Oates and Oates

[2019] FCCA 2450

FEDERAL CIRCUIT COURT OF AUSTRALIA

OATES & OATES [2019] FCCA 2450

Catchwords:
FAMILY LAW – Property – significant contributions by way of personal injury compensation – wife has unresolved workers’ compensation claim – application for spouse maintenance refused.

Legislation:

Family Law Act 1975 (Cth) s.75(2)

Applicant: MS OATES

Respondent: MR OATES

File Number: ADC 4395 of 2017

Judgment of: Judge Young

Hearing dates: 15 and 16 August 2019

Date of Last Submission: 16 August 2019

Delivered at: Darwin

Delivered on: 5 September 2019

REPRESENTATION

Counsel for the Applicant: Mr Britton

Solicitors for the Applicant: Bartel and Hall

Counsel for the Respondent: Ms Cocks

Solicitors for the Respondent: Tindall Gask Bentley

ORDERS

1. The wife is to provide draft orders to the court reflecting these reasons within 14 days.

2. Liberty to apply.

IT IS NOTED that publication of this judgment under the pseudonym Oates & Oates is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADC 4395 of 2017

MS OATES

Applicant

And

MR OATES

Respondent

REASONS FOR JUDGMENT

1. This is an application for alteration of property interests.

2. The applicant wife is 53 years old.  The respondent husband is 48 years old. The wife is presently unemployed and in receipt of Newstart allowance. The husband is employed on a farm.

3. The parties began the relationship in 2002 or 2003 according to the husband and in about … 2003 according to the wife. It appears they began a relationship in about 2002 but I accept the wife's evidence that they did not begin living together until 2003.  They were married in 2005. They separated in February 2017. The relationship lasted about 13½ years. There are no children of the marriage.

4. The wife had two children from a previous relationship and they lived with the parties throughout. They were about 10 and six years old at the commencement of the relationship of the parties.  The husband had three children from a previous relationship and they spent time with him. One of the husband’s children lived with the parties for about a year.

   The property pool

5. At the commencement of the relationship the wife owned a house at A Street Suburb B , apparently jointly with her former husband.  She also owned some vehicles and personal effects.  The husband owned a house at C Street, Suburb B, and also a vehicle and some tools.  He also had an unspecified superannuation entitlement in an accumulation fund.  The husband said that the wife paid her former husband $2,500 in property settlement but I have been unable to make a decision about whether this was the case.

6. The husband says he assisted the wife in renovations at A Street Suburb B: painting the house, filling open trenches, removing rubbish and landscaping. The wife agreed that the husband had done some work but she generally minimised his contribution. I consider the husband made some significant contribution to readying the house for sale but it is not possible to be more precise than that.

7. The A Street Suburb B property was sold in … 2004.  The wife received net proceeds of $67,992.  Of that sum about $36,000 was paid into a mortgage offset account for the husband's house at C Street, Suburb B.

8. The husband said that in 2003 he paid his former wife $20,000 which represented half the equity in the C Street, Suburb B property.  He did not say how he financed this payment but I infer that the net position of the husband was that he had $20,000 of equity in the C Street, Suburb B property at the commencement of cohabitation.  He did not say how much was outstanding on the mortgage on the C Street, Suburb B property at the commencement of cohabitation.

9. Both parties were employed during much of the relationship. The husband was employed full-time, apart from some away from work due to a work injury.  The wife was employed part-time or on a casual basis.  It was not suggested that either party did not work to the full extent that their education and skills allowed.  The husband worked in factories and farms.  The wife worked in customer service. 

10. In 2006 the wife was injured at work.  It appears she received income support payments while unable to work.  In addition she received a payment or payments in redemption of her future entitlements to income.  She said she received lump sum payments totalling $55,000.  Some of this was spent on vehicles and the like.  She gave unchallenged evidence that some $52,000 of this money was paid into the mortgage offset account for the C Street, Suburb B house in … and … 2009.  Along with her payment of $36,000 in 2004 this amounts to lump-sum contributions of $88,000 by the wife to reduce the C Street, Suburb B mortgage. 

11. Ms Cocks for the husband submitted that as the account was a redraw account, and as amounts were redrawn from time to time, I should not find that the wife's cash contribution was, in reality, $88,000.  I accept that submission in principle but there was no evidence that this contribution was whittled down in the way Ms Cocks says. I am satisfied that the bulk of the money was used to reduce the mortgage balance.

12. In 2013 the husband was injured at work.  In his trial affidavit he claims that he received about $20,000 compensation for residual disability and about $40,000 for arrears of pay.  In cross-examination he conceded that he was mistaken about these figures and that he actually received lesser payments: $7,850 and $29,770 with the latter, apparently for arrears, a total of $37,620.  In his trial affidavit he said he spent $16,000 on a solar system for the house, gave $1,000 to the wife to "spoil” herself, purchased materials to renovate the kitchen and the balance was used to reduce the mortgage.  Although I cannot make a definite finding about how much money was spent I accept that the bulk of the $37,000 was spent on improvements or in reducing the mortgage on C Street, Suburb B. 

13. The asset pool at trial was as follows:

Description	Wife	Husband	Total
Assets
1	C Street Suburb B	$165,000
2	D Street, Suburb B	$80,000	$80,000
3	Wife’s chattels and cars	$19,835
4	Husband’s chattels and cars	$46,410
5	Wife’s TPD superannuation payment	$45,585
6	Add back for portion of TPD superannuation payment used by wife for legal fees	$29,299
Total assets	$174,719	$291,410	$466,129
Liabilities
7	Mortgage C Street Suburb B	$300	$300
8	Mortgage D Street, Suburb B	$77,500	$77,500
Total liabilities	$77,800	$77,800	$155,600
Net assets	$96,919	$213,610	$310,529
Superannuation
9	Wife’s superannuation	$24,443
10	Husband’s superannuation	$72,169
Total Superannuation	$24,443	$72,169	$96,612

1. By 2016 the mortgage on the C Street, Suburb B property had been reduced to almost zero, reflecting, I am satisfied, lump sum payments by the wife of about $88,000, payments by the husband of $37,000 and his initial contribution to the equity of about $20,000. Of these contributions, which amount to $145,000, the wife contributed about $88,000 or 61% and the husband about $57,000 or 39%.  The evidence showed that generally these payments were made up of compensation payments for incapacity, payments of arrears of wages and redemption of rights to future payments.  The general principle is that compensation for incapacity is generally treated as the sole contribution of the injured party but the evidence was not precise about how much was injury compensation and how much was arrears of wages or redemption of future entitlements.  However, I am satisfied that significant amounts were paid to both parties for residual disability or incapacity. 

2. Ms Cocks pointed out, as noted, that this picture must be modified because of redraws by the parties - although there was no specific evidence about that, and regular mortgage payments made from the wages of the parties. I accept that submission but nevertheless, after taking account of the employment of both the parties and that the husband was generally paid more, I am satisfied that the financial contribution to the acquisition of the C Street, Suburb B property was, at least, 50% by the wife.

3. In 2016 the parties decided to buy an investment property at D Street, Suburb B for $152,000.  They borrowed $160,000 secured, according to the husband, against the A Street, Suburb B property and, presumably, the C Street, Suburb B property.

4. At trial the joint mortgage on D Street, Suburb B stood at $155,000 and the value of the property was agreed at $160,000 with, in practical terms, almost zero equity.

5. The joint mortgage debt on C Street, Suburb B is only $600.

6. The husband agreed that non-financial contributions were equal and made no submission about financial contributions.  Overall, he sought an equal division of assets.

7. The wife made no submission about contributions but sought orders that the C Street, Suburb B property be sold and the mortgage on D Street, Suburb B be paid out and the property be transferred to her.  She said nothing about the balance of the proceeds, if any, but on the agreed value of $165,000 there would be little, if anything, left over after the costs of sale.  This would result in something like 85% of the non-superannuation assets going to the wife and 15% to the husband.  That would not be a just and equitable outcome.

8. The husband paid the mortgage on D Street, Suburb B until May 2019.  When the wife was ordered to pay half the mortgage she had been in occupation since November 2018.  This is a significant contribution by the husband but is offset because the husband had lived since separation in a house that was co-owned, at least in equity, with the wife but mortgage free.

9. Another area of contention was that the husband received the rents on D Street, Suburb B without accounting to the wife.  The evidence suggested the rent and other outgoings were about equal to the mortgage payments which the husband paid from separation in February 2017 to May 2019.  He also claimed the entirety of the outgoings as a tax deduction, which simply reflected the fact that he paid them.  In 2019 the wife was paid $74,884 for the Total and Permanent Disability (“TPD”) insurance attached to her superannuation account.  From this sum she has paid $29,299 for legal fees leaving a residue of $45,585 in cash. This was paid to her because, as the name suggests, she has a significant incapacity.  While the premiums on the policy might be seen as a joint contribution I am satisfied that the capital sum ought to be treated the same way as compensation for personal injury, that is, as a contribution by the injured or incapacitated party.  While I am prepared to treat the $29,299 paid for legal fees as an "add-back" I also propose to treat the whole amount, which was received after separation in 2019, as the wife's contribution and to give full credit for it.  It represents 24% of the net asset pool. 

10. Leaving aside the wife's TPD payment, I find that, overall, contributions were 52% by the wife and 48% by the husband.  However, as noted, I find that the TPD payment of $74,884 in total, including the add-back for legal fees, is the wife's contribution.  This results in overall contributions of 63.5% by the wife and 36.5% by the husband in relation to non-superannuation assets.

11. In relation to superannuation, it was submitted by the husband that his superannuation accumulation account was $49,854 at separation.  It was submitted that this amount should be used to “equalise” the parties’ superannuation interests with the implicit submission that the each party contributed equally to the accumulation of the other party’s superannuation.  I accept that submission.  The wife's current account is $24,443.  The total of these amounts is $74,297.  If they were “equalised” this would result in each party having an interest of $37,148 (ignoring cents).    

12. However, the husband's present superannuation balance is $72,169.  The husband’s submission implied that the increase in the figure since separation was entirely his contribution. I do not accept that submission because the current balance also represents 2½ years of capital growth on the balance at separation in February 2017, as well as further contributions by the husband.  The husband presented no evidence about the level of his contributions compared to capital growth but, doing the best I can, I would assess the amounts as about equal.  So of the $22,000 increase about $11,000 represents capital growth.  Accordingly, I consider that each party should be seen as contributing equally to the capital growth or $5,500 each.  So I propose to add that contribution to the amount that each party should be entitled to after equalisation.  This results in an “equalised” figure of $42,648.  Accordingly, I consider there ought to be a superannuation split out from the husband superannuation to the wife of $18,205.

    Section 75(2) factors

13. The wife is 53 years old.  She currently receives Newstart Allowance but has applied for a disability support pension. 

14. The wife has significant health problems.  The medical report from her general practitioner said she was currently unable to work due to ankle injuries at work, including injuries to tendons in her ankle.  He said she has residual disability and is in pain.  He thought she may be suffering from a complex regional pain syndrome.  He thought she should be assessed by a psychiatrist.

15. He thought the wife could work if a suitable job could be found, involving minimal standing and mobilising, no lifting, squatting or climbing stairs.

16. It appears the wife has a workers’ compensation claim under way.  She did not give any evidence about this, either as to the nature or amount of the claim or the prospect of success. I consider that to be an important and unexplained lacuna in her evidence, particularly as she seeks an order for spousal maintenance.  I am not satisfied that the wife has a need for spousal maintenance.

17. On the contributions percentages I have found (63.5% by the wife and 36.5% by the husband) the husband would pay the wife about $97,466. I consider that it is just and equitable having regard to her health that a further sum be paid to her to enable her to obtain ownership of the D Street, Suburb B property free of mortgage. I consider that the sum she needs to do that is $115,000. This requires a payment beyond the contributions factors of $17,534 to her from the husband, which I find is the appropriate adjustment for s 75(2) factors.

18. The husband is 48 years old.  The husband earns about $50,000 a year. He is a manual worker, presently working on a farm. He has no formal qualifications. He has re-partnered with Ms E. She works part-time, about 27 hours a week.  She says she has a diagnosis of High Suspicion for Breast Cancer and intends to have a total mastectomy this year.  She also intends to have some other surgery. She expects to be unable to work for an extended period and, presumably, the husband will support her during any such period. Her evidence about this was unchallenged.  Consequently, I am not satisfied the husband has the capacity to pay spousal maintenance.

19. The order I will make will see the husband pay the wife $115,000. This will enable her, along with her own cash resources of $45,585 to pay the existing mortgage on D Street, Suburb B and perhaps have a small amount of cash left over. The husband, on the other hand, will need to refinance the property at C Street, Suburb B to the extent of about $115,000. He will then have some significant mortgage commitment. In the circumstances, I do not propose to make any further adjustment for s 75(2) factors. I do not consider that the wife has demonstrated a need for spousal maintenance while her workers’ compensation claim is unresolved or that the husband has the capacity to pay spousal maintenance.

20. I propose to make an order that the husband pay the wife $115,000 within 90 days, failing which the property at C Street, Suburb B is to be sold and $115,000 paid to the wife from the proceeds. The wife also gave evidence that she will be entitled to borrow up to about $44,000 from a government supported lender to persons on low incomes but I do not consider that is likely to be required. The husband did not give evidence of his borrowing capacity but $115,000 is about 69% of the value of the C Street, Suburb B property and there was no evidence to indicate he would be unable to obtain finance.

21. I will make a super splitting order of $18,205 to the wife from the husband’s superannuation fund.  There will need to be procedural fairness given to the trustee and the order will not be operative until a letter from the trustee is provided.  Each party will retain any other property or chattels in their possession.

22. The result of the orders will be as follows:

Description	Wife	Husband	Total
Assets
1	C Street Suburb B	$165,000
2	D Street, Suburb B	$160,000
3	Wife’s chattels and cars	$19,835
4	Husband’s chattels and cars	$46,410
5	Wife’s TPD superannuation payment	$45,585
6	Add back for portion of TPD superannuation payment used by wife for legal fees and other expenses	$29,299
Total assets	$254,719	$211,410	$466,129
Liabilities
7	Mortgage C Street Suburb B	$600
8	Mortgage D Street, Suburb B	$155,000
Total liabilities	$155,000	$155,600
Net assets	$99,719	$210,810	$310,529
Husband’s payment to the wife	$115,000	($115,000)
Final division	$214,719    (69%)	$95,810 (31%)	$310,529
Superannuation
9	Wife’s superannuation	$24,443
10	Husband’s superannuation	$72,169
Splitting order	$18,205	($18,205)
Total Superannuation	$42,648 (44%)	$53,964 (56%)	$96,612

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Young

Date: 5 September 2019