Murray and Murray
[2008] FMCAfam 89
•13 February 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MURRAY & MURRAY | [2008] FMCAfam 89 |
| FAMILY LAW – Property – contribution – initial contribution – future needs. |
| Family Law Act 1975, ss.75, 79 |
| Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Norbis & Norbis (1986) 161 CLR 513 Pierce & Pierce (1998) FLC 92-844 Rosati v Rosati [1998] FLC 92-804 Williams & Williams [2007] FamCA 313 |
| Applicant: | MS MURRAY |
| Respondent: | MR MURRAY |
| File number: | SYM 972 of 2006 |
| Judgment of: | Altobelli FM |
| Hearing date: | 14 November 2007 |
| Date of last submission: | 14 November 2007 |
| Delivered at: | Wollongong |
| Delivered on: | 13 February 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Millar |
| Solicitors for the Applicant: | Rita Thakur & Associates |
| Solicitor Advocate for the Respondent: | Mr David |
| Solicitors for the Respondent: | Hansons Lawyers |
ORDERS
No later than 28 March 2008, the husband is to transfer to the wife his entire right title and interest in the parties’ jointly owned former matrimonial home known as and situated at MMMM in the state of New South Wales.
Simultaneous with such transfer of the home to her, the wife shall pay to the husband the amount of $62,020 by way of adjustment of property interest.
The wife retain all other assets in her possession or control.
The husband retain in all other assets in his possession or control.
Pending the transfer of the property in accordance with these orders, the husband is to continue paying for the benefit of the wife spouse maintenance in the sum of $250 per week.
I grant leave to the parties to re-list this matter before me on 7 days notice as regards:
(a)The wife being unable to make the payment to the husband in accordance with these orders; or
(b)The interpretation, implementation and enforcement of these orders.
IT IS NOTED that publication of this judgment under the pseudonym Murray & Murrayis approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYM 972 of 2006
| MS MURRAY |
Applicant
And
| MR MURRAY |
Respondent
REASONS FOR JUDGMENT
Introduction
This case is an application for alteration of property interests under s.79 of the Family Law Act, commonly known as a property settlement. The applicant is Ms Murray, and the respondent is her husband Mr Murray. The wife is 67 years old, and the husband 65 years old. They first met in 1982, commenced cohabitation in 1983, married in April 1986, and then finally separated on 25 May 2006 after 23 years if cohabitation. There were no children of the marriage, but each had adult children from previous marriages.
Background
This is a case in respect of which there are relatively few contested facts, so there is no need to provide detailed background. As will be seen below, the issues are relatively discrete. When the parties commenced cohabitation, the husband had quite substantial assets.
A few years later, when the wife received her property settlement from her first marriage, she brought in some money. Some of the assets of the parties have been pooled, and some of the assets have been kept separate. The issues for determination are largely assessing contribution and s.75(2) factors.
During the 23 years that the parties cohabited they each made diverse financial and non-financial contributions. The husband had contributed $20,000 towards the purchase of a home at D in which the parties lived at cohabitation. At cohabitation he also had three shops at AP which were subsequently sold. He also had various A policies. The husband retired from A, where he had been working, in 1988 and received various sums. Then in 1997, he received a substantial inheritance from his father.
Whilst the wife had minimal assets at cohabitation, by 1985 she had received her property settlement in the sum of $35,000. In 2005 she received an inheritance from her father's estate, and in 2006 an inheritance from her mother's estate. These facts are largely undisputed. As indicated before, the issue is how contribution is assessed having regard to these facts.
Mr Millar, who appeared as counsel for the wife argued her case on the basis that the husband had, indeed, made a greater contribution which should be assessed at 65 per cent in favour of the husband, and 35 per cent in favour of the wife. He submitted that a 30 per cent differential on contribution fairly represented the difference in contribution. However, he argued for a 10 per cent s.75(2) adjustment in favour of the wife thus resulting in a final outcome of 55 per cent for the husband, and 45 per cent to the wife.
Mr David, solicitor, appeared for the respondent husband. His case was presented on the basis that the contribution made by the husband was so significant that it should be 75 per cent in his favour. He conceded, however, that a s.75(2) adjustment in favour of the wife was appropriate but should be limited to five per cent, thus resulting in the final settlement of 70 per cent to the husband and 30 per cent to the wife.
A significant issue also emerged about how the property settlement should be structured. It was apparent that until comparatively recently both parties were prepared to sell the former matrimonial homeat MM. The wife's case was now presented on the basis that she retain the home. The husband argues that if she retains the former matrimonial home he has to realise a number of investments which triggers a capital gains tax liability. The husband submits that in order to avoid the uncertainty of this liability I should order the home to be sold. In the alternative, the husband submits that a capital gains tax adjustment should be made in his favour. The wife's clear position is that she now wishes to retain the home. Through her counsel, the wife accepted that if she retains the home, the husband is entitled to use his assets to re-accommodate himself and that he will incur a tax liability which she is prepared to acknowledge, on an indicative basis only, could be as much as $43,559. The wife submitted, however, that the precise quantification of this liability was subject to so many variables that it should not be treated as liability, but rather as a s.75(2) factor.
Issues
The issues that I therefore need to determine can be expressed as a series of questions:
1)Should the potential capital gains tax liability incurred by the husband be treated as an actual liability to be deducted from the pool of assets, or alternatively as a contingent liability dealt with as a s.75(2) factor?
2)Having regard to the diverse contributions made by each of the husband and wife over a 23 year relationship, how should the greater contribution of the husband be assessed?
3)How should the s.75(2) factors in favour of the wife be assessed on the facts of this case?
4)Having regard to the above matters, what is a just and equitable outcome?
5)What is the form of the order that should be made in this case?
Agreed assets and liabilities
At the hearing I was provided by Mr David and Mr Millar with an agreed list of assets and liabilities that I reproduce below:-
| Item | Ownership | Agreed Value |
| MM, NSW | Joint | $760,000 |
| ANZ Bank Account | Wife | $1,224 |
| Share Portfolio | Wife | $668 |
| 2006 Mazda 3 Motor Vehicle | Wife | $20,000 |
| Household Contents | Wife | $3,500 |
| ANZ Bank Account | Husband | $ 7,348 |
| Commonwealth Bank Account | Husband | $11,200 |
| Property Trust & Share Portfolio | Husband | $930,587 |
| 2000 Landrover Defender Motor Vehicle | Husband | $14,500 |
| Household Contents | Husband | $3,500 |
| Horizon Credit Union Account | Husband | $1,540 |
| Paid Legal Costs | Husband | $10,794 |
| Paid Legal Costs | Wife | $220 |
| Total | $1,765,081 |
Liabilities - NIL
Superannuation
| Item | Ownership | Agreed Value |
| A Deferred Annuity | Husband | $131,409 |
| Whole of Life Super Plan | Husband | $7,702 |
| Total | $139,111 | |
| TOTAL NET ASSETS | $1,904,192 |
The Applicable Law
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
1)Identify and value the property, liabilities and financial resources of the parties; and
2)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
3)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution made by the husband in bringing property into the marriage. In this regard, I need to consider the decision of the Full Court in Pierce & Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce & Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 27, 28, 29 and 32:
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) …28.…said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
Treatment of possible capital gains tax liability
On behalf of the wife it was not disputed that if an order was made that gave her the opportunity to retain the former matrimonial home, it was appropriate for the husband to use some part of his liquid assets to purchase suitable accommodation for himself. The husband's unchallenged evidence was that he intended to allow a budget of $450,000 for this purpose. He was not able to produce evidence in admissible form that quantified what his precise capital gains tax liability might be if he were to liquidate his other assets in order to purchase a home.
Mr Millar, on behalf of the wife, quite sensibly conceded that the figure of $43,559 could be indicative of the husband's potential capital gains tax liability, but his submission was that it ought not be treated as a liability because it is uncertain and is, at most, contingent. Thus, for example, there was no evidence about which shares would be sold, or when. There was no evidence about when the husband lodges his tax returns, as that has an impact on the date for payment. Having regard to the level of uncertainty, the potential capital gains tax liability should be treated as a s.75(2) factor. Mr Millar submitted that the figure that he agrees is an indicative figure is only about 2.2 per cent of the property pool and thus should be treated as a s. 75(2) factor.
Mr David's submission was that to proceed as suggested by the wife would not be just and equitable to the husband. It would leave him, for example, with a volatile share portfolio with potentially high realisation costs. The risks associated with quantifying the contingent nature of the liability ought to be shared between the parties.
One of the problems with the husband's case in this regard is that he has known since 30 May 2007 that his wife's application for property settlement now seeks an order that the home be transferred to her. The hearing of this matter took place on 14 November 2007. He had ample time to formulate a definite proposal for the orderly disposition of assets so that he could fund the acquisition of the home, and to obtain evidence in admissible form of the capital gains tax implications. Moreover, the argument that the husband would be left with a potentially volatile share portfolio is not persuasive because the risks of values fluctuating after the matter has been heard and determined is an ever constant risk faced by all litigants.
The Full Court of the Family Court of Australia has provided guidance about the treatment of capital gains tax in Rosati v Rosati [1998] FLC 92-804:
6.36 It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s.79 of the Act in relation to the effect of potential capital gains tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:
(1) Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2) If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3) If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4) There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.
I am satisfied that the facts of this case fall squarely within the third principle stated by the Full Court. I accept that there is a significant risk that the husband will have to liquidate assets in order to re‑accommodate himself thus triggering a potential capital gains tax liability in the vicinity of $43,559. However, that is best treated as a s.75(2) adjustment, rather than as a liability to be deducted from the pool of assets.
Assessing contribution
The first property in which the parties resided was at D. There was no dispute about the husband's assertion that he had contributed the balance of the deposit including expenses for the property D when he purchased that house. The parties subsequently resided there. The balance of the purchase price was funded by a loan from the A Society, the husband's employer at that time. The evidence indicates that by mid 1987 he had repaid that loan. During this period, however, the wife's evidence is that she was also working at the P Hospital. She retired in August 1987. It could be argued, therefore, that she made a direct or indirect, financial or non-financial contribution to the D property during this period, but it could not have been substantial. The D property was then sold in 1988 to fund part of the husband's share of the purchase price of the former matrimonial home at MM.
At cohabitation the husband owned three shopsAP. His unchallenged evidence was that shortly before cohabitation the shops had been valued at $200,000, and were subject to a mortgage of about $50,000. This means the value to the husband at the time of cohabitation of this property was about $150,000. His evidence is that the rentals from the shops paid the mortgage, but in cross-examination he agreed that he had to pay insurance, council rates, water rates, and repairs. The shops were sold in September 1988 for $360,000. As the mortgage had already been paid out by the end of 1986 the evidence indicates that the husband had available to him most of the sale proceeds, and in fact invested $337,211.52 into a term deposit with National Mutual. It is possible, therefore, that during this short period between the date of cohabitation and the date that the shops were disposed of, the wife made a direct and indirect, financial and non-financial contribution to this asset. However, it would not have been a substantial one.
The husband's evidence indicates that he also had a number of A insurance policies, but he was not able to adduce in admissible form evidence about their value.
In April 1988 the husband and the wife acquired the property which became the former matrimonial home at MM. The purchase price was $165,000 and it was purchased as tenants in common with the husband receiving 25/34th shares and the wife receiving 9/34th shares. This reflected the cash contribution that each had made, with the husband contributing about $121,000, and the wife contributing about $44,000. The wife's financial contribution to this property was, in fact, derived from her share of property settlement received from her previous marriage. She received this in June 1985 in the sum of $35,000, and I accept that it had grown to about $44,000 by the time the MM property was purchased. The husband's evidence is that he paid the expenses associated with the purchase including the stamp duty and legal costs. He could not be shaken about this evidence, in cross-examination. The wife, at paragraph 13 of her affidavit, makes the general assertion that:
We paid about $5000 in stamp duty and legal expenses of the purchase.
The wife is not specific about what she asserts she contributed towards these expenses, and I therefore accept the husband's evidence in this regard. Nothing much turns on this.
In June 1988 the husband retired from his employment with A and he sold his client roll for $25,000, as well as receiving a termination payment totalling $64,221. This seems to have converted into a net amount of $58,682 that was placed into an approved deposit fund.
In 1997 the husband's father died, and the husband inherited $197,339. He invested these funds.
In February 2005 the wife received approximately $9,000 as an inheritance from her father's estate, and in 2006 approximately $45,000 as an inheritance from her mother's estate.
As indicated earlier in this judgment, these facts are uncontentious. The real issue is how they should be assessed from the perspective of the respective contributions the husband and the wife have made. Mr Millar, for the wife, conceded it should be 65 per cent in favour of the husband. Mr David, for the husband, submits it should be 75 per cent. Both of these figures represent contribution in the broad sense, and not just the financial contribution made by each of the parties as represented in the evidence set out above. I accept that the wife made a contribution as homemaker and that she directly, and indirectly with the assistance of her family, contributed to the preservation and improvement of the former matrimonial home. The husband made similar contributions. For present purposes, the only relevant differences in contribution are the financial ones.
Mr Millar submitted that 65 per cent was appropriate because when the cash value of the husband's contributions are added up they total about $640,000, which represents about 33 per cent of the value of the total pool of assets. Thus, a 30 per cent differential in the contribution adequately reflects the differences in contribution.
Mr David submits that the value of the husband's contribution ought to be considered in the context of the value of the properties acquired at the relevant time, and not by reference to the current value of the pool. On this analysis, Mr David submits that the husband's contribution is 86 per cent and the wife's 14 per cent. He submits, therefore, that to devalue the husband's contribution to 65 per cent is not just artificial but unjust and inequitable.
The authorities to which I have referred indicate that the task before me is determining the weight to be attached, in all the circumstances, to the initial contribution. I must not lose sight, of course, of the diverse and disparate contributions that have taken place since the initial financial contributions. I must also give appropriate weight to the value to the parties of the contributions made. I am not satisfied that the approach proposed by Mr Millar is just and equitable under the circumstances. To merely give the husband credit for, in general terms, the cash value of what he brought in is to ignore that the present value to the parties of these assets is considerably greater. Thus, for example, to give credit to the husband for the inheritance he received from his father based on the value at the time of receipt ignores the reality in this case that, on the evidence, it was invested, and these investments have grown significantly. It cannot be said that the wife has made any meaningful contribution to the significant funds that now exist as a result of the husband's inheritance. This is one example to demonstrate the unfairness of the wife's approach to contribution. I mention in passing that at one stage Mr Millar submitted that the wife had made a contribution to the welfare of the husband's father, and that this should influence the weight that I might otherwise give to his father's inheritance. With respect, the evidence that the wife adduces in her affidavit at paragraphs 42 and 43 hardly lead to the outcome suggested by Mr Millar. On the evidence, the wife made no contribution to the inheritance received by the husband.
If I were to accept the husband's submission of 75:25 contribution, that creates a disparity of 50 per cent in his favour, or $950,000 out of a pool of assets having a combined worth of $1.9 million. Having regard to the length of the marriage, I am not satisfied that this would be just and equitable from the wife's perspective. The husband and the wife cohabited for 23 years. The marriage was a social partnership as well as a legal partnership. The passage of time has to be taken into account in assessing the weight of contributions of a financial nature, particularly having regard to other contributions. This is not a scientific or mathematical exercise and there is clearly room for reasonable disagreement about assessment. I think under all the circumstances I assess contribution in favour of the husband as being 70 per cent, with the differential between the parties therefore being 40 per cent. I am satisfied that this is a just and equitable recognition of the greater financial contribution made by the husband.
Assessing future needs
In Mr David's submissions on behalf of the husband he conceded there should be a five per cent s.75(2) adjustment in favour of the wife. It was implicit in this concession that she was older than the husband, would be left with less assets than the husband and did not have his investment management skills. Neither the husband nor the wife are working, nor can they be expected to at their age. Mr Millar submits that the factors point to a higher adjustment, in the vicinity of 10 per cent. An order for the husband to pay interim spouse maintenance to the wife in the sum of $250 per week was made on 22 August 2006 and, in theory, an option open to me is to continue it. I certainly agree that the spouse maintenance order should continue until settlement of the sale of the former matrimonial home at MM, or the date of transfer of this property from the husband to the wife. I think it is important, however, for there to be finality in a financial sense as between the husband and the wife and for that reason I will order spouse maintenance cease on one of these events.
Under the circumstances I think a 10 per cent adjustment for s.75(2) factors is indeed appropriate. It leaves the wife with 40 per cent of the pool worth $1.9 million. The disparity in the assets available to each of these parties in the later years of their lives is still significant and I am satisfied that the husband will have the ability to do far more with his share, even taking into account his desire to buy accommodation for himself.
However, the final s.75(2) matter to be taken into account is the contingent liability arising out of the husband needing to realise his investments in order to re-accommodate himself. The indicative liability of $43,000 is 2.2 per cent of the total pool of assets. I will round this off to 2 per cent, and I do consider it an appropriate s.75(2) adjustment to make in the husband's favour. Accordingly, the s.75(2) adjustment in this case will be 8 per cent and the final amount available to the wife will be 38 per cent. Of course, this adjustment will only apply if the wife is able to retain the former matrimonial home. If the home has to be sold, the appropriate split will be 60:40.
Just and equitable
Is the proposed order just and equitable? If the former matrimonial home is sold, the husband will receive 60 per cent of all assets, and the wife 40 per cent. If the wife retains the former matrimonial home, however, the husband will receive 62 per cent of the assets, and the wife 38 per cent. If the wife gets the home she may not have much money left over, but that is her desire. If the wife gets the home, the husband gets a sum of money which, even after spending on a house that he wants, he will have plenty left over. The conclusion is just and equitable.
Through her counsel, the wife has expressed confidence that she will be able to keep the home and pay out her husband. I will proceed on that basis and give her a reasonable opportunity to do so, but rather than make potentially complex orders, if she is unable to do so, I will give leave to relist the matter before me.
Assuming the wife retains the home, her overall entitlement will be 38% of $1,904,192 at $723,592. Her settlement will take the following format:
Matrimonial home
$760,000
ANZ Bank Account
$1,224
Share Portfolio
$668
Mazda
$20,000
Household contents
$3,500
Paid legal costs
$220
$785,612
Less payment to husband
$62,020
Total:
$723,592
If the husband receives a payment from the wife of $62,020, his settlement will take the following format:
Payment from the wife
$62,020
ANZ Bank account
$7,348
Commonwealth Bank account
$11,200
Property Trust Share Portfolio
$930,587
Landrover
$14,500
Contents
$3,500
Credit Union
$1,540
Paid Legal Costs
$10,794
A deferred annuity
$135,409
Whole of life super
$7,702
Total
$1,184,600
The represents approximately 62% of the overall pool of assets.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate: Lisa Molloy
Date: 13 February 2008
0
2
1