Mulloy and Mulloy

[2015] FCWAM 131

JURISDICTION : MAGISTRATES COURT OF WESTERN AUSTRALIA – 150 TERRACE ROAD

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: MULLOY and MULLOY [2015] FCWAM 131

CORAM: KAESER M

HEARD: 6 OCTOBER 2014

DELIVERED : 2 JULY 2015

FILE NO/S: PTW 3819 of 2010

BETWEEN: MS MULLOY

Applicant

AND

MR MULLOY
Respondent

Catchwords:

Property Settlement; short marriage; Husband made majority of financial contributions; husband wasted sale proceeds of former matrimonial home; husband later declared bankrupt; section 75 (2) adjustment in wife’s favour given husband’s conduct; superannuation splitting order made in circumstances where no other tangible assets available to achieve a just and equitable outcome.

Legislation:

Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant: Self Represented Litigant

Respondent: Self Represented Litigant

Solicitors:

Applicant: Self Represented Litigant

Respondent: Self Represented Litigant

Case(s) referred to in judgment(s):

Stanford v Stanford (2012) 247 CLR 108

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

Background

1The parties have been unable to resolve their property settlement issues. They had a slightly different view as to the period of cohabitation. The wife said that the parties cohabited from 26 March 2004 to 6 April 2009; whilst the husband said the period was from April 2005 to 6 April 2009. In my view, the husband’s version is more likely to be accurate.

2The wife effectively says that the parties lived together from 26 March 2004 when they were spending time together [overseas]. The husband says that initially he was simply holidaying with the wife and they did not live together until she moved to Australia in April 2005.

3The parties lived apart from 18 April 2004 to 21 December 2004 and also from February 2005 to April 2005. In the above periods of time, the husband lived in Australia and the wife lived overseas. I accept that they were in a relationship and they were planning to live together in Australia, but at that stage they were not living together on a permanent basis as a de facto couple or in a marriage‑like relationship. That did not occur until the wife moved to Australia.

4The wife relied upon her evidence only and called no witnesses. The husband similarly only relied on his own evidence.

5This trial commenced and was completed on 6 October 2014. On that date I made orders for the husband to provide directly to the Court an up to date superannuation statement. That statement was later provided and indicated that the account balance for the husband with Sunsuper at 7 October 2014 was an amount of $125,741.84.

Wife’s case

6At the commencement of the trial, the wife clarified her position. In her amended Form 1 application filed on 24 April 2014 she sought final orders in the following terms:

1Two sets of property’s [sic] proceeds were worthy [sic] $435,000. The order of $250,000 is sought.

(i)One [Mr Mulloy] offered his superannuation ‑ E$150,000 to me over the phone. As such, the order of $150,000 is sought; or

(ii)The order of $150,000 is sought from two sets of sold property proceeds.

7Given the Court’s confusion with precisely what orders were sought and as to whether it was cash or superannuation or both, the wife clarified that she meant that:

1the husband was to pay her $250,000 cash or in the alternative, the husband pay the wife $150,000 cash plus transfer $150,000 by way of a superannuation splitting order.

Husband’s case

8The husband’s position at the commencement of the trial was that there should be a superannuation splitting order providing for $12,500 to be transferred from his superannuation fund to the wife’s superannuation fund.

9The following aspect of the husband’s evidence was, quite frankly, appalling. He conceded that he received the proceeds of sale of the [Coastal Town E] property so at 10 August 2009 he had a balance of $122,441.75 in his account. He says that he lived overseas from 2009 to 2010. He spent most of his time in [Country A] and [Country S]Fphill and attempted to secure various business ventures. He was extremely evasive about his evidence on where that money was spent. He indicated that he invested money into some schemes and simply lost it all. He was given numerous opportunities by the wife and by the Court to properly explain his spending. He consistently said that he could not remember what he had spent his money on and he provided absolutely no detail as to the investments. I was left with the distinct impression that he was living an extravagant lifestyle and “blowing” his savings whilst living overseas. It may well be that the husband was spending money on items for his personal enjoyment, the details of which he was too embarrassed to disclose. He denied, however, that the money was spent on alcohol. An example of the spending is set out below.

10On 24 September 2009 there were a series of ATM withdrawals. From 2.07 pm to 4.48 pm he had withdrawn in eight separate transactions an amount totalling $1,859.93. The husband attempted to explain this and other transactions by suggesting that there were limits on how much could be taken out of an ATM at any one time. Each of the withdrawals, however, was only the equivalent of between $48 and $360. I take judicial notice of the fact that ATM withdrawals overseas permit larger withdrawals than that.

11A further example is on 28 September, he made a series of 17 separate withdrawals from ATMs, withdrawing a total of $3,921.18. This pattern continued through the rest of September and into October. All of the withdrawals were from ATMs. The husband specifically denied spending this money on gambling. He also does not appear to have any substantial assets to show. In light of his evidence (which I do not accept) about his failed business ventures, all that is left is to conclude that the husband has spent that money on items or on activities that produced no discernible asset, but were for his personal pleasure.

12The upshot of the husband’s evidence was that during the period of time that he lived overseas, he spent the entire net sale proceeds that he had received from the sale of land in 2009. When he returned to Australia he had very little left (about $3,000). In my view, he utterly wasted that money. There is, however, little benefit in that finding in terms of the wife’s case. That money is gone; the husband is now bankrupt; there are no tangible assets from which the wife could obtain a reasonable property settlement. For the reasons set out below, the only “asset” available for distribution is the husband’s superannuation.

Bankruptcy of the husband

13One significant hurdle to the orders sought by the wife was the bankruptcy of the husband. It is clear that the husband was declared bankrupt on 9 September 2013. The official trustee in bankruptcy was appointed administrator of his estate. The trustee wrote to the Court advising that it was aware that a family law matter involving the bankrupt husband was being heard. The trustee provided the certificate of appointment and a report to creditors dated 22 October 2013. The letter said:

Initial information obtained by the trustee is that the bankrupt currently does not hold any real property that could be realised for the benefit of unsecured creditors of the bankrupt estate. As such, the trustee proposes to not intervene in proceedings and is agreeable to abide by orders of the Court.

14The report to creditors outlined total unsecured liabilities (creditors) amounting to $61,928 with assets amounting to $120,439.

15Of that amount, superannuation comprised an amount of $112,422. The report indicated that a dividend is not expected to be paid for the estate.

16An effect of the bankruptcy is that the trustee has exclusive control over certain assets. The Court is not able to make orders about any assets that would form part of the estate. Any excluded assets, such as superannuation, may still be dealt with by the Court. Given the evidence of the husband and the evidence from the trustee, it is clear that apart from superannuation there is virtually nothing left to divide between the parties.

17The wife’s request for payments of either $150,000 or $250,000 cash is unrealistic and could not be a just and equitable outcome. Superannuation is specifically excluded under the provisions of the Bankruptcy Act 1966 so the Court may deal with it.

18The wife does not accept the report of the trustee in bankruptcy. That is, however, something that she must take up with the trustee. In her opening statement, she argued that the nature of the Australian legal system was such that Judges and Magistrates have the power and should investigate evidence from both sides, so effectively should operate as an inquisitorial body. The Australian legal system, however, is based upon an adversarial system. It is up to the parties in the case to present evidence and the Court makes findings based on the evidence presented and the orders flow from those findings. The Court does not have the power to independently investigate allegations made by parties and, quite frankly, does not have the resources to do so. That is, in the Australian system, the parties’ responsibility.

Property Settlement Law

19The parties were married, therefore the provisions of the Family Law Act 1975 apply.

20Section 79(1) of the Act provides that the Court must make such orders as it considers appropriate. Section 79(2) provides that “the Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”.

21Traditionally that has meant that the Court followed a four‑stage process.

22That process is as follows:

(a) identify the value of the assets and liabilities of the parties;

(b) assess the contributions made by each party to the assets;

(c) assess the factors set out in s 79(4)(e) and s 75(2); and

(d)consider whether the proposed orders are just and equitable between the parties.

23The fourth step of this process was seen to be the check required pursuant to s 79(2) to only make an order if it was just and equitable to do so.

24The High Court examined these provisions in Stanford v Stanford (2012) 247 CLR 108.

25The High Court noted at [36-40] that when exercising the property settlement power, three fundamental propositions must not be obscured:

(a)One must first identify, according to common law and equitable principles, the existing legal and equitable interests of the parties in the property [emphasis added];

(b)The Court’s power must be exercised in accordance with legal principles; and

(c)To conclude that making an order is “just and equitable” only because of reference to the various matters set out in s 79(4), without separately considering s 79(2), would be to “conflate the statutory requirements and ignore the principles laid down by the Act”.

26The Court also held that the mere fact of separation is not necessarily enough to warrant exercising the property settlement power and making an order.

27The power under s 79 is to alter a party’s interest in property, which is why the High Court considered it is essential to begin with an examination of what interests in property the parties have. It may or may not be necessary to alter any such interests.

28The High Court at [42] acknowledged the reality that in many cases, the “just and equitable” requirement is:

… readily satisfied by observing that, as a result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife.

29In the event that the Court decides that s 79 demands that an order be made, then the Court must make such orders as it considers appropriate. It must also take into account the provisions of s 79(4) and s 75(2).

30The parties’ have virtually no tangible assets. There is little point setting them out in a table. They are of nominal value.

Is it just and equitable to make an order?

31The Court must make orders for a property settlement in this case. The husband wasted the sale proceeds of the Coastal Town E property to which the wife made contributions. The Court is therefore unable to make orders for payment of any cash amount to the wife given the wastage by the husband. The Court is able to treat superannuation as if it was an asset and that will be the only way to achieve some equity between the parties.

Contributions

32The parties were together for four years.

33The parties started communicating with each other from December 2003. The husband visited the wife overseas on more than one occasion. He stayed for reasonably lengthy periods. In December 2004, for instance, they were together for about seven weeks.

34I have no doubt that both parties contributed to the maintenance of the home in which they lived in Australia and contributed to the welfare of the family unit that they had created. On 23 June 2004 the husband received $60,744.03 from the sale of his [Suburb P] property.

35In 2006 the husband received more than $50,000 in compensation payments because of an arm injury.

36In my view, the wife misunderstood some of the financial transactions that occurred during the marriage and since separation. The first of these issues arose from a bank statement of the husband for his offset home loan. On 31 October 2008 there was an entry entitled “amount received – excess funds” with a credit of $388,736.34. Based on that line, the wife asserted that the husband received that amount and has then ensured that that money disappeared and has not accounted for that money. What the wife, in my view, has failed to appreciate is that the very next line of the same statement has the following entry:

31 October 2008 amount received – excess funds reversal $388,736.34.

37Prior to the amount being put into the husband’s account, his balance was zero. After that money went in and it was subsequently reversed immediately, his account balance remained zero. That was clearly an error by the bank which was immediately reversed. The very next line of the statement had the following entry:

31 October 2008 amount received – excess funds $38,836.34

38This was the correct figure that he had received from the sale of a property.

39Despite the above evidence, the wife maintained that there was still about $350,000 missing and the husband has “squirrelled” that money away somewhere. That is clearly not the case.

40The second of the wife’s errors, in my view, related to the settlement of the sale of [the Country Town E Property] on Monday 3 August 2009. The settlement stated dated 3 August 2009 revealed that the sale price for the property was $269,000 less the necessary fees, providing a total of $268,221.32. The various settlement cheques disbursing that amount went to the real estate agent, the conveyancers and to other entities. Two specific amounts are relevant:

1A payment to the husband was made of $118,746.18.

2A further payment was made to Bendigo and Adelaide Bank Limited of $140,613.23. Again, the wife has read (in my view, misread) that statement to mean that the husband received two separate amounts; one to him personally and one to an account in his name with the Bendigo and Adelaide Bank. What in fact occurred was that the husband had at that stage two separate mortgages over that property with the National Mortgage Company (operated by the Bendigo and Adelaide Bank). The two statements from the National Mortgage Company dated 1 August to 4 August 2009 revealed that both of those mortgages were discharged (paid out) with the following amounts:

(i)In relation to BSB account number [xxxxxxxxxxx] the amount is $61,033.31;

(ii)In relation to BSB account number [xxxxxxxxxxx] is a credit amount of $79,579.92.

41Those two amounts together total $140,613.23. It is therefore clear that the amount payable to the Bendigo and Adelaide Bank was an amount that discharged the existing mortgages over that property. The husband therefore received, in his hands, the figure of $118,746.18. That amount is reflected in his bank statements for his National Australia Bank account. There is an entry on 10 August 2009 for a credit to his account of $118,746.18. It is clear the husband did not receive an extra $140,000. That money went to discharge the mortgage.

42The wife gave evidence that she did not know whether the husband had a mortgage over the Coastal Town E property at the time. He clearly did because the settlement statement indicates the mortgage was discharged. The loan documentation shows that the two mortgages were set up over the Coastal Town E property on 19 September 2008. Eighty thousand dollars was the first mortgage and $60,000 was the second. One of them was to pay outstanding debts such as car finance and so on; the second was in order to refurbish and renovate the house.

43During the course of the trial the wife alleged that the husband had further cash in a St George Bank account. She relied upon a statement attached to the husband’s material to indicate that he had $9,264.86 in that account. Eventually she conceded that the account was a MasterCard statement and the amount referred to above was the closing balance of the account. That meant that he owed St George Bank that amount; not that he had that amount in savings.

Conclusions in relation to contributions

44There was no evidence of any significant financial contribution to the acquisition, conservation or improvement of any of the property of the parties by the wife. She no doubt made some non‑financial contributions and she contributed to the welfare of the family (comprised of the husband and wife).

45In my view, those contributions should be recognised. I am unable to order a cash amount as the husband wasted all of the available cash. Almost all of the significant financial contributions came from the husband. To the date of separation I assess the wife’s contributions on an overall basis as a relatively minor amount and award a figure of 10%.

Section 75(2) factors

46I will detail only the factors that are relevant to this matter.

The age and state of health for each of the parties

47At trial the husband was 58 years old and the wife was 50 years old. Despite the reference above to an arm injury, neither party presented any independent evidence in relation to any physical limitations for work.

The income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment

48The husband is an undischarged bankrupt. The wife has a much better earning capacity than does the husband. Whilst the wife is a qualified teacher, she is not currently working.

The eligibility of either party for a pension, allowance or benefit

49Both parties appear to be in receipt of income tested pensions or benefits.

A standard of living that in all the circumstances is reasonable

50It is not possible to maintain anything like the standard of living enjoyed by the parties when they were travelling between countries and then later during their cohabitation in Australia, given the lack of any available resources.

Any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account

51The wastage by the husband is a significant factor in this case. On that basis alone a percentage adjustment in the wife’s favour is warranted.

Conclusions

52At the end of the day, the parties were together for a reasonably short period of time. The wife did not contribute any significant financial amounts to the property. The only available resource that can be used to achieve any form of just and equitable outcome is the husband’s superannuation. The amount proposed by the husband to transfer to the wife out of his superannuation is unreasonably low. It is not possible, nor is it just and equitable, to make the orders sought by the wife in relation to the amounts that she seeks either by way of a cash adjustment (which is impossible and inherently unreasonable) or by way of a superannuation splitting order. The amount sought by the wife by way of a superannuation split exceeds the amount that is currently in the husband’s superannuation account. His current account balance from 7 October 2014 is $126,741.84.

53Given all of the parties’ respective contributions, and in particular (and I take this into account pursuant to s 75(2)) the way that the husband has wasted the net sale proceeds from the Coastal Town E property, in my view, it is appropriate to provide a significant amount out of his superannuation.

54I take into account the fact that he is a bankrupt, but he will be discharged from that bankruptcy in due course. He is 58 years of age and will have little to retire on when he reaches retirement age. Had the husband not wasted the net sale proceeds whilst living overseas, there would have been an amount of cash from which the wife could have received a proper property settlement entitlement. Given that the net sale proceeds are no longer available and the only entitlement the wife will receive will come from superannuation (which will take several years before she is able to access), the amount that she receives should be significant. In my view, an amount of 40% of the available superannuation is an appropriate award. Forty percent of $126,741.84 is $50,696.74.

Orders

1.Except as provided for in these orders, the parties shall retain all assets in their respective use, possession or control as at the date of these orders.

2.The parties shall forthwith indemnify and keep each other indemnified in relation to all liabilities in their respective names.

Superannuation splitting

3.Upon the Court noting the following:

(a)The husband has an interest in the SunSuper fund, such interest being an accumulation interest (“the husband’s fund”);

(b)SunSuper is administrator of the SunSuper fund and for the purpose of this document is referred to as the trustee;

(c)The relevant date is 6 October 2014;

(d)Pursuant to Regulation 22(1)(a) of the Family Law (Superannuation) Regulations 2011 (“Family Law Regulations”), the gross value of the husband’s interest in the fund is $126,741.84 at the relevant date;

(e)The trustee having been notified, with a copy of the proposed orders, of the parties’ intention to seek orders in the Family Court of Western Australia pursuant to Part VIIIB of the Act, and having been provided with a copy of the proposed orders; and

(f)The trustee having confirmed that they have no objection to the proposed consent orders

then the following further orders are made:

4.The base amount allocated to the wife out of the interest held by the husband in the husband’s fund is $50,696.74.

5.In accordance with s 90MT(1)(a) of the Act, whenever a splittable payment (within the meaning of s 90ME of the Act) becomes payable to or on behalf of the husband from his interest in the SunSuper fund, the wife or her legal personal representative shall be entitled to be paid by the trustee of the husband’s fund the amount calculated in accordance with Part 6 of the Family Law Regulations, using a base amount of $50,696.74 and there shall be a corresponding reduction in the entitlement the husband would have had but for these orders.

6.The operative time for order 5 is 4 business days after the service of these orders on the trustee of the husband’s fund.

7.The wife shall provide the trustee of the husband’s fund with a notice pursuant to Regulation 72 of the Family Law Regulations within 21 days of the publication of these orders.

8.The trustee of the husband’s fund, having been afforded procedural fairness, is bound by orders 4-8 of these orders.

9.The parties shall do all acts and things and sign all documents necessary to give effect to the terms of these orders.

10.Each party shall have liberty to apply in relation to the implementation of, and to give full force and effect to, these orders.

11.The proceedings are otherwise dismissed.

I certify that the preceding [54] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court

Secretary