Ordway and Ordway
[2012] FMCAfam 624
•13 July 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ORDWAY & ORDWAY | [2012] FMCAfam 624 |
| FAMILY LAW – Property – leave to proceed out of time – property settlement – contributions – long period of separation. |
| Family Law Act 1975, ss.44(3), 44(4) and 79(4) |
| Whitford (1979) FLC 90-612 Oxenham [2009] FamCAFC 167 Tamaniego [2010] FamCAFC 254 Frost&Nicholson (1981) FLC 91-051 Hedley & Hedley (2009) FLC 93-413 Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 Norbis v Norbis (1986) FLC 91-712 Zalewski (2005) FLC 93-241 Polonius & York [2010] FamCAFC 228 Gollings & Scott (2007) FLC 93-319 Konitza (No.2) [2009] FamCAFC 213 |
| Applicant: | MS ORDWAY |
| Respondent: | MR ORDWAY |
| File Number: | ADC 3726 of 2009 |
| Judgment of: | Cole FM |
| Hearing dates: | 26 and 27 October 2011 and 22 February 2012 |
| Date of Last Submission: | 22 February 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 13 July 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Jordan |
| Solicitors for the Applicant: | Howe Martin and Associates |
| Counsel for the Respondent: | Mr D Berman SC |
| Solicitors for the Respondent: | Barnes Brinsley Shaw Lawyers |
ORDERS
The wife have leave pursuant to Section 44(3) of the Family Law Act 1975 to institute and proceed with her application seeking orders for property settlement.
The wife within six (6) months of the date of these orders pay to the husband the sum of $228,857.
Upon receipt of the sum referred to in paragraph 1 of these orders, the husband forthwith transfer and assign his interest in the property situated at [H] being the whole of the land comprised in Certificate of Title Volume [omitted] (“the property”) to the wife free of encumbrances.
In the event of the wife failing to pay the funds due and owing pursuant to paragraph 2 of these orders:
(a)the parties take such steps and do all such actions as are reasonably required to sell the property, with the terms and conditions of the sale to be agreed by the parties;
(b)the net proceeds of sale be disbursed in payment of:
(i)15.78% to the husband in lieu of the payment referred to in paragraph 2 of these orders; and
(ii)the remainder to the wife
(c)the husband pay the costs associated with the discharge of the mortgages.
SAVE as set out in these orders, any interest the wife may have in the property in the husband’s possession including:
(a)Property [G];
(b)the husband’s savings;
(c)furniture and effects;
(d)Mazda motor vehicle;
(e)[F] Super; and
(f)Super withdrawal;
vest in the husband absolutely.
The husband indemnify the wife in respect of all liabilities arising therefrom thereafter.
SAVE as set out in these orders, any interest the husband may have in the property in the wife’s possession including:
(a)[N] property;
(b)[M] property;
(c)the wife’s savings;
(d)[Art work omitted];
(e)furniture and effects;
(f)Ford Telstar motor vehicle;
(g)[business] stock;
(h)personal jewellery;
(i)[A] Super; and
(j)other super
vest in the wife absolutely.
The wife indemnify the husband in respect of all liabilities arising therefrom thereafter.
All applications be otherwise dismissed.
There be liberty to the parties to apply as to consequential orders.
IT IS NOTED that publication of this judgment under the pseudonym Ordway & Ordway is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 3726 of 2009
| MS ORDWAY |
Applicant
And
| MR ORDWAY |
Respondent
REASONS FOR JUDGMENT
The wife seeks an order for leave to proceed out of time, the parties having divorced in 1986. Her application is opposed by the husband.
The wife also seeks an order for the division of the matrimonial assets that would provide her with the property at [H] and the sum of $100,000. The husband, in the event that leave is granted, opposes the application and seeks an order for the sale of the [H] property and an equal division of the proceeds of sale, with the parties to otherwise retain the property in their possession.
The wife did seek a lump sum spousal maintenance component to be included in her portion of the assets, however abandoned this in the course of closing submissions.
The parties have agreed that rather than hear the matter in two parts that they would proceed on the basis that all issues would be heard and addressed at trial.
Background
The wife was born [in] 1948 and is aged 64. She is currently working to establish a [omitted] business.
The husband was born [in] 1946 and is aged 66. The husband is a paraplegic following his contracting polio in his youth and is confined to a wheelchair. He works as an [omitted] on a part time basis subject to his health issues.
The parties married [omitted] 1969 and obtained a decree nisi on 9 April 1986.
There are two children of the relationship namely Mr B born [in] 1972 and Mr K born [in] 1975. Both children remained residing with the wife following the parties’ separation in April 1983, the youngest Mr K leaving home in May 1999.
The wife and the children remained in the former matrimonial home at [H] (“the home”). The wife continues to reside in that property. The husband is the sole registered proprietor of the home.
There is no dispute that the home was subject to a mortgage when the parties separated and was subsequently used as security over the years by the husband.
In 1987, the parties executed a settlement agreement although neither party at trial submitted that it was then or is now enforceable.
In 1988, the husband commenced cohabiting with his current wife.
In 1989, the wife commenced employment in the husband’s [business omitted].
The husband resides with his current wife Ms O in premises they jointly own.
In May 2008, the husband sold his [business omitted]. On 22 May 2009, the husband sold the property at [P].
On 21 September 2009, the wife commenced these proceedings.
One year later in September 2010, she resigned from her employment with the [business omitted] (having completed a [qualification omitted]) and commenced work on setting up her [omitted] business under the name of [omitted].
The issues are:
a)whether the wife should have leave to proceed out of time and if so;
b)what the division of the assets should be?
The evidence
The wife relied on:
a)her Initiating Application filed 21 September 2009;
b)her Trial Affidavit filed 5 October 2011;
c)her Financial Statement filed 5 October 2011;
d)her Affidavit of Documents filed 5 October 2011;
e)the Affidavit of Mr B filed 5 October 2011; and
f)the Affidavit of Ms M filed 20 October 2011.
The wife and her son Mr B gave evidence and were cross-examined.
Ms M was available, however she was not required for cross-examination.
The husband relied on:
a)his Amended Response filed 14 December 2010;
b)his Trial Affidavit filed 4 October 2011;
c)his Financial Statement filed 4 October 2011;
d)the Affidavit of his wife Ms O filed 4 October 2011; and
e)the medical report of Associate Professor S.
The husband and Ms O gave evidence and were cross-examined.
Professor S was not required to give evidence.
Leave to proceed out of time
The law
Section 44(3) of the Family Law Act1975 (“the Act”) requires the applicant to obtain leave to institute proceedings (more than twelve months having elapsed since the divorce took effect).
Section 44(4) of the Act sets out the requirements for leave being granted, the relevant section being:
44(4)(a) That hardship would be caused to a party to the marriage or a child if leave were not granted.
Counsel for the husband submits that the wife does not have the advantage of s.44(4)(b) of the Act that would enable leave to be granted in circumstances where, at the end of the period within which proceedings could be instituted, the wife would have been unable to support herself without an income tested pension or benefit.
The Act introducing the amendment received assent on 26 December 1987 and the date of commencement for the new section was 1 April 1988.
Section 64 of that Act provided that the amendment did not apply if the period in which proceedings could have been instituted without the leave of the Court had expired before the commencement of the Act. It was accepted by Counsel that the period of time had in fact expired, and that s.44(4)(b) did not apply. The question then is pursuant to s.44(4)(a), would hardship be caused if leave were not granted?
Hardship
Counsel referred me to a number of decisions on this matter, including the matter of Whitford (1979) FLC 90-612.
In addition, I have noted the recent decisions of His Honour Justice O’Ryan exercising the jurisdiction of the Full Court in the matters of Oxenham [2009] FamCAFC 167 and Tamaniego [2010] FamCAFC 254 and the discussion of the law contained therein are of particular assistance.
Reference was made in those matters to the decision of Whitford (1979) FLC 90-612 at p 78, 144, where the Full Court said:
… on an application for leave under section 44(3), two broad questions may arise for determination. The first of these is whether the Court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the Court is not so satisfied, that is the end of the matter. If the Court is satisfied, the second question arises. That is whether in the exercise of its discretion the court should grant or refuse leave to institute proceedings.
At paragraph 99 of the judgment in the matter of Oxenham (supra) His Honour, referring to the authorities of Whitford (supra) and Frost&Nicholson (1981) FLC91-051 at p.76, 423 noted that:
“The applicant may establish hardship although the applicant is not in poor or necessitous circumstances.”
At paragraph 102 of his judgment he said:
In summary, in order to establish hardship in the relevant sense the applicant for leave must have a prima facie case to be heard by the court on the merits. This does not require a detailed hearing of the merits of the substantive application, but a consideration of whether there exists a prima facie case on the strength of the applicant’s material.
At paragraph 103 he went on to say:
As to the second part of the exercise the fundamental issue in any application for extension of time is whether this will enable the court to do justice between the parties: Gallo v Dawson (1990) 93 ALR 479. In Gallo v Dawson McHugh J referred to the need to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences to the parties of the grant or the refusal of the extension of time…. In summary in considering the second question the court may have regard to a number of factors that include whether the applicant has an adequate explanation for the delay in bringing the proceedings and whether to grant leave would prejudice or impose hardship on the respondent to the application for leave or other persons.
From the above, leave should be granted to enable proceedings to be instituted if the Court is satisfied hardship would be caused to the applicant or child if leave was not granted. To establish hardship the applicant must have a prima facie case to be heard on its merits.
As Justice Cronin said at paragraph 102 in the recent decision of Hedley & Hedley (2009) FLC 93-413 at paragraph 219:
It is not appropriate for a court in a limited s 44(3) hearing to conduct the proceedings as if it was an application under section 79 of the Act. Each of the defined steps in section 79 carry subjective judgments. In a s 44 (3) application, the applicant need only establish that there is a case to be argued bearing in mind those subjective judgments in section 79.
If the Court is satisfied there is a prima facie case then the question would be, would the grant of leave enable the Court to do justice between the parties.
As His Honour Justice O’Ryan said at paragraph 154 in the matter of Tamaniego (supra):
In summary, there are two questions that have to be considered and the applicant for leave bears the onus on the balance of probabilities.
Can the Court be satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted? The evidence would support a conclusion that it can.
In any event, at the conclusion of the hearing, Counsel for the husband conceded that the wife had in all probability satisfied the first step of this process, namely that she would suffer hardship if denied the ability to bring proceedings of property settlement. She would, in effect, be left with nominal assets and would be subject to hardship.
I accept that concession. I note that Counsel went on to submit that the wife however, had not provided any adequate explanation as to delay. I will refer to that when considering the exercise of discretion.
Will the granting of leave enable the Court to do justice between the parties?
A consideration of these issues requires me to have regard to, amongst other things, the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences to the parties of the grant or the refusal of the extension of time.
That would include a consideration of whether there is an adequate explanation for the delay and the prejudice, if any, that would be incurred by the party in allowing proceedings to proceed at this point in time.
Is there an adequate explanation for the delay in bringing the proceedings?
There is no dispute that the delay in the institution of proceedings is substantial, the parties separated in May 1983 and the decree nisi became absolute on 10 May 1986.
It would appear to be common ground that following the parties’ separation, the husband continued to meet the outgoings on the former matrimonial home, financially supported the wife and the children and pay the children’s school fees, amongst other things. That financial support fell away as events occurred such as the children leaving their private school and the wife commencing work.
In 1987, the parties entered into a Deed purporting to set out the arrangements between the parties as to the wife’s continued use and occupation of the former matrimonial home, a motor vehicle and maintenance. A copy of the Deed was Annexure RC 01 to the husband’s Trial Affidavit. The Deed stated amongst other things that:
1. The husband will provide to the wife the use, enjoyment and occupation of the house of suitable quality and standard during her lifetime;
2. The husband will provide to the wife a motor vehicle of suitable quality and standard;
3. The husband will provide the wife with sufficient maintenance such as to enable her to continue the standard of living which she now enjoys or did enjoy prior to separation and dissolution …
In or about 20 March 1987, the solicitor responsible for the preparation of the Deed forwarded a letter to Mr Ordway. A copy of the letter was before the Court as Annexure H to the Trial Affidavit of the wife.
In that letter to Mr Ordway, his solicitor advised that:
We confirm our advice that the agreement is so generally worded so as to be possibly void for uncertainty. It is not possible for it to be registered as a maintenance agreement in the Family Court, thus enabling its enforcement as to the maintenance provisions. Unless the document is put before the Family Court for approval it will be unenforceable as to property settlement.
The agreement may carry some persuasive force if your former wife attempts to re-open the issue of property settlement in the Family Court subsequently however. Having signed the agreement it may be more difficult for her to claim that she was undergoing any hardship that required the relief of the formal settlement. If you were to renege on the agreement it may assist her to demonstrate hardship, thus affording her the opportunity to bring action for property settlement and maintenance notwithstanding the lapse of 12 months before the date of the decree nisi.
It is notable that at the commencement of the letter, the solicitors took care to confirm the instructions of Mr Ordway to prepare a property and maintenance agreement between his former wife and himself and that the agreement to be “couched in general language”.
The wife continued to reside in the property at [H]. The husband remarried in 1989. That same year the wife commenced working as a [omitted] in the husband’s business.
In or about 1995, the wife undertook some renovations to the [H] property which cost her some $12,000.
The husband used the equity in the [H] property as security.
In 2002, the wife commenced living with a Mr H in the property, finally separating from him in September 2010. There is no evidence of any objection to this by the husband.
It is the wife’s evidence that she first sought legal advice in September 2009. Proceedings however, were not instituted until later that month.
It is useful to note at this point the history of the registration of securities registered against the [H] property set out in Annexure D to the wife’s Trial Affidavit. That evidence, which was unchallenged, shows inter alia mortgages to:
a)Westpac registered in 1983, 1987 and 1989;
b)a mortgage to Citibank registered in 1990 and to St George Bank in 2002; and
c)mortgages to the National Bank registered in 1995 and 2001.
It would appear from the information supplied that the NAB mortgage (Mortgage Number [omitted]) remains registered against the property. There are no funds owing in respect of these securities, however it is an open question as to whether the banks can rely on these securities in respect of any other debt the husband may owe them.
Counsel for the husband submits that there is nothing in the wife’s documents that would talk of any fact that would suggest delay. Nothing suggests she obtained legal advice. Nothing suggests that she was, with respect to the wife, sufficiently concerned about her circumstances to take that action and it would appear that she was prepared for matters to simply proceed as they have over the years, without seeking to clarify or determine her position.
Counsel for the husband also submits however, that when the parties’ son became involved, it became clear that the husband’s position was not consistent with the wife’s position and it was at that time that the wife brought these proceedings.
The wife argues that the Affidavit material explains the delay and refers to, amongst other things, the husband’s payment of expenses for the wife and children (overtaken by the husband giving the wife employment to defray those expenses), the husband’s unfulfilled promise to convey the former matrimonial home to the wife and the reluctance of the wife to jeopardise her employment by the husband.
The wife’s evidence is that she did not seek independent legal advice until 7 September 2009 (paragraph 36 of her Affidavit).
At paragraph 37 of her Affidavit she says that she did not seek advice following receipt of a letter from Knox and Hargrave dated 27 February 1986 in which they wrote to her at the instructions of
Mr Ordway to advise her of her rights to property settlement and maintenance pursuant to the Family Law Act. That letter (which was annexed to wife’s trial affidavit as Annexure F) included the advice that:
Your right to property settlement and maintenance is such that you may commence your proceedings at any time as a right up to 12 months after the date of the decree nisi for dissolution. After that time you may only commence such proceedings with the leave of the Court. Such leave will only be given if you can establish that hardship would be caused to you or to the children such leave will not be granted.
At paragraph 38, her evidence is that she was concerned at her security of tenure in the home and recalled having some discussions with the husband requesting an agreement of some sort in writing.
She confirmed that a draft agreement was provided to her by Mr Carman of Messrs Knox and Hargrave and that following a conversation with Mr Carman, the agreement was amended into the final form.
She also confirmed receiving a copy of the letter to the husband from Messrs Knox and Hargrave dated 20 March 1987 which is referred to above.
Her evidence is that at the time of the signing of the agreement she had a limited understanding of the husband’s other assets.
She states that she was aware in general terms that the agreement was not legally binding because of the letter from Knox and Hargrave, however she believed that having signed the agreement the husband would honour it. She notes however, that over the years, the agreement was not honoured in total. For example, from about 1989 onwards the husband ceased making payments on the outgoings of the property.
At paragraph 43 of her Affidavit she states that:
It was a difficult situation for me because I was working for my former husband and every time I would discuss issues with money, or issues relating to the ownership of the house, he would become agitated and cranky, and so I would then not take the discussions any further. My former husband has a fairly short temper and I recall that on a few occasions when I would raise these sorts of issues he would slam documents down on his desk and raise his voice and become quite aggressive. However, on a number of occasions he said words such as ‘of course it’s yours’. On one occasion I remember mentioning to him the value of the property as it appeared in a recent rates notice and he said ‘congratulations’ and ‘pretty good investment’ or words to that effect.
In or about early 2009, the wife took some formal steps to try and get the property transferred into her name. She confirms that her son Mr B had been urging her to do something about formalising the agreement or understanding. At the suggestion of her son, she instructed a conveyancer who prepared transfer documents which were forwarded to the husband. Mr B wrote an email to the parties explaining why he became involved in trying to put the agreement into effect. The husband responded by email which is Annexure J to the wife’s Affidavit. The wife’s evidence is that at that point it became apparent that the transfer documents would not be signed. It was at that point that she took action to obtain legal advice and these proceedings were subsequently instituted.
From the evidence of Mr B, it was apparent that he had been instrumental in organising the transfer documents to be prepared and forwarded to the husband. That transaction appears to have been made with the knowledge and concurrence of the wife.
The husband did not challenge the wife’s assertion that she sought a written agreement to protect her interests.
No challenge was made to the solicitor’s letter confirming the husband’s instructions that he required the agreement to be in general language.
Neither party challenged the solicitor’s advice that the agreement was most probably unenforceable and neither party contends that it is enforceable as at the date of hearing.
The agreement itself is vague and is open to misinterpretation as is clear from the position taken by the parties, the wife considering the property hers, the husband considering it to be an investment.
The wife’s evidence that she understood the house to be hers until it became clear in 2009 provides an explanation for her delay.
Her evidence that upon realising that her interpretation of the agreement did not accord with that of the husband’s and that following that becoming apparent, she took immediate steps, is accepted.
Her evidence that she attempted to raise the issue of the transfer of the property with the husband over the years of the relationship and her attempts were rebuffed (in that the issue was put off) by the husband is also accepted.
The husband’s demeanour in the witness box and his response to the cross-examination of the wife’s Counsel supported a conclusion that he would have given short shrift to any conversation regarding this matter should he not have wished to discuss it at that time.
It is worth noting that the husband does not say that prior to 2009 he advised the wife that he would not transfer the property. There is no evidence of any attempt to clarify an agreement which had been prepared in “general terms”.
The context in which these arrangements were reached is relevant to the reasons for the delay.
The husband’s evidence is that as at the date of separation he was struggling to keep all of the balls in the air. His children were at an expensive private school, there were outgoings to meet, in addition to his commitments to his business.
It would appear to have been to the advantage of both parties not to force the issue at the time. The husband was able to provide accommodation and support for the wife and the children. I accept his evidence this would not have been possible should either party see fit to force the issue.
I am not convinced the wife did not have some idea of the parties’ position and chose not to force the issue at the date of separation. I note at the time she had no income and was reliant on the husband for support.
She was subsequently however, in a position to at the very least, take advice and chose not to do so.
I have accepted her evidence that she did not wish to disturb the arrangements, however her failure to seek advice until 2009 remains unexplained save for her statement that she trusted the husband.
The evidence of the wife would support a conclusion that she did not wish to have a major dispute with the husband. It is obvious when considering the parties’ financial circumstances that there was a significant power imbalance.
She was able to continue to reside in the house and rely on the husband for limited financial support. When she subsequently became employed within his business, I accept that she had concerns that if she pushed the issue too far, she would lose her job.
She offers no explanation as to why she did not seek legal advice at that time and did not seek legal advice until 2009. I accept however, her understanding that she had an agreement with the husband and did not need to do so.
I also accept that neither party was willing to disrupt the status quo. I consider the explanation for the delay is made out and that upon matters being clarified in 2009, appropriate steps were taken.
Would the granting of leave prejudice the respondent to the proceedings?
The husband submits that the prejudice to him, should leave be granted, is obvious. He says in his Affidavit:
I believed that I was able to move on. I believe I was able to get on with my business, to accumulate assets, to improve my financial circumstances, to go into partnership.
The reference to partnership includes not only the partnership with his current wife but also his business arrangements.
The husband submits that the asset pool as it then was has significantly changed. The current position means that the wife in effect, having remained silent for some 22 years, is now coming back and saying we want to revisit the husband’s financial affairs over that period of time.
He submits the parties divorced, they entered into an arrangement, there was nothing to suggest that the arrangement would not be honoured. There appeared to be a tacit understanding that it could not happen immediately, (although the parties differ as to what that understanding was).
The husband accepts that he utilised the house for borrowings. He accepts that from time to time the equity in the house was used to enable the purchase of properties and for the purposes of the husband’s business. It is not disputed that the financial circumstances of the parties might well have been very different, noting the husband’s concession that had there been a settlement at the time it would, in effect, have raised the possibility that the business and the house would have to be sold and the parties would have to start again.
The wife does not accept the position put forward by the husband namely that the matter had been resolved and his leaving of the property to the wife in his Will was appropriate.
It is her case that the husband was aware of her position. She considered that he had promised to transfer the property to her in 1989. She continued to raise this in conversations with her husband throughout the years. The husband responded in such a manner as to indicate that the property would one day be transferred to her. In effect her submission is that he knew that that the division of the matrimonial assets had not been resolved.
The husband at the date of separation was a professional man running his [business omitted]. The wife was engaged in home duties and the care of their twelve and nine-year-old sons.
On the husband’s evidence, in the course of the parties’ relationship, he had been involved in a number of business dealings and his evidence is that, amongst other things, he had [businesses omitted]. He was familiar with the need to document any significant agreements in a legally appropriate fashion.
He instructed his lawyers to prepare an agreement between the wife and himself in general terms. He received advice from his lawyers that the agreement “was so generally worded as to be possibly void for uncertainty”.[1]
[1] Exhibit H of wife’s Affidavit sown on 5 October 2011
When questioned about the agreement, his evidence was that he thought that he could not get divorced without a financial agreement being in place. This explanation, taking into account the husband’s business expertise, his access to legal advice and the timing of the agreements some nine to eleven months after the divorce, is not credible.
His case is that having reached an agreement, it is appropriate that he be allowed to rely on that. That is not to say that he is raising the issue of estoppel but rather that he is now prejudiced by what he sees as the late claim because he thought matters were settled and he had moved on. One of the difficulties with this submission is the wife’s evidence which was not challenged, that at some point in time, the husband started withdrawing from the arrangements set out in the agreement.
In 1989, he stopped paying the outgoings on the [H] property, save and except for the mortgage. His financial support for the wife reduced from $185 a week to $150 per week. By 1999, the husband had stopped paying any maintenance at all save for three payments of $50.
He also concedes that he has not continued to supply the wife with a motor vehicle.
Counsel for the wife also points out that the husband, having agreed to supply the wife with a suitable house, allowed and facilitated the wife obtaining a loan for some $12,000 to undertake renovations on the [H] property. This is either not consistent with someone who says the property is his, or in the alternative, is another example of the husband having promised to provide suitable accommodation allowing the wife to spend money on “his investment” and reneging in part on his agreement.
The core of the husband's submission is that he had thought that an arrangement had been entered into with the wife and that it was therefore open for him to get on with his life and make decisions in respect of his future without reference to those matters arising from his relationship with the applicant. I have difficulty with this.
The arrangement put forward by the husband in effect provides the wife with exclusive occupation of the [H] property, subject to the husband being at liberty to mortgage the property at any stage for his financial requirements.
The husband conceded there was no certainty in the arrangement. He argued that he had made appropriate arrangements in his Will however, then conceded that the Will could be changed at any time, and in the event of his death, could be challenged.
The husband is an [occupation omitted] who has run his own business and who, despite his obvious difficulties with his health, continues to [work]. He did not present in the witness box as someone who was naive and he certainly did not give the impression that he would rely on such an important business transaction being sealed by what he has conceded is in effect, an unenforceable agreement. It was not news to the husband that the agreement was unenforceable. He knew this from the very beginning. His instructions to his lawyers to draw the agreement in general terms raises issues as to why, when he would be aware that he would require and need certainty, he gave those instructions.
Any agreement would require a common meeting of the minds of the parties as to what is meant for them. This was not apparent on the evidence from the beginning. I have already noted that subsequent to the provision of those instructions, there was advice that the agreement was unenforceable in any event.
I have difficulty with his submission that he is entitled to rely on that agreement, when he did not comply with that agreement and he had received advice that it was unenforceable.
In the course of the parties providing evidence, it was clear that there was no love lost between the husband and the parties’ son Mr B.
It was apparent that Mr B’s involvement in this matter on behalf of his mother, when combined with the purported approach of Mr B to his father for funds, was cause for great concern on the part of the husband and his wife.
The submission that the involvement of Mr B and the husband's subsequent response in 2009 was a catalyst for these proceedings being instituted, on the evidence before me is a logical conclusion. It is at that point that the position of the parties was clarified.
I would therefore find that the husband was always aware that his financial affairs with the wife had not been concluded.
At the very least, it is open to me and I would find that the wife had the impression or perception that the husband had agreed to transfer the property to her in due course. It was not until Mr B’s involvement in 2009 that it would appear that the husband did anything to dissuade the wife from that belief. Whether or not the parties had actually reached agreement to transfer the property is inconsequential, taking into account the fact that I consider that the husband was aware of the circumstances at all relevant occasions.
The arrangements as they then stood left him in a position that enabled him to, amongst other things, use the equity in the house to further his financial position and that of his second wife.
I do not accept that granting leave to the wife would prejudice the husband. This is not something that should come as a surprise to him as I consider he was aware of the unfinished business at all times.
Property Settlement
Having decided that leave should be granted to the wife to proceed out of time, I now turn to consider the competing applications for the division of the matrimonial assets.
The Law
In determining what orders should be made for the division of the matrimonial assets, I am required to take an approach that involves four inter-related steps which are to:
a)identify and value the property, liabilities and financial resources of the parties at the date of hearing (“the Asset Pool”);
b)identify and assess the contributions of the parties within the meaning of s.79(4)(a), (b) and (c) of the Family Law Act 1975 (Cth) (“the Act”) and determine the contribution-based entitlements of the parties expressed as a percentage of the net value of the property of the parties (“Contributions”);
c)identify and assess the relevant matters referred to in s.79(4)(d), (e), (f) and (g), including the matters referred to in s.75(2) of the Act so far as they are relevant, and determine the adjustment (if any) that should be made to the contribution-based entitlements of the parties established at step 2 (“Financial Resources and Needs”); and
d)consider the effect of these findings and determinations and resolve what order is just and equitable in all the circumstances of the case (“Review of Outcome”).
See Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143.
I will now consider those matters.
The Pool
The husband submits that notwithstanding this significant period of separation, the property of the parties including their respective superannuation entitlements should be treated on a global basis.
His submission is that the measure of the contribution of each of the parties represents the gravamen of the proceedings.
The wife submits the asset by asset approach may be preferable. Reference is made to the authority of Norbis v Norbis (1986) FLC 91-712 where the Court said that:
If the parties’ interests in specific items of property differ or they have made differing contributions, it may be desirable to proceed upon an item by item basis in the division of property between them. In such a case, justice and equity might best be served by treating the items separately for the purpose of determining the proportions in which they are to be divided, particularly if the overall division is to be effected by the transfer or retention of interest in individual assets, as was convenient in this case.
Reference is made in the submissions of the wife to circumstances where the asset by asset approach has been used by the Courts in considering the division of the parties’ assets. They include where there has been a long delay between separation and proceedings, particularly where one or both of the parties have built up significant assets or accumulated significant debts after separation.
The decision of Zalewski (2005) FLC 93-241 is referred to and in particular the judgment of Justice Finn at paragraph 42 being:
In these long separation periods, the parties would usually have built up substantial new assets or incurred substantial liabilities. In an endeavour to satisfy the parties that any orders which are eventually made by the court in this somewhat complicated cases are just and equitable, it can, in my view be very useful for judges to assess contributions to property on an asset by asset bases.
It is noted that the passage was more recently quoted with approval in the matter of Polonius & York [2010] FamCAFC 228.
The defining characteristic about this case is that the parties did not in effect go their separate ways. The wife remained residing in the former matrimonial home. The parties remained in close contact, the wife working in the husband’s business. The husband contributed to the outgoings for the home and family in the initial years and continued throughout the period following separation to use the property to secure his financial arrangements with the various banks.
In Zalewski, the parties entered into terms of consent which were not filed with the Court. It was found that the husband had not made full and frank disclosure.
The parties separated on 12 February 1994. They reconciled in 1994 and 1995. Approximately one year after they separated, they entered into an agreement for division of property. A Decree Absolute was granted on 8 October 2002 and proceedings commenced on 16 October 2002.
The husband had purchased a property in 1997 (which was not disclosed) and in March 2002, purchased a property with his then defacto partner. The trial Judge adopted a global approach, having regard to the parties’ pre-separation and post-separation contributions. Save for the comments set out above, his approach was not the subject of criticism by the Full Court.
In Polonius & York, the parties separated on the wife’s evidence in July 1997, but the parties continued living under the same roof until May 2007. The wife’s evidence was accepted.
The only significant asset in July 1997 was the house. In 1998 the husband became bankrupt. In the following years the wife, amongst other things, received an inheritance which enabled her to discharge the husband’s bankruptcy, pay legal fees and purchase a unit.
The Court adopted a global approach when considering the division of assets. The Full Court, whilst citing the judgment of Finn J in Zalewski with approval, were critical of the failure to acknowledge the contributions made by the husband or in the alternative the finding that the financial contributions of the wife negated any contributions made by the husband. They said:
104…..If His Honour had adopted the approach suggested by Finn J in Zalewski then in respect of the category of assets acquired after separation it would have been within his discretion to find that the wife had a significantly greater contribution based entitlement in respect of these assets.
The criticism of the decision however focussed more on the decision to give no credit for the husband’s contributions with the comment being that if a different process was adopted, the error would not have occurred.
Having considered this matter and the authorities referred to, I accept the submissions of Counsel for the husband and would propose to deal with this matter on a global basis.
The parties to their credit, through the course of the hearing, continued to negotiate with the assistance of Counsel in respect of the identity and value of the matrimonial asset pool. Their agreement was as follows:
| Assets currently with the wife | ||
| $ | $ | |
| Property [H] (H) | 1,450,000 | |
| [N] property (W) | 30,000 | |
| [M] property | 35,000 | |
| Savings (W) | 815 | |
| [Art work omitted] (W) | 3,000 | |
| Furniture and effects (W) | 1,000 | |
| Ford Telstar motor vehicle (W) | 3,000 | |
| [business] stock (W) | 13,000 | |
| Personal jewellery (W) | 2,000 | |
| [A] Super (W) | 6,405 | |
| Other Super | 5,017 1,549,237 | |
| Wife’s liabilities | ||
| [M] mortgage | 63,672 | |
| HECS debt | 5,187 | |
| Credit cards | 16,814 | |
| Store accounts | 1,232 | 86,275 |
| TOTAL | 1,462,962 | |
| Assets currently with the husband | ||
| Property [G] (H) | 225,000 | |
| Savings (H) | 425,600 | |
| Furniture and effects (H) | 15,000 | |
| Mazda (H) | 16,000 | |
| [F] Super (H) | 30,788 | |
| Super withdrawal | 65,000 777,388 | |
| Husband’s liabilities | ||
| [G] mortgage | 78,000 | |
| Credit Cards | 8,548 | |
| CBA Overdraft | 6,000 | |
| Personal Loan | 20,000 | 112,548 |
| TOTAL | 664,840 | |
Total of husband and wife: | ||
Wife: | 1,462,962 | |
Husband: | 664,840 | |
TOTAL | 2,127,802 |
Contributions
There are three stages to the history of this matter namely:
a)1969 – 1983, being the period of the relationship;
b)1983 – 1999, being the period from the parties’ separation until the time when Mr K moved out of home (Mr B having left); and
c)1999 – 2012, being the period since the children became independent.
Neither party suggests that their contributions prior to separation were not equal. The dispute concerns the period post separation.
Some of the history of these parties has been previously set out, however I think it appropriate to revisit it when considering their respective contributions.
The parties commenced cohabiting in 1969.
During the course of the relationship they had two children namely
Mr B who was born [in] 1972 and Mr K who was born [in] 1975.
The husband was employed as an [omitted] at the date of marriage. He has continued in this profession until the present day.
He [worked] on his own in Adelaide for a six-year period, then subsequently in 1979 entered into partnership with Mr N in which the wife was employed on a casual part-time basis.
The parties purchased the [H] property in 1978. They were living there at the time of separation. The property at that time was encumbered by a mortgage.
In 1986, the husband ceased [working] with Mr N and entered into [business] with Mr M.
There is no dispute that following the parties’ separation, the husband controlled all of the assets and disposed of the proceeds of the sale of those assets as he saw fit in the ordinary course of business.
Save for the financial support provided by the husband, the wife did not receive anything or have any participation in the husband’s subsequent financial dealings. I accept her evidence that he ceased paying the outgoings on the property in 1989. Up until this time, the wife had been engaged with home duties and save for the $185 per week received for herself and the boys, did not receive any other income.
The wife remained residing in the house and was responsible for its maintenance and upkeep including payment of the rates and taxes for the property. She had use of the property and for a period of time, resided there with her defacto partner.
In 1995, the wife spent money on renovating the kitchen although it is not suggested that this had any significant effect on the value of the property.
The wife did not participate save as a paid employee in the husband’s business.
The husband continued to use the equity in the home as security for his business transactions.
I accept that the wife continued to contribute to the asset pool in a number of ways.
She remained the primary carer for the children until 1999. She did so without all of the support promised by the husband in the agreement. In 1992, he reduced the payments to the wife from $185 to $150 per week. He paid that sum until Mr K left home in 1999.
The wife’s contribution to the welfare of the family was not challenged. The husband concedes she was and is a good mother.
In addition, her equity remained in the home and was used by the husband to assist with his business enterprise.
In 1987, he purchased a unit at [B].
Prior to 1990, he purchased a building with Mr N on the corner of [location omitted] and established a [ommited] business.
In 1989, he married his current wife.
In 1993, the [U] property was sold.
In 1997, the husband and his current wife acquired vacant land at [E]. A home was built on the premises and the property was eventually sold in 2007.
In March 2001, the husband and his current wife acquired the property at Property [G]. They remain residing in those premises.
In May 2008, the husband sold his [business] to [omitted]. The husband’s evidence is that he arranged for [omitted] to employ his former wife and she remained employed until December 2010 when she resigned of her own accord.
In 2009, the husband’s company [P] Pty Ltd, sold the [omitted] premises receiving a net of $537,231.
It is common ground that the parties separated in April 1983. Exhibit D to the wife’s Trial Affidavit shows that the home at the time was security for a mortgage to the National Bank.
The schedule shows that further securities were lodged against the title to the home as follows:
a)11 July 1983 Westpac (discharged 9 January 1984);
b)7 November 1984 NAB (discharged 20 October 1987);
c)20 October 1987 Westpac (discharged 4 January 1990);
d)26 May 1989 Westpac (discharged 4 January 1990);
e)4 January 1990 Citibank (discharged 4 January 1995);
f)4 January 1995 NAB (currently registered on title);
g)6 March 1995 NAB (discharged 15 May 2002);
h)27 March 2001 NAB (discharged 15 May 2002); and
i)15 May 2002 St George Bank (currently registered on title).
In addition, a lien was lodged by the [omitted] Pty Ltd on 8 August 1986 which ceased on 29 September 1986.
In that period of time the husband had purchased, amongst other things:
a)his unit at [B], corner of [location omitted] (1983);
b)the building with Mr N (late 1980’s);
c)Property [P] (late 1980’s);
d)the land at [E] (1997); and
e)the property at [G] (March 2001).
Counsel for the husband refers me to the authority of Gollings & Scott (2007) FLC 93-319, paragraph 68 where the Court says:
65. As a general rule once the parties have separated, subject to the obligations of maintenance and support and subject to the type of considerations described in Kowaliw (1981) FLC 91-092 relating to waste, each party is entitled to get on with his or her life, independent of the other ...
He argues the Full Court was entirely prepared to recognise that once a person discharges their obligations then to the extent that the husband had income surplus, he was free to use that income in any way he wished. The husband did this he submits and should, amongst other things, be recognised for his superior contribution.
The difficulty I have with that argument is that I consider there can be no doubt that the use of the equity in the home was of some significant assistance in his endeavours. It is noted that the current equity comprises some 68% of the net value of the asset pool.
With the issue of the house at [H] unresolved, in many respects the parties remained financially linked. In some ways, the continuing use of the asset could be characterised as a joint endeavour entered into with the implicit consent of both parties who had not bothered to finalise their financial arrangement.
The wife continued to work in the business and was paid for her efforts which could be said to reflect the arrangements with other parties who remain together and participate in the running of a professional [business].
For 16 years following the parties’ separation, the wife had the children residing with her. Her evidence is that she lived frugally on the support provided by the husband and the income received from her employment. Her contribution to the welfare of the family must be recognised.
The husband through his efforts managed to acquire further assets. It is reasonable however, to conclude that they were acquired with the backing of the security provided by the [H] property (“the home”). This meant that the wife, through the use of her equity in the home, continued to share the risk (particularly with the asset remaining in the husband’s name).
The husband in the course of cross-examination, conceded amongst other things that:
a)“In the later years, the banks wanted everything as security.”;[2]
b)That his business overdraft at times was possibly in the vicinity of four or five hundred thousand dollars;
c)When asked about whether his large borrowings being overdraft and loans with the bank were secured against [H] at all material times, that some of them were and he answered “they weren’t all secured against [H], no”;[3]
[2] Transcript 27/10/11 page 26
[3] Transcript 27/10/11 page 28 paragraph 35
It was put to him that if the wife had pressed him to transfer the house to him he could not have done it because he could not get rid of the bank mortgage. He responded that he did not know.
I find his answers to this group of questions about the use of the home as security to be vague, evasive and generally unsatisfactory.
Even if the home was not used for security for each particular transaction, it was there when the husband presented his Statement of Assets and Liabilities to the relevant bank. There is no evidence to show that it would not or was not to be listed as an asset for any financial institution considering his position. I accept that the use of the equity in the home was an integral part of the husband’s efforts to acquire and conserve his property.
It is worth noting that although the evidence is that there are no monies owing on the mortgages secured against the home, two remain on the title being the NAB and the St George Bank. The fact that they remain on the Title leaves open the question as to whether their use as a security against the property is concluded.
I note the husband’s evidence that the sum of $8,000 was paid to discharge the mortgage debt just prior to the trial. The home was therefore continuing to secure debt until quite recently.
Do the mortgages remain to secure other debt (being other loans with the same institution) or are they there in case they may be required at some point in the future? In other words is the role of the property to provide security for current or future debt concluded? The evidence would suggest not.
I have difficulty, when considering and weighing up the respective contributions of the parties, in reaching the conclusion put forward by either party.
They, through their lack of action, continued to collaborate in what could be called a joint endeavour whereby the husband had the use of the equity in this property while the wife had the use of the property itself for the 26 years that followed before the wife took action to determine her share in the assets.
Each in their own way contributed and I have addressed that above. However, neither party’s contributions were such as to either completely eclipse the other or justify the results they seek. Neither sought to claim their equity in what is the central asset of this pool and each permitted the use of it by the other.
The wife, in addition to being the primary caregiver for the children until they left home in 1999, continued to participate in the financial contributions to the acquisition, conservation and improvement of the property through her maintenance of the [H] property and the use of its equity in the husband’s business dealings. (Equity that she was unable to access given that the home was registered in the husband’s name.)
The contribution of the husband, particularly post 1999, can and should be balanced against that of the wife. He continued to work in the business and the income he received assisted with the servicing of the loans on the properties he had acquired. Those assets were however shared with his current wife and it is only his portion that is brought to account.
Considering an alternative approach to the parties’ contributions such as an asset by asset approach is not without difficulty.
There is little or no information about what the assets were worth at the date of separation, how the proceeds of sale were disbursed and how any subsequent assets were acquired. The husband says he has looked for the documents without success. He also says he is unable to remember the exact detail of how the finance was arranged. He concedes at one point the debt exceeded $500,000. I have noted the difficulty I have with his evidence.
Whilst there is an argument that the contributions of each party to the other’s assets were at best nominal, that argument ignores the central asset of this pool, which the wife used, maintained and preserved and whose equity was used by the husband. Its role in allowing each party to acquire further assets (for without it, would the wife have been able to purchase, for example, the [M] property or would she have been forced to use her funds for accommodation) cannot be ignored.
There is also some weight to the submission that the wife was kept in a “financial cocoon” being unable to access her equity, which was at the same time exposed to the risk of the husband’s business enterprise.
I therefore return to considering this on a global basis and for the reasons set out above, including the fact that neither party was prepared to clarify the agreement or resolve the issue between them, conclude that this is a matter where the contributions are equal.
Financial Resources and Needs
The husband is aged 66. He is a paraplegic and is confined to a wheelchair. He is able to work as an [omitted] on a part-time basis subject to ongoing issues in respect of his health.
Professor S in his report dated 11 October 2011 (Exhibit “A”) notes that Mr Ordway has degenerate bilateral shoulder problems arising from the heavy use of his shoulders following the development of polio in his youth. He considers his ability to work to be severely restricted given the nature and severity of his muscular skeletal problems.
In addition, Mr Ordway has been diagnosed with polycythemia mibravera by Dr J (Exhibit “G”). There is no evidence however of secondary complications and the prognosis is 10-20 years.
Whilst it is considered that the husband’s symptoms make it difficult for him to work, there is no suggestion that he is about to stop.
He has been working as an [omitted] for over 40 years and continues to do so on a part-time basis.
The husband is supported by his wife who retains a 50% interest in the [G] property and in the funds held in the investment account. Her interest in that property remains unchallenged although the evidence would suggest that the funds came primarily from the husband’s endeavours. The evidence of Ms O was that following the sale of her business shortly after she met the husband, she has not worked outside the home since (although she did care for the husband’s father and now the husband).
The wife is aged 64. She has a [qualification omitted] and prior to resigning in 2010 was earning approximately $50,000 per annum. She is now attempting to establish a [omitted] business. The income, if any, from that business is minimal.
Her ability to return to the [omitted] industry and resume her previous employment was not something that was pressed in any significant way. There is no evidence that would support a conclusion that a 64 year old woman with her experience would be easily placed in the [omitted] sector.
I am therefore left with the conclusion that the wife’s capacity to earn an income is considerably limited.
The husband continues to work and receive an income. He and his current wife own their residence and are each able to access their share of savings of over $800,000. In 2009 he declared a taxable income of $68,000 with Ms O shown as $53,196 on the husband’s tax return. In 2010 his taxable income was $34,275 (allowing for deductions of $16,907) and his wife’s income $14,748. In 2011 his taxable income was $47,231 and his wife’s income is shown as $32,751. The 2011 taxable income for the applicant wife was $21,547 of which $7,482 was Australian Government Allowances and $12,866 was income received from her employment which ceased in October 2010.
The husband’s significant bank of experience in the [omitted] industry cannot be ignored when considering his financial resources and needs. He has demonstrated the ability to continue to earn an income and has a significant “amount” of savings to fall back on.
The wife’s equity remains for the present locked in the value of the home and will not be realised until it is sold. There is a reasonable prospect that this will have to occur, which will mean the wife will incur further costs in relocating and rehousing herself.
I have little confidence that she will receive any income of significance from her [omitted] business.
The wife is currently entitled to receive an income tested pension or benefit from Centrelink. There is nothing to suggest that position will change for the foreseeable future.
I am satisfied that her financial circumstances are significantly less than the husband, even with the difficulties he faces in view of his health; and that taking into account her age there is little or no prospect of that improving.
In the circumstances I consider that an adjustment of 8% is warranted in the wife’s favour.
Just and Equitable
The net value of the asset pool is $2,127,802. Fifty eight per cent of that figure is $1,234,125.16 which I will round to $1,234,125.
The wife pursuant to the orders I would make would have assets with a value of $1,462,962. She would be entitled to receive $1,234,125. This means she would need to pay the husband $228,837.
This would mean the husband would have or receive the following assets and liabilities:
| Assets | |
| Property [G] | $225,000 |
| Savings (H) | $425,600 |
| Furniture & effects | $15,000 |
| Mazda motor vehicle | $16,000 |
| [F] Super | $30,788 |
| Super withdrawal | $65,000 |
| Payment from wife | $228,837 |
| Subtotal Assets | $1,006,225 |
| Liabilities | |
| [G] mortgage | $78,000 |
| Credit cards | $8,548 |
| CBA Overdraft | $6,000 |
| Personal Loan | $20,000 |
| Subtotal Liabilities | $112,548 |
| Net | $893,677 |
The wife currently is in possession of the following assets and liabilities:
| Assets | |
| Property [H] | $1,450,000 |
| [N] Property | $30,000 |
| [M] Property | $35,000 |
| Savings (W) | $815 |
| [Art work omitted] | $3,000 |
| Furniture & effects | $1,000 |
| Telstar motor vehicle | $3,000 |
| [business] Stock | $13,000 |
| Personal Jewellery | $2,000 |
| [A] Super | $6,405 |
| Other Super | $5,017 |
| Subtotal Assets | $1,549,237 |
| Liabilities | |
| Property [M] Mortgage | $63,672 |
| HECS debt | $5,187 |
| Credit cards | $16,184 |
| Store accounts | $1,232 |
| Payment to husband | $228,837 |
| Subtotal Liabilities | $315,112 |
| Net total | $1,234,125 |
The orders I will make will mean that the amount to be paid to the husband by the wife is $228,837.
This may mean that the property will have to be sold. If that is the case then I consider it appropriate that the wife have some say in the sale and would therefore order that the terms and conditions of sale be agreed by the parties.
In addition I consider it appropriate that some allowance be made for the costs of the sale and the vagaries of the markets.
There is a reasonable prospect that the property would have to be sold. Should that occur, the wife will need time to present and market the property and obtain alternative accommodation.
$228,837 represents 15.78% of the agreed value of the property. The property was valued for the commencement of the trial in 2011. It may not sell until 2014. There is a risk that the sale price may favour one or the other party should the husband’s payment be fixed. I would therefore order that in the event of the property being sold, he receive a percentage of the net proceeds of sale.
Counsel for the wife submits that this matter is decided in the context of the husband post separation, accumulating assets which he distributed equally between himself and his current wife with a combined net value in excess of $1,200,000. His access to that asset pool together with the benefit of shared expenses should not be ignored. I accept that submission.
In addition, it is noted that the husband did not seek prior to these proceedings to sell the property. His evidence was that he had left it to his wife for her use and enjoyment with the property to be passed on, in equal shares, to his sons. He was clear that it was not and had never been part of the property to which his current wife had any entitlement.
These are factors that affect my consideration of the division of the property and which would support the conclusion that the proposed orders are just and equitable and do not require adjustment.
The parties were referred in the course of the proceedings to the decision of the Full Court in Konitza (No. 2) [2009] FamCAFC 213. Counsel for the wife submits it provides some assistance when considering a long period of time post separation and I accept that. I note her Honour’s conclusion that it was to the benefit of both parties that the property was retained. I note that the circumstances of this case meant that the parties remained more closely linked over the period than in that matter.
That is not to say the payment should be deferred indefinitely. Time however, should be allowed and in the event that finance is not possible, the property should be sold.
The property was purchased prior to September 1985. There is no evidence nor is there any submission that there will be any Capital Gains Tax issues.
I would therefore make the orders set out at the commencement of these reasons.
I certify that the preceding two hundred and twenty-three (223) paragraphs are a true copy of the reasons for judgment of Cole FM
Date: 13 July 2012
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