ORCHIDE & ORCHIDE
[2017] FCCA 1833
•11 August 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ORCHIDE & ORCHIDE | [2017] FCCA 1833 |
| Catchwords: HELD – The Wife’s superannuation not be included in the pool of assets for division between the parties – there should be a 25% adjustment in the Wife’s favour for contributions –there should be a 2.5% adjustment in the Husband’s favour in relation to section 75(2) factors – ordered the Wife refinance the liabilities currently secured over the former matrimonial home, pay the Husband the sum of $20,795 and the Husband transfer to the Wife his interest in the former matrimonial home and the Wife retain her superannuation. |
| Legislation: Family Law Act 1975, ss.75(2), 79(2), 79(4) |
| Cases cited: Hickey and Hickey and Attorney General for the Commonwealth of Australia [2003] FamCA 395 Stanford v Stanford [2012] HCA 52 Bevan and Bevan [2013] FLC 93-545 Bevan & Bevan (No 2) (2014) FLC 93-572 Trask & Westlake [2015] FamCAFC 160 Zaruba & Zaruba [2017] FamCAFC 91 |
| Applicant: | MR ORCHIDE |
| Respondent: | MS ORCHIDE |
| File Number: | MLC 6035 of 2015 |
| Judgment of: | JUDGE BENDER |
| Hearing date: | 28 June 2017 |
| Date of Last Submission: | 28 June 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 11 August 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr McFarlane |
| Solicitors for the Applicant: | Berry Family Law |
| Counsel for the Respondent: | Mr Morfuni QC with Mr Sweeney |
| Solicitors for the Respondent: | Mills Oakley |
ORDERS
The Wife pay to the Husband the sum of $20,795 (“the payment”) on or before the 10th day of October 2017 (“the date”);
Contemporaneously with the payment:
(a)the Husband and the Wife do all necessary acts and things and execute all documents necessary to cause the Bank A Home Loan Account Number (omitted) secured by registered mortgage number (omitted) (“the Mortgage”) over the real property at Property A in the State of Victoria (“the Property A property”) to be discharged (“the Bank A discharge”) and the Bank B Account Number (omitted) (“the Bank B Liability”) also secured over the Property A property to be discharged (“the Bank B discharge”) provided that the Wife be solely liable thereafter and indemnify the Husband in respect of all and any new borrowings required to be taken out by the Wife in order to effect the Bank A discharge and the Bank B discharge;
(b)the Husband do all such acts and things and sign all such documents as may be required to transfer to the Wife at the expense of the Wife all of his right, title and interest in the Property A property; and
(c)the Wife be responsible for all apportionable rates, taxes and outgoings of or with respect to the Property A property of whatsoever nature and kind.
In the event that the whole of the payment has not been made by the date or the Bank A discharge or Bank B discharge has not been obtained then the Property A property be forthwith sold altogether out of Court (“the sale”) and upon completion of the sale be applied:
(a)first to pay all costs, commissions and expenses of the sale;
(b)secondly to discharge the Mortgage and the Bank B Liability and any other encumbrances affecting the real property;
(c)thirdly so much of the payment as is then outstanding together with interest thereon at the rate of 8 per centum per annum adjusted monthly from the date to the Husband; and
(d)fourthly the balance to the Wife.
The Wife retain, to the exclusion of the Husband, all of her right, title, interest and benefit in the following:
(a)her 2006 (omitted) motor vehicle;
(b)her (omitted) Superannuation Fund;
(c)all funds held in any bank accounts in her name; and
(d)all of her furniture, household contents and personal belongings.
The Husband retain, to the exclusion of the Wife, all of his right title, interest and benefit in the following:
(a)his 2010 (omitted) motor vehicle;
(b)his 2001 (omitted) motor vehicle;
(c)his tools of trade;
(d)his (omitted) Superannuation Fund;
(e)all funds held in any bank accounts in his name; and
(f)all of his furniture, household contents and personal belongings.
Each party shall be solely responsible for, and indemnify the other party against and in relation to all credit card, personal loans and debts and taxation liabilities of whatsoever nature and kind in their individual names. In particular the Husband shall be solely liable for and indemnify the Wife in respect of:
(a)MasterCard debt to (bank omitted) of E$43,000;
(b)Visa Card Debt to (omitted) Bank of E$47,000;
(c)Debt to Australian Taxation Office of E$58,000;
(d)(omitted) Overdraft of E$2,000; and
(e)Debt to the Husband’s mother of E$13,000
In the event either party refuses or neglects to do all acts and things and execute all such documents as are necessary to give effect to these orders within 14 days of being requested to do so by the other party’s legal representative:
(a)a Registrar of the Federal Circuit Court of Australia be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to give effect to the orders made herein; and
(b)for the purposes of this order, an affidavit setting out the non-complying party’s failure to comply with the orders shall be sufficient evidence of neglect or default; and
(c)the non-complying party pay all reasonable costs incurred by the other party for the purposes of enforcing this order.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders;
(b)insurance policies remain the sole property of the owner/beneficiary named therein;
(c)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Orchide & Orchide is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 6035 of 2015
| MR ORCHIDE |
Applicant
And
| MS ORCHIDE |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter relates to the Husband’s application for property orders 20 years after the parties’ separation.
The Husband is seeking orders that the Wife pay him the sum of $662,500 which represents 50% of the value of the former matrimonial home at Property A (“the former matrimonial home”).
It is the Husband’s proposal that from the monies paid to him by the Wife he will discharge the mortgage of $328,376 to the Bank A and the Bank B overdraft of $15,600, both currently secured over the former matrimonial home. He will also be liable for his credit card debts, tax liabilities and other personal debts totalling $163,137.
It is common ground between the parties that the total amount owing on the mortgage, the overdraft and the other debts set out in paragraph 3 herein have all been incurred by the Husband after separation and that he has had the total benefit of all the borrowed funds.
The Husband argues an equal division of the value of the former matrimonial home is just and equitable as the Wife has had the benefit of living in the unencumbered former matrimonial home for over 20 years, she is in secure, well paid employment and the parties’ daughter is now completely independent.
The Wife proposes that orders be made that the Husband transfer the former matrimonial home to her, that she refinance the Bank A mortgage into her sole name and that otherwise the parties retain all property in their possession including superannuation. It is her proposal that the Husband otherwise be responsible for all the debts or liabilities incurred by him post separation.
It is submitted on behalf of the Wife that her proposal would represent a 25% division of the value of the former matrimonial home in the Husband’s favour and that such division is just and equitable given her vastly superior post separation contributions to the care and maintenance of the former matrimonial home and to the financial, emotional and physical wellbeing of the parties’ daughter.
It is further submitted on behalf of the Wife that she should retain the entirety of her superannuation of $135,468 as it was all earned after the parties’ separation and as such the Husband has made no contribution to it.
Background
The Husband was born on (omitted) 1957 and is aged 60 years. He earns an income of $70,000 gross per annum by (occupation omitted). He has not repartnered.
The Wife was born on (omitted) 1955 and is aged 61 years. She is employed as the (omitted) at (omitted) and earns $87,000 per annum. She has not repartnered.
The parties commenced their relationship in 1976. At that time the Husband was employed as an (omitted) and the Wife worked as a (omitted) at (omitted).
In 1979 the Wife commenced a (omitted) business, “(omitted)”, with her sister and a friend. The Husband undertook renovations on the building in which “(omitted)” operated. The Wife and her sister purchased the freehold on which “(omitted)” operated for $43,000.
In 1981 the Husband established his business [Business A] (“[Business A]”). This business undertook renovation and extension work.
In 1982 the Wife and her sister sold the freehold and the business “(omitted)”. The Wife received $45,000 from the sale. She utilised the funds in part to travel overseas for 6 months. The Husband joined her for 3 months of that travel.
In 1983 the Wife and her sister opened a business called “(omitted)”. The Husband undertook most of the shop fitout for nominal payment.
In 1982/1983 the parties rented the property at Property B (“the Property B property”) from the Husband’s father.
In 1984 the Wife sold “(omitted)” and made a small profit.
The parties married on 20 October 1984.
The parties purchased the Property B property from the Husband’s father in 1985 for $80,000. It is the Husband’s evidence the property was worth $100,000 but his father reduced the price. It is the Wife’s evidence that she contributed $20,000 to the purchase price from the sale of her car and monies remaining from the sale of “(omitted)”. It is the Wife’s further evidence the Husband’s mother lent the parties $20,000 to complete the purchase.
The parties’ daughter [X] was born on (omitted) 1987 (“[X]”).
In 1988/1989 the parties renovated the Property B property utilising $30,000 loaned from the Husband’s mother.
In 1989 the parties sold the Property B property for $295,000. They repaid the Husband’s mother and purchased Property C mortgage free for $195,000 (“Property C”).
In 1993/1994 the parties subdivided Property C. They built a new home at the rear of the property (“Property C1”), extended the front property and landscaped both properties. It is the Husband’s evidence the parties borrowed $200,000 from his mother to fund these works.
The parties sold Property C for $220,000 in June 1995 and
Property C1 for $252,000 in October 1995. They repaid the Husband’s mother and purchased Property A in February 1996 for $190,000.
The parties subdivided Property A, performed renovations on
Property A and built a second home at Property C1. They borrowed $150,000 from Bank B and took out a $15,000 overdraft to fund the build. $15,000 of the borrowings were used to purchase a (car model omitted) motor vehicle for the Wife.
The parties separated in late 1996. The Husband vacated Property A. The Wife and [X] remained in Property A.
On 16 July 1997 (omitted Real estate appraiser) valued Property A at $230,000 on the basis it was fully renovated with no apparent repairs required.
It is the Wife’s evidence that when the parties separated it was agreed between them that she would retain Property A and the Husband would retain Property C1 and [Business A] and be responsible for the borrowings with the Bank B.
The Husband refutes the Wife’s assertion they agreed at separation the Wife would retain Property A and he would retain Property C1 and [Business A]. It is the Husband’s evidence that the parties agreed that the Wife and [X] would stay in Property A in lieu of he paying child support. It is the Husband’s evidence that because [X] was still in primary school and he did not want to cause further upheaval for [X] on top of her parents’ separation, he decided, despite legal advice to the contrary, not to pursue property settlement.
Property C1 was sold for $278,000 in May 1997.
The Husband was solely responsible for the manner in which the proceeds of sale of Property C1 were utilised. It is his evidence that the proceeds of sale were used to pay the overheads for his business, to reduce the loans from Bank B used to fund the renovation and extension of Property A and the purchase of the Wife’s (omitted) motor vehicle. He is unable to provide the Court with any independent documents that confirm how the proceeds of sale were utilised by him.
It is the Wife’s evidence she believed that on settlement of the sale of Property C1, all the monies owing to Bank B were paid and that the mortgage and overdraft secured over the former matrimonial home were discharged.
After separation the Husband rented a flat above a bakery in Property A. It is his evidence [X] did not like staying in the flat and accordingly she spent little overnight time with him.
In August 1998 the Husband purchased Property D for $350,000. The Husband utilised the loan facility with Bank B secured over the former matrimonial home to raise the $35,000 deposit for this purchase. It is the Wife’s evidence the Husband did not discuss with her or seek her permission to utilise the Bank B loan facility to borrow monies.
The Husband otherwise borrowed $220,000 from the Bank A to complete the purchase of Property D in September 1998. This loan was secured over Property D.
In October 1998 the Husband refinanced the Bank B loan secured over the former matrimonial home with the Bank A. In the loan documents the Husband was described as the sole borrower and the Wife as guarantor. The Bank B Bank loan then secured against the former matrimonial home in the sum of $145,814 was discharged using funds from the Bank A loan.
It is the Wife’s evidence she signed the guarantee with the Bank A to assist the Husband as theirs was an amicable separation and she trusted he would repay the loan when Property D was redeveloped and sold. It is her evidence that she did not realise, and was not told by the Husband, that the Bank A loan was secured over the former matrimonial home.
Between 1998 and 2001 the Husband subdivided Property D, renovated the original residence and built a second home, Property D1. The Husband sold Property D1 for $798,500 in April 2001 and Property D for $795,000 in October 2001.
It is the Husband’s evidence that in addition to the (omitted) developments, [Business A] had other projects in construction including one called (omitted construction project). These projects placed enormous financial and mental pressure on the Husband.
It is the Husband’s evidence that because of the extreme stress of operating his business, his mental health deteriorated to the extent that upon the completion of the (omitted construction project) project and the sale of Property D and Property D1 he made the decision to “get out of the building industry” and [Business A] ceased to trade.
The Husband placed before the Court an affidavit sworn 26 June 2017 containing reconstructed figures prepared for the Husband by his accountant Mr G which purported to be the Operating Income and Expenditure Statement for [Business A] from 1998 to 2002.
The Husband deposes that when [Business A] ceased to trade and all outstanding business expenses were paid he received $72,018. It is his evidence this amount was in reality a part payment to him of outstanding wages owed to him by the business.
The Husband’s accountant was unavailable for cross examination and therefore the basis on which he had prepared the statements annexed to the Husband’s affidavit could not be explored. No source documents were available to support the figures set out in the financial statements annexed to the Husband’s affidavit.
It is the Husband’s evidence that from the $72,018 received by him when [Business A] stopped trading, he paid [X]’s school fees at (employer omitted) from July 2002 to the end of 2003 when [X] finished Year 12 in full.
[X] attended (employer omitted) for all of her secondary education. The Wife paid all [X]’s school fees until July 2002 save for a gift of $10,000 from the Husband’s mother. The Wife was also responsible for the cost of [X]’s uniforms, books, excursions and her extracurricular activities.
After the Husband left the building trade in late 2002 he travelled around Australia for 6 months.
In 2003 the Husband moved to Sydney and lived in his uncle’s property in (omitted) where he undertook some renovations in lieu of paying rent. He also studied (omitted).
In the second half of 2003 the Husband commenced a relationship with Ms K and lived with her in her property for 6 months.
In 2004 the Husband returned to Melbourne where he studied (omitted). He also resumed work as a (occupation omitted).
In August 2006 the Husband commenced studying (omitted).
In 2007 the Husband was employed doing maintenance work for local real estate agents and continued studying (omitted).
In May 2007 the Husband guaranteed the $25,000 loan taken out by the Wife to purchase a new car.
In 2008 the Husband took a room at (business omitted) as a (occupation omitted) for 12 months.
In 2012 the Husband moved to (omitted) where he attempted to establish a (omitted) business. This venture was unsuccessful and the Husband re-commenced (occupation omitted) for (businesses omitted). He also (occupation omitted).
In 2014 the Husband contacted the Wife to advise his Bank A loan had become unmanageable and he was switching to interest only payments. It is the Wife’s evidence that the Husband asked her to sign documents guaranteeing this loan. It is the Wife’s evidence that as she had previously signed a guarantee for the Husband’s loan it was her understanding the Husband needed her to continue to guarantee the loan. She agreed to do this as she and the Husband had both guaranteed the other’s loans since separation. It is her evidence that she did not at any time realise that the loan at that time was $252,000.
In 2014 the Husband ceased his (occupations omitted) and commenced his (business omitted) in (location omitted).
It is the Wife’s evidence that the Husband contacted her in May 2015 insisting the former matrimonial home be sold so he could realise his equity in the property. He explained this was necessary because he was no longer able to service his high level of debt which at that time exceeded $400,000.
It is the Wife’s evidence she was:
“…aghast, and so upset that I had to hang up on [Mr Orchide]. At the time, I had no knowledge of [Mr Orchide]’s financial circumstances and was not aware of any debts owed by him.”[1]
[1] Paragraph 14 of the Wife’s affidavit sworn 7 June 2017.
It is the Wife’s evidence that she made enquiries at the Bank A (omitted) branch and was advised there was no debt owed to the Bank A in her name. She then obtained a title search of the former matrimonial home which revealed that a Bank A mortgage registered on the former matrimonial home in 1998 had not been discharged.
In the Wife’s trial affidavit sworn 7 June 2017 and Outline of Case filed 19 June 2017 she sets out the “history” of the Bank A mortgage as revealed by way of documents subpoenaed from the Bank A. The history is as follows:-
Date
Amount Owing
Amount Withdrawn
30 June 2006
$38,885
30 June 2007
$38,226
30 June 2008
$79,283
Husband withdrew $35,485 in preceding 12 months
30 June 2009
$99,218
Husband withdrew $35,700 in preceding 12 months
30 June 2010
$99,298
30 December 2010
$111,687
Husband withdrew $15,000 in preceding 6 months
30 June 2011
$135,318
Husband withdrew $15,000 in preceding 6 months
27 August 2013
$252,549
Husband withdrew $110,000 in preceding 26 months
30 June 2014
$313,327
Husband withdrew $60,000 in preceding 10 months
8 May 2017
$328,376
Interest incurred on the loan
It is the Wife’s evidence that between 7 March 2011 and 30 June 2014, a period of only two and a half years, the Husband increased the mortgage by in excess of $192,000.
It is the Wife’s evidence that at no time after separation did the Husband advise her there was a mortgage over the former matrimonial home to the Bank A which he was using to pay his living expenses or in support of his failed life coaching business ventures.
The Husband commenced proceedings in the Federal Circuit Court in Brisbane seeking property orders on 13 January 2016. The proceedings were transferred to the Melbourne Registry on 7 March 2016 on the Wife’s application. The Husband’s application seeking access to the former matrimonial home to effect maintenance and repairs was dismissed after an interim hearing.
After receipt of written submissions, Judge Cassidy made orders that the Husband pay the Wife’s costs of the interim hearing of 7 March 2016 in the sum of $4,161, such sum to be paid upon the receipt by the Husband of any settlement funds provided pursuant to this litigation.
In August 2016 the Husband’s solicitors advised the Wife he had not paid the Bank A mortgage payments since June 2016 and had negotiated a moratorium with the bank on such payments until 29 September 2016. The Husband’s solicitors advised the Wife that the Husband would not be able to meet the mortgage payments upon resumption of the bank’s requirement for payment after September 2016.
The Wife made arrangements with the Bank A to make interim payments totalling $4,560 between October 2016 and January 2017 to stave off a default notice issuing.
Neither party has paid the Bank A mortgage since January 2017.
The matter was listed for final hearing on 21 June 2017. On that day, the Husband sought an adjournment of the matter to enable him to obtain documents and place evidence before the Court from his accountant Mr G about the sale of the various properties by [Business B].
The matter was adjourned to 28 June 2017 and the following orders were made by consent:-
2. By 4.00pm on 28 June 2017 the Husband pay to the Wife’s solicitors the sum of $17,140.00 being:
(a) The costs of today fixed in the sum of $12,740.00; and
(b)The costs of 20 April 2016 fixed in the sum of $4,400.
3. The Husband produce all documents relied upon by 4.00pm on 26 June 2017.
4. If the payment pursuant to Order (2) herein is not made by the Husband and/or the Husband fails to produce documents pursuant to Order (3) herein the matter is to proceed on an undefended basis.
The Husband complied with the orders of 21 June 2017. The matter proceeded to final hearing on 28 June 2017.
The Evidence
The Husband
The Husband relies on his affidavits sworn 12 January 2016, 19 May 2017, 15 June 2017 and 26 June 2017, his Financial Statement sworn 19 May 2017 and his Outline of Case filed 19 June 2017. The Husband also gave vive voce evidence at the final hearing.
The Wife
The Wife relies on her affidavits sworn 4 March 2016 and 7 June 2017, her Financial Statement sworn 7 June 2017 and her Outline of Case filed 19 June 2017. The Wife gave vive voce evidence at the final hearing.
The Issues
Having read the parties’ affidavits, heard the parties’ evidence and the submissions made on the parties’ behalf, the issues between the parties are:
a)what, if any, should be the adjustment in the Wife’s favour for her post separation contributions as parent, homemaker and for maintaining the former matrimonial home;
b)is it just and equitable that orders be made adjusting the Wife’s interest in her superannuation given it was earnt by her entirely after separation and to which the Husband has made no contribution; and
c)
should there be any adjustment in the Husband’s favour
for s.75(2) factors and in particular for the disparity in the
parties’ earning capacity, the Wife’s superannuation entitlements (particularly if retained in its entirety by her) and the Husband’s debt situation.
The Legislation
Section 79 of the Family Law Act 1975 (“the Act”) defines the Court’s powers in determining applications for property settlement. Section 79(2) of the Act provides that:
The Court shall not make an Order under this Section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
Section 79(4) of the Act sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under section 75(2) of the Act are as follows:
(a)the age and state of health of each of the parties; and
(b)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; and
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party's role as a parent; and
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties to the marriage; and
(q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The High Court in the matter of Stanford v Stanford [2012] HCA 52 held that prior to making orders for the division of the property in which the parties have an equitable interest in accordance with the provisions of section 79 of the Act the Court must first determine that it is just and equitable that the Court make such orders.
The High Court in Stanford (supra) held that in the majority of matters the decision as to whether it is just and equitable for the court to make property orders is easily resolved by the breakdown of the marital relationship and the mutual desire of both parties for orders altering their respective property interests.
Whilst neither party sought orders adjusting their property interests for nearly 20 years after separation and both offer quite different explanations for this, they are now both before the court asking that orders be made.
Subject to paragraphs [86] to [96] of this judgment, I am satisfied that orders should be made adjusting property matters between the parties.
Prior to the decision in Stanford (supra), a trial judge would follow the four step approach in determining how to alter property interests between the parties as articulated by the Full Court in Hickey and Hickey and Attorney General for the Commonwealth of Australia [2003] FamCA 395.
The four step process set out in Hickey is as follows. Firstly, the Court determines the nature of the property pool and attributes valuations. Secondly, the Court considers the contributions of the parties to the property pool including direct and indirect financial contributions and non-financial contributions often in the form of homemaker or parent. Thirdly, and after considering entitlements based on contributions, the Court determines whether any further adjustments to either party’s entitlement is proper, given the considerations under s.75(2) of the Act. Finally, the Court stands back and considers whether the proposed division of the property is just and equitable pursuant to section 79(2) of the Act.
The High Court in Stanford (supra) and subsequently the Full Court in Bevan and Bevan [2013] FLC 93-545 observed that this four step approach should not be rigidly followed.
In Bevan & Bevan (No 2) (2014) FLC 93-572 the Full Court, having upheld the appeal against the decision at first instance proceeded to re-determine the property application before the Court. At paragraphs 18 and 19 of Bevan (No 2) Bryant CJ and Thackray J state the following:
18.Senior counsel for the husband structured his submissions by reference to the “four-step” approach to property settlement applications discussed in our earlier reasons. By way of explanation for doing so, senior counsel said:
16.The adoption of the above [four-step] approach is not intended to presuppose a positive answer to the question posed [by] section 79(2), nor to suggest that it is an approach appropriate in all proceedings. Rather, and provided that the fundamental propositions outlined by the High Court in Stanford (2012) 293 ALR 70 … are not obscured, such approach is intended to and does no more than provide a principled, disciplined and structured means by which all of the matters arising for consideration pursuant to section 79 can be conveniently and properly identified and assessed.
17.Further, and whilst not said critically nor in a matter which seeks to cavil with the decision in this appeal, no other approach to the determination emerges readily from either Stanford nor the decision in this appeal. It is respectfully submitted that provided that the ‘fundamental propositions’ articulated in Stanford are not obscured, and whilst not universally so as has always been recognised, the approach set out above continues to provide a proper, transparent, certain and structured approach to the presentation and determination of applications pursuant to section 79.
19. We have no issue with what senior counsel has said about the utility of the four-step process, which we accept provides a convenient way to structure both submissions and judgments, provided the caveat mentioned is not overlooked.
I am satisfied that this is a matter where the four step approach of Hickey is the appropriate approach to be taken to determine a just and equitable division of property between the parties.
Assets and Liabilities
How Should the Wife’s Superannuation be treated?
The Wife has superannuation entitlements with (omitted) Superannuation Fund valued at $135,468 as at the 1st of June 2017.
It is common ground between the parties that the Wife’s superannuation has been earned by her entirely since the parties separated and that the Husband has made no contribution to the Wife’s superannuation.
It is submitted on behalf of the Wife that her superannuation should not be treated as an asset for division between the parties.
The Husband does not seek to include the Wife’s superannuation as an asset for division between the parties but rather as a financial resource available to her that is not available to him.
The Full Court in Zaruba & Zaruba [2017] FamCAFC 91 considered how a property acquired by a party after separation to which the other party had made no contributions should be treated.
In Zaruba (supra) the Wife acquired a property “Mindarie” after the parties separated and to which the Husband made no contribution.
In paragraphs 26 to 28 their Honours Bryant CJ, Thakray and Murphy JJ held:
26. We consider with respect that his Honour erred in the application of s 79(2) of the Act in relation to Mindarie. Having determined to approach the parties’ respective s 79 claims on an asset by asset basis, his Honour did not consider whether it was just and equitable to make any order pursuant to s 79(2) in respect of that property.
27. By reference to the evidence before his Honour, and findings which are not the subject of challenge, we consider it was not open to his Honour to conclude that it was just and equitable to make any order altering the wife’s interests in Mindarie (or the cash, shares and superannuation just mentioned).
28. Even if s 79(2) permitted of an order being made in respect of the property just mentioned, we consider that, in any event, his Honour erred. We are unable to see any evidentiary basis for his Honour’s finding that the husband had made “non-financial and indirect” contributions to Mindarie in the period between its purchase in 1993 and the wife’s departure from their shared residence in 2005.
At paragraphs 38 to 40 their Honours concluded:
38. In the vast majority of cases, it will be appropriate to address the s 79(2) question by ascertaining the legal and equitable interests in property without making distinctions between individual assets. That is because the “express and implicit assumptions that underpinned the existing property arrangements” can be seen to apply (to the extent and degree to which they do apply) to all of the property of the parties or either of them, including property in which the legal interests vary.
39. However, the position is likely to be different in circumstances where, as here, the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly and where, as here, the parties’ relationship had taken on quite different characteristics during the period to which the s 79 inquiry is directed.
40. We are respectfully unable to see any evidentiary foundation by which it was open to his Honour to conclude that it was just and equitable to alter the wife’s legal and equitable interest in Mindarie.
Where the Wife’s superannuation was earned by her post separation and where the Husband has made no contributions to it whatsoever, it cannot be seen to be just and equitable to make orders that alter the Wife’s interest in her superannuation.
It is noted the Husband has a very small superannuation entitlement of $1,157. As is the case with the Wife, the Husband’s superannuation was earned by him post separation and consists of contributions made solely by him. Accordingly it is not just and equitable that orders be made altering the Husband’s interest in his superannuation.
Motor Vehicles/Current Bank Accounts/Tools
Both parties currently own motor vehicles, have some small amounts of cash in their bank accounts and the Husband has tools which he estimates have a value of $5,000. As with the parties’ superannuation, these assets have all come into existence after the date of separation. For this reason I am satisfied it is not just and equitable that orders be made altering the parties’ current interests in these assets.
The property to be divided
The only remaining asset to which s 79 applies is the former matrimonial home. It has an agreed value of $1,325,000.
The Husband’s liabilities are as follows:
| Bank A Mortgage (secured over the former matrimonial home) | $328,376 |
| Bank B overdraft (secured over the former matrimonial home) | $15,204 |
| (omitted) Visa (husband) | $46,380 |
| (omitted) Mastercard (husband) | $42,728 |
| (credit card omitted) (husband) | $1,986 |
| Tax liability (husband) | $57,656 |
| Debt to the Husband’s mother (husband) | $13,000 |
| Total | $505,330 |
The Husband acknowledges that all the above liabilities have been incurred by him well after separation and that he has had the benefit of the monies that have given rise to those liabilities. Therefore those liabilities are solely his.
Contributions
It is submitted on behalf of the Wife that whilst the parties’ contributions prior to separation should be considered as equal, her contributions in the 20 years since separation have been vastly superior to those of the Husband.
It is the Wife’s submission that when the Husband left the former matrimonial home, the responsibility for the care of the parties’ then
9 year old daughter fell squarely on her shoulders. [X] spent relatively little time with the Husband whilst he was living in Melbourne and even less so when he was travelling around Australia and living in New South Wales.
It is the Wife’s evidence that the Husband paid no child support and that the financial responsibility for meeting all of [X]’s needs fell entirely upon her.
The Wife concedes that the Husband paid a year and a half of [X]’s private school fees but that the remaining four and a half years were paid for by her save for the assistance of a $10,000 gift from the Husband’s mother.
It is the Wife’s evidence that in addition to paying for four and a half years of school fees, she was also solely responsible for all of [X]’s school uniforms, books, excursion costs as well as her extracurricular activities. She was also responsible for paying for [X]’s clothing, her toiletries, birthday parties, holidays, pocket money, outings as well as her food accommodation costs.
It is the Wife’s evidence that when she turned 18, [X] undertook full time tertiary education. The Wife continued to fully support [X] until she finished her university degree and was able to obtain employment and achieve her own financial independence.
It is the Wife’s evidence that in order to pay she and [X]’s expenses, she not only worked full time at (employer omitted), she also worked most weekends in her catering business and for some years cooking 3 or 4 meals a night for a family.
It is the Wife’s evidence that she was almost entirely responsible for maintaining the former matrimonial home. She concedes that the Husband did some small maintenance works around the house when he was visiting [X] but rejects his evidence that he was regularly attending the home to complete maintenance works on it.
Whilst conceding that he did not pay child support for [X], it is the Husband’s submission that in allowing the Wife and [X] to continue to reside in what he calls the mortgage free former matrimonial home and not pursuing property settlement whilst [X] was completing her studies, he was providing substantial assistance to [X] and to the Wife.
The Husband further submits that for many years after separation he ensured that he provided the Wife with firewood every year, that he paid the insurance on the former matrimonial home and that he did undertake regular maintenance chores around the home so that it remained in good condition.
It is therefore the Husband’s submission that his contributions post separation are equal to those of the Wife.
Mr Sweeney of Counsel for the Wife referred the Court to the Full Court decision of Trask & Westlake [2015] FamCAFC 160 where their Honours Thackray, Ryan and Murphy JJ considered the question of the post separation contributions of homemaker and parent. In paragraph [13] their Honours held:
“In particular, the notion “…that the contribution of the homemaker and parent ceases upon the separation of the parties…” involves “…a serious misreading of s 79(4)(c)” (Ferraro & Ferraro [1992] FamCA 64; (1993) FLC 92-335, 79,568).
In paragraph [14] their Honours further held:
“His Honour plainly, and with respect correctly, recognised that the wife’s contributions did not cease upon separation but, rather, continued in circumstances made more difficult by the fact of separation.”
It is the Wife’s evidence that when the parties separated the parties agreed that she would retain the former matrimonial home and that the Husband would retain the benefit of the investment unit at Property C1 as well [Business A] and any further developments undertaken by it.
It is the Wife’s evidence that at the request of the Husband when the parties separated she transferred her interest in [Business A] to the Husband. This accorded with her understanding that the Husband was to retain the benefit of that business.
As can be seen from paragraphs [31]-[32] in this judgment, what amount the Husband actually retained after the sale of Property C1 is extremely difficult to ascertain. He deposes in paragraph [64]-[65] of his affidavit sworn 19 May 2017 that Property C1 was sold for $278,000 and that the profit from that sale was used to extensively renovate and extend the former matrimonial home. He estimates that approximately $100,000 was spent on the renovation and extension of the former matrimonial home from the proceeds of sale of Property C1.
There is a problem however with the Husband’s evidence in this regard. It is apparent from the valuation of the former matrimonial home that was completed by (omitted Real estate appraiser) in July 1997 that the renovations to the former matrimonial home were completed at the time of the valuation. Therefore there were no renovations to be completed on the former matrimonial home at the time of the sale of Property C1.
Counsel for the Wife submitted that it is open for this Court to conclude that the Husband made at least $100,000 profit from the sale of Property C1 after the discharge of the mortgage that was held over both the former matrimonial home and that property.
It is tempting to adopt this figure as being indicative of the profit achieved by the Husband on the sale of Property C1. Absent independent documentation this cannot be seen to determine this issue. What is apparent is that the Husband retained all the net proceeds of sale of Property C1 after the parties’ separation and utilised them to meet business costs, his own living expenses and to contribute to the further developments undertaken by him within his business [Business A].
I reject the submission made on behalf of the Husband that letting the Wife and [X] remain in the former matrimonial home for nearly 20 years was somehow or other a contribution by him to the maintenance of [X] throughout the entirety of her education.
After separation the Husband had the benefit of the proceeds of the sale of Property C1 and of [Business A]. The Wife and [X] remained in the former matrimonial home. I do not accept the Husband “allowed” the Wife to remain in the former matrimonial home but rather both parties agreed at separation what joint property each would retain at that time. Both parties chose not to seek court orders that reflected this agreement or to seek an alternative division of their property.
The Wife had the sole financial responsibility for almost all of [X]’s care after the parties separated. The Wife also provided almost all of [X]’s physical and emotional care given [X] spent very little time in the Husband’s care. The Wife also maintained the former matrimonial home with some small assistance from the Husband
Having considered all these factors, I am satisfied that the Wife made a significantly greater contribution than the Husband post separation and that there should be an adjustment in her favour of 25%.
Section 75(2) factors
The Husband is aged 60 and currently generates income by running an Airbnb from his rental accommodation in (omitted). Whilst he gave oral evidence that he suffers from depression and anxiety which inhibit his capacity to re-engage in other forms of paid employment, he placed no independent evidence before the court verifying these claims.
The Wife concedes that the Husband has suffered from depression and anxiety but not to the extent that it impacts on his ability to pursue gainful employment.
After separation the Husband made lifestyle choices. He closed his (omitted) business, travelled around Australia and undertook study and obtained qualifications in (omitted). He attempted to establish a business as a (occupation omitted) but this was unsuccessful. He is now living in (omitted) running an (business omitted).
Since separation, and particularly since 2008, the Husband has incurred considerable debt in supporting his lifestyle. He has done so in the full knowledge he was not generating sufficient income to meet those liabilities.
In a period of two and a half years between 2011 and 2013 he increased his debt level by nearly $200,000. I am satisfied he did so without at any time advising the Wife that he was using the equity in the former matrimonial home to do so.
The Wife is currently aged 61 and is employed on a full time basis as (occupation) at (employer omitted) earning $87,000 per annum.
It is the Wife’s evidence that despite a recent triple bypass she is in reasonably good health and hopes to continue in her employment for some years to come.
Whilst the Wife currently earns more than the Husband, I am not satisfied on the evidence before me that she has a superior earning capacity. The Husband has made certain lifestyle choices, but he is a (occupation omitted) and has the capacity to earn a reasonable living in this profession if he chose to do so.
The Wife however has superannuation of $132,000 in comparison to the Husband’s miniscule superannuation of $1,187. She clearly has a superior financial resource, albeit this is as a result of her working hard and investing in superannuation, a choice the Husband did not make.
In the circumstances I am satisfied that there should be an adjustment in the Husband’s favour for s 75(2) factors of 2.5%.
Just and Equitable
As can be seen I have determined that there should be a distribution between the parties in relation to the former matrimonial home such that the Wife retains 72.5% of same and the Husband retain 27.5%.
In order to retain the former matrimonial home the Wife will need to refinance the liabilities to the Bank A and the Bank B currently secured over the former matrimonial home and pay the Husband the sum of $20,795.
It is submitted on behalf of the Husband that to make orders that would have the net effect of the Wife retaining, as was her proposal, a million dollar property and $130,000 worth of superannuation whilst the Husband is left with debts of over $500,000 can not be seen on any measure to be just and equitable.
Whilst there is no doubt the Husband’s current financial circumstances are dire, the Husband is the one responsible for his current financial predicament. At separation he retained the benefit of the proceeds of sale of Property C1 and the ability to continue to generate income through his business. He made the choice to leave the (omitted profession) and to pursue other interests which did not provide him with an income sufficient to support himself.
Rather than obtaining properly paid employment, the Husband proceeded to live by borrowing monies that were secured against the former matrimonial home. I am satisfied that he did so without advising the Wife of these borrowings and that the Wife had no knowledge of this until he contacted her seeking the sale of the former matrimonial home.
Further, the Husband continued to borrow money in the full knowledge he had no capacity to pay those debts.
By contrast, since separation the Wife has worked hard to support herself and the parties’ daughter [X]. She did so, I am satisfied, in the belief that she was to retain the former matrimonial home.
The division determined by the Court will require the Wife to obtain and fund a mortgage of $364,580 if she is to retain the former matrimonial home. She indicated a willingness to do so.
The refinancing of the current liabilities secured over the former matrimonial home and the payment to the Husband of $20,795 will see his current level of indebtedness reduce by 72%.
In all the circumstances I am of the view that such an outcome is just and equitable and orders will be made accordingly.
I certify that the preceding one hundred and forty two (142) paragraphs are a true copy of the reasons for judgment of Judge Bender
Date: 11 August 2017
Key Legal Topics
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Family Law
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Property Law
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