N and B

[2006] FCWA 50

JURISDICTION:

FAMILY COURT OF WESTERN AUSTRALIA

ACT:	FAMILY LAW ACT 1975
LOCATION:	PERTH
CITATION:	N and B [2006] FCWA 50
CORAM:	THACKRAY J
HEARD:	16 MARCH 2006
DELIVERED:	26 MAY 2006
FILE NO/S:	PT 1553 of 2005
BETWEEN:	N

Applicant/Wife

AND

B

Respondent/Husband

(Page 2)

Catchwords:

Property settlement - short marriage - contributions - relevance of conduct.

Legislation:

Family Law Act 1975, s 75, s 79

Category: Not Reportable

Representation:

Counsel:

Applicant:	Mr J Hanly
Respondent:	Mr D Childs

Solicitors:

Applicant:	Hotchkin Hanly
Respondent:	Carr & Co

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

Figgins and Figgins (2002) FLC 93-122
JEL and DDF (2001) FLC 93-075
Kennon v Kennon (1997) FLC 92-757
(Page 3)

1 [Ms N] and [Mr B] separated in June 2004 after a short marriage. I am required to resolve a dispute concerning the division of their property.

Orders sought

2 [Ms N] wants to retain the parties’ homes in [two different suburbs]. She is prepared to make a payment to [Mr B] to bring about a 65:35 division of the property (save for certain assets she owned prior to marriage, which she wants excluded).

3 [Mr B] is agreeable to [Ms N] retaining the [southern suburban] property but wants the property in [the inner suburbs] to be sold. Although his Papers for the Judge suggest he should receive 52.5% of all the assets, the orders Mr [Mr B] seeks would result in an equal division.

Brief background

4 [Ms N] is 57 years of age and works as [an administrator]. [Mr B] is 63 years of age and is employed as a [supervisor]. Both parties were previously married. Each has adult children.

5 The parties met in early 1998 and soon began spending a great deal of time together. They commenced living in a de facto marriage relationship some time prior to their marriage in December 2000.

6 At the commencement of the relationship, [Ms N] owned her home in [the southern suburbs], subject to a small mortgage. [Mr B] owned his home in [the northern suburbs], which was unencumbered. The [northern suburbs] property was sold in December 2001 and [Mr B] then purchased a property in [the inner suburbs]. Although [Ms N] was strongly opposed to the acquisition, the parties agreed to carry out a major extension and improvement to the [inner suburban] premises. This was funded by the proceeds of sale of the [northern suburbs] property and money [Ms N] borrowed on the security of the [southern suburbs] property. The renovation of the [inner suburban] property was [Mr B]’s main occupation during their relationship, whilst [Ms N] continued to work full-time.

(Page 4)
7	The parties’ relationship was volatile and there were a number of separations, although I do not accept they were as lengthy as alleged by [Mr B]. The final separation occurred in June 2004, when [Ms N] left the [inner suburban] home and moved back to [the southern suburbs]. By this stage, the parties had implemented an agreement, pursuant to which each would be registered as the joint owner of the other’s property.
8	[Mr B] continued to live in the [inner suburban] property until late 2005. [Ms N] has continued to live in the [southern suburban] property. Regrettably, the work on the [inner suburban] home has not yet been completed.

The main arguments

9 [Ms N] submits that the value of the contributions she made exceeded those made by [Mr B] and that she should receive a further “loading” arising out of what she regarded as his appalling conduct. She also says he should receive no part of her superannuation, her shares or her interest in a property at [in the south] because he made no contribution to them.

10 [Mr B] claims that the parties agreed all of their assets, including those [Ms N] now wishes to have excluded, would be treated as owned equally. He says [Ms N] accepted this was fair because of the funds, skill and labour he contributed to the [inner suburban] property. He says he was the driving force behind the [inner suburban] project and he should therefore receive credit for the substantial increase in value of that property. He denies s [Ms N]’s allegations concerning his behaviour during the marriage but, in any event, he says “she gave as good as she got”.

Credibility

11 Credibility was important because the parties gave starkly contrasting evidence in relation to the extent of [Ms N]’s contributions to the [the northern suburbs] and [inner suburban] properties. Her evidence gave the impression she spent much of her leisure time labouring on the properties, using skills and experience she had obtained as the daughter of a master builder. [Mr B] said her contributions were nothing like what she alleged.

12 I was not convinced that either party gave entirely accurate evidence in relation to the extent of [Ms N]’s work on the two

(Page 5)

properties, but I concluded that [Ms N]’s version was much closer to the truth. Apart from some embroidery of contributions, the only area in which I considered her evidence to be suspect related to the parties’ conduct toward each other. Although I suspect she probably painted a fairly accurate picture of [Mr B] as being an unpleasant partner, I was inclined to consider [Ms N] underestimated the extent to which she had responded in kind.

13 [Mr B] was an unimpressive witness and I had serious difficulty in accepting large portions of his testimony. His own oral evidence established that his affidavit was totally misleading in describing the work [Ms N] had done. He also contradicted his own evidence in a number of other respects – for example, his explanation for not accompanying [Ms N] on an overseas holiday.

14 [Ms N]’s mother, [Mrs L], gave evidence that corroborated some of her claims about the work done on the properties. [Mrs L] was not cross-examined in relation to most of these matters. I was informed that this was because of a desire not to upset an elderly lady. Whilst a chivalrous decision, I am not sure it was justified. Although [Mrs L] did appear a little frail, she was a very keen participant in the proceedings. She made a number of comments in the back of the Court; instructed [Mr B] not to lie whilst he was making his way to the witness box; pulled faces whilst he gave evidence; and laughed when she heard counsel explain his instructions about her cross- examination. I consider she could have withstood – and probably relished – a much more robust cross-examination.

The law

15 I am required to follow a four-step process in dealing with an application for property settlement pursuant to the Family Law Act 1975. Those steps are:

• identify and value the assets and liabilities of the parties;

• assess the parties’ contributions to the assets;

• assess a range of other factors set out in s 75(2) and s 79(4) of the Act; and

• consider whether the order proposed is just and equitable.

(Page 6)

The assets and liabilities

16 Both cases were well prepared and many issues had been resolved before trial. In particular, there was no significant dispute concerning the assets and liabilities, which I find to be as set out in the table below:

Description	Husband	Wife
Assets	$	$
[the inner suburban] property	325,000	325,000
[the southern suburbs] property	340,000
One third interest in [the block]	80,000
Superannuation	69,298

Commonwealth Bank Streamline Account	1,263
Commonwealth Bank Award Saver Account	391
[motor vehicle]	5,000
Husband’s business	250
[motor vehicle]	10,000

Furniture and contents	5,000	5,000
Bobcat	1,000

Tabcorp Ltd shares	769
Alinta Gas shares	4,833
Assets TOTAL	336,250
(Page 7)

Liabilities

[the southern suburbs] mortgage	67,095
Commonwealth Bank MasterCard	2,388
Personal loan	20,000
Liabilities TOTAL	20,000 69,483
NET ASSETS

316,250 767,071

17 The only areas of controversy about the liabilities were as

follows:

Husband’s personal loan

18 [Mr B] claimed to have borrowed $20,000 shortly prior to the trial. [Ms N] foreshadowed in her Papers for the Judge that she required proof of this liability. Her counsel confirmed this in opening. [Mr B] had alluded to the $20,000 liability in a supplementary affidavit sworn shortly prior to trial; however, he gave no details concerning the disbursement of the money, other than say it had been used to pay off his credit card debt and was otherwise to be used to meet legal costs. His counsel did not seek leave to adduce further evidence-in-chief to prove the existence of the loan, or the manner in which the funds had been disbursed.

19 Under cross-examination, [Mr B] claimed for the first time that the loan had been used in order to discharge $10-11,000 in accounts relating to the [inner suburban] development. When he was challenged in relation to this assertion, [Mr B] claimed he had not kept the invoices which established the expenditure. He did say that the expenditure could be proven by reference to his credit card statements; however, the only statements produced in evidence related to the period prior to separation.

20 [Mr B]’s counsel foreshadowed the possibility of applying for leave to re-open, with a view to providing evidence to show the

(Page 8)

money had been used in payment of costs associated with the building work. No application to re-open has been made. Given my doubts about [Mr B]’s credibility, and in view of the way in which the case was presented, I am not satisfied that the personal loan was required to meet anything other than [Mr B]’s legal expenses and his living expenses incurred post-separation. Although it has been included in the table of liabilities, I do not propose to take it into account.

Paid and unpaid legal costs

21 [Ms N] had paid more than $12,000 in legal expenses prior to trial and [Mr B] had paid more than $14,000. [Ms N] claimed that she owed a further $17,000 in costs and [Mr B] said he owed in excess of $8,000.

22 There was some doubt in relation to the extent of funds that might be held by [Mr B]’s solicitors on trust. [Ms N]’s counsel did not concede the extent of his paid and unpaid legal costs, and asked for them to be vouched. This had not been attended to by the end of the trial. I indicated I would be prepared to receive further information concerning this issue after the hearing. I have heard nothing further.

23 I am not satisfied either party has paid legal costs from property which could be reasonably regarded as jointly owned. I find that

[Ms N] has primarily discharged her legal expenses from the sale of shares she owned prior to meeting [Mr B] and from income she has earned after separation. I am uncertain how [Mr B] has paid his legal costs, but at least portion of them would have been paid from the $20,000 personal loan. In these circumstances, I do not propose to add-back the paid legal costs (which are of similar amounts in any event) and I do not propose to take into account the parties’ unpaid legal expenses.

Contributions

24 I turn now to consider the contributions made by each party.

Initial contributions

25 [Ms N] owned her home in [the southern suburbs] at the date of the marriage. She also owned some furniture, a car, a one-third interest in a block [in the south] and some shares. She had debts totalling less than $9,000 (excluding $2,000 she had drawn down to

(Page 9)

lend to [Mr B] before the marriage). I find she also had savings of about $8,000, half of which she lent to [Mr B] after the marriage. She had about $10,000 in a Tower Life superannuation fund and $15,000 in the Government Employees’ Superannuation Fund.

26 [Mr B] owned his home in [the northern suburbs] at the date of marriage. The parties had differing views about the value of their homes at the time, but they were in agreement that [Mr B]’s home was worth about $60,000 more than s [Ms N]’s. [Mr B] had a vehicle of similar value to [Ms N]’s vehicle. His furniture was somewhat less valuable than hers. He had no debts at all, apart from the money he had borrowed from [Ms N].

Contributions during the relationship

27 [Mr B] was receiving social security when the parties first met. He remained on benefits until late 1998, notwithstanding the help he received from [Ms N] to obtain regular employment. He was also undertaking occasional work in the building industry.

28 In late 1998, [Mr B] commenced a business development course. [Ms N] assisted him to some small extent with his studies and also in helping him start up a business. The business got off the ground in July 1999, but did not generate much income. [Mr B]’s taxable income each year from 2000/01 to 2003/04 was between $10,000 and $13,000.

29 [Ms N] was in full-time employment throughout the relationship. She earned between $37,000 and $50,000 per annum. She made a few modest payments into her Tower Life superannuation fund and then rolled it into her Government Employees’ fund. Excluding the amount of the rollover, her superannuation fund increased in value from about $15,000 at July 2000 to about $37,000 in July 2004. The increase represented a combination of payments made by her employer and interest on investments in the fund.

30 [Mr B]’s home in [the northern suburbs] was in poor condition when the parties met. I find they worked hard together improving the property from July 2000, with a view to selling it. I am satisfied the work done was largely as described in paragraphs 35 and 36 of

[Ms N]’s affidavit. I am satisfied [Mr B] grossly underestimated the
extent of [Ms N]’s work in paragraph 21 of his affidavit and he

(Page 10)

conceded in cross-examination that she had done more than he had
given credit for.

31 I do not accept that [Mr B] paid [Ms N] $3,000 for her efforts in improving the [northern suburbs] property. I find the $3,000 was repayment of one-half of the total amount she had advanced earlier. [Ms N] was not cross-examined on her claim that she had lent [Mr B] money, even though he denied having borrowed anything.

32 The [northern suburbs] property was eventually sold in December 2001 for $348,000 net. Over [Ms N]’s strong objections, [Mr B] then purchased a humble dwelling in [the inner suburbs] for $246,000. Using his considerable experience in the building industry, he drew up plans for the improvement of the home and made the necessary applications to allow the project to proceed. [Ms N] assisted him with some of the secretarial work. The parties agreed to use the proceeds of the [northern suburbs] property to finance the improvements.

33 Work on [the inner suburban home] finally started in September 2002. [Mr B] was confident the work would be completed in one year and would cost about $90,000. I find both parties worked hard on the project, with [Mr B] carrying out the main work and supervision. I find the work done was largely as stated in paragraphs 59 to 71 of [Ms N]’s affidavit. I find that [Mr B] again grossly underestimated the extent of [Ms N]’s involvement in the work in paragraph 27 of his affidavit.

34 The parties lived in the [inner suburban] home for part of the time the work was being done. I am satisfied the conditions were as unpleasant as described in paragraph 61 of Ms [Ms N]’s affidavit.

35 The project ran over time and over budget. When the money from the sale of [the northern suburban home] ran out, [Ms N] borrowed $75,000 on the security of her [southern suburbs] property. She used $15,000 from this money to discharge a liability relating to a new car she had acquired. I am satisfied the balance of the money was used to meet costs associated with the [inner suburban] property and joint expenses.

36 Although the parties planned to let the [the southern suburban] property, this did not come about, as the [inner suburban] property was never finished to a stage where they could take up permanent residence. [Ms N] believes [Mr B] deliberately slowed down the work

(Page 11)

to achieve this outcome, but there was insufficient evidence to allow me to draw such a conclusion. In any event, [Ms N] became so frustrated with the long delay that she moved back into [the southern suburban home] permanently in June 2004. A few months later she decided to move back into [the inner suburban property], but [Mr B] ordered her to leave after a few days.

37 The parties had executed an informal agreement in September 2003, which ultimately resulted in them becoming registered as tenants in common in equal shares of the [southern suburban] and [inner suburban] properties. The agreement recorded that [Ms N] was to pay [Mr B] $50,000 to reflect the fact that her home was worth less than the amount [Mr B] had contributed to the [inner suburban] property. The payment was to be made by [Ms N] borrowing the $50,000 and then being responsible for the repayment of the loan. Notably, no provision was made for any other property to be jointly owned. The parties later executed Wills, confirming they had no other jointly owned assets. The September 2003 agreement and their Wills are inconsistent with [Mr B]’s claim that it was agreed he would become a half owner of [Ms N]’s property in [the south], her superannuation and her shares. I did not accept his evidence on this issue.

38 By the time of separation, [Ms N] had much the same personal assets she had at the date of marriage. Her superannuation had increased in value as she had been receiving the benefit of the superannuation guarantee levy. She owed about $65,000 on her mortgage and credit card. [Mr B] had much the same personal assets he had at the date of marriage.

39 I am satisfied [Ms N] undertook the great majority of the household duties during the relationship, both in the [the southern suburban] and [inner suburban] properties. She also did almost all of the work associated with the maintenance of [the southern suburban] property. I accept that the condition of the [the southern suburban] property deteriorated to some extent during the relationship, but I was not persuaded this was a matter to take into account.

40 [Mr B] has continued to reside in the [inner suburban] property since separation. Although the property had undergone a dramatic transformation by the time of separation, there is still much work to be done. [Mr B] claims he has not finished off the work because he

(Page 12)

cannot afford the additional $75,000 he says is needed. Given his long experience in the building industry, it is difficult to understand how he so badly underestimated the time and expense required to complete the work.

41 Save as described above, the parties did not intermingle their financial affairs during the marriage. They kept separate accounts and [Ms N] was responsible for all payments on the loan obtained to finance part of the building work. They shared responsibility for some household expenses, but I am satisfied [Ms N] paid much more than half because she had much higher income. [Mr B] largely paid the outgoings relating to the [inner suburban] property and [Ms N] paid the outgoings on the [southern suburban] property.

Parties’ conduct

42 [Ms N] detailed her complaints about [Mr B]’s behaviour in paragraphs 75 to 80 of her affidavit. In essence she says he was chauvinistic, verbally abusive and ungrateful. She believes it was his behaviour that caused her to become depressed, which in turn required her to take medication. She says [Mr B]’s conduct made it more difficult for her to make her contributions and that this should be reflected in the outcome.

43 In Kennon v Kennon (1997) FLC 92-757 Fogarty and Lindenmayer JJ said at 84,294:-

“…where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage, or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions...”

44 [Ms N] did not allege any physical violence, but the Full Court in Kennon made clear that violence is just the “most obvious example of a wider and more general category of conduct which may be relevant”. Nevertheless I did not consider [Mr B]’s conduct was such as to warrant any adjustment. [Ms N] is a mature, independent woman. Her behaviour during the trial, both in and out of the witness box, suggested she is capable of being very forceful. I am satisfied she stood up for herself during the relationship. At all times she had

(Page 13)

the option of returning to her own home, which she did on many occasions. Whilst I accept that [Mr B]’s behaviour made life unpleasant for [Ms N], I was not persuaded it was so exceptional as to be a matter to be taken into account pursuant to the principles enunciated in Kennon.

Assessment of contributions

45 This is a case that warrants an asset-by-asset treatment in relation to some of the property. I am satisfied [Mr B] made no contribution whatsoever to [Ms N]’s [southern] property or to her shares. They should be excluded from consideration and retained by [Ms N].

46 Portion of [Ms N]’s superannuation entitlement was built up during the period the parties cohabited. I consider some allowance should be given to [Mr B] for this portion, since the parties were involved in a joint endeavour that prevented [Mr B] from engaging in full-time employment. [Ms N] was earning an income and increasing her superannuation entitlements whilst [Mr B] was working on the [inner suburban] property. [Ms N]’s counsel appeared to concede that some modest allowance (perhaps $6,750) should be given to [Mr B] on account of the increase in [Ms N]’s superannuation. Given that her superannuation increased in value by about $22,000 whilst they were together, I consider [Mr B] should receive the benefit of half that amount.

47 Otherwise, I am unable to see any reason why the parties’ contributions should not be regarded as being of equal value, provided that [Ms N] remains responsible for the mortgage she took out to equalise the capital contributions. The contributions both parties made were very valuable. [Ms N] earned a good income, which I am satisfied she contributed towards meeting expenses associated with the properties or joint expenses. She also did a substantial amount of work at the [the northern suburban] and [inner suburban] properties and did more of the housework than [Mr B] did. [Mr B] earned some income and also contributed the skills that he had acquired in the building industry. He helped with the work involved in getting the [northern suburbs] property ready for sale. Importantly he provided his labour and skills in bringing about a major transformation to the [inner suburban] property.

48 Counsel for [Mr B] appeared to argue that [Mr B] should be given additional credit for the special skills and experience he brought

(Page 14)

to bear in selecting the [inner suburban] property and planning and effecting the improvements. Presumably counsel had in mind the judgment of Holden and Guest JJ (with whom Kay J agreed) in JEL and DDF (2001) FLC 93-075, where their Honours suggested that:

“[i]n qualitatively evaluating the roles performed by marriage partners, there may arise special factors attaching to the performance of the particular role of one of them [and] [t]he Court will recognise any such special factors as taking the contribution outside the “normal range””.

49 The concept of “special” or “outstanding” contributions has been the subject of some adverse comment since JEL and DDF. In Figgins and Figgins (2002) FLC 93-122 at [57] Nicholson CJ and Buckley J expressed concern about the line of authority culminating in JEL and DDF and suggested that the doctrine of “special contribution” should be reconsidered in an appropriate case. All I need say here is that I find [Mr B]’s contributions fell a very long way short of being “special” in the sense discussed in JEL and DDF.

50 Although [Ms N] was opposed to undertaking the [inner suburban] project (for reasons which might now seem to be vindicated), she willingly pitched in to assist with the work, both physically and financially. The property has escalated considerably in value because of the capital and labour applied to its improvement and because of market forces. I would consider it unjust if [Ms N] were not permitted to share the benefit of that increase equally with [Mr B].

51 In light of the discussion above, and taking into account all of the evidence, I conclude: -

• The parties contributed equally to the pool of assets constituted by the [the southern suburbs] and [inner suburban] properties;

• Neither party made any contribution of substance to assets held by the other and each should therefore retain the assets currently in their possession;

• Each party should retain responsibility for their current liabilities (which in [Ms N]’s case includes the mortgage she obtained to equalise the capital contributions to the real estate).

• [Ms N] should retain her superannuation but pay [Mr B] $11,000 on account of the increase in her entitlements during the period of the relationship.

(Page 15)

Section 75(2) and other factors

52 Ultimately, neither party appeared to be pressing for an adjustment on account of s 75(2) factors. Given the length of the marriage, their respective ages and their current working capacity, I consider this was warranted. Accordingly there will be no adjustment.

Just and equitable?

53 The final step in the process of property adjustment is to step back and consider whether the proposed division is just and equitable.

54 Both parties came into the relationship owning a home that was essentially unencumbered. [Mr B]’s home was more valuable, but the gap was bridged when [Ms N] borrowed the money required to proceed with the [inner suburban] project. They have since disposed of [Mr B]’s home, but now own another that is substantially more valuable. In my view it is equitable they should share equally in the improvement in the value of their real estate, since it is the result of their joint efforts. It is also equitable [Ms N] should retain the property she had at the commencement, since [Mr B] has made no contribution to it.

55 The outcome I have foreshadowed is, in effect, what the parties themselves agreed in September 2003. Although I am in no way bound by that agreement, in my view it was eminently fair. I therefore consider the outcome to be just and equitable.

Orders

56 I do not propose to accede to [Ms N]’s request for the [inner suburban] property to be transferred to her. The agreement that the property is worth $650,000 was reached on the basis it was a “tentative” figure for me to bear in mind when making my decision. In my view, it would only be fair to test the market on the basis that both parties be allowed the opportunity to bid if they wish. Counsel for [Ms N] conceded as much in opening. As I am uncertain how the parties will wish to proceed with the marketing of the property, I will ask counsel to provide a Minute of Proposed Orders to give effect to my judgment.

I certify that the preceding [56] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate
(Page 16)