Mulchidore and Mulchidore
[2013] FamCA 964
•10 December 2013
FAMILY COURT OF AUSTRALIA
| MULCHIDORE & MULCHIDORE | [2013] FamCA 964 |
| FAMILY LAW – PROPERTY SETTLEMENT – Long marriage – Issues in respect of financial disclosure by both parties – Lack of evidence in respect of debts wife accrued post-separation – Whether an adjustment should be made in respect of wife’s post-separation financial contributions in respect of maintaining mortgages and outgoings on the parties’ properties – Where there is no evidence in respect of Capital Gains Tax implications if properties sold |
| Family Law Act 1975 (Cth) |
| Bevan & Bevan [2013] FamCAFC 116 Harris & Harris (1991) FLC 92-254 Kessey & Kessey (1994) FLC 92-495 |
| Stanford v Stanford (2012) 247 CLR 108 |
| APPLICANT: | Mr Mulchidore |
| RESPONDENT: | Ms Mulchidore |
| FILE NUMBER: | PAC | 3163 | of | 2011 |
| DATE DELIVERED: | 10 December 2013 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 8, 9 and 10 October 2013 and 15 November 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Gillies |
| SOLICITOR FOR THE APPLICANT: | Brydens Law Office |
| COUNSEL FOR THE RESPONDENT: | Mr Dura |
| SOLICITOR FOR THE RESPONDENT: | CM Lawyers |
Orders
That the Interim Orders dated 21 June 2012 in respect of the properties situate at B Street, Suburb C and D Street, Suburb E be discharged.
That within two (2) months of the date if these Orders the husband do all necessary things and sign all necessary documents to transfer to the wife all his right, title and interest in the real estate property situated at F Street, Suburb E, and concurrently with such transfer, the wife do all necessary things and sign all necessary documents so as to procure a discharge of the mortgages presently secured over the said property so as to release the husband from all or any liability in relation to such mortgages.
That within two (2) months of the date of these Orders the husband do all things necessary and sign all necessary documents to transfer to the wife all his right, title and interest in the vacant land situate at 1 G Street, Suburb H, Queensland and concurrently with such transfer, the wife do all things and sign all documents so as to procure a discharge of any mortgage presently secured over the said property so as to release the husband from all or any liability in relation to any such mortgage.
That within two (2) months of the date these Orders wife do all necessary things and sign all necessary documents to transfer to the husband all her right, title and interest in the real estate property situated at D Street, Suburb E.
That within two (2) months of the date of these Orders the wife do all things necessary and sign all necessary documents to transfer to the husband all her right, title and interest in the vacant land situate at 2 and 3 G Street, Suburb H, Queensland and concurrently with such transfer, the wife do all necessary things and sign all necessary documents so as to procure a discharge of any mortgage presently secured over the said properties so as to release the husband from all or any liability in relation to any such mortgage.
That within two (2) months of the date of these Orders the wife do all things necessary and sign all necessary documents to transfer to the husband all her right, title and interest in the timeshare resort interest in the I Resort, J Town.
That concurrently with the transfer of D Street, Suburb E to the husband pursuant to Order 4 above, the wife provide to the husband vacant possession of the said property.
That concurrently with the transfer of F Street, Suburb E to the wife pursuant to Order 2 above, the husband provide to the wife vacant possession of the said property.
That within seven (7) days of the date of these Orders the husband and wife do all necessary things and sign all necessary documents so as to authorise and direct that the money presently held in trust for the parties be paid out to the husband or as he may otherwise direct in writing.
That within one (1) month of the date of these Orders the wife transfer to the husband any right, title and interest she has in the company K Pty Ltd, and resign as a director and/or secretary of the company as applicable.
That otherwise the Court declares that the parties have the sole right, title and interest in any other property, including real property, which is at the date of these Orders in their respective possession, entitlement, control or name and they shall be solely liable for and indemnify the other party against any liability arising in respect to such property.
That the parties have liberty to apply as to implementation or enforcement of these Orders.
That all outstanding applications and cross-applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Mulchidore & Mulchidore has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 3163 of 2011
| Mr Mulchidore |
Applicant
And
| Ms Mulchidore |
Respondent
REASONS FOR JUDGMENT
The Proceedings
After 31 years of cohabitation and three children, the Applicant husband and Respondent wife are unable to agree as to the division of the matrimonial property.
At the commencement of the hearing:-
a)The husband sought orders that in effect would facilitate a sale of the assets of the parties and a division of the proceeds equally; and
b)The wife sought orders that provided for the property at L Street, Suburb C and the parties’ timeshare interest to be transferred to the husband and that otherwise the remaining real estate assets of the parties be transferred to her and monies remaining held on trust for the parties be paid out to her.
F Street Suburb E, pre-cohabitation
In October 1975 the parties jointly purchased the property at F Street, Suburb E for $33,000. The purchase price comprised a deposit of $6,800 from the wife’s savings and the balance by way of mortgage borrowing. Otherwise the additional costs of purchase of stamp duty, bank fees and legal fees were met also from the wife’s savings, apart from a modest contribution of about $1,000 from the husband.
This property became the parties’ family home. Mortgage payments were, subsequent to purchase, deducted from the parties’ joint CBA account to which they deposited their primary income. Later the parties’ home loan was refinanced with the Advance Bank. The property over the years was used as collateral security for other property borrowings and in 2001 additional funds of $200,000 were borrowed from ING to purchase land in Queensland. This took the ING mortgage debt secured over the property to $274,000.
Cohabitation
In 1975 the parties married. The parties commenced cohabitation after their marriage in the F Street, Suburb E property.
At cohabitation the wife was employed full-time with a Religious Education Office. In about 1991 the wife’s employment with the Religious Education Office changed to casual part-time without any accruing leave entitlements, and she continued that work until 2004. The wife obtained other part-time work at a W Hospital from 1991 and this continued thereafter throughout cohabitation (and up until mid 2008). The wife deposited her W Hospital income into her own account. In 2007 the wife obtained a further part-time warehouse position as she was not being offered as much casual work as her previous employment.
The husband was employed as a warehouse assistant and, after a period of study, retraining and part-time work, as a computer programmer/analyst until late 1986.
By 1993 the parties had acquired investment properties at D Street Suburb E, M Street, Suburb N, two vacant blocks of land and a timeshare.
There are three children of the marriage:- Mr O, born in 1976, now aged 37; Ms P, born in 1984, now aged 29; and Mr Q, born on 30 November 1986 and now aged nearly 27.
Following the birth of the first child of the marriage the wife took time off from her employment with the Religious Education Office.
In 1980 the parties extended the mortgage on the F Street, Suburb E property by about $25,000 to undertake significant renovations to the property. Primarily the works were undertaken by contract tradesman but the husband undertook some work in relation to the renovation.
Subsequent to the birth of the later children the wife also took time off from her employment.
In late 1986 the husband obtained employment as a full-time contractor through his company K Pty Ltd with R Pty Ltd until February 1990 and thereafter contracted through his company with S Pty Ltd until about December 2010. The wife refers to this company as “the family business”.
The husband and wife during the period of the relationship applied their incomes to the marriage, the household, their children’s education and outgoings in relation to the various properties except as referred to below.
Over the period of cohabitation the parties acquired various real estate properties and the family home was used at various times as collateral security in relation to borrowings taken out to finance the various purchases.
Timeshare in J Town
In November 1987 the parties purchased a timeshare resort interest in the I Resort, J Town for the sum of $9,400. The purchase price was paid from the parties’ available funds.
Since December 2006 the wife has paid levies of about $600 a year for the time share from her own funds.
9 B Street, Suburb C
In 1989 the parties purchased in their joint names vacant land at 2 B Street, Suburb C. The purchase price was paid from the wife’s then withdrawn unpreserved superannuation benefit. There is no evidence as to over what period this benefit accrued.
Subsequent to late 2006 the wife met the modest property outgoings from her funds without contribution from the husband.
In August 2013 the property was sold for the sum of $144,000. The net proceeds of sale of the property of $110,000 are held in trust on behalf of the parties.
L Street, Suburb T
In 1989 the parties also purchased vacant land at L Street, Suburb T for $17,500. The purchase price was paid from funds available to the husband at that time.
Subsequent to late 2006 the wife met the modest property outgoings from her funds without contribution from the husband.
In August 2013 the property was sold for the sum of $5,500. The wife received the net proceeds of $5,263.
D Street, Suburb E
In July 1991 the parties jointly purchased the property at D Street, Suburb E for $250,000. A deposit of $50,000 was paid and the balance of the purchase price of $200,000 was secured by way of mortgage advance. By the 30 June 2003 the property was unencumbered.
Subsequent to the purchase of this property, $40,000 was borrowed to undertake renovations to the property.
The property comprises retail shop premises and a 2 bedroom residence and was purchased to enable the parties to operate a retail perfumery business from the premises. After 4 years the business closed.
The residential flat was rented until 2000 when the parties’ eldest son moved in. He was joined by the wife and the parties’ youngest son in 2009. In June 2010 the parties’ daughter also commenced to occupy the premises. In April 2011 the parties’ eldest son moved out.
The shop premises have remained vacant for some years.
By 30 June 2006 outgoings were being paid from the rent with a surplus of about $3,000 per annum but thereafter an annual levies of about $6,000 per annum remained unpaid and in June 2008 a special levy of $20,000 was raised by the strata body. These levies remained unpaid until $80,000 was paid out of the parties’ capital from the sale of Suburb N in 2009 following recovery proceedings commenced by the strata body. Otherwise the wife retained the rent and paid most outgoings each year.
After separation the wife undertook certain improvements and repairs to the premises at a cost of about $55,000.
49 M Street, Suburb N
In 1991 the parties jointly purchased the property at M Street, Suburb N for about $117,000. The purchase price is substantially funded by way of a mortgage borrowing of $93,600. The balance was from funds available to the parties at that time.
The property was rented out subsequent to purchase, with rent applied to the mortgage and outgoings.
This property was subsequently sold in November 2009 to the parties’ son Mr O for the sum of $380,000.
After discharge of the mortgage of $6,728, payment of land tax owing of $19,911 and legal expense of $2,236 the net the proceeds of sale were paid as to $174,561 being one half to the wife, and the balance of proceeds of sale of $134,573 after payment of various other outstanding Council rates and levies, were retained in a controlled monies account on trust for the parties.
The wife applied portion of her $174,561 as follows:
Payment of arrears of strata levies of D Street, Suburb E $ 80,000
Payment of strata levies of D Street, Suburb E $ 6,141
Mortgage payments of F Street, Suburb E & QLD landholding $ 15,719
$101,860
Otherwise the wife expended remaining funds on payments to her credit cards of $61,748 and some unexplained legal fees.
On 21 June 2012 the Court ordered that from the balance of the proceeds of sale of the Suburb N property of $134,573 payments be made towards the discharge of all or any arrears of Council rates, water rates, land tax and or strata levies associated with the parties’ properties and that the sum of $20,000 be released to the wife of the sole purpose of meeting interest on her then outstanding credit cards.
U Street, Suburb V
In 1998 the parties purchased in the name of the wife the property at U Street Street Suburb V for about $325,000. The purchase price comprised a deposit of $97,500 with the balance being secured by way of mortgage. The property has been rented out subsequent to purchase.
In November 2006 the wife refinanced the mortgage secured over this property with the NAB from the sum of $220,000 to the sum of $520,000 on an interest-only basis for five years. The additional borrowings by the wife of $300,000 were retained by her but the application of those funds is not considered below.
Prior to the refinance there had been a rental income loss on the property of about $5,000 each year. The loss increased in the 2006 year to about $13,500 but thereafter to about $5,000 per annum. Then in the 2010 year the property, after a significant rent increase, returned a rental surplus of about $22,000, only to return to a surplus of about $6,000 the following year.
1, 3 and 2 G Street, Suburb H, Queensland
In about 2001 the parties purchased jointly three vacant blocks of land being 1, 3 and 2 G Street, Rivers Head, Queensland for the sum of about $210,000. The purchase price comprised a deposit of $15,000 from the wife’s credit card and an ING mortgage borrowing for the balance secured by way of additional borrowing over the home at F Street, Suburb E as referred to above.
Subsequent to December 2006 the wife has met the property outgoings and mortgage payments from her own funds.
B Street, Suburb C
In October 2005 the wife purchased vacant land at B Street, Suburb C for the sum of about $37,500. She funded the purchase from monies available to her at that time.
Subsequent to December 2006 the wife met expenses in relation to this property from her income and other sources considered below.
Separation and thereafter
The wife asserts that the parties separated in about December 2001 and remained living under the one roof, whilst the husband asserts that separation occurred in December 2006 under one roof, with the wife finally moving out of the F Street property to reside at D Street, Suburb E in January 2009.
Nothing turns on the actual date of separation in the context of this property application, however, a significant change in the financial relationship took place in late 2006 when the husband ceased any contribution to property mortgages and outgoings. The Court will adopt late 2006 as the time of separation.
The husband claims that the wife was a hoarder and as a consequence upon her vacating the family home the property was left in a deplorable state as evidenced by photographs. Notwithstanding the husband’s attempts to clean up the property the wife thwarted same.
Subsequent to the wife vacating the family home the husband has remained in occupation thereof and paid some utilities in relation to the property.
The husband complains that from 2004 onwards the wife failed to provide the parties’ accountant with rental income statements in relation to the various properties that were tenanted, nor details of outgoings paid in relation to those properties to the effect that the husband was precluded from lodging in his tax returns thereafter the rental schedules for his interest in the various rented properties.
Parties’ superannuation
In May 2006 the husband’s accrued superannuation of $41,157 was transferred into an Advance Retirement Savings Account. In 2011, upon the husband reaching retirement age, he transferred the then balance of his retirement savings account of $48,119 to his account with the Arab Bank. He has subsequently expended those monies on day to day living expenses and a holiday.
In May 2008, following the wife ceasing employment with Health NSW, her First State Superannuation entitlement was $184,730. The wife acknowledged that she had made various withdrawals from her superannuation accounts from March 2008 as follows:
March 2008 Advance Retirement Fund $ 10,000
January 2009 First State Super $ 68,672
June 2009 First State Super $ 13,242
May 2011 First State Super $ 59,500
October 2011 First State Super $ 49,630
February 2012 Education Super $ 14,353
March 2012 AXA Super $ 10,600
April 2012 CBA Life Rollover $ 4,500
April 2012 NGS Super $ 7,173
$237,670
Interim Orders for sale of property
On 21 June 2012 the Court ordered by consent that the properties at D Street, Suburb E, L Street, Suburb T, and 1 and 2 B Street, Suburb C be sold. The Orders provided for reserve prices in relation to each of the properties. The net proceeds of the properties were to be to be applied to discharge the outstanding mortgages secured over the properties at F Street, Suburb E and U Street, Suburb V with the balance to be held on trust for the parties.
The Court further ordered that from funds held in trust for the parties, from the balance of the proceeds of sale of the Suburb N property, payments be made towards the discharge of all or any arrears of Council rates, water rates, land tax and/or strata levies associated with any or all of the parties’ properties and that the sum of $20,000 be released to the wife of the sole purpose of meeting interest on her then outstanding credit cards.
The properties at B Street, Suburb C and at D Street, Suburb E have not as yet been sold.
The husband’s income post-separation
The husband continued to earn income by contracting his services through his company until May 2013.
His sworn evidence reveals that his personal tax returns more recently have failed to disclose his true level of income and that his financial statements in these proceedings misrepresents his income circumstances.
In particular he failed to disclose in his 2010 tax return assessable capital gains tax income as a consequence of the sale of the Suburb N property and he failed to disclose his true level of income through his company.
The husband’s evidence in relation to his post-separation income was non-responsive and evasive. In relation to matters that were clearly within his knowledge and/or recollection he offered no satisfactory response.
In the year ended 30 June 2009 he disclosed an income of $11,925 but conceded that in the same year he had drawn $70,000 from his company as contract payments. His company in the same period had earned gross income of $122,000.
In the year ended 30 June 2010 deposits to his personal bank account totalled $144,991, whereas he asserted to the Australian Taxation Office that his income was $10,700.
In the 2011 financial year to 8 March 2011 payments from his company to his personal account totalled $74,960.
Otherwise in his personal tax returns for the financial years ended 30 June 2004 to 2011 the husband failed to include rental schedule returns in relation to the investment properties owned jointly with the wife. This was notwithstanding that the wife had included in her own returns the relevant rental schedules. The husband’s proffered explanation was that the wife had failed to make available to him the relevant documents.
The inference arising from the husband’s recent non-disclosure to the Australian Taxation Office is that such conduct continued earlier in cohabitation with the benefit to the parties accruing over the years in terms of income received on which no tax had been paid. The result was that the parties had available cash sums which could be applied to the acquisition of properties over the period of cohabitation.
The wife’s income
In May 2008 the wife’s minimal part-time work ceased with the Religious Education Office. The wife also received in May 2008 a termination payment of about $13,000 in respect of her work at the W Hospital. The wife applied her termination entitlement to outgoings in relation to the properties of the parties.
The wife’s income from the Department of Health for the 2008 financial year up to retirement in May was $59,384 gross. In 2006 she earned $48,184 and in 2007 $40,152 gross.
Belatedly, during the course of the proceedings, the wife produced for the first time copies of her personal income tax returns for the financial years ended 30 June 2002 to 30 June 2011.
In her personal tax returns for the financial years ended 30 June 2002 to 30 June 2011 the wife failed to disclose her supplementary income earned through her part-time employment at the W Hospital. The only income she disclosed to the Australian Taxation Office was her income from casual teaching with the Religious Education Office and rental schedules in relation to the various investment properties owned jointly by the parties or her alone.
The wife acknowledged that she failed to disclose her income so as to minimise her income tax liabilities, knowing that such a course was wrong and knowing that the tax returns filed by her were false.
Other funds received by the wife
Subsequent to sale of the Suburb N property the wife in November 2009 received a distribution of about $174,000 expended as referred to above. Otherwise the remaining balance of proceeds of sale was applied by the solicitors holding the funds in trust to pay other expenses as ordered by the Court.
The wife continued to receive rental payments in relation to the jointly owned Suburb N property until its sale and she applied those rental payments to the property expenses.
The wife asserts having borrowed from her relatives and the parties’ children the sum of about $330,000 since 2009 and incurred credit cards debts of about $110,000 to meet property outgoings since that time. In oral evidence the wife conceded that her credit cards debts are unrelated to the property of the parties.
In November 2006 the wife refinanced the mortgage secured over this property from the sum of $220,000 to the sum of $520,000. The additional borrowings by the wife of $300,000 were applied to mortgage payments and outgoings on properties from that date.
In August 2013 the property at L Street, Suburb T was sold for the sum of $5,500. The wife received the net proceeds of $5,263.
At about that same time the property at 2 B Street, Suburb C was sold for the sum of $144,000. The net proceeds of sale of the Suburb C property, after a payment of $10,000 to the wife, of $110,000 are held in trust on behalf of the parties.
Loans from the children and other borrowings by the wife
Since 2010 the parties’ son Mr Q made capital advances to the wife in total of $19,719. The application of those funds by the wife is not known.
The child Mr O has advanced to the wife funds of about $52,000 since 2007. The application of these funds by the wife is not clear.
The child Ms P has advanced in total funds to the wife of about $144,000. Part of this sum comprise:
c)$84,524 paid to the wife’s credit cards in respect to which the expenditure by the wife is unexplained;
d)Cash of $15,880 given to the wife with no supporting evidence as to the application of those funds by the wife;
e)Bank transfers of $8,136 to the wife’s account with no evidence as to the application of those funds by the wife.
Over the period from 2007 to 2010 the wife has received other funds from her sister, her brother and mother totalling $42,600. The application of those funds by the wife is not known.
The wife’s commitments after December 2006
The wife accepts that property mortgages totalled about $7,000 per month ($85,200 per annum) over the period since late 2006 when the husband ceased making a contribution. She has thus paid about $596,000 to service the parties’ loans up to the time of the hearing.
Otherwise the wife has paid property outgoings, without contribution from the husband, over the same period.
Rental schedules attached to the wife’s taxation returns give the Court an estimate of outgoings (exclusive of interest paid) net of rent for each property on an annual basis since December 2006:
D Street, Suburb E:
2006 (50 pert cent) $ 2,904
2007 $7,966 Loss
2008$14,000 Loss
2009$12,148 Loss
2010$ 8,133 Loss
2011$ 6,879 Loss
2012$ 7,500 Est Loss
2013$ 7,500 Est Loss
Cash flow for period: $61,222 Loss
The wife has not produced tax returns for subsequent years so the Court has adopted an average of the 2 previous years as a guide.
U Street, Suburb V:
2006 (50 per cent) $ 13,058
2007 $ 4,986
2008$ 15,476
2009$ 19,173
2010$ 24,486
2011$ 20,905
2012$ 22,600 Est
2013 $ 22,600 Est
Cash flow for period: $143,284
The wife has not produced tax returns for subsequent years so the Court has adopted an average of the 2 previous years as a guide.
M Street, Suburb N:
2006 (50 per cent) $ 3,195 Loss
2007$ 9,853
2008$ 6,959
2009$ 9,940
2010$ 3,681
Cash flow for period: $27,238
Overall, for these three properties, the wife had a positive cash flow for the period of about $109,300. This averages out at about $13,600 per annum. The surplus was available to the wife to meet outgoings on the timeshare and vacant land holdings.
There is no evidence before the Court to justify the wife’s substantial credit card expenditure.
Capital income and expenditure of the wife
Since December 2006 the wife has had the following capital sums:
Superannuation withdrawals $237,670
Termination payment $ 13,000
Mortgage refinance $300,000
Sale of Suburb N $174,561
Sale of Suburb N $ 20,000
B Street sale $ 10,000
Suburb T sale $ 5,263
$760,494
The wife has incurred expenditure as follows:
Repairs to D Street $ 57,000
Capital gains tax Suburb N $ 27,000
Payment strata levies Suburb E $ 80,000
Payment strata levies Suburb E $ 6,141
Mortgage payments:
Suburb E and QLD landholding $ 15,716
Mortgage payments otherwise $596,000
$781,857
Otherwise the wife has been out of employment since May 2008. She has had some rental income surplus after outgoings and interest since 2006.
Otherwise she has had funds made available to her by the children and extended family and expended unexplained sums on her credit cards. The strong inference arising is that these funds made available to her otherwise met her own living and household expenses, to some extent.
Discussion
The approach to the determination of an application under s 79 of the Family Law Act 1975 (Cth) is set out in Stanford v Stanford (2012) 247 CLR 108 and that decision was the subject of detailed consideration by the Full Court in Bevan & Bevan [2013] FamCAFC 116.
The Court should firstly identify the present assets, financial resources and liabilities of the parties.
The Court should then consider whether, having regard to the circumstances before it, it would be unjust and unfair not to make orders for alteration of the property interests of the parties having regard to the provisions of s 79(2) of the Act.
The Court can then proceed to consider the contributions by each of the parties as contemplated by s 79(4)(a) – (c) of the Act.
Having determined the contribution-based entitlements of the parties the Court can then consider the various factors set out in s 75(2) of the Act and whether any further adjustment to the parties’ contribution-based entitlements is appropriate.
The Court is then required to consider the justice and equity of the proposed orders and whether in all the circumstances the orders to be made are appropriate.
The property of the parties
The Court is firstly required as a starting point to identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing.
At trial there was substantial agreement as to a majority of the assets and liabilities for consideration but there was also discrete issues as to particular items, whether they should be included or excluded in the pool of assets for the purposes of adjustment between the parties.
The parties’ respective contentions at trial were provided to the Court in the form of balance sheet admitted into evidence as Exhibit W.
That balance sheet is set out below and represents the property, the liabilities and financial resources of the parties at the time of hearing, with the items ultimately in contention marked with an asterisk:
Assets:
Joint F Street, Suburb E $1,100,000
Joint D Street, Suburb E $ 600,000
Wife U Street, Suburb V $ 650,000
Joint Timeshare at I Resort, J Town $ 4,500
Wife B Street, Suburb C $ 150,000
Joint 1 G Street, Suburb H, Qld $ 115,000
Joint 2 G Street, Suburb H, Qld $ 115,000
Joint 3 G Street, Suburb H, Qld $ 120,000
Joint Proceeds of sale of 9 B Street $ 110,000
Joint Household contents $ 20,000
Husband St George Bank account $ 326
Husband Arab Bank accounts $ 11
Husband Motor vehicle $ 10,000
Wife SUV motor vehicle $ 33,000
Liabilities:
Joint ING home loan $ 199,000
Joint ING loan Suburb H properties $ 145,000
Wife NAB loan Suburb V property $ 505,000
Husband K Pty Ltd tax debt $ 12,348*
Husband MasterCard debt $ 14,435*
Husband Personal loan debt $ 2,000*
Wife Credit card debts $ 135,590*
Wife Personal loans from relatives $ 313,000*
Superannuation:
Wife Advanced Superannuation $ 1,204
Otherwise at trial it was contended on behalf of the husband that certain funds should be added back to the pool of assets as against the wife. That contention is discussed below.
Unjust or unfair not to make orders
Firstly, the Court should determine whether it is just and equitable to make a property settlement order. The Court needs to conclude that it would be unjust or unfair to leave present property rights intact.
In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and thus, for example, the common ownership or use of property by husband and wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship.
In particular such a circumstance arises where both parties seek adjustment orders but are unable to agree as to same.
In this matter over the period of the parties’ relationship, which was for some 31 years until physical separation, the parties accumulated property and financial resources. The strong inference being that such assets were accumulated for the common purpose of providing for their life into the future and in all probability ultimately for their adult children. As a consequence of the commencement of proceedings as to property settlement in respect to which both parties seek disparate property adjustment orders identified earlier in these reasons, the Court is satisfied that it is just and equitable to make orders as to property adjustment under s 79 of the Act.
The appropriate pool for division
The present assets and liabilities of the parties have been identified above.
The items in contention as to whether they should be included or omitted in the pool for adjustment as between the parties are considered below.
Husband: K Pty Ltd tax debt $12,348
Counsel for the husband contends that this company tax liability should be included in the pool for adjustment. In doing so the result would be that the wife would bear some portion of the liability for the debt. As was submitted by counsel for the wife the only evidence before the Court in relation to the taxation liability is an Australian Taxation Office statement evidencing the existence of the liability as at July 2012. The company’s income tax statement of account dated 26 April 2012 evidences that as at 20 April 2012 the company’s only tax debt was the sum of $222. There is no evidence adduced by the husband that would warrant this debt being included in the asset pool for adjustment between the husband and wife. This liability will thus be omitted.
Husband: MasterCard debt $14,435 and personal loan debt $2,000
It was conceded by counsel for the husband that it was appropriate to remove these present liabilities of the husband from the asset pool for adjustment between the parties. Thus these liabilities will be omitted.
Wife: Credit card debts $135,590
During cross-examination the wife acknowledged that the asserted credit card debts were substantially personal in nature. There was no effort to quantify the expenditure from the wife’s credit cards that may have related to payment of property outgoings and expenses including mortgage payments. The capital funds available to the wife subsequent to the parties’ physical separation in 2006 are set out above together with, as best can be identified, significant expenditure items incurred by the wife. As best the Court can determine, the wife suffered a shortfall of about $21,363.
Since 2008 the wife has had little income, save for the net rental stream from the investment properties. Otherwise she has had to provide for her own living and personal expenses from other funds. The strong inference is that a portion of the debt incurred by her on her credit cards related to that expenditure. Since 2006 the husband has retained his income derived from his company and made no contribution to significant property outgoings and mortgage payments. The income received by him from 2006 would have provided to him a comfortable standard of living. In such circumstances it is not appropriate to include the wife’s overall credit card debt in the pool for adjustment as between the parties but the Court will have regard to same in the context of s 75(2) considerations.
Wife: Personal loans from relatives $313,000
Whilst the advance of various monies to or on behalf of the wife by the children of the marriage and other relatives is not in dispute, the application of those funds by the wife is unclear. By reason of the disparity in income circumstances between the parties, as referred to above after the wife ceased employment in May 2008, the wife had no significant disposable income from which to meet her own living and other expenses. However, in the absence of evidence as to the particular application of these borrowings by the wife, it is inappropriate to include the debt in the pool for adjustment as between the parties. Counsel for the husband conceded that in relation to these personal loans they should be omitted from overall consideration.
Addbacks?
In Bevan & Bevan (supra), the Full Court (per Bryant CJ and Thackray J) said as follows in relation to this issue at [79]:
79. We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
Ultimately the question of notional add backs or whether circumstances are relevant for consideration under section 79(4) or section 75(2)(o) of the Act is a matter for judicial discretion in all of the particular circumstances of the case, with the Court mindful of the general guiding principle that “add backs” are more the exception than the rule.
The husband’s counsel contended that there should be an addback to the pool of assets for adjustment to recognise the surplus capital received by the wife over and above explained expenditure. However, an examination of the capital sums realised by the wife as opposed to the substantive expenditure by her since 2006 reveals that there is no such surplus. Accordingly, this contention is rejected.
The wife’s counsel contended that the husband’s superannuation in the sum of $48,119 realised by him following his retirement from employment should be added back to the pool of assets for adjustment purposes. It was the husband’s evidence that subsequent to retirement those funds have been expended by him on his personal and living expenses. That evidence was not challenged in cross-examination. Thus, the Court is not satisfied that the husband’s received superannuation should be added back to the pool for adjustment purposes.
The pool for adjustment
Thus, the assets and liabilities of the parties for the purposes of adjustment are as follows:
Assets:
Joint F Street, Suburb E $1,100,000
Joint D Street, Suburb E $ 600,000
Wife U Street, Suburb V $ 650,000
Joint Timeshare $ 4,500
Wife B Street, Suburb C $ 150,000
Joint 1 G Street, Suburb H $ 115,000
Joint 2 G Street, Suburb H $ 115,000
Joint 3 G Street, Suburb H $ 120,000
Joint Proceeds of sale of 2 B Street $ 110,000
Joint Household contents $ 20,000
Husband St George Bank account $ 326
Husband Arab Bank accounts $ 11
Husband Motor vehicle $ 10,000
Wife SUV Motor vehicle $ 33,000
Subtotal $3,027,837
Liabilities:
Joint ING home loan $ 199,000
Joint ING loan Suburb H properties $ 145,000
Wife NAB loan Suburb V property $ 505,000
Subtotal $ 849,000
Superannuation:
Wife Advanced Superannuation $ 1,204
The pool for adjustment has a value of $2,180,041.
Contributions
In Kessey & Kessey(1994) FLC 92-495 at 81,151 the Full Court made clear that ultimately all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party:
... In many – indeed probably in most – property settlement cases the Court has to evaluate and assess contributions to property in the absence of precise valuations of the contributions in question. Indeed, where the contributions to property are indirect or non-financial, precise valuation is impossible, and even where the contributions are direct or financial so that a valuation might be provided, other factors (not capable of precise mathematical statement) may well have eroded the initial value of such contributions. In a case such as the present, it is not necessary to arrive at precise mathematical valuations of the parties’ contributions - all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party.
In assessing contributions the Full Court in Harris & Harris (1991) FLC 92-254 observed at 78,705:
The task of the court in proceedings under section 79 is not akin to an accounting exercise. To borrow a phrase used by McLelland J in Davey v Lee (1990) DFC 95-084; (1990) 13 Fam LR 688 at 689 in relation to section 20 of the De Facto Relationships Act 1984 (NSW) ''the Court is required to make a holistic value judgment in the exercise of a discretionary power of a very general kind”.
Counsel for the husband contends that overall there should be a finding as to equality in relation to the party’s contributions to date of hearing.
Counsel for the wife contends that as a consequence of the wife’s realisation of her superannuation entitlements and mortgage borrowing to fund the parties’ outgoings subsequent to 2006 and the husband’s retention of his income from that time until hearing, other than minor contribution to outgoings, has led to an increase in the parties’ debt. Particularly it is contended this is so as a consequence of the additional borrowing as against the Suburb V property to meet mortgage payments and other outgoings. That borrowing has increased the ongoing interest burden in relation to the parties’ assets in circumstances where the husband was more than able to make an ongoing contribution to outgoings, particularly mortgage payments, post-separation, but failed to do so.
Both parties were reluctant to make concessions as to the other party’s contributions. The Court considers such reluctance with circumspection. The children of the marriage gave evidence for the wife. No evidence as to parenting or homemaker issues was adduced from them. They were not required for cross-examination.
The parties applied their incomes to the acquisition of assets. The husband was the primary income earner and the wife worked during the relationship. The inference is that significant income during cohabitation, on which the husband paid no tax, was accumulated for the purpose of property acquisitions.
Both parties contributed to the parenting of the children of the marriage in the context of their income-earning obligations.
The history of the relationship is set out above and the Court is satisfied that contributions in terms of financial contributions, parenting and homemaker contributions to the date of physical separation should be regarded as equal.
However, the husband’s conduct post separation has clearly added to the debt-burden associated with the parties’ assets as contended by counsel for the wife.
Further, the husband has had the occupation of the parties’ primary asset, being the former matrimonial home, to the exclusion of the wife, since 2008.
Contributions by the parties post-separation should favour the wife such that overall contributions to date of trial shall favour the wife as to 52.5 per cent and as to the husband 47.5 per cent. This will create a disparity of about $109,000 between the parties.
Section 75(2) considerations
Counsel for the husband contends that there were no relevant factors such as would warrant any further adjustment to the contribution-based entitlements of the parties.
Counsel for the wife contends that no adjustment is called for except in the circumstances where the Court excludes from the asset pool for adjustment the wife’s credit card liabilities. It is submitted that these are a real debt and should be considered otherwise in the context of s 75(2).
The Court has had regard to all of the factors in s 75(2) and, save for a consideration of the issue of the wife’s credit card liabilities, none of the factors call for any adjustment otherwise as between the parties.
The circumstances relating to the wife’s credit card debts have been considered earlier in these reasons. The Court is required to consider the property and financial resources of the parties. In that context, the Court will have regard to the net property of the parties by reason of a consideration of the parties’ liabilities as they exist in reality at the time of trial.
The husband, as compared to the wife, asserts a modest credit card liability. The inference being that his access to his income post 2006 unfettered by any commitment to the substantial outgoings of the parties has led to a modest accretion of that debt. On the other hand, and as discussed earlier in these reasons, the wife over and above capital received and capital items expended has had a very modest income from net rent to the effect that she has been required to live to some extent on credit. Whilst there is no evidence before the Court as to the extent of her ongoing living expenses since May 2008, that are now the subject of credit card and other debt, the reality is that she has a debt far in excess of that the husband.
The Court is satisfied that a further adjustment in favour of the wife of 2.5 per cent is called for.
Overall
Overall, the pool for adjustment is to be apportioned as to 55 per cent to the wife and 45 per cent to the husband. In money terms, the husband’s entitlement is $981,018. The wife’s entitlement is $1,199,022.
The husband seeks orders for sale of all of the parties’ assets as a consequence of which the parties would incur significant selling costs and in all probability the realisation of underlying capital gains liabilities in respect of which there is no evidence before the Court.
The wife seeks to retain assets in specie in the following order and priority:
a)F Street, Suburb E
b)U Street, Suburb V
c)B Street, Suburb C
d)1, 2, 3 G Street, Suburb H
All of the real estate properties of the parties are the subject of agreed values.
A transfer to the wife of the property at F Street, Suburb E, subject to its present mortgage encumbrances, and the wife retaining the properties at U Street, Suburb V, subject to mortgage, the Suburb C property, and her SUV motor vehicle and superannuation of $1,204 would see the wife receive property to the net value of $1,085,204. That would leave a sum of $113,818 to be received by her.
The wife seeks to retain the three blocks of land at Suburb H. That retention would see her receive more than her entitlement.
However, in the event that the wife retains G Street, Suburb H, having a value of $115,000, that will in round terms meet her entitlement.
Otherwise the husband will retain the following:
a)D Street, Suburb E $600,000
b)Timeshare at I Resort, J Town $ 4,500
c)2 and 3 G Street Suburb H $235,000
d)Proceeds of sale held in trust $110,000
e)Household contents $ 20,000
f)St George Bank account $ 326
g)Arab Bank account $ 11
h)Motor vehicle $ 10,000
$979,837
Overall, the Court is satisfied that orders giving effect to the above division are appropriate. Such proposed orders have no effect on the earning capacity of either party.
The husband presently occupies the property at F Street, Suburb E whilst the wife occupies the property at D Street, Suburb E. The parties will be required to give vacant possession to the other within two months from the date of these Orders.
I will grant the parties liberty to apply as to implementation of the orders.
I certify that the preceding one hundred and forty-three (143) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 10 December 2013.
Associate:
Date: 10 December 2013
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Equity & Trusts
Legal Concepts
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Remedies
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Injunction
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Res Judicata
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