Penton and Penton
[2017] FCCA 2798
•15 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PENTON & PENTON | [2017] FCCA 2798 |
| Catchwords: FAMILY LAW – Property – 35 year marriage followed by a lengthy separation under one roof – where the husband left the former matrimonial home in March 2017 and promptly applied for a property settlement – where the husband is terminally ill – relevance of life expectancy to the division of property between the parties. |
| Legislation: Family Law Act 1975(Cth), ss.75, 79 |
| Chorn & Hopkins (2004) FLC 93-204 Lawrie & Lawrie (1981) FLC 91-102 Leggero & Jagger [2007] FamCA 659 Mallett & Mallett (1984) FLC91-507 Morcomb & Lennox [2016] FCCA 985 Omacini & Omacini (2005) FLC 93-218 Pallister & Donnelly [2016] FamCA 86 Stanford & Stanford (2012) HCA 52 |
| Applicant: | MR PENTON |
| Respondent: | MS PENTON |
| File Number: | NCC 1350 of 2017 |
| Judgment of: | Judge Terry |
| Hearing dates: | 11 & 12 September 2017 |
| Date of Last Submission: | 12 September 2017 |
| Delivered at: | Newcastle |
| Delivered on: | 15 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr G. Levick |
| Solicitors for the Applicant: | Peninsula Law |
| Counsel for the Respondent: | Mr Lloyd |
| Solicitors for the Respondent: | Jacqueline Gore & Associates Pty Ltd |
ORDERS
The parties shall do all acts and things required to sell the former matrimonial home located at and known as Property A, Folio Identifier Lot (omitted) in (omitted), and for that purpose:
(a)The property shall be listed for sale by private treaty with a real estate agent agreed between the parties within 14 days and failing agreement by the parties as nominated by the president of the Real Estate Institute of NSW.
(b)The listing price of the property shall be the amount agreed between the parties and failing agreement as nominated by the agent.
(c)The sale price of the property shall be the amount agreed between the parties and failing agreement as nominated by the agent.
(d)The parties shall co-operate in every way with the agent in relation to the marketing of the property for sale including making the key readily available and allowing inspection of the property at all times reasonably requested by the agent.
(e)Upon agreement being reached for sale of the property, the parties shall execute the contract of sale and all other documents necessary to complete the sale including all transfer documentation forthwith upon its submission to them by the agent or their solicitor or conveyancer.
The proceeds of sale shall be utilised:
(a)To pay the costs, commissions and expenses of sale including any rates adjustments.
(b)To pay the mortgage secured over the property in favour of (omitted) Bank.
(c)To pay the balance as to 61.5% plus $40,508.32 to the wife and 38.5% less $40,508.32 to the husband.
Contemporaneously with the sale of the property, the husband shall provide a withdrawal of caveat in registrable form together with the necessary filing fee to the solicitor or conveyancer having the carriage of the sale.
Pending sale of the property:
(a)The wife have the sole right to occupy the property.
(b)The wife pay all the outgoings, bills, utilities and essential repairs and indemnify and keep indemnified the husband in that regard.
(c)Neither party shall encumber the home (including increasing the present balance of the mortgage) without first obtaining the written consent of the other party.
The husband is declared the owner of the following property which is currently in the possession of the wife:
(a)One wedding ring and one ring with twin diamonds formerly the property of Ms E, the crystal dresser jewellery box including a crystal tray, two crystal bowls and two matching vases, the two rose patterned vases and the silver trophies NOTING THAT the ring may need to be cut from the wife’s finger and if that is necessary the husband shall accept it in a damaged condition and the silver trophies have been damaged and the husband shall accept them in their current condition.
(b)The contents of three garden sheds at the property as they stand today NOTING THAT the push mower is not in the sheds and will be property of the wife.
The wife shall deliver the items in 5(a) to the husband’s solicitor’s office within 7 days and allow the husband’s nominee reasonable access to the property to remove the contents of the garden sheds.
The wife is declared the owner of the three tubs of photos in the husband’s possession and the husband shall cause the tubs of photos to be delivered to wife within 7 days.
Each party is otherwise declared the owner of all assets in their possession or under their control.
In the event that either party refuses or neglects or is unable to execute any instrument or document being an instrument or documents the execution of which is provided for in these orders or is necessary to put into effect the provisions of these orders, then at the request of the other party and Registrar of the Federal Circuit Court of Australia is hereby appointed pursuant to Section 106A to execute any such instrument or document in the name of the party refusing or neglecting or being unable to so execute the instrument or document.
IT IS NOTED that publication of this judgment under the pseudonym Penton & Penton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1350 of 2017
| MR PENTON |
Applicant
And
| MS PENTON |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment were delivered orally and have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.
This is a property dispute.
The parties married in 1966 and separated in 2001 after 35 years of marriage. They never resumed their marriage but somewhere between 2003 and 2006 they resumed living under one roof. The exact date that occurred is of some importance to the parties but is of little relevance in terms of what I need to decide.
The husband left the home in March 2017 and the parties are now living separately.
The husband is 70 and has a terminal illness. He filed an application for a property settlement in July 2017. He proposed that the home be sold and the proceeds divided equally and that each party otherwise keep what they had.
The wife is 69. She filed a response proposing that she keep the home which would have given her something like 95 % of the pool as it was then known.
I gave the matter an early final hearing date as the husband had a legitimate wish to have the property matter decided sooner rather than later.
By the time of the final hearing, the wife had changed her position about whether the home should be sold and she also decided not to pursue certain conduct allegations she had made against the husband. However, the core of the parties dispute remained namely whether there should be a significant adjustment in the wife’s favour for s. 75(2) matters because of the husband’s limited life expectancy, and there was also an argument about whether money which the husband had transferred to the parties’ children relatively recently should be added back to the pool.
The pool is relatively modest and the major asset is the former matrimonial home in which the wife has lived for nearly 40 years and the husband for the majority of that time.
The husband’s case was that there should be no add-backs, that contributions should either be assessed as either equal or as slightly favouring him and that there should be – although this was a reluctant concession – a small s. 75(2) adjustment in the wife’s favour due to the life expectancy issue. It was his case that the outcome should be no more than about 52.5 % in the wife’s favour or at most 55 %.
The wife contended for add-backs totalling about $80,000.00. Her counsel submitted that contributions favoured her by about 2.5%, although that was a bit of a moveable feast and submitted that there should be a 10 to 15 % adjustment in her favour for s. 75(2) matters. The outcome he contended for was in the range of 62.5 % to the wife and 37.5 % to the husband.
Documents relied on
The husband relied on amended initiating application, trial affidavit and financial statement filed on 28 August 2017 and on the affidavit of Dr C, his treating GP, filed on 7 September 2017. He filed an affidavit by the parties’ daughter Ms R but did not seek to rely on it at trial.
The wife relied on her amended response, trial affidavit and financial statement filed on 30 August 2017.
The husband, wife and Dr C were cross-examined.
In his initiating application filed on 9 May 2017, the husband sought an order for the appointment of a litigation guardian. The wife opposed that application on the basis that the litigation guardian he proposed was unsuitable. I heard some argument about it on 19 July 2017 but in the end I did not need to determine it as the husband agreed to withdraw the application on the basis that the matter would be given an early hearing date.
The husband presented at the hearing as was well able to conduct his own case. He was in a wheel chair and he was obviously frail in body but there were clearly no issues with his mind. He dealt well with cross-examination and I have no concerns about his fitness to give instructions to his lawyers or conduct his case. He remained present in the Courtroom without incident throughout the hearing and he is here today to hear the decision.
Background
The parties married in 1966 when they were both 19 and they have three children: Mr S, born on (omitted) 1970; Ms R, born (omitted) 1973; and (omitted), born on (omitted) 1974.
In 1968 the parties purchased a home in (omitted) . They sold that property in 1978 and the next year they purchased land in Property A and built a home on it. They lived in that home for the remainder of their marriage and their time of living separated under one roof and the wife is still living in that home.
The parties separated in 2001. There was a dispute about how long it was before they commenced living under one roof again. I will come to that again when discussing contributions but I do not consider that anything turns on it.
Since March 2017 the wife has been living in the home and the husband has been living in rented accommodation.
Both parties have had significant health problems over the years but the wife is currently well, or well enough and the husband is seriously ill, and I will refer to that again later as well.
The assets and liabilities
The parties have the following assets:
Description
Ownership
Value
Property A)
Tenants in common in equal shares
$685,000.00
Hyundai (omitted)
Wife
$1,000.00
(omitted) Lawnmower
Wife
$500.00
Chainsaw
Wife
$100.00
(omitted) shares – 250
Wife
$1,168.00
Ford (omitted)
Husband
$1,000.00
Total
$688,768.00
The parties did not obtain a valuation of the former matrimonial home but they agreed that $685,000.00 was a reasonable estimate of its value. Of course the actual price will be whatever the home sells for.
There is furniture and there are household contents at Property A and the husband has some household contents. There was no admissible evidence of the value of these items and during discussion at the beginning of hearing the parties agreed that these items could be omitted and I have not included them in the pool.
The other small items in the pool were included at values agreed after discussion.
There are some rings and ornaments in the wife’s possession which she agreed the husband could have and I will refer to that at the conclusion of the judgment but neither party ascribed a value to them and or sought to have them included in the pool.
There is no superannuation.
The wife cashed in her superannuation in about 2006. She continued to work for the next few years after that, she said in her affidavit on contract, and there was a query at trial about whether she might have any further superannuation. However the wife was adamant that she did not and there is nothing to discredit that evidence.
The next issue I have to deal with is the issue of add-backs.
It is still legitimate and indeed often necessary to ensure that outcomes are just and equitable to include in the pool to which percentages are applied notional assets in other words assets which have existed but which no longer exist.
In 2016/early 2017, the husband divested himself of nearly $80,000.00 as follows: he gave $60,000.00 to his son Mr S and his daughter Ms R in around November 2016; he transferred $6,600.00 worth of (omitted) shares to Mr S in October 2016; and he gave $15,000.00 to Ms R in January 2017 and I must consider whether any of these amounts should be included in the pool.
In Omacini & Omacini the Full Court said that there were three categories of cases in which the Court should consider adding back amounts which had existed at a certain point but which no longer existed at the time of trial. Those categories of cases were: where there had been a premature distribution of assets; where there had been waste; and where legal fees had been paid. There is no doubt that husband’s disposition of the three amounts above comes within the first category, in other words it was a premature distribution of assets. [1]
[1] Omacini & Omacini (2005) FLC93-218
The parties separated 16 years ago and if it was clear that these amounts had been acquired post-separation that might tend to negative any add-back argument, but the first two clearly were not.
I will deal with the (omitted) shares first because that is the clearest case which requires an add-back.
The husband said that he transferred that money to his son to pay for his funeral expenses but I do not consider that is relevant when it comes to the issue of whether that amount should be added back.
Both parties received (omitted) shares on the demutualisation of (omitted) which well predated separation. The husband has divested himself of his; the wife’s are still in the pool and it would be unjust in those circumstances to ignore the husband divesting himself of his shares. The amount of $6,600.00 must be added back.
The second matter I will deal with is the $60,000.00.
On 8 September 2011 the husband received $62,853.24 from (omitted), a superannuation fund. Tendered documents show that he joined the fund in 2002 but the eligible service date is given as 1988 and it could well be that there was money rolled over.
The husband retired in 2008 which was after the parties separated but he made no effort to clarify whether any of the money in the fund was acquired post-separation; he did not mention this money at all in his affidavit.
I am satisfied on the balance of probabilities having considered the (omitted) documents that the $60,000.00 or at least a good part of it would have been acquired during the marriage and the husband sat on it after the parties commenced living under one roof while the wife used her superannuation - or at least a good part of it - to improve the home. It would be unjust if the husband’s disposition of this amount was ignored by it not being included in the pool.
I acknowledge that some of it may be attributable to post-separation work by the husband but the husband made no effort to establish that or to establish how much was due to post-separation employment and while he disclosed documents about this superannuation as part of the disclosure process he made no reference to it in his affidavit.
The $60,000.00 has to be added back.
I am not going to add back the $15,000.00 the husband gave to Ms R. That derived from money that the parties drew from the equity loan and divided between them quite recently. The wife’s share of that no longer exists; the husband has given his to Ms R.
I am going to add back a total of $66,600.00 which means that the assets total $755,368.00.
It is no answer to an add-back argument, I might add, that the husband no longer has the assets; that is always the case with prematurely distributed assets. The husband voluntarily divested himself of them to his children and they need to be added back so that what remains in the pool can be fairly divided.
The husband’s counsel submitted that if the husband’s superannuation was added back then so should the amount of $80,000.00 the wife received in 2006, or at least so much of it as the wife could not prove she had spent on the home.
In her affidavit the wife said that she spent the money on renovations, improvements and on living expenses. She said that she paid to have a driveway installed, a retaining wall constructed, a privacy hedge planted, a new kitchen installed, the bathroom renovated and new timber floors installed.
The wife produced documents evidencing that she had spent about $25,000.00 on those items. However in my view it is not appropriate, regardless of the fact that the wife does not have documents proving how the entire amount was spent to add-back any of the $80,000.00.
It is crystal clear that some of it was spent on renovations, there is documentary evidence to establish that. The wife’s description of what she did to the home means that there could well have been expenses in addition to the amounts the wife now has invoices for and indeed it is not surprising that she does not have all the invoices. It is just what happens in life.
The wife also said that she spent some of that money on living expenses. That is neither unbelievable nor unreasonable given that these parties have never been high income earners and in Chorn & Hopkins the Full Court said that money which had been spent on living expenses should not be routinely added back. [2]
[2] Chorn & Hopkins (2004) FLC93-204
The $80,000.00 the wife no longer has is in a very different category to the $60,000.00 the husband no longer has and I am not going to add any of it back.
The wife received $19,000.00 when she terminated a life insurance policy on the husband’s life. She used $10,000.00 to pay for the installation of flooring. She cannot provide evidence or even accurately recollect what happened to the rest but was nothing to suggest that it was frittered away or gambled away. It has gone. There is a reasonable explanation for what has happened to the majority of it and it is not appropriate to consider adding any of it back.
So we have assets of $755,368.00. From that has to be deducted the (omitted) Bank home loan which is the only debt I am going to take into account:
Description
Ownership
Value
(omitted) Bank Home Loan
Joint
$64,000.00
Total
$64,000.00
The wife has credit card debt of $19,000.00 and documents tendered at trial indicated that about $8,800.00 of that was spent on legal fees but even if had all been spent on something else, it would not be appropriate in a situation where the parties have long been separated to include it as a debt in which the husband has to share.
The wife also owes $16,500.00 for legal fees and again that is not a relevant liability. The husband also owes money for legal fees.
I will refer to the parties’ debts when considering s. 75(2) matters but it is not appropriate to take them into account in calculating the pool.
The pool allowing for the fact that I have used $64,000.00 as the amount of the (omitted) Bank debt is worth $691,368.00.
The applicable law
S. 79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property.
S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford the High Court stressed that when an application for a property settlement is made the court must first identify the parties interests in property and then consider whether it is just and equitable to make an order altering those interests. It stressed that this question could not be answered simply by considering whether a party had made contributions as set out in s. 79(4) of the Family Law Act.[3]
[3] Stanford & Stanford (2012) HCA 52
Both parties asked the Court to make orders adjusting interest in property and I satisfied that it is appropriate to do so given that they cannot continue to jointly enjoy the use of the assets they acquired during their marriage.
It was apparent that the wife was somewhat suspicious that perhaps Mr S and Ms R, from whom she is estranged, were behind the husband’s application. However the husband gave evidence and he is clearly mentally capable and was well able to take part in the trial. There was no evidence he was his children’s puppet. He may well have a legitimate wish to secure his part of the property that so he can leave it as he chooses but that is not an unreasonable wish. It may well be what is driving the litigation and the wife needs to accept that.
I intend to take the usual steps to resolve the question of what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s79(4)(a), (b) and (c) and to express those contributions as a percentage;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which includes the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
The parties were very young at the start and in their affidavits they each emphasised their contributions during their 35 year marriage.
The wife handed up a document setting out her employment history in some detail. She was out of the workforce for seven or eight years when the children were young and she was the children’s primary carer during that period. The husband said that he was employed as a (occupation omitted) for most of the marriage. He appears to have had some other employment toward the end and retired in 2008.
The husband listed at length in his affidavit work that he had done on the property. I suspect that some of it may have been done post-separation and some of it was not directly related to the property, for example, constructing a dolls house for his grandchildren, but there is no doubt the husband has done a lot of work around the property.
The parties both received lump sums during the marriage which were used for family purposes. The wife received a compensation payment regarding a medical issue. The husband received a retrenchment payment.
In my view it is appropriate to assess contributions during the marriage - which, remember, ended in 2001 - as equal.
I cannot assume equality because it was a long marriage. I have to be careful not to do that as Mallet & Mallet makes clear.[4] But the evidence establishes that each party earned income during the marriage. They each did some parenting and homemaker tasks. They each did some work around the house.
[4] Mallett & Mallett (1984) FLC91-507
As I observed to the parties during the hearing people often do not have a clear and accurate recollection of the past. They often see it through the prism of their current feelings about each other. Memories fade. Human nature means that people often talk up their contributions and downplay the other party’s. In my view it is open to me to find that while the parties were in a marriage their contributions were equal.
The parties separated in 2001. The wife said that between then and when she said the husband moved back into the home she repaid the mortgage to the extent of about $50,000.00 so that it was down to a few thousand when he moved back.
That is something which is very important to the wife but as I pointed out during submissions the wife had exclusive occupancy of the jointly owned home during that period. She ought to have been making the mortgage payments. The husband was paying rent elsewhere and people do not get credit for making mortgage payments in those circumstances.
After the husband moved back into the home, the parties went to the bank and they each paid about $1,100.00 which discharged the mortgage and as a result for quite a lengthy period of time they were able to live in the home without having to pay accommodation costs. They had to pay outgoings and the arrangement was that they would each pay half of those.
In about 2014 the parties took out an equity loan of $60,000.00. The loan was taken out because the wife wanted money to repay credit card debt and the husband agreed to sign up for the loan.
Some of the money was drawn down immediately to pay the wife’s credit card debt and the amount according to my notes, was admitted to be about $14,500.00. The wife said that some money was also drawn down to pay things like rates and expenses for the home. I have no reason to disbelieve that because although there is no documentary evidence of it, by that time each party was on an age pension. They did not have a lot of income. It is not inherently incredible that they would have used the equity loan for those purposes.
In 2016 the parties withdrew what was left and divided it up.
The husband received $14,000.00. The total left was $32,000.00 and the husband’s counsel tried very hard to show that the wife had received more than the husband at that time.
The wife said that was not the case and that some of the money was used to pay outgoings for the house, and the husband’s immediate response when he was asked about what happened to the balance available on the equity loan was “We went halves”.
I prefer the wife’s evidence that some of the $32,000.00 was used to pay household bills and that whatever remained was divided equally and if the husband got $14,000.00 it is reasonable to assume that the got $14,000.00 as well.
Neither party has recently made any repayments on the equity loan but they both benefited from it to varying degrees. They are both responsible for it and I cannot make an adverse finding against one of them because one of them has not made the loan repayments.
It is a relevant matter however that the wife received the major benefit of the equity loan; it was taken out to pay her post-separation credit card debt and the husband helped her by agreeing to mortgage the former matrimonial home and made a contribution to her welfare.
However there are is another post-separation matter to be taken into account. The wife used her superannuation to pay for work on the house. The superannuation was acquired mainly during the marriage and the husband had if you like, some sort of an interest in it so she does not get credit for the amount she paid but the husband benefitted from her initiative and her efforts in conserving the home.
Conclusion about contributions
I have to decide whether there should be any adjustment in the husband’s favour because he agreed to the equity loan being taken out so the wife could pay her credit card debt.
The wife’s counsel submitted that an adjustment of 5% should be made in the wife’s favour for contributions but that is simply not open on the evidence.
The husband’s counsel submitted that contributions slightly favoured the husband without putting a percentage on it and I agree that they do because of the equity loan.
However, I also have to take into account the wife’s efforts in organising some work on the house and in my view a 1% adjustment in the husband’s favour is an appropriate adjustment to deal with his agreement to the equity loan being taken out and the wife’s use of the money. It creates a differential of nearly $14,000.00 between the parties’ entitlements so it is possibly at the high end of the range but it is the adjustment I am going to make.
That would mean the wife is entitled to 49% of the pool of $338,770.32 and the husband to $352,597.68.
S. 79(4)(d)(e) (f) & (g)
I am required to take into account the matters in s. 79(4) (d), (e), (f) and (g). The only relevant one is (e) which requires me to have regard to the matters in s. 75(2).
S. 75(2) matters
I am going to start with the wife although she is the respondent because the issue of what is to happen in relation to the husband’s terminal illness is a significant issue in the case.
The wife is 69. She will be 70 in (omitted). She is on the aged pension. She has had some serious health issues over the years including a benign brain tumour which was removed by surgery. She presented as a little frail and she was helped in and out of the witness box. She said in her affidavit that she suffered migraines and had had some falls but it was not suggested by her nor was there any evidence to establish that she had an immediately life-threatening condition.
According to the wife’s financial statement she has an excess of expenses over income. That is not an incredible assertion because she has credit card debt so even now she is not quite living within her means. Once the house is sold she will not have to pay rates and water as at present, which will save her $90 a week, but she will have to pay rent.
The husband is paying $300 per week rent so if the wife continues to receive her age pension, she is going to have even more of a shortfall of expenditure over income once the matrimonial home is sold.
On the wife’s evidence, which included a financial statement in which part N was completed, the wife cannot really live on the age pension without something additional or without incurring some credit card debt and her situation in that regard is going to become more difficult once the home is sold.
The expenditure the wife set out in part N of her financial statement was very modest, and it is not inherently unbelievable that people whose only income is the age pension are going to live a frugal existence.
On the basis of contributions the wife is entitled to $338,770.32. She did not make clear in her affidavit what she intended to do when the home was sold but that is the amount she is entitled to on the basis of contributions.
The wife has a debt of $16,500.00 for legal fees which will have to come off that. She has credit card debt which she may or may not choose to repay in full. If she does repay it in full that is another thing that will reduce her capital.
On any view the wife is going to be left with an age pension and a modest amount of capital once the home is sold.
The husband is 70 and he is in very poor health indeed.
Dr C provided a report about the husband’s health and under the heading Prognosis he said as follows:
As can be observed, his medical conditions –
I think he must have missed out a word there –
his prognosis is considered poor and hence he has been recorded as not for resuscitation.
Although a timeline for life expectancy is not something I am comfortable with providing, owing to his lifestyle – mainly continued smoking and his poor mental state – I feel his life expectancy is very poor.
The husband has previously said that in his view he may have six months to live. I do not know where he got that from and I cannot necessarily place any weight on it.
Dr C was pressed in cross-examination to give an opinion about the husband’s life expectancy and he was most reluctant to do so. He said that sometimes doctors were very embarrassed by the fact that they suggested that a patient had a limited life expectancy and 10 years later the patient walked in the door still fit and healthy.
It is impossible to believe that is going to happen for the husband given his current state and Dr C, when pressed, said that his estimate of life expectancy would be 12 to 24 months.
Whether that entirely fits with the information under the heading “Prognosis” is not clear. The information under that heading would lead one to believe that the likely life expectancy is going to be at the lower rather than the higher end of the range.
The question is what should be done with the evidence about the husband’s health.
The wife pressed for an adjustment to be made in her favour for s. 75(2) matters because she was relatively well and there was no challenge to her life expectancy at present whereas the husband had a limited life expectancy. The wife’s case was that whatever she received would have to last her a lot longer than anything the husband received was going to have to last him and it was her case that as a result she should get an adjustment in her favour for s. 75(2) matters.
In the 1981 case of Lawrie & Lawrie the majority of the Full Court said that life expectancy was a legitimate matter for the Court to consider when determining whether there should be an adjustment for s.75(2) matters. Fogarty J said as follows:
It is appropriate and in my view necessary to consider the relative future needs of the parties in determining what is a just and equitable order under section 79. Where there is a significant disparity, that would ordinary be reflected in the orders. This is frequently a result in cases of a more usual type. Further, where in any case it is clearly established that the future financial needs of a party will terminate or perhaps significantly diminish on the happening of a definite future event, it is proper to take that into account. A number of examples of that readily spring to mind. The weight to be given to that will obviously vary from case to case.[5]
[5] Lawrie & Lawrie (1981) FLC 91-102
In Lawrie & Lawrie the trial judge had made an adjustment of 15% in the wife’s favour because of the husband’s limited life expectancy and the Full Court on appeal did not interfere with that.
The husband’s counsel referred me to the 2007 case of Leggero & Jagger. In that case Young J was attracted to the dissenting judgment of Asche J in Lawrie & Lawrie and noted that Asche J said as follows:
[H]is Honour has in my view, over-emphasised the one factor that the husband’s life expectancy is limited. That should not, in my view, have led his Honour to make an alteration of what he otherwise would have come to in his assessment, namely an equal division.
…
[T]he Court is bound to do that which is just and equitable to both parties, and in the circumstances which [the Trial Judge] found, which called for an equality of contribution, it is not just and equitable that the husband should be deprived of some part of what would otherwise be his equal share on the basis that he has a short life expectancy. It is not just and equitable to him, it is not just and equitable to his desire and capacity to deal with his estate as he wishes; and although I concede that I am stating this in an extreme way, it might well seem to him as if he were being punished for his illness”.
Young J went on to say:
I am of the opinion that Asche J’s rationale, but not his analogy to punishment, bears considerable force. In my view, it does present a difficulty for it to be said to be just and equitable within the focus of the Act as it is now drafted for a party to receive an additional loading based not on some specific need of their own, but rather on the diminished need of another. To award one party an adjustment to which they would not be entitled were the other not terminally ill is, in effect, to allow the surviving party to profit from the other’s tragic circumstance.[6]
[6] Leggero & Jagger [2007] FamCA 659
I do not agree with the logic of that and query whether it was influenced by the facts of that case, which involved a pool worth millions and a wife who was 56 and much younger than the husband and who was working and earning a good income. For that wife to seek an adjustment under s. 75(2) for life expectancy issues may have appeared like a raw grab for extra money without much justification.
It is true that in the case before me if the husband were not terminally ill, it is not likely that there would have been any s. 75(2) adjustment. I would have had two parties of almost identical age on an aged pension and there would not have been an adjustment. But the fact is that is not the case. The husband is terminally ill and in my view his life expectancy is legitimately to be considered under s. 75(2).
In Leggero & Jagger the trial judge queried whether s. 75(2) as it now stood justified taking life expectancy into account. He said as follows:
Before leaving this topic, however, I wish to reiterate that I see considerable logic in the reasoning of Asche J’s dissenting judgment in Lawrie. In my view, it would be appropriate and indeed necessary for the Full Court to reconsider the principle which Lawrie has come to stand for. This is especially appropriate since that principle was based on the then drafting of s.75(2)(d), which has since been amended. Whilst S v P and the subsequent Full Court case of JCVB v SKK (2005) FLC 93-233 have applied Lawrie under the Act as it presently stands, when Lawrie was decided s 75(2)(d) read as follows:
(d) the financial needs and obligations of each of the parties.
This section was amended by the Family Law Amendment Act 1987 (No. 181 of 1987) and now reads:
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
To my mind, the language in the amended section is much broader than, and of a different emphasis, to its predecessor. It omits the much commented upon terminology of ‘needs’ and the stress placed upon financial obligations. The new language explicitly includes commitments to others including children and may perhaps be more accommodating of a party’s right to direct their estate as they see fit, their commitments to beneficiaries under a will and of their entitlement to benefit from their assets and financial resources acquired during a marriage. The Full Court in S v P (supra) did not specifically consider this amending legislation which I regard to be more supportive of the reasoning and outcome favoured by Asche J in Lawrie.
I simply cannot understand that because there are numerous subsections in s. 75(2) which are relevant to this situation.
The first is s. 75(2) (a) which is the age and state of health of each of the parties.
Another is s. 75(2)(d)(i), which refers to the commitment of each of the parties that are necessary to enable the party to support himself or herself. For some reason the judge in Leggero & Jagger focused on s. 75(2)(d)(ii), but the case before me and, indeed the case before the trial judge in Leggero & Jagger did not involve a child who needed to be supported, it involved adult children who were self-supporting.
Another relevant consideration is s. 75(2) (g) which requires the court to take into account a standard of living that in all the circumstances is reasonable.
In my view it is legitimate to take life expectancy into account when considering whether there should be s. 75(2) adjustment.
There is no doubt however that every case turns on its own facts.
Counsel for the husband referred me to Pallister & Donnelly, a decision of Austin J handed down in January 2017. Austin J, interestingly, does not refer to any of the decided life expectancy cases, but the point to bear in mind about that case is its vastly different facts.
On my reading of that case notwithstanding the husband’s counsel’s submissions the trial judge did not make any s. 75(2) adjustment. He made a small adjustment in the husband’s favour for contributions and no s. 75(2) adjustment for life expectancy or for any other reason. [7]
[7] Pallister & Donnelly [2016]FamCA 86
The facts in that case were that the husband was terminally ill and had a very short life expectancy. The wife was 54. She was earning $80,000.00 per annum, had re-partnered with a wealthy high income earning new partner and was entitled to $2.9million on the basis of contributions. It is hardly surprising that a s.75 (2) adjustment in her favour for the life expectancy factor was not considered.
In my view none of the cases that the husband’s counsel referred me to mean that I should not consider making an adjustment in the wife’s favour for the life expectancy issue.
The wife is well. She is an aged pensioner. She will find it difficult to make ends meet if the house is sold. She has difficulty making ends meet now and she will have to do this for much longer than the husband.
The husband did not establish, as did the husband in Pallister & Donnelly, that he had any immediate need to dip into capital himself. He did not seek to establish that he had medical needs or housing needs that he could not meet on his pension. He has, sadly for him and I dislike having to say this but I have no choice, limited mobility, limited capacity if any to get out of the house and limited things to spend money on.
The wife is in a very different situation and can be expected to be so for some little while.
In Lawrie & Lawrie the adjustment in the wife’s favour was 15 %. The pool was very small and the wife was living in Housing Commission housing and had minimal income.
I was referred Morcomb & Lennox, a decision of Judge Brewster.[8] In that case the husband was 60 and the wife was 56 and was working. The husband had advanced lung cancer and had a life expectancy of six to 24 months with a median of 12 months. The pool was much larger than the pool in this case; it was net $1.5 million.
[8] Morcomb & Lennox [2016] FCCA 985
Judge Brewster made a 15 % adjustment in the wife’s favour for s. 75(2) matters based on the life expectancy issue. He did not explain the reasoning behind choosing 15 % and I can only assume that it may have been because of Lawrie& Lawrie and the desirability of trying to make judgments fit together and be consistent.
I have to decide what to do in this case and in my view the wife has clearly established that there should be an adjustment in her favour and I cannot even remotely consider that an adjustment of 2.5% or even 5% would be adequate.
A 15 % adjustment was made in Morcomb & Lennox. In that case the pool was much larger but the wife was much younger so she had to provide for was much longer than the wife in this case.
I have a smaller pool but the wife is much older and I have to decide what to do and as has been said in many cases - and I think it is Fogarty J who mentioned it - there is, to an extent in these cases, always an intuitive leap that you have to take.
It is also a difficult exercise because people can die suddenly and unexpectedly. It is unclear how long the wife will live but the Court often has to make assumptions. It does that when it gives a party an adjustment for the care of a child who is living with them or for earning capacity.
Given the wife’s age and the fact that she has less time in front of her than the wife in Morcomb & Lennox to look after herself, notwithstanding the fact that the pool was larger in Morcomb & Lennox I am going to make an adjustment in the wife’s favour of 12.5%. I consider that is well justified on the facts of this case.
I have a pool of $691,368.00. If I make a 12.5 % adjustment it gives the wife an additional $86,421.00. Factoring in the previous one per cent adjustment in the husband’s favour, the wife will have in total, $425,191.32.
That is very modest given that her only income is the aged pension and she is either going to have to pay rent and then draw on capital progressively to try and have any sort of a reasonable lifestyle or she will have to use some of it to rehouse herself and the amount she has to do that will be reduced by payment of credit card debt and legal fees.
The husband will receive 38.5 % of the pool, which is $266,176.68.
I am conscious of the fact that part of the husband’s entitlement is in the form of a notional assets worth $66,600.00 but that is because he has already partially exercised his right to leave an inheritance for his children so I do not consider that means the outcome is not just and equitable.
This amount will allow the husband to pay his legal fees, have some comfort at this time in his life and still be able to leave a reasonable inheritance to his children which is his wish. There was no evidence that he had any pressing need otherwise for money on a day-to-day basis.
In my view overall, given the facts in this case, that is a just and equitable outcome.
I will make orders as agreed after discussion about the wife delivering some rings and other specific items of property to the husband.
I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of Judge Terry.
Date: 16 November 2017
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