Palmer and Palmer
[2009] FMCAfam 987
•17 November 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PALMER & PALMER | [2009] FMCAfam 987 |
| FAMILY LAW – Property – 37 years cohabitation – 12 years since final separation. |
| Family Law Act 1975, ss.75(2) & 79(4) |
| Re NHC and RCH (2004) FLC 93-204 Hickey & Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Ibrahim and Beavis [1999] FamCA 765 AJO v GRO (2005) FLC 93-218 |
| Applicant: | MR PALMER |
| Respondent: | MS PALMER BY HER LITIGATION GUARDIAN BRIAN HUDSON |
| File Number: | BRC 2059 of 2007 |
| Judgment of: | Howard FM |
| Hearing dates: | 9, 10 & 11 September 2009 |
| Date of Last Submission: | 11 September 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 17 November 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Galloway |
| Solicitors for the Applicant: | Reardon & Associates Lawyers |
| Counsel for the Respondent: | Dr Sayers |
| Solicitors for the Respondent: | Harrington Family Lawyers |
| Counsel for the Litigation Guardian: | Dr Sayers |
| Solicitors for the Litigation Guardian: | Harrington Family Lawyers |
ORDERS
The parties have 14 days to submit to the Court draft orders to reflect the Reasons for Judgment.
IT IS NOTED that publication of this judgment under the pseudonym Palmer & Palmer is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 2059 of 2007
| MR PALMER |
Applicant
And
| MS PALMER BY HER LITIGATION GUARDIAN BRIAN HUDSON |
Respondent
REASONS FOR JUDGMENT
Background
The Applicant husband was born [in] 1935.
The Respondent wife was born [in] 1935.
Both parties are therefore currently aged 74 years.
The parties married in Melbourne [in] 1960.
There are two adult children of the marriage, Mr P born [in] 1966 and Mr N born [in] 1968.
The parties separated in October 1997.
The parties were divorced in May 2005.
The parties are unable to agree on how to divide their property.
On 29 November 2008 the wife suffered a stroke. By reason of the incapacity suffered by the wife primarily as a result of the stroke a litigation guardian was appointed for her in these proceedings by order of the Court on 11 August 2009.
By reason of her incapacity the wife was also unable to give evidence at the final hearing.
The final hearing proceeded, by agreement between the parties, “on the papers”. There was no oral testimony.
A final hearing had in fact taken place in July 2007. Judgment was handed down by His Honour Federal Magistrate Lucev on 8 February 2008.
On 21 July 2009 the Full Court of the Family Court of Australia (hereinafter, “the Full Court”) allowed an appeal by the husband and ordered that the matter be remitted to this Court for re-hearing. Substantial parts of the Transcript from the hearing before Lucev FM were admitted into evidence by consent. The re-hearing proceeded in the format described on 9, 10 and 11 September 2009.
The four step process
In any property settlement proceedings brought pursuant to section 79 of the Family Law Act 1975 (hereinafter “the Act”) the Court should consider the well known four step process. The four step process has been referred to on numerous occasions including by the Full Court in Hickey & Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143. The four steps to be considered are as follows:-
a)the Court must ascertain the property pool;
b)the Court must consider the contributions of the parties in accordance with section 79(4) of the Act;
c)the Court must consider the parties’ needs both now and in the future (the section 75(2) factors);
d)the requirement that the Order be just and equitable.
Before embarking on the four step process I consider it appropriate to set down a summary of the history of financial dealings between the parties.
The financial history of the parties
In 1959 the husband purchased a property at Property M, Queensland from [R]. The husband paid approximately £600 for this land. At about the same time the husband purchased a two and a half acre block of land at Property S, Queensland. The Property S land was later sold in about 1964 but the husband does not recall any details of the purchase or the sale of that land.
At the commencement of the marriage the wife had some savings, some superannuation and a car. The wife was then [employed within the Educational Industry] and was earning £30 per week. The husband was an [employed in the Maritime Industry].
The parties moved to Brisbane in January 1960 and lived in a flat in Property F.
In the early 1960s (possibly as early as 1960) the wife received an inheritance of £15,000 from her mother’s estate.
In the early 1960s the parties built a house on the land earlier purchased by the husband at Property M. The parties borrowed money to build the house.
After the parties had built the house at Property M they purchased an adjoining block next door to the house. The wife’s evidence is that she funded the purchase of the adjacent block – presumably from her inheritance. The title in respect of the two properties was then amalgamated.
In paragraph 29 of the wife’s Affidavit filed 31 May 2007 she states:-
“29.In early to mid 1960 I purchased three blocks of land at Property B, New South Wales for £1,000 each. This purchase was funded from monies inherited from my mother. I again, instructed that the titles be registered in joint names.”
In various parts of the evidence the Property B property is also referred to as, “Property B”.
In paragraph 10 of the husband’s Affidavit filed 31 May 2007 he stated:-
“10.We purchased three blocks of land at Proeperty B, New South Wales in or about 1965 or 1966. Most of the money for the purchase was borrowed from the wife’s brother Mr W and the balance from joint funds. The monies borrowed from the wife’s brother were repaid. During the course of the marriage we sold two of the blocks that we purchased.”
There is therefore a factual discrepancy between the parties as to how the purchase of the Property B properties was funded. Because I have not had the benefit of observing the parties in the witness box I am not able to reach a concluded view on the funding of the purchase of that land.
In any event it is apparent from the available evidence that the wife used her £15,000 inheritance for the benefit of the parties and their family. The husband does not contend otherwise.
When the parties moved to Queensland the wife was offered work as a [in the Educational Industry] on £11 per week. This was such a substantial reduction from her previous wage in Melbourne that she declined an offer of employment [in the Educational Industry] and began work [in the Trade Industry] for [P]. The wife then commenced studying [omitted].
The wife says in paragraph 30 of her Affidavit filed 31 May 2007:-
“30.In late 1960 I funded the purchase of the husband’s new business venture which was a [omitted]. The purchase price of the business venture was about $3,500. The husband soon closed the business down.”
In paragraph 23 of his Affidavit filed 31 May 2007 the husband provides a table showing his work history throughout the marriage as follows:-
Period
Employer
Annual salary (approximately)
1960 – 1961
[C]
£3,000
1962 – 1965
[G] (Aust) Pty Ltd
£5,000 + car
1965 – 1967
[A] Pty Ltd
$14,000
1967
[I]
$14,000 (including commission)
1967 – 1970
[W]
$1,000 + commission + car
1970 – 1973
[J]
$12,000 + commission + car
1973 – 1975
[S]
$10,500 + bonus + car
1975 – 1985
[B] Limited
$11,000 - $18,000 + car
1986 – 1992
[O]
$50,000 - $70,000
1992 – 1998
[L]
- no salary
- expenses such as car and my out-of-pocket expenses
- I paid housekeeping money to the Wife of about $200 per week
- The wife had use of a company Alfa Romeo
1999 – 2001
[omitted] College (part time)
- $6,000 - $8,000
It can be seen from the above table that the husband was in receipt of a salary from 1960 until 1965 with [C] and then [G] (Aust) Pty Ltd. This would appear to cover the period of time during which the wife says the husband conducted the [omitted] business. To the extent that there is any discrepancy between the parties on this issue – I am not prepared to make a particular finding one way or the other. I have not had the benefit of observing the parties in the witness box.
In 1971 the wife purchased a 54 perch block of land at Property P, Queensland. The purchase price was $3,000. The wife instructed that the title be registered in the parties’ joint names. The wife says that the purchase of the land was financed through the inheritance received from her mother’s estate.
The Property P land was later mortgaged to finance the husband’s business venture, [S]. It seems that the husband ran that business between approximately 1973 and 1975. It may have been earlier. The wife says that that business “did not do well and was eventually closed/disposed of”. I note the wife’s evidence in that regard appears in paragraph 35 of her Affidavit filed 31 May 2007.
The land at Property P was sold for $27,000. This occurred (according to the wife’s evidence) because the husband had not paid the loan for the [S]. The wife says also that if the Property P property had not been sold the bank had told the parties that it was going to foreclose on the matrimonial home at Property M.
$11,000 was used by the wife from the sale of the Property P property towards the design and construction of a house at Property T, Queensland.
The block of land at Property T had in fact been purchased in 1974. The Property T property was paid off over a period of ten years. That property was also registered in joint names.
Between 1992 and 1998 the husband ran a business known as [L]. The parties mortgaged various pieces of property to fund the business. Those properties included the property at Property M and a property in Property V, Queensland. The Property V property was situated in Property V. It was registered in both names. The husband had funded the purchase of the property at Property V from a payout he had received when he stopped working for [P]. The property at Property V served as an office for the [L] business.
Unfortunately the [L] business eventually folded when the [omitted] Shire Council refused to renew the company’s contract for a [omitted] service. The husband’s Affidavit filed 31 May 2007 reveals in relation to the [L] business:-
“34.The business grew and the revenues of the business between 1994 and 1997 were as follows:
(a) in 1994/95, the revenues were $323,623;00;
(b) in 1995/96, the revenues were $460,463.00; and
(c) in 1996/97, the revenues were $436,556.00.
35. I employed approximately thirteen people in the business.”
It can therefore be seen that there was substantial turnover from the [L] business between 1994 and 1997.
The husband sought legal advice from a well known Queensland legal firm, Thynne & Macartney.
Subsequently [L] sued Thynne & Macartney for negligence.
The husband and [L] had obtained legal advice from senior counsel (Simon Couper SC) prior to pursuing the claim for damages for negligence against Thynne & Macartney. The trial of the action proceeded in the Supreme Court of Queensland for nine days in July 2004. Cedric Hampson QC appeared at the trial with junior counsel on behalf of [L].
Unfortunately the claim by [L] Pty Ltd was dismissed and a costs order was made.
The wife contributed more than $30,000 for legal fees in respect of the [L] litigation.
[L] Pty Ltd had sought damages in excess of $5 million against Thynne & Macartney for negligence. As noted, however, the action failed.
The evidence also reveals that two of the blocks of land at Property B were sold to pay debts on behalf of [L] Pty Ltd.
The above list is not meant to be an exhaustive list of the financial history between the parties but merely a summary of some of the more important dealings.
The pool
I find that the property pool in this case is as follows:-
Assets
Title
Value
Property T
Wife
$925,000
One half Property M
$365,000
Wife’s superannuation
$186,000
Subtotal
$1,476,000
Liabilities
Mortgage in respect of Property T
$340,000
Debt to Butts & Barkley
$33,579
Debt to Mr Thompson of counsel
$10,000
Subtotal
$383,579
Net total
$1,092,421
Mr Galloway of counsel appeared on behalf of the husband and had initially contended that the other half of the equity in Property M should also be included in the pool. Fifty percent of the Property M property is owned by the parties’ sons having been transferred to them in October 1998. The husband had also initially contended that the one remaining block of land at Property B should be included in the pool in the sum of $80,000.00. That block of land was in fact transferred from the wife to the parties’ son Mr P in May 2002 for the consideration of $1. Mr Galloway subsequently altered his submission. He submitted that those two pieces of property ought not be included in the pool but the Court should rather take them into account when assessing contributions. I will refer to that later in these Reasons.
Add Backs
The husband has also contended that the following three items should be added back into the property pool, namely:-
a)the wife’s legal fees totalling $36,600;
b)the wife’s withdrawal of superannuation totalling $60,000; and
c)an increase in the mortgage totalling $105,469.
Dr Sayers of counsel appeared on behalf of the wife and submitted that none of these items should be added back into the pool. In AJO v GRO (2005) FLC 93-218 the Full Court stated at paragraph 30:-
“30.To date three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
‘11.6 For reasons set out in Farnell, s.117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s.117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.’
(b)Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
‘In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal wit the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.’
(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
‘As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec.75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.’”
So far as the wife’s legal fees are concerned those fees were incurred no earlier than 2007. That was ten years post separation. To my mind it is possible for the Court to infer from the available evidence that those legal fees incurred by the wife were incurred from post separation earnings and ought not be added back into the pool. Post separation the husband did not make any direct financial contributions. Whether or not the wife paid those legal fees from savings which she made from her post separation earnings or alternately whether or not the wife drew down on mortgages – which she had initially reduced from post separation earnings – to my mind makes no difference. It would be unjust and unfair to the wife in the particular circumstances of this case to add back into the pool the amounts paid in respect of those legal fees. This approach accords with the decision of the Full Court in Ibrahim and Beavis [1999] FamCA 765 – which was referred to with approval by a later Full Court in Re NHC and RCH (2004) FLC 93-204 at paragraph 48 and 49.
After separation the wife continued to make contributions to her superannuation. In 1997 the wife’s superannuation was approximately $82,500. In September 2009 the wife’s superannuation was approximately $186,061. At one stage it had been as high as $270,000. It seems to me that the wife ought to be entitled to draw down on her superannuation given that it is still substantially above the level that it was at the time the parties separated. Essentially the wife was accessing income that she earned post separation. Whilst there may be an argument that the husband contributed to that superannuation because the wife gained her qualifications during the marriage – having regard to the fact that the current level of the wife’s superannuation is more than double what it was at the time of separation in 1997 I do not consider it appropriate in the circumstances of this case to add back into the pool the sum of $60,000.
In relation to the increase in the mortgage - the evidence reveals that at about the time of separation (in fact in August 1997) the level of the parties’ indebtedness to lenders was somewhere between approximately $400,000 and $689,000. Since separation the wife has made all of the mortgage repayments in respect of the real estate. The total mortgage indebtedness in the current pool is $340,000. It can be seen therefore that the wife was in fact the person who paid down the mortgages. The fact that she then may have drawn them up in more recent times should not be held against her. Furthermore, there is evidence to show that since the wife suffered her stroke she has needed to access funds in order to purchase various items. I do not consider that there should be an add back into the pool in respect of the increase in the mortgage identified by the husband of $105,469. In the circumstances of this particular case an add back of the kind sought by the husband would be unjust for the reasons stated.
I have also taken the view that the proceeds of sale of the [L] [business asset omitted] should not be added back into the pool. It seems to me that the husband has provided a reasonable explanation in his Affidavit material as to what happened to that money. I consider in the circumstances of this case that it would be unjust and unfair to the husband to add back that amount into the pool.
Furthermore I have concluded that the husband’s inheritance in the sum of approximately $36,000 ought not be added back into the pool.
I accept the submission made by Mr Galloway of counsel on behalf of the husband in relation to these two items. The husband is, essentially, impecunious. I do not consider that it would be an appropriate exercise of my discretion to add those two items back into the property pool in the circumstances.
Other matters concerning the pool
It is of course the case that the real estate identified was at one stage in fact registered in joint names of the parties. In 1997 at the time of the separation the wife maintains that the husband handed her a letter essentially advising the wife that she could keep all of the property. The letter has never been found.
The husband says that the properties were transferred out of his name into the wife’s name for reasons of asset protection. This is another example of a factual dispute between the husband and the wife. In the special circumstances of this case – considering that I have not had the benefit of observing the parties give evidence in the witness box – I am unable to make a finding one way or the other.
Exhibit 5 in this trial is the bundle of exhibits from the first trial as set out in appeal book D from page D96 onwards. Included therein is a loan application form signed by the parties on 25 August 1997 – just two months prior to separation. The total assets of the parties listed there were $1,607,000. The total liabilities were $689,000. That left net assets of $918,000. That is essentially a snap shot of the financial situation of these parties as at August 1997.
Contributions
The wife worked throughout the marriage. The wife ran her own business as a [omitted]. Subsequently the wife also worked [in the Educational Industry].
The husband also worked throughout the marriage. Although I do note that between 1992 and 1998 the husband’s evidence is that he received no salary from “[L]”.
Furthermore, the wife provided most of the home making contributions. This includes most of the contributions in relation to the raising of the parties’ two sons. The husband did also make contributions towards home making and assisting with the children.
As noted, the wife inherited a large sum of money (£15,000) from her mother in the early 1960s (possibly as early as 1960). It is clear on the evidence that the wife contributed the entirety of her inheritance (£15,000) to the benefit of this family. In particular the wife purchased real estate (as referred to earlier) and she organised for that real estate to be registered in the joint names of the parties.
The husband was involved in more than one business venture throughout the marriage. Those business ventures included the [omitted] service; [S] and, most significantly, [L]. Whilst the wife may have, on occasions, had some reservations in relation to the husband’s business ventures I am able to infer from her actions that she nonetheless supported the husband in his business endeavours. In particular I note that the land at Property P was mortgaged in order to finance the [S] business. This must have been done with the agreement of the wife.
Further, in paragraph 44 of the wife’s Affidavit filed 31 May 2007 she makes it clear that two of the blocks of land at Property B were sold to pay business debts. Again, this must have been done with the agreement of the wife.
The loan application form (which has already been referred to and which is part of exhibit 5) was signed by both of the parties on 25 August 1997. The assets and liabilities are listed as follows:-
Assets
Value
Property M
$380,000
Property T
$300,000
Property V
$300,000
Property B
$80,000
Alfa Romeo
$10,000
Nissan Navarra Ute
$12,000
[Specific business asset omitted]
$220,000
One [specific business asset omitted]
$280,000
Two alum work [vehicles omitted]
$25,000
Total Assets
$1,607,000
Liabilities
Value
NAB (mortgage)
Total owing $485,000
Overdraft NAB
$110,000
Loan (NAB) [Property V] (Inc above)
$89,000
Visa card
$5,000
Total liabilities
$689,000
It can be seen from the above that the parties, as at August 1997, included in their own “list of assets” - assets that were owned by the company running the [L] business. To my mind this indicates that the parties did not, at that time, see the [L] business as “the husband’s business”. But rather, it seems to me, the parties must have looked upon the business as a “family” business or as the “joint enterprise” of both parties. Both parties have signed and dated the loan application form.
Thirty seven years elapsed from the time of the marriage in 1960 until final separation in October 1997. In some respects it was a “traditional” marriage, with the wife providing the majority of the home making contributions and the husband earning income outside the home. However, it must also be noted that the wife also worked and earned income outside the home throughout the marriage. Both parties made their incomes available for the benefit of the family. At the very least this is an inference which can be drawn from the available evidence. To my mind, the evidence reveals that both parties were doing their best to assist their family and make contributions towards the family’s advancement.
Mr Galloway of counsel on behalf of the husband has submitted that up until the date of separation the contributions based entitlements should be seen as 50% each.
Dr Sayers, on behalf of the wife, has submitted that the contributions based entitlement of the wife at the time of separation should be assessed at between 60% and 65%. One of the major reasons for this submission by Dr Sayers is the evidence concerning the inheritance received by the wife.
I do consider that up until the time of separation the contributions do favour the wife. To my mind the contributions based entitlements of the parties up until the time of separation favour the wife 55% to 45%. This was, of course, a very long marriage (lasting 37 years up until the time of separation). In most cases involving such a long marriage contributions would be seen to be equal. But in this case taking into account the inheritance received by the wife; the fact that the wife used the inheritance to purchase real estate which provided benefits for the family over the years; taking into account the fact that the wife worked and earned income throughout the entirety of the period in question as well as making the majority of the home making contributions leads me to the conclusion that there should be a weighting in favour of the wife so far as contributions are concerned up until the time of separation.
Post separation contributions
After separation it is the case that the wife made all of the repayments in respects of the various mortgages. After separation the husband did not make any further loan repayments. He conceded as much in his evidence. The property pool has been substantially preserved for twelve years post separation because the wife has made the loan repayments.
The wife continued to work throughout this period (up until the time that she fell ill in 2008).
For several years the husband pursued the [L] litigation which unfortunately did not end well. The wife financially assisted the husband in pursuing the [L] litigation.
Having regard to the fact that twelve years have elapsed since separation and during that time the husband did not make any direct monetary payments towards any of the mortgages, I take the view that there should be a further weighting in favour of the wife so far as contributions are concerned. Dr Sayers of counsel submitted that in respect of post separation contributions there should be up to a further 15% assessment in favour of the wife. I consider that the appropriate further assessment is 10%. My assessment in that regard would have been higher but I have taken into account the fact that the wife has transferred two pieces of property out of the pool post separation. I refer to my comments in paragraph 48 herein in that regard. In my view it is appropriate (in assessing post separation contributions) in this case to take into account the fact that one half of the Property M property and the remaining Property B property have been transferred out of the pool by the wife. They are both properties about which it can be said that the husband made contributions.
Conclusion in relation to contributions
My conclusion in relation to the contributions based entitlements of the parties up until the time of trial is therefore that they ought to be assessed in favour of the wife 65% to 35%.
Section 75(2)
Both of these parties are now aged 74 years.
In 2008 the wife suffered a stroke. The wife has led evidence that she has significant needs as a result of the disabilities she now encounters following the stroke. It is unlikely that the wife will return to paid employment.
The husband is no longer working. He has led some evidence in relation to health issues. He is under the care of a cardiologist and also has some prostate issues.
Mr Galloway of counsel on behalf of the husband has submitted that there should be no adjustment under section 75(2) on the basis that both of these parties are elderly and, notwithstanding the fact that the wife has suffered a stroke, it is foreseeable that the husband will also require care and assistance in the not too distant future due to the normal aging processes.
Dr Sayers of counsel on behalf of the wife has submitted that there ought to be an adjustment in favour of the wife having regard to the section 75(2) factors of 10% – 15%.
In view of the fact that the wife has suffered a stroke and there is evidence that she is currently in need of assistance I have concluded that there should be an adjustment in favour of the wife pursuant to section 75(2) of the Act. In the circumstances of this case the adjustment should be 5%.
Justice and equity
I have come to the conclusion that the wife should receive 70% of the net pool as found and the husband should receive 30% of the pool.
I note that the husband is essentially impecunious. Both parties are elderly. Neither party is in good health – although I note the wife’s health is currently more fragile than the husband’s.
The parties were together for 37 years. The parties experienced the ups and downs of family life together.
To my mind an order of the kind proposed is, in the circumstances of this case, just and equitable.
I certify that the preceding eighty-six (86) paragraphs are a true copy of the reasons for judgment of Howard FM
Associate: J Witenden
Date: 17 November 2009