NIKOLOV & NIKOLOV
[2015] FamCA 576
•17 July 2015
FAMILY COURT OF AUSTRALIA
| NIKOLOV & NIKOLOV | [2015] FamCA 576 |
| FAMILY LAW – PROPERTY SETTLEMENT – Where all other assets, aside from the wife’s own bank account, including three pieces of real property, bank accounts, shares and motor vehicles, are legally owned by the husband – Where the parties have no liabilities – Where it is clearly appropriate for an order to be made to recognise both the wife’s contributions and future needs – Where this has been a 50 year marriage – Where the wife provided the majority of care and supervision for the children – Where the husband was the breadwinner – Where the husband proposed no adjustment at all – Where the husband simply does not understand the acquisition by the wife over time of an equitable interest in his assets – Where the parties contributed equally to the parties’ asset pool – Where both parties do not have the capacity for paid employment – Where the husband has three real properties that generate rental income for him – Where the husband failed to disclose the extent of his recent income – Where there is a substantial projected capital gains tax liability in relation to two of the husband’s properties if they were to be sold – Where it would work an injustice against the wife to introduce the possibility of capital gains tax when no property is likely to be sold –Husband to transfer to the wife one of his real properties, the property in which she is currently living, and pay her a cash property settlement amount |
| Family Law Act 1975 (Cth), ss 75, 79 |
| Bevan & Bevan [2013] FamCAFC 116 Stanford & Stanford (2012) 247 CLR 108 |
| APPLICANT: | Ms Kolokov as case guardian for Ms Nikolov |
| RESPONDENT: | Mr Nikolov |
| FILE NUMBER: | NCC | 477 | of | 2014 |
| DATE DELIVERED: | 17 July 2015 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Cleary J |
| HEARING DATE: | 21 & 22 May 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Duane |
| SOLICITOR FOR THE APPLICANT: | Mason Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Tregilgas |
| SOLICITOR FOR THE RESPONDENT: | NLS Law |
Orders
Within sixty (60) days the husband shall pay to the wife the sum of $215,260.
Within sixty (60) days the husband shall do all such acts and things to transfer his right title and interest in the property at B Street, Suburb C, and more particularly described as Lot … of section A in Deposited Plan … to the wife.
That pending the transfer described in Order 2 hereof, the husband shall do all acts and things to discharge the mortgage to the Westpac Bank, registered number …, and indemnify the wife against all liability pursuant to the mortgage.
Each party shall otherwise retain all right title and interest in the assets, items of personalty and superannuation benefits and entitlements, presently in their possession, other than in accordance with these Orders and notations.
That the husband and wife pay and indemnify each other in respect of any and all liabilities attaching to the assets in that party’s possession and in respect of any and all liabilities standing in the sole name of that party.
That in the event of either party refusing or neglecting to sign within fourteen (14) days after receipt of a written request to do so, any documents necessary to put into effect the terms of the Orders, the Registrar of the Newcastle Registry of the Family Court of Australia is hereby appointed to execute such documents in the name of the defaulting party pursuant to the provisions of
s 106A of the Family Law Act.
NOTATION:
(A)The parties agree that the husband should have a period of sixty (60) days in order to enable him to remove the furniture and white goods stored in B Street, Suburb C.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Nikolov & Nikolov has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 477 of 2014
| Ms Kolokov as case guardian for Ms Nikolov |
Applicant
And
| Mr Nikolov |
Respondent
REASONS FOR JUDGMENT
Introduction
By her Amended Application filed 6 March 2015, the applicant wife seeks orders for an adjustment of interests in matrimonial property.
By his Amended Response to the wife’s original Initiating Application filed
7 July 2014, the respondent husband asks the court to dismiss that application.
The Parties
The applicant is the wife, aged 73 years. She was born in Country D and has lived in Australia since early 1974; about 40 years.
The respondent husband is aged 76 years. He too was born in Country D and has lived in Australia since 1966; almost 50 years.
Both parties speak and understand English, but have continued to use their first language, Country D. The wife, whose physical and mental health is frail, has reverted to using Country D exclusively in recent years. Both parties were ably assisted by a Country D interpreter.
Short History Of Relevant Events
The parties met in their native country in 1963.
In the following year they married and their first child Ms Kolokov was born.
In 1966 the husband moved to live in Australia, leaving the wife and infant daughter in the care of his own father. For eight or nine years this arrangement continued.
The wife attended to the care and upbringing of Ms Kolokov.
The wife also did manual labour on the farm. She milked cows and sheep, made cheese, washed and yarned wool and made clothes and blankets out of that wool. Seasonally she planted vegetables and preserved the fruit and vegetables for winter supply and she made bread each week. The wife assisted her father-in-law to collect hay off the fields to feed the farm animals during the winter when the animals were under shelter.
For his part, the husband arrived in Australia intending to, using his own words, “set up a better life for my family”. He undertook factory work for various companies, commencing with BHP, working on a full time basis. The husband worked hard and saved.
Somewhere between his arrival in 1966 and 1972, the husband was injured at work during his employment with BHP. On 21 July 1972 he received a payment of compensation for that injury in the sum of $23,283.00.[1]
[1] Exhibit 6
On a date between July 1972 and early 1974, the husband used part of that compensation payment to purchase his first property, hereafter known as the “Suburb E property”. The purchase price was approximately $12,000.
The proposition was put to the wife during cross examination that the husband sent back money for herself and the child during the years when they lived apart. The wife vehemently disagreed. Having heard all of the evidence, I consider it likely that the husband did send some money back to Country D, but not directly to the wife. If he did send it, the transfer was probably to his father, however, there was no indication of how much was allegedly sent and it is not an issue for determination.
After eight years of physical separation the wife concluded that the husband was not going to return to Country D. She made the decision to leave the farm of her father-in-law and travel to Australia, to use her own words, “to preserve our marriage”.
On her arrival in February 1974 the wife spoke no English and had no savings. The wife and Ms Kolokov moved in with the husband to the Suburb E property.
The reunion of the parties was not an easy one. The wife and Ms Kolokov moved out of the Suburb E property, staying with the wife’s sister for a short period, before moving back.
This pattern became characteristic of the 40 years that have followed.
In 1975 two things happened. First the husband’s father migrated from Country D to Australia which had the effect of stabilising the parties’ domestic life. Second the husband purchased a property at B Street, Suburb C (“B Street”), he says for approximately $15,000, the wife asserting $8,000. There was no evidence to enable me to determine the purchase price.
In 1977 the parties’ second child Mr F was born.
In 1979 the husband purchased two adjacent properties in G Street, H Town (“the H Town properties”). The husband borrowed the majority of the purchase price.
On a date prior to December 1989 the husband had a second accident at work, falling from a ladder during his employment with I Pty Ltd. He again injured his back, leg and heels. In December 1989 he received a nett payment of $10,075 by way of compensation.[2]
[2] Exhibit 7
In that year also the wife had serious ill health. She had a thyroid tumour removed and went through chemotherapy and radiation therapy.
In approximately 1990 or 1991 the husband sold the Suburb E property for $160,000.
He used the sale proceeds to purchase two more properties, 2 B Street, Suburb C (“2 B Street”) and J Street, Suburb C (“the J Street property”). As each property was purchased the husband organised tenants for it who rented single rooms in the nature of a boarding house.
The husband undertook renovation and maintenance work on the various properties, installing new kitchens and bathrooms, floors and renewing plumbing and electrical work. He did much of the physical work himself, sometimes with the assistance of his father and on occasions paying for tradesmen. The husband denied that the wife had assisted with any of that renovation or maintenance work, other than sometimes assisting with rubbish removal from the properties.
The wife asserted that she had assisted in the renovation work by tearing down old walls, filling trailers with rubbish, plastering, pushing wheelbarrows of concrete, painting into the early hours of the morning and assisting with the installation of bathrooms and kitchens. Once brought up to standard for rental, the wife maintained the properties by mowing and tending to the gardens and by cleaning.
I accept the wife’s evidence for two reasons. First, the wife had undertaken hard physical labour on a daily basis on her father-in-law’s farm in Country D, which establishes her capacity for hard, physical work. Second, the husband had two injuries; the second one occurring after the wife arrived in Australia. The injuries from the later accident aggravated the existing injury to his back and incapacitated him to some extent because of an injury to his foot. I consider it likely that although the husband did more of the physical work when he was able to, the wife did carry out such work probably in combination with her father-in-law.
The parties agree that the one task which the husband always undertook himself was the collection of rent from the tenants in each of the properties.
In 1995 the quality of the parties’ marriage deteriorated, although it appears that the pattern of the household continued. By then, Ms Kolokov had been living independently for about eleven years and had married. Mr F was 18 years old.
The husband continued to manage the properties. The wife was cooking, cleaning and washing for the husband and Mr F.
On 21 December 1999 the wife filed an Initiating Application for final property orders. In that document she identified that the parties had been separated under the one roof since 1995 and that she herself had left the matrimonial home on 27 August 1999.[3]
[3] Initiating Application of the wife filed 21/12/1999, para D11
The husband agrees that there was a separation under the one roof, however just as the wife continued her roles, the husband continued to financially support the wife during that period of four years, paying all household bills and taking the wife to the doctor as needed. As he did throughout the relationship, the husband managed the parties’ finances, including doing the family shopping himself in the absence of the wife, bringing it home for her to unpack.
The physical separation in August 1999 was effected by the wife moving out of B Street into Ms Kolokov’s home. When she took that step the husband ceased financially supporting her and the wife successfully applied for a Commonwealth benefit.
Soon after leaving the home, the wife was diagnosed with a brain tumour. She had surgery and most of the tumour was able to be removed. The wife continued to live with Ms Kolokov for two and a half years, where she received nursing care until she recovered her health.
This was an immensely difficult period of time for the wife:
I had to learn everything again, I could not eat, walk, talk or look after myself in any way. My daughter nursed me back to good health. After two and a half years I thought I was intruding in my daughter’s life and moved back with [the husband] however we did not share a room.
During that two and a half year period, and in response to the wife’s application, the husband had sold the H Town properties for approximately $430,000.
On 23 May 2001 interim orders were made by consent providing for the nett proceeds of sale of those properties to be deposited into an interest bearing account, being a controlled money account operated by the parties’ respective solicitors.[4] However the property proceedings did not go ahead.
[4] Order 1.2 made 23/05/2001
On 8 August 2001 orders were made by consent that the monies held in the controlled monies account be transferred to the husband and that the wife’s application of 21 December 1999 be withdrawn. Prior orders were discharged and hearing dates projected for July 2001 were vacated.[5]
[5] Orders 1-4 made 08/08/2001
The wife was still going through chemotherapy and was suffering from depression. She did not feel up to proceeding with the property settlement and perhaps also, independent life.
Initially the parties agreed that the money from the H Town properties would be paid to their son Mr F. On 9 August 2001 $390,000 was transferred to Mr F, however in 2002, he returned all but $20,000 of that amount to the husband.
After the wife returned to live with the husband, they appear to have resumed the quality of relationship that had existed between 1995 and 1999.
The wife resumed the cooking, most of the cleaning and assistance with maintenance on the rental properties. She did the washing for the parties and Mr F. She also spent time gardening and tending to plants. The parties did not share a room and the husband referred to the parties having “lived separate lives”.[6] This appears to be a reference to levels of intimacy rather than the mutually supportive activities which were continuing.
[6] Affidavit of the husband filed 10/04/2015, par 31
After the return of the wife to the family home, the husband recommenced financially supporting her and the wife’s pension ceased.
The period between late 2001 and November 2013 was one of shared living on a separated basis. The husband stated there had been no reconciliation, but in terms of mutual support and contribution, the exact characterisation of their relationship makes no difference.
In November 2013 there was an incident between the parties where police were called.
On 12 November 2013 and interim Apprehended Violence Order (“AVO”) was made for the protection of the wife from the husband.[7]
[7] AVO Document filed 28/02/2014
The wife was admitted to the K Mental Health Service and after the AVO was made, the husband chose to accept the advice of the police that he should not remain in the home and he moved into the parties’ property next door, 2 B Street.
That situation has continued to date with the wife and Mr F living at B Street and the husband living at 2 B Street. Tenants continue to occupy rooms in both properties, as well as in the J Street property.
On 28 February 2014 the wife initiated the current set of proceedings.
On 27 March 2014 an order was made that the wife be at liberty to occupy the B Street property to the exclusion of the husband until further order. The financial position of the parties was otherwise preserved by order.
On 26 May 2014 the parties’ daughter Ms Kolokov was appointed as Case Guardian for the wife.
Since the physical separation effected by the husband leaving the home, the wife has again received a Commonwealth benefit, a pension of $827.00 per fortnight.
The current arrangements see the wife relying on Ms Kolokov to provide her with some assistance for day to day tasks, such as shopping for groceries and attending appointments.
At the time of swearing her affidavit in April 2015, the wife expressed a wish to purchase a small property close to Ms Kolokov in another suburb of Newcastle, with a contingency fund to enable her to be more financially secure into the future.
During the course of the hearing, the wife changed her position to a wish to remain living at the B Street property together with Mr F for as long as he wished, at least in the short term.
Approach to alteration of interests in property
In considering applications for alteration of property interests and transfer of property the Court must:
(i)Identify the existing legal and equitable interests of the parties in property;[8]
(ii)Consider whether it would be just and equitable in the particular circumstances to make an alteration;
(iii)
If an alteration should be made, to consider the matters contained in
ss 79(4) and 75(2) of the Act in coming to an adjustment; and
(iv)Analyse and consider whether the adjustment under consideration would be just and equitable.
Identify the assets and liabilities of the parties
[8] Stanford & Stanford (2012) 247 CLR 108; Bevan & Bevan [2013] FamCAFC 116
Assets
The parties’ assets are set out in the joint balance sheet:[9]
[9] Exhibit 3
O’ship
Description
Wife’s value
H’band value
ASSETS
1
H
B Street, Suburb C
$540,000
$540,000
2
H
2 B Street, Suburb C
$530,000
$530,000
3
H
J Street, Suburb C
$360,000
$360,000
4
H
Newcastle Permanent Savings Account
$66,677
$66,677
5
H
Commonwealth Bank Account
$2,489
$2,489
6
H
Newcastle Permanent Cheque Account
$200
$200
7
W
Newcastle Permanent Building Society
$17,414
$17,414
8
H
NIB Shares (4,200)
$12,180
$12,180
9
H
IAG Shares (2,452)
$13,388
$13,388
10
H
Station Wagon
$500
$500
11
H
Sedan motor vehicle 1
$1,500
$1,500
12
H
Sedan motor vehicle 2
$2,000
$2,000
13
H
Household Contents
$1,000
$1,000
Total
$1,547,348
$1,547,348
Of the assets identified in the parties’ joint balance sheet, the only legal interest of the wife is her savings in the Newcastle Permanent Building Society of $17,414 and some household effects. All other assets, the three pieces of real estate, bank accounts, shares and motor vehicles are legally owned by the husband.
Liabilities
The parties have no liabilities.
Where it would be just and equitable to make a property adjustment
There was initially a submission that the facts of this case fell within the parameters of Stanford & Stanford. After an early indication by me that such a position appeared to be unsustainable given the wife’s clearly stated wish to be independent financially and to manage her own future, together with her wish to remain separated from the husband, counsel sensibly withdrew from that position.
This has been a 50 year marriage and is still on foot. There is no application by either party for divorce, although there may be.
The parties have two adult children and have worked and lived together, often unhappily, for about 40 of the 50 years of their marriage.
An application having been made, it is clearly appropriate for an order to be made in favour of the wife to recognise her contributions and future needs.
An adjustment in her favour is required.
Consideration of ss 79(4) and 75(2) of the Act
Given that an adjustment is required, the respective contributions and future entitlements of the parties need to be considered.
Both parties have worked hard physically, and by their careful and frugal lifestyle, to acquire assets.
The husband was in full time employment and used his wages and compensation payments to create a platform for the acquisition of real estate which thereby created an income stream that supported both parties.
The husband acknowledges that the wife provided the great majority of what was required for the care and supervision of the children and of course, for the first 10 years of their daughter’s life, she did so in the absence of the husband.
The wife acknowledges that the husband was the bread winner throughout the marriage and that she was never in the paid workforce.
The parties began their married life as young people in their very early twenties with no assets of their own.
They now have $1.5 million to provide for their respective futures.
I accept the submission of counsel for the wife that there could hardly be a clearer example of equal contribution over a long marriage.
The wife proposes an equal division of the assets.
The husband proposes no adjustment at all.
I consider it likely that the husband was genuinely unable to give instructions for any adjustment. His evidence revealed both his honesty in how he went about managing his financial affairs, including the filing of his taxation returns, and the keeping of orderly records, at least until the most recent separation. It also revealed his profound incredulity that the wife would be entitled to have assets transferred into her legal ownership.
The husband either does not accept, or as I think more likely, simply does not understand the acquisition by the wife over time of an equitable interest in his assets.
Having come to the conclusion that the parties have contributed equally to the parties’ asset pool, I now turn to their future needs.
The relevant matters to be taken into account are as follows.
The age and state of health of each of the parties
The parties are 73 and 76 respectively.
Neither is particularly well.
The wife has had invasive surgery in relation to her brain tumour and has suffered with anxiety and at least one episode of “acute distress” requiring sedation.[10] She has some difficulty with her memory and is acutely stressed by this litigation.
[10] Affidavit of the wife filed 10/04/2015, Annexure A
The husband has had some physical injuries which have come back to create problems for him. He has pain in his legs. The proceedings have also caused him significant stress.
Both the adult children of the parties were present throughout the proceedings, no doubt anxious to see a resolution of their parents’ dilemma.
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
The wife has a Commonwealth pension as her only source of income and some money in the bank, saved from a previous time of receiving Commonwealth benefits. She has no capacity to engage in paid employment.
The husband has the three properties and each of the tenants in the three properties pays $150 per week per room with some minor variation. At any particular time there are between 10 and 15 tenants all told. The husband has the physical and mental capacity to continue to manage the properties and the income and outgoings associated with them. He likely does not have the capacity for paid employment.
The responsibilities of either party to support any other person and the eligibility of either party for a pension, allowance or benefit under any law of the Commonwealth or any superannuation fund or scheme
The wife receives a Commonwealth pension and neither party has a superannuation benefit.
The husband may become eligible for a pension or part pension when his rental income reduces.
Where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable
The parties are separated and not divorced. They have been separated on a final basis for about 18 months. Throughout the marriage they maintained a good standard of living but never an extravagant one.
The wife, by remaining in Country D caring for the parties’ daughter, enabled the husband to work fulltime to capacity to raise funds for the future support of the family.
In the 40 years they were together, the wife provided domestic services, cooking, cleaning, washing and physical labour in the conservation and maintenance of the parties’ investment properties.
The duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
The marriage has endured for 51 years.
Both parties started out in a rural community.
The wife arrived in Australia with a child of nine or 10 years and within three years of her arrival, the parties had their second child. She was a parent to a child under 18 for the first 30 years of the marriage.
The terms of any order made or proposed to be made under s 79 in relation to the property of the parties
An order for adjustment in favour of the wife giving her a half share of the husband’s legal assets will have an impact on the income generating quality of the real estate.
Any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
Capital Gains Tax
On a day of hearing the husband filed an affidavit by a chartered accountant.[11]
[11] Affidavit of Mr L, filed 20/05/2015
The material was relevant, being the capital gains tax projected in the event of the sale of any of the three pieces of real estate. The B Street property is unaffected, having been purchased before the relevant date in September 1985. The other two properties would attract a combined maximum capital gains tax of $156,863.
The evidence of the husband was a strong wish not to sell either of those properties if it could possibly be avoided. The husband’s preference would be to borrow, if necessary, to pay out the interest of the wife.
However, I accepted that there may be an order for such sale and allowed the evidence to come in on that basis.
The court has a discretion about how to take into account the possibility of capital gains tax but should not ignore the existence of the issue.
In this matter it was established that an analysis of the financial statements of the husband from May 2014 revealed a sum of approximately $40,000 unaccounted for after all other expenses were taken into account.[12] That is, the husband had about $172,000 in bank accounts in May 2014 and about $70,000 in April 2015. The husband’s evidence about that was that he had spent the money.
[12] Financial statements of the husband filed 06/05/2014 and 10/04/2015
Given his history of respect for money and thrift in lifestyle, it seems unlikely that he would spend $40,000 with no asset to show for it. In combination with this evidence is the admission by the husband that he ceased banking the rental income from October 2014. Indeed he was fairly explicit about not banking but making arrangements to store cash money at home.
He said words to this effect:
Since September 2014 he had paid all bills by cash and also I saw trouble like this [referring to the litigation], I am spending it. I worry day and night about coming to this. You questioning me to upset me.
I consider the probable explanation is that the husband has been saving as hard as he possibly can to be in a position to meet any order of this Court that is made against him for a cash payment to the wife. That has led to a failure to disclose the extent of his income in his financial statement.
However he gave his evidence in an honest and straight forward way, conceding that the average weekly income from the B Street property has been $750 per week, with five tenants, and that that income will be lost to him if the wife remains in the property.
Further that there are six tenants at 2 B Street (on average there are six to 10, sometimes less), each paying $150 per week, which would amount to $900 per week.
There are four to five tenants at the J Street property, sometimes more, which generates an income of about $740 per week.
The income disclosed in his financial statements in May 2014 was a total of $1,284 and $1,500 in April 2015.The current figure is between $2,300 and $2,400 per week
Although the disclosed income was said to be an average figure, it was very much a conservative view of average, and I am comfortably certain that the husband has earned more than $1,500 per week from the tenants consistently over the last 12 months, which money is being saved.
In my view it would work an injustice against the wife to introduce the possibility of capital gains tax having to be paid by the husband when:
a)No property is likely to be sold;
b)The time when the taxable event takes place would be uncertain even if there were to be a sale; and
c)The capital gains tax, if added to the income of the husband and on present indications, would be nowhere close to the maximum payable.
Accordingly, rather than attempt to bring back onto the balance sheet income and savings of between approximately $40,000 and $100,000, I will accept the balance sheet as it is and make no specific provision for capital gains tax.
Legal Costs
The wife has paid about $45,000 in legal costs. The husband has paid $14,000 in legal costs, reflecting a period of time when he represented himself.
Conclusion
There should be an adjustment in favour of the wife to effect an equal division of the assets by transfer to her of B Street, the home in which she presently lives, into her sole name. The wife is then free to sell the property now or in the future to meet her accommodation and personal needs.
There should also be a cash payment of $215,260 by the husband to the wife. This will alter her current financial position from $17,414 to $773,674. That figure comprises B Street, valued at $540,000, plus building society funds of $17,414 and her household contents estimated at $1,000.
The nett asset position of the husband will be $773,674. He retains
2 B Street and the J Street property, with an obligation to pay $215,260 from undisclosed savings and or borrowings. It is possible, but less likely, that one of the properties will be sold. The husband will probably maintain tenants in those properties to generate income.
Accordingly, an Order will be made for:
(1) a transfer to the wife of the B Street property, with a period of two months allowed in order to enable the husband to remove the furniture and white goods stored in that property; and
(2) a cash payment to the wife of $215,260.
I am satisfied that the Orders effect a just and equitable adjustment of interests in view of contributions and needs.
I certify that the preceding one hundred and seventeen (117) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 17 July 2015.
Associate:
Date: 16 July 2015
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Injunction
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Costs
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