Less debt owing to sister ($20,000) Net assets held by wife
$150,806
Additional cash adjustment to the wife
$413,681
52.5% of the net asset pool
$564,487
The husband will retain the assets he presently holds, but will have to realise assets or extend his borrowings to pay out the wife’s entitlement. On the basis of the proposed orders, the husband’s financial position will be as follows:
Former matrimonial home $780,000 Furnishings and effects former matrimonial home $9,000 Shareholdings $208,565 Motor vehicle $25,000 Savings $10,600 Addbacks $71,922 Super Fund N $138,476 $1,243,563
Less - home loan account **502 ($76,522) - - home loan account **406 ($134,910) - - investment loan ($107,723)
Less adjustment to wife
($413,681)
47.5% of the net asset pool
$510,727
The Court must now consider the justice and equity of the proposed outcome. On the basis of these reasons, the wife is retaining a greater proportion of the identified net asset pool. The wife will retain her existing assets and the cash settlement sum, but her capacity to re-enter the real estate market will be limited. The husband will retain the former matrimonial home, although it must be acknowledged that this will depend upon his capacity to borrow the necessary funds to pay out the wife’s settlement.
As discussed above, this outcome has arisen following the Court’s consideration of the s.75(2) factors, particularly the uncertainty surrounding the husband’s disposal of assets after separation and the uncertainty regarding his actual financial position at trial. I am satisfied the proposed orders reflect a just and equitable settlement between the parties.
Costs
The wife seeks an order for costs, including an order for indemnity costs. Section 117 states that parties should each bear their own costs, unless the Court considers that a costs order is justified, taking into account the matters set out in s.117(2A). These factors include:
a)the parties’ financial circumstances;
b)whether either party was in receipt of legal aid;
c)the parties’ conduct as a litigant during the proceedings;
d)whether the proceedings were necessitated by either party’s failure to comply with previous orders;
e)whether either party was wholly unsuccessful in the proceedings;
f)whether either party had made an offer in writing to settle the proceedings; and
g)any other relevant matters.
In addressing these factors, I incorporate my previous discussion of the parties’ financial circumstances and will not repeat those matters here. Neither party is in receipt of legal aid.
The wife argues that the husband’s conduct falls within the category anticipated in s.117(2A)(c). She says that he failed to provide full and frank disclosure of relevant financial records, which required the wife to incur addition legal fees, including the issuing of subpoenas to the Commonwealth Bank and ANZ Bank. She further argues that the husband has deliberately obstructed the litigation process and that his behaviour justifies costs being awarded on an indemnity basis.
The husband argues that the wife also failed to meet her disclosure obligations, but I reject that submission. The wife acknowledged that she retained savings at the date of separation, albeit she allocated an incorrect figure in her first-filed Affidavit. She disclosed the balance of her bank accounts in her first-filed Financial Statement and in her subsequent Financial Statement filed at trial.
The husband is correct to point out that the wife did not include her bank balance of $18,690 in her Balance Sheet at trial, but her failure to do so has not disrupted the litigation, nor has it disadvantaged the husband in any way. The Court has included this figure in the relevant asset pool.
The husband properly disclosed many of his financial records, but as discussed above, he failed to disclose a host of other relevant financial documents, requiring the wife to chase him on this point and eventually issue the subpoenas referred to. His actions left the wife in an invidious position, where any potential for negotiation was inevitably compromised. In the absence of full disclosure it was impossible for the wife and her legal advisors to engage in any settlement discussions.
Neither party can argue that they have been wholly successful in these proceedings, or that the other party has been wholly unsuccessful, given the findings in this judgment. Neither party has referred me to any offer of settlement that would affect my decision. I note the husband’s Case Outline included a Letter of Offer, which I disregarded for the purposes of determining the property proceedings. The wife has achieved a better outcome than the settlement proposed by the husband, so the husband’s Offer does not affect my decision on the question of costs.
I am satisfied that the husband’s conduct added to the wife’s costs in these proceedings. The situation would have been very different if the husband had conducted these proceedings more openly. It is entirely possible that the trial could have been avoided if both parties were negotiating on a level playing field. I conclude that the husband’s conduct meets the threshold in ss.117(2A)(c) and that a costs order in the wife’s favour is appropriate.
The wife seeks that the husband pay indemnity costs in the sum of $42,332 as follows:
CBA subpoena and hearing
D’Angelo Cavanagh Fees $2,448 Conduct money $528 Sub total
$2,976
ANZ subpoena
D’Angelo Cavanagh Fees
$1,448
Application in a Case filed 15 November 2018 and hearing
D’Angelo Cavanagh Fees $1,995 Counsel fees $500 Valuation by Mr O $1,595 Sub total
$4,090
Trial preparation and Counsel fees
D’Angelo Cavanagh Fees $18,423 Counsel fees (2 day hearing plus written submissions) $15,400
Sub total
$33,823
Total costs sought
$42,337
In the alternative the wife seeks costs in accordance with the Federal Circuit Rules 2001 Schedule 1, in the sum of $17,293 as follows:
CBA subpoena and hearing
Item 3(a) $1,867.00 Item 3(b) – short mention + advocacy loading (item 12) $457.50 Sub total
$2,324.50
Application in a Case filed 15 November 2018 and hearing
Item 3(a) $1,867.00 Item 3(b) – short mention + advocacy loading (item 12) $457.50 Sub total
$2,324.50
Trial preparation and Counsel fees
Item 7 $5,921.00 Item 13 – 2 day hearing + advocacy loading $6,723.00 Sub total
$12,644.00
Total costs sought
$17,293.00
I decline to order costs on an indemnity basis. The authorities are clear that the Court has a discretion when making an order for costs against a party, but indemnity costs should only be ordered in exceptional circumstances.[31] The husband’s conduct was unacceptable, but it was not at the level that would justify costs being awarded on an indemnity basis. Accordingly, the costs claimed by the wife will be assessed in accordance with Schedule 1.
[31] Kohan and Kohan (1993) FLC 92-340; Limousin & Limousin(Costs) [2007] FamCA 1178; Bant & Clayton (Costs) [2016] FamCAFC 35
Turning to the quantum of the costs order, I am not satisfied the husband should meet the wife’s costs relating to her Application in a Case filed 15 November 2018. The wife decided to seek an order for Mr O to conduct a second valuation of the former matrimonial home. The Court granted her Application, but it must be remembered that Mr A was initially instructed by both parties and the husband was entitled to rely upon Mr A’s valuation. The Court ultimately accepted Mr O’s valuation, but that occurred in circumstances where Mr A was not cross-examined.
I conclude that the husband should pay the wife’s costs otherwise claimed by her in accordance with the Schedule, fixed in the sum of $14,969.
I now make orders as published at the commencement of these Reasons.
I certify that the preceding one hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of Judge Kelly
Date: 31 July 2019
[5] D & D (2003) FamCA 473 at 49
In the Marriage of AJO & GRO (2005) 33 Fam LR 134NOTE : These figures do not match the parties’ Case Outlines but are drawn from the most recent Superannuation Statements tendered by each party
Key Legal Topics
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Family Law
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Costs
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