MWP & LMP

[2005] FamCA 733

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA
AT BRISBANE No. NA15 of 2005

(No. BRM6562 of 2004)

BETWEEN:
  P
  M W
  Appellant Husband

AND:
  P
  L M
  Respondent Wife

BEFORE THE HONOURABLE JUSTICE WARNICK

REASONS FOR JUDGMENT

Dates of Hearing: 15 July 2005

Date of Judgment: 2 August 2005

MWP and LMP        NA15 of 2004 (BRM6562 of 2004)
Heard:  15 July 2005
Delivered:  2 August 2005
APPEAL FROM FEDERAL MAGISTRATES COURT - PROPERTY SETTLEMENT – CONTRIBUTIONS – The parties cohabited for seven years and had no children – Pool of assets of approximately $300,000 – The learned Magistrate found contributions of 77.5% by the wife and 22.5% by the husband – A further adjustment of 5% for s75(2) factors – At the commencement of cohabitation the wife held property which became the parties principal residence – The husband’s contributions were 16% smaller and consisted of a combined savings and superannuation of $60,000 and a car – Neither party had any substantial income during the course of the relationship – While regard should be had to the use made of an initial contribution it is not automatically determinative of the weight to be given to that contribution – By focussing almost exclusively on the unprofitable nature of the use to which the husband’s initial contributions were put, and overlooking the joint “lifestyle” uses to which such contributions were put, the Federal Magistrate unduly diminished the value of the husband’s initial contributions.
RE-EXERCISE OF DISCRETION – The appellate Judge found contributions to have been 67.5% to the wife and 32.5% to the husband with an adjustment of 5% to the husband on s75(2) factors.
Phillips & Phillips (2002) FLC 93-104
House & The King (1936) 55 CLR 499
Pierce & Pierce (1999) FLC 92-844
Kowaliw & Kowaliw (1981) FLC 91-092
Allesch & Maunz (2000) FLC 93-033
Appeal allowed. Orders 1 and 2 of FM Baumann made 12 January 2005 be amended, by deletion of the figure “40,000.00” and insertion of the figures and words “$70,179.00 (less the sum of $40,000.00 already paid)”, and order 1 be amended by the substitution in that order of “16 September 2005” for “11 April 2005”.

Mr P appeals orders made by Baumann FM by way of alteration of property interests between Mr P and Ms P, following the breakdown of their marriage. The period of cohabitation was of some seven years. It was a relationship entered into later in the lives of the parties and there were no children of it.
In short, the learned Magistrate divided a pool of assets of approximately $300,000.00 72.5% to the wife. This was the result of his assessment of contributions at 77.5% to the wife, reduced by a 5% adjustment to the husband on account of section 75(2) factors.
By his amended Notice of Appeal, the husband challenged the division arrived at by the learned Magistrate, based on contributions, on the basis that the learned Magistrate took into account irrelevant considerations and failed to take account of relevant considerations. He attacked the adjustment in the husband’s favour of 5% on account of section 75(2) factors, on the basis that it was manifestly unreasonable.
The husband sought a re-exercise of discretion and an order requiring a payment (if the wife retained the home) to the husband of $76,534.60, rather than the $40,000.00 payment ordered by the Federal Magistrate. This represented a division of the asset pool of 39.3%, as against that adopted by the learned Magistrate of 27.5%, to the husband.
In the end, I have decided that the appeal should succeed and the discretion be re-exercised. The reasons for this result and the details of the re-exercise of the discretion are set out under the following headings:
1.Background and summary of the judgment of the trial Magistrate.
2.Principles applicable to the appeal.
3.Grounds of appeal in the amended Notice of Appeal.
4.Discussion of ground 1.
5.Whether any consideration of ground 2 is necessary.
6.Further evidence.
7.Re-exercise of discretion.

Background and summary of the judgment of the trial Magistrate

The parties commenced cohabitation in 1996, and married in 1998. They separated in December 2003.
At the commencement of cohabitation, the wife owned a home at Beachmere and throughout the cohabitation, the parties lived predominately in that property.
The learned Magistrate made the following findings about the contributions of the parties at the commencement of cohabitation:
“17. …I find that the contributions of the parties at the commencement of cohabitation can be assessed as follows:
Husband
Cash and superannuation (paragraph 6 of his affidavit)     $60,300
     Interest in Cooloola land ultimately achieved  $5800
     Holden SS Commodore say:  $30,000
     Diamond ring  $2590
Total  $98,690
Wife
20.    In respect of the wife's contributions at the commencement of cohabitation, I adopt her assessment of the value of the home of $120,000. The Nissan at $10,000. Furniture as it now exists at $1500 and cash being inherited from her father of $5000. A total of $136,500.”
His Honour identified issues for determination as follows:
“2. …There is a dispute as to the assets that they brought into the relationship; how long the relationship existed in a cohabitation sense; and what the respective contributions each of them made in a financial and non-financial sense.”
In identifying assets of the parties the learned Magistrate noted that there was an absence of agreement and/or evidence about values. However, there is no point taken in relation to the assessment of the pool for division which the learned Magistrate determined to be as follows:
“House at Beachmere  $242,500
Hyno bus  $40,000
Holden Statesman  $8000
Contents in former matrimonial home  $1500
Husband's tools  $800
Husband's camping equipment  $500
Wife's superannuation  $1387
Ring in wife's possession  $2590
Total Pool  $297,277”
During the course of the relationship neither party had any substantial income. The husband was in receipt of a disability support pension during the cohabitation and remained so at trial. At the commencement of cohabitation the wife was working for a modest wage. Later, there were periods during which, with the support of the husband, she operated a business, but about this the learned Magistrate said he did not know:
“…if I have the full picture about the business.”
The learned Magistrate said:
“33. Accordingly, the assets which exist at the hearing have not been swelled by any significant contributions by either party through income generated during the course of the relationship.…
34.    Accordingly, the Court must look at the contributions which existed as I found them to be at the commencement of cohabitation, and how they have been used. Ms Sweetapple…persuaded me that the majority of the husband's initial financial contributions were utilised towards the acquisition of motor vehicles and the like.
…
37.    …it is apparent that there was not any significant money placed into the home from either husband or the wife for improvements other than from the proceeds of the insurance claim.
38.    …I am satisfied the husband both had the capacity, the skills and the knowledge to make improvements to the home roughly in accordance with his evidence…
39.    I am also prepared to accept that the husband was at least a primary maintainer of the outside areas of the home including the gardening. That is not to say the wife did not make a contribution but I take the view from all the evidence and having the opportunity of seeing the husband and wife give their evidence that it is more likely than not the husband was involved in those activities.”
40.    The difficulty in assessing, however, the effect of those contributions is the absence of any probative evidence which would establish how the financial (minimal though that might be) and the non financial (more substantial that they are of the husband) contributions caused an increase in the value of the home. The home was worth $120,000 in 1996…and is now worth $242,500.
41.    The absence of this evidence makes it difficult perhaps to attribute to the husband the level of contributions of an effective quality as he asserts.…
42.    When I consider all the factors that I have set out and I consider the directions given in the case of Pierce (1999)FLC 92-844 and cases like it about looking at the quality of the contribution and how it wash (sic) used, that the ownership of the wife’s home throughout the period is significant. I form the view on contributions that the appropriate adjustment is 22.5 per cent for the husband and 77.5 per cent for the wife.”
At trial, the wife was 52 years of age, the husband “…some ten years older”. Of the husband, the learned Magistrate said:
“43. …He has inferior health. His capacity to work is reduced and his earning capacity is in my view on the evidence almost non existent.”
In relation to the wife, the learned Magistrate found that she was:
“43. …highly presentable and articulate. She has had recent work experience…she has, in my view, superior capacities for employment into the future. The fact that she is younger of course means that she has a longer working life ahead of her than the husband and greater needs.
45. …These factors, in my view, favour the husband. Furthermore, the nature of the order I propose to make vests in the wife a substantially appreciating asset, namely the home, whereas the husband's assets are of an inferior quality. A proportional division of course is a matter which I am required to take into consideration in favour of the husband.”
The learned Magistrate then said:
“46. This would have been a case where an adjustment to the husband in the vicinity of 7.5 per cent or 10 per cent for s.75(2) factors could have been justified for these matters. However, I believe that such an adjustment should be reduced by factors which I believe do favour a reduction in favour of the wife. Although the evidence as to the wife's obligations to care for her elderly mother is scant, nonetheless, she was unchallenged on her assertion that as a person with family responsibilities for her mother she is (sic) now has a reduced income and earning capacity. I do not know how long that will occur. It is unlikely, it seems to me, her responsibilities are likely to continue for the whole of her anticipated working life. She has a choice about what responsibilities she meets and there is insufficient evidence before me about other family members who might be able to care for her mother.
47.    Similarly, she may be able to care for her mother on a part-time basis whilst at the same time working part-time. None of these things were explored and none of them were dealt with in the wife's material. The mere fact that she is currently a carer, a role that she has undertaken just recently, is not sufficient for me, in my view, to infer that that will be her ultimate and only role for the rest of her working life. Nonetheless I would reduce to some degree an adjustment I would otherwise make under s.75(2) for that factor.
48.    It will also be a factor, in my view, to be taken into account and would otherwise reduce the s.75(2) adjustment in the husband's favour that the result of my order will mean that the wife will need, if she wishes to retain her home, to obtain a small mortgage. She will have the impost of the interest and the repayments on that mortgage.
49.    I consider all the s.75(2) factors as I am required to do. I form the view the exercise in my discretion, that a further adjustment in the husband's favour of 5 per cent is appropriate. By way of reference to the amount of 5 per cent of the pool this equates to an amount of approximately $15,000 which I would not regard for the factors I have mentioned to be overly generous.”
Turning to a consideration of the justice and equity of proposed orders, the learned Magistrate specifically addressed a submission that a relevant consideration should be the impact of any proposed order for payment (which would need to be borrowed) by the wife to the husband upon the capacity of the wife to retain the home. The learned Magistrate considered this argument, in particular in the light of what was said by the Full Court of the Family Court in Phillips, (2002) FLC 93-104, but thought the instant matter distinguishable from the circumstances in that case.
The learned Magistrate found himself satisfied with the proposed division of the asset pool previously identified, namely 27.5% to the husband and 72.5% to the wife.

Principles applicable to the appeal

The limited circumstances in which an appellate court should interfere with a discretionary judgment such as this was are contained in the judgment of Dixon, Evatt and McTeirnan JJ in House v The King (1936) 55 CLR 499, at pp 504‑505:
“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if the allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some of the material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his orders, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.”

Ground of appeal as set out in the amended Notice of Appeal

“1. That in providing that the Appellant was entitled to 22% of the asset pool, the Federal Magistrate erred in that he:
(a)made such a determination on the basis that there was no evidence that contributions by the Appellant had increased the value of the property;
(b)failed to have regard to the extent to which such contributions conserved the property;
(c)failed to take into account all of the matters necessary to be considered under Section 79; and
(d)failed to properly take into account the contribution of the Appellant at the commencement of cohabitation.

2.     (deleted)
3.     (deleted)
4.     That in reducing the adjustment considered proper in the Appellant’s favour by reason of factors in Section 75(2), the Federal Magistrate erred in that he failed to have proper regard to the provisions of section 75(2).”

Discussion of Ground 1

The argument on behalf of the husband is essentially this:
Initial contributions were in the proportion of 42% the husband, 58% the wife. That is a 16% differential. The end result of assessment of contributions was 22.5% the husband, 77.5% the wife, namely, a 55% differential. This movement was manifestly excessive given that:
· Neither the husband nor the wife had any substantial income during cohabitation.
· The evidence of the husband was preferred as to non-financial contributions.
It was submitted that it appeared from the Federal Magistrate’s reasons that the differential arose firstly, because the husband’s contributions were used towards “the acquisition of motor vehicles and the like” and secondly, because there was no evidence that the non-financial contributions of the husband had increased the value of the wife’s home.
Having regard to paragraphs 34, 40 and 41 (earlier quoted) of the learned Magistrate’s reasons, I accept the accuracy of this submission.
While I consider that both the circumstances referred to by the trial Magistrate were appropriately taken into consideration by him, that they were given such massive effect raises concern about a miscarriage of discretion. They are only aspects of contribution, of a nature to colour a contribution, rather than strongly categorise its weight.
For example, the non-financial contributions of the husband seemed to be virtually discarded, merely because of the absence of expert evidence of the impact of them on the current capital value.
As to the use of initial contributions, in paragraph 42 of the learned Magistrate’s reasons previously quoted, his Honour referred himself to Pierce (1999) FLC 92-844 and “…cases like it about looking at the quality of the contribution and how it was wash (sic) used…” The relevant passage of Pierce is paragraph 28, where it was said:
“…It is necessary to weight 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. In the present case that use was of substantial contribution to the purchase price of the matrimonial home:…”
However, while regard should be had to the use made of a contribution, in my view, nothing in Pierce points to the use of an initial contribution as being automatically determinative of the weight to be given to that contribution. I opine that, like almost all factors considered in the application of section 79 of the Family Law Act 1975, as amended, the weight to be given to a particular contribution, no doubt in the light of its use, depends upon all the circumstances, which invariably calls for a comparison of contributions, each with the others.
I do not imagine that, for example, in a case in which one party had a home at the commencement of cohabitation and the other cash of equal value, and the parties jointly made a decision that they would live in the home and spend the cash on overseas travelling, the party with the cash would be disadvantaged in an assessment of contributions.
In addressing the “use” made by each party of their initial contributions, the comments of Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 are of some assistance:
“Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec 79(4) and sec 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.” (at 76,643-76,644)

Though the learned Magistrate found that during the relationship “…the parties did not significantly intermingle their financial affairs…” (para 22), he went on to accept that the husband did have access to the wife’s accounts and bank card.
He also had before him the evidence of the husband that, of the $60,300 that the husband initially held, mostly in cash, the husband identified having contributed $20,000 to the purchase of a second hand Land Cruiser in 1997 and a further $30,000 for the purchase of a caravan in 2000. Under cross examination by counsel for the wife, the husband stated;
“Counsel: So really we’ve isolated $30,000 in the caravan and another 20 you took out in March 1997 that’s gone into the vehicles and the caravan of your money?
Husband: Yes.
Counsel: So that’s $50,000 give or take $10,000 of the $62,000 you came into the relationship with has gone into the vehicles and the caravan?
Husband: Yes, for – as a contribution towards the marriage and it’s what I – we agreed to do and it was joint decisions, it wasn’t my decision only.
Counsel: And what you’ve got as a result of all that dealing now is a bus worth $40,000 which you retain?
Husband: Which I paid $36,000 for, yes.
Counsel: And the Holden Statesman which [Ms P] has got which is now worth $8,000?
Husband: Yes, which I paid over $12,000 for, yes.
Counsel: And you’ve got no money left?
Husband: No.
Counsel: So that $62,000 has become $48,000, hasn’t it?
Husband: Yes.”
The evidence before the learned Magistrate disclosed that, even on the wife’s case, the parties took a 3 month trip to the Kimberleys, a 6 week trip to Victoria (which the husband contended was 3 months), and a few weekend trips to places such as Toowoomba and Byron Bay.
As was submitted on behalf of the husband, it appears that the question of the husband’s contributions to the capacity of the wife to retain the home, which substantially appreciated in capital value, by way of the provision of motor vehicles, of which both had use, in a case in which there was no suggestion that the husband had been reckless, careless or wanton with his assets, may not have been given due weight.
I am satisfied that the learned Federal Magistrate, by focussing almost exclusively on the unprofitable nature of the use to which the husband’s initial contributions were put, and overlooking the joint “lifestyle” uses to which such contributions were put, unduly diminished the value of the husband’s initial contribution. As earlier noted, the husband’s initial contribution was only 16% less than the contribution of the wife. When subsequent contributions did not favour the wife, an assessment of contributions at the end, of 77.25% to the wife and 22.5% to the husband was manifestly excessive. Accordingly, ground 1 should succeed.

Whether discussion of the remaining ground is necessary

Where an assessment of contribution is found to be in error and, consequently there will be a re-exercise of discretion, that will necessarily involve a consideration of section 75(2) factors, in the light of re-assessed contributions. In my view, accordingly, there is no point in discussing the challenge to the trial Judge’s dealing with the section 75(2) factors.

Further evidence as to the wife’s capacity to pay

In accordance with the common practice of this Court following Allesch & Maunz (2000) FLC 93-033, in considering the possibility of re-exercising the discretion in this case, I enquired of the parties whether, in that event, they would seek to place further evidence before the Court. Counsel for the wife indicated that she would seek to introduce further evidence as to the wife’s financial position, in particular, reflecting the wife’s capacity (or lack thereof) to borrow, beyond that already undertaken to pay to the husband the amount ordered by the trial Judge.
I have received copies of affidavits from a finance broker and the wife. The affidavit of Anthony Smith, finance broker, confirms the borrowing, through him, by the wife of $50,000.00 to meet payment to the husband under the orders appealed and to pay legal fees and expenses. Mr Smith says it would be impossible for the wife to obtain further advances, because of her limited income.
The wife details her current income and circumstances and says that any further payment ordered would result in the forced sale of her home.

Re-exercise of discretion

I have regard to the initial contributions as found by the trial Magistrate. As already observed, these favoured the wife 58%, to those introduced by the husband, of 42%. I have regard also to the use made by the husband of his initial contributions and in particular that his assets were not utilised for profitable investments. On the other hand, I have regard to what I have already said about the use of the husband’s assets to some extent for the parties’ lifestyle. I have regard also to the learned Magistrate’s preference for the evidence of the husband with regard to non-financial contributions, though these seem to be relatively minor.
In all the circumstances, I would assess contributions at 67.5% to the wife and 32.5% to the husband.
As to section 75(2) factors, it was not suggested that the learned Magistrate failed to identify relevant factors but simply that a 5% adjustment was manifestly unreasonable. The factors identified by the learned Magistrate were the comparative earning capacities of the parties, the husband being almost non-existent and the wife with superior capacities for employment into the future. I note that the wife is now employed part-time, earning $220.00 per week net.
The learned Magistrate noted the fact that the wife was younger with a longer working life than the husband and greater needs. I see no reason to regard that finding (if it was so intended) as a negative factor for the wife, but regard it as a finding that more probably than not, a longer working life would enable the wife to advance financially.
I note and give weight to the Magistrate’s findings that the wife’s employment capacity is impeded by her obligation to care for her elderly mother to some degree.
I take account of the disproportionate assessment of contributions, however, I do not take account of the nature of the assets held by the wife, for I cannot be confident that she will retain the home. The husband may also be in a position where he can obtain a very modest piece of real estate.
I also have regard to the position referred to by the learned Magistrate that, if the wife borrows to retain the home she will have the costs of arising from that borrowing.
I place some weight on the “fairness” of the wife retaining the home, but not to the extent where that factors overwhelms the legitimate claims of the husband.
I would make an adjustment of 5% in the husband’s favour which, having regard to the asset pool, produces but a modest $14,863.00.

Terms of the orders

A division of 37.5% to the husband would see him receive $111,479.00. He already has:
Hyno bus  40,000.00
tools  800.00
camping equipment  500.00         $41,300.00
Therefore the wife should pay him $70,179.00, less the $40,000.00 paid pursuant to the orders appealed, so $30,179.00.
I have considered whether a lengthy time to pay the husband would assist the wife to retain the home, but think if time was allowed she should pay interest to the husband, in which case an extended period would not be of assistance.

ORDERS

That the appeal be allowed.
That orders 1 and 2 of the orders of Baumann FM made 12 January 2005 be amended, by deletion of the figure “40,000.00” and insertion of the figures and words “$70,179.00 (less the sum of $40,000.00 already paid)”, and order 1 be amended by the substitution in that order of “16 September 2005” for “11 April 2005”.
I certify that the preceding 47 paragraphs
are a true copy of the Reasons for Judgment
herein of the Honourable Justice Warnick.
………………………………….
Associate
Date: 2 August 2005

[2005] FamCA 733

2 August 2005

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Family Law

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