Pitcher and The Estate of Pitcher
[2007] FamCA 208
•16 March 2007
FAMILY COURT OF AUSTRALIA
| PITCHER & THE ESTATE OF PITCHER | [2007] FamCA 208 |
| FAMILY LAW - PROPERTY SETTLEMENT – Contribution - section 75(2) - adjustment |
| Family Law Act 1975 (Cth) Sections 75(2) & 79(4) & (8) |
Tasmanian Trustees Ltd (as administrators of the estate of B J Gleeson) and D M Gleeson (1990) 14 Fam LR 189 at 192 (FC); [1990] FLC 92-156;
In the Marriage of Coghlan (2004) 33 Fam LR 414;
In the Marriage of Hickey (2003) 30 Fam LR 355 at 370;
In the Marriage of Omacini (2005) 33 Fam LR 134;
In the Marriage of Lenehan (1987) 11 Fam LR 615;
In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712;
In the Marriage of Zyk (1995) 19 Fam LR 797;
Mallett v Mallett (1984) 9 Fam LR 449;
In the Marriage of Ferraro (1992) 16 Fam LR 1;
In the Marriage of Shewring (1987) l2 Fam LR 139;
In Parrott and the Public Trustee of NSW as Administrator of the Estate of the late L J Parrott (1993) 17 Fam LR 785
| APPLICANT: | Mrs Pitcher |
| RESPONDENT: | The Estate of the late Mr Pitcher |
| FILE NUMBER: | SYF | 4791 | of | 2005 |
| DATE DELIVERED: | 16 March 2007 |
| PLACE DELIVERED: | Sydney |
| JUDGMENT OF: | Judicial Registrar Loughnan |
| HEARING DATES: | 2 & 7 March 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr N Jackson |
| COUNSEL FOR THE RESPONDENT: | Mr P Batey |
SOLICITOR FOR THE RESPONDENT: | Pritchard Law Group |
Orders
Within 21 days from the date of these orders the respondent, being the executrix of the estate of the husband (being the late husband), sign all documents and do all acts and things necessary to pay the wife $256,000 from the funds of the estate.
Within 21 days from the date of these orders and if practicable, at the same time as the payment pursuant to order 1, parties sign all documents and do all acts and things necessary to the transfer the estate’s half interest in the property located at D in the state of New South Wales, to the wife.
Forthwith upon that transfer, the wife sign all documents and do all acts and things necessary to discharge the mortgage secured over that property in favour of RESI Home Loans and to pay out and close the overdraft account of the husband and wife with the Commonwealth Bank.
Otherwise, as between the parties, the wife and the estate shall each solely be entitled to the exclusion of the other to all other property and resources not already referred to in these Orders in the possession or control of that party at this date.
In the event that either party should fail to sign any document necessary for the implementation of these orders, the Registrars of this Court are appointed pursuant to s.106A of the Act to sign such document in the name of the defaulting party and to do all things to give validity to such document.
Leave is granted to both parties to re-list these proceedings by arrangement with the Associate to Judicial Registrar Loughnan on 7 days notice in relation to the form or implementation of these orders or in relation to costs.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 4791 of 2005
| Mrs Pitcher |
Applicant
And
| The Estate of the late Mr Pitcher |
Respondent
REASONS FOR JUDGMENT
These are proceedings for property settlement, commenced by the wife and continued for the respondent husband by the executrix of his estate, pursuant to section 79(8) of the Family Law Act. Notwithstanding that fact I will refer to the wife and husband as “the parties”.
Applications
By her Amended Application for Final Orders filed 6 July 2006 the wife seeks certain orders. Learned counsel for the wife confirmed that the wife abandoned those orders relying on accrued jurisdiction. Thus the wife seeks:
1. That pursuant to Section 79 of the Family Law Act the Respondent, being the Executrix of the Estate of the Husband (being the late [husband]) do all acts and things necessary to transfer the estate’s half interest in the property located at [D] in the state of New South Wales, to the Applicant Wife.
2. That pursuant to Section 79 of the Family Law Act the Respondent, being the Executrix of the Estate of the Husband (being the late [husband]) do all acts and things necessary to transfer the estate’s interest in the Westpac Term Life Insurance policy in the name of [the husband] Member number […] to the Applicant Wife.
3. ….
That is not terribly helpful because that outcome would be different to the outcome advanced by learned counsel for the wife in his submissions. In fact the wife seeks a distribution in the proportions 85% to her and 15% to the estate.
By a minute handed up at the commencement of the hearing (exhibit A) the Estate seeks certain orders. Counsel for the estate said that the intention of the minute was that the interest on estate funds would be applied to the benefit of the children while engaged in secondary or tertiary education and that the minute of orders incorrectly used the term “tertiary” when “secondary” was intended. That correction has been made below. In answer to a question asked by her own counsel, the executor said that irrespective of the amount if any, to be paid to the wife from the estate funds held in the St George Bank, the executor seeks that the form of orders set out below be made:
1. That the Executor of the estate of the late [husband], cause to be invested the balance of the estate funds currently in St George Bank, and being Account No. […] and […] and cause to be paid the unpaid legal fees incurred in these proceedings of the executor and the wife with the balance remaining to be invested with a recognised financial institution in two term deposits of equal value on the following terms:
1.1.The 1st term deposit account to be an estate trust account for [the parties’ son] born [September 2990] with a maturity date of [September 2011] with interest to be paid quarterly to the estate of the late [husband]
1.2.The 2nd term deposit account to be an estate trust account for [the parties’ daughter] born [April 1992] with a maturity date of [April 2013] with all interest to be paid quarterly to the estate of the late [husband]
2. That within 7 days of the receipt of the quarterly interest payments on the two term deposits being received by the estate, provided for in Order 1.1 and 1.2 herein, the executor to forthwith cause to be paid any outstanding taxes, charges or fees incurred by the trust in the day to day management of the trust, and thereafter to cause the balance to be paid forthwith in the following priority:
2.1Any fees, expenses and charges incurred by or on behalf of the children for their secondary and/or University education, sporting activities, and extra curricular activities upon the production of any invoice, account, or validated payment request.
2.2Any fees, expenses and charges incurred by or on behalf of the children for their school or university uniforms, clothing, footware and/or sporting equipment and accessories upon production of any invoice, account, or validated payment request.
2.3Any travel and accommodation expenses incurred or to be incurred by the children in any school or university excursion or sporting activity whilst so ever the children remain in secondary or university education, upon the production of any invoice, account, or validated payment request.
2.4Any balance remaining of the quarterly interest, to the wife as trustee for the children to be applied by her in the day to day expenses of the children, (including any mortgage or rental payments of a residence occupied by the children) as determined by the wife in her absolute discretion.
3. That the Executor of the estate of the late [husband] provide to each of the children no later than 31 July each year for the duration of the term deposits provided for in Orders 1.1 and 1.2 herein, a statement and relevant bank statements of all interest received by the estate and disbursements made from the estate in accordance with these Orders.
4. The Executor to transfer the Estate’s interest in the former matrimonial home to the wife.
5. The wife to do all things to discharge the existing mortgage and re-finance.
Issues for determination
The issues for determination are:
Are the legal fees paid by the estate in respect of the family law proceedings $34,000 or $37,512.99;
Were the husband’s credit card and other personal debts, debts of the marriage;
Is the wife’s credit card debt a debt of the marriage;
Did the wife’s contributions exceed those of the husband from the date of separation to the date of the husband’s death;
What is the impact of the wife’s contributions after the husband’s death;
What impact does the potential contributions from the husband’s estate to the children have on the section 75(2) adjustment to be made in favour of the wife;
Short History
The wife is 51 years of age. The parties were married in December 1977 and separated in March 2001. They were not divorced. The husband died in January 2006.
Children
The parties have two children:
A sonwho was born in September 1990 and as at the date of hearing was 16 years of age; and
A daughterwho was born in April 1993 and as at the date of the hearing was 13 years of age.
Background Facts
The parties were married in December 1977.
Neither party had assets of any significant value. The wife had furniture and household effects and the husband owned a motor vehicle. The husband was employed at a spare parts company. The wife had just completed teachers college and had been employed part-time and in the holidays with a confectionary company.
In 1978 the wife commenced employment as a teacher at P High School. She remained a teacher at P High School and later B High School for 12 years.
In August 1978 the parties purchased a block of land at Y for $18,500. They borrowed $14,000 to fund the purchase.
In November 1979 the husband was diagnosed with a brain tumour and underwent surgery. He later had radiotherapy.
In November 1979 the parties signed a contract to a build a home. In February 1980 they refinanced their loan with St George Bank. The new loan was $43,000.
In February 1980 the husband returned to work but in August 1980, he resigned. He was unemployed for two months and in October 1980 he purchased a gardening business. The parties registered the business name PG. The wife worked in the business every school holidays and most weekends until 1987. She mowed lawns, cut down trees and shrubs, garden, rake leaves, sweep paths and generally did the same work as the husband in the business. In addition the wife undertook painting.
In February 1989 the wife gave up full time employment to concentrate on having a family. The parties joined the GIFT program. The wife received $17,145.67 from First State Super. $2,000 of that sum was preserved.
In April 1989 the wife’s parents advanced the parties $8,000 to partially discharge the St George Bank mortgage. The balance of $3,045 was paid off shortly thereafter.
The son was born in September 1990.
The daughter was born in April 1993.
In June 1993 the parties purchased an investment unit at H for $89,000. The wife contributed $11,474 being the proceeds of her superannuation payment plus interest. The parties borrowed the balance.
In 1998 the parties purchased land at D for $295,000. The purchase settled on in December 1998 and the parties borrowed $335,000 to complete the purchase and build a home on the land.
In May 1999 the Y property was sold for $375,000. $343.503 was paid in discharge of the mortgage. The parties moved into rented accommodation at B until 2001.
In December 1999 the parties sold the H investment property for $113,000. They received net proceeds of $99,211. They drew a cheque for $10,000 payable to the husband’s grandmother, Mrs R. The wife believes that it must have been a repayment of a loan but has no knowledge of such a loan.
In March 2000 the parties refinanced the mortgage with RESI.
In September 2000 the home was completed and in November 2000 the family moved into the new home at D.
In March 2001 the parties separated when the husband moved in with his parents.
The assets of the parties at that time were:
The Y property;
The business PG;
The wife’s motor vehicle;
The husband’s motor vehicle;
AMP shares in the husband’s name;
I shares in the husband’s name;
Savings with the Credit Union and St George Bank (W);
Wife’s Super interest at $3,800
The Husband’s AMP Superannuation policy.
The parties then owed:
The RESI mortgage on the Y property at $140,000;
A line of credit with RESI secured by the mortgage at $75,000;
An overdraft cheque account with the Commonwealth Bank at $6,352.87;
The wife’s Visa card account at $3,000.
After separation the husband took out a personal loan with the Commonwealth Bank for $8,000 or $9,000. The repayments came out of the parties’ overdraft cheque account with that bank. The husband also incurred debts with ANZ visa, Commonwealth Bank Visa and Virgin and Citibank credit cards.
After separation the wife’s income came in the form of Centrelink benefits and some income as a part-time tutor.
In 2003 the husband moved to rented accommodation at S for 6 months. He then rented accommodation at O for 6 months.
In 2004 the husband returned to live with his parents.
In October 2004 the wife was diagnosed with breast cancer.
In November 2004 the wife underwent a partial mastectomy and then chemotherapy treatment. In December 2004 the wife had a full mastectomy. The wife later had radiotherapy treatment.
In mid 2005 the wife sought to finalise a property settlement. Until that time the husband had agreed that the wife reside in the former matrimonial home at D on the basis that she pay the mortgage instalments. D is registered in joint names.
On March 2005 the husband suffered a stroke.
In July 2005 the husband sold some I shares and received $6,714.
In August 2005 the husband sold some AMP shares and received $1,276.
In October 2005 the husband was admitted to hospital and was released shortly thereafter. He received a $14,000 payment from a client of his business. He paid that sum to his mother. The wife asserts that the transaction was a loan. The husband’s mother asserts that it was a payment for money spent or to be spent by her on the husband’s expenses.
In November 2005 the husband was diagnosed with brain tumours and he was admitted to hospital. He started to receive Centrelink benefits.
In November 2005 the husband’s mother severed the joint tenancy of D using a power of attorney granted by the Husband.
In January 2006 the husband died. His mother is Executrix of his Estate. In March 2006 probate was granted of the husband’s estate.
The husband’s estate received $539,799.96 as the proceeds of an insurance policy on the husband’s life. The estate also received a $50,001.67 payment from an AMP superannuation policy. The wife asserts that, after the payment of estate expenses, $518,000 was invested in a controlled monies account and $9,628.71 in the solicitors’ trust account.
The husband’s mother withdrew $3,000 in three amounts from joint account.
In November 2006 the wife closed the joint account at the request of the ANZ Bank.
On 5 December 2006 orders were made by this Court providing that $100,000 be released to the wife. She received $80,000 after payment of legal expenses.
Credit and Submissions
The evidence of the witnesses
The only witnesses called for cross-examination were the wife and the husband’s mother.
The wife was a good witness. She does not have complete recall of all relevant facts and transactions but there was no instance of her being successfully challenged on the thrust of her evidence.
The husband’s mother was also a good witness. She made concessions in favour of her daughter in law. For example she conceded that her daughter in law was struggling financially in 2006. The only unsatisfactory aspect of her evidence related to her answers in relation to requests made by the wife of the estate for funds to be applied the benefit of the children during 2006. It is the unchallenged evidence of the wife that in a conversation with the husband’s mother in October 2006 she was told that the payments had been approved. In cross-examination the executrix conceded that no payments had been made and variously responded that she did not know why she had not authorised any payments, that she followed her lawyers’ advice on the requests and that she expected her daughter in law to ask her directly and not through lawyers. The last answer, bizarre though it is, has the ring of truth about it.
Submissions
It was submitted on behalf of the wife that the assets should be divided 85% to the wife and 15% to the estate.
In relation to the pool it is submitted for the wife that care should be taken not to double count the $100,000 advanced from the estate pursuant to orders made in these proceedings and the moneys paid for legal costs from that sum. It was conceded that the following debts of the husband, subsequently paid out by the estate, should not be read back into the list of assets:
Payment to Commonwealth Bank for credit card debt (H) $19,307.00 Payment to ANZ Consumer Finance (H) $9,321.00 Payment to Virgin Finance (H) $7,143.00 Payment to Toyota Financial Services (H) $7,221.00
It is an agreed fact that the contributions made by and on behalf of the parties were equal, up until the date of separation. After separation the wife submits that her contributions exceeded those made by and on behalf of the husband after separation, particularly as parent and homemaker, justifying a 15% adjustment overall. Thus it is submitted that the wife’s contributions were 65% compared to 35% by and on behalf of the husband. The ultimate distribution sought is 85% to the wife and 15% to the husband. Therefore the adjustment ultimately sought under section 75(2) is a further 20%.
It is submitted on behalf of the wife that the events of 2006 suggest that the wife cannot assume that contributions to the children from the estate will be readily forthcoming. It is submitted that Tasmanian Trustees Ltd (as administrators of the estate of B J Gleeson) and D M Gleeson (1990) 14 Fam LR 189 at 192 (FC); [1990] FLC 92-156 is authority for the proposition that the entitlement of an estate may be reduced to a small proportion or indeed, to nothing, in certain circumstances. Thus a distribution in the proportions 85:15 would be just and equitable.
On behalf of the estate the written submissions about the issues that were finally argued were as follows:
CONTRIBUTIONS PURSUANT TO SECTION 79(1) - (4)
Section 79(4) (a)
Financial contributions made directly or indirectly on by or on behalf of a party or a child of the marriage, to the acquisition, conservation or improvement of any of the property of the parties or either of them......
·The Husband contributed his earnings throughout the relationship from 1977 - 2001
·Toyota Motor vehicle with value of $12,000
·Superannuation entitlements of $539,698
·Life Insurance Policy proceeds $45,000
·The Husband contributed mortgage payments, school fees and payment for the support of the two children from separation (2001) to his death ((2006)
·A gift from the Husband’s Mother of $10,000.
·The Wife contributed the whole of her earnings from 1977 to date
· Section 79(4) (b)
The contribution, (Other than financial contributions ) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition conservation or improvement of any of the property of the parties to the marriage............
·The Husband contributed as the substantial and majority worker to the conservation and maintenance of the properties for the parties throughout the marriage
·Both parties made an equal contribution to the day to day domestic tasks,
Section 79(4) (c)
The contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any of the children of the marriage, including any contribution made in the capacity of homemaker or parent.
·The Husband contributed almost equally as the home maker during the marriage when he was not working.
·Subsequent to separation the Wife has made the majority contribution to the children’s care and welfare
Section 79(4) (d)
The effect of any proposed order upon the earning capacity of either party to the marriage
·Not Applicable
Section 79(4) (e)
The matters referred to In Sub Section 75(2) as far as they are relevant
·Separate submissions under this heading
Section 79(4) (f)
Any other Order made under this act affecting a party to the marriage or a child of the marriage; and
The Wife is seeking a payment pursuant to the Family Provision Act from the estate, which may have the effect of diminishing the property pool the subject of the Family Law proceedings
Section 79(4) (g)
Any Child Support under The Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future for a child of the marriage.
·The Husband paid child support from the date of separation to just prior to his death for the two children of the marriage.
·The estate will not be liable for child support
THE TRUSTEE SUBMITS THAT THE PARTIES CONTRIBUTIONS UP TO THE DATE OF HEARING SHOULD BE FOUND TO BE EQUAL
6.FACTORS TO BE CONSIDERED PURSUANT TO SECTION 75(2)
SECTION 75(2)(a)
·The Wife is aged 51 and is in fair health
·The Husband is deceased
SECTION 75(2)(b)
·The retains skills and a capacity for full time employment
SECTION 75(2)(c)
·The Wife will; have the sole responsibility for the day to day care of the two children
SECTION 75(2)(d)
·The Wife has no duty to maintain any other person other than herself
SECTION 75(2)(e)
·Not applicable to either party
SECTION 75(2)(f)
·The Wife has superannuation entitlements of approximately $4,500
SECTION 75(2)(g)
·Both parties enjoyed an modest standard of living prior to separation
·The Wife continues to have a modest standard of living
SECTION 75(2)(h)
·Not Applicable
SECTION 75(2)(j)
·Not Applicable
SECTION 75(2)(k)
·The parties cohabited for a period of 24 years.
SECTION 75(2)(l)
·Not Applicable
SECTION 75(2)(m)
·The Estate does not know if the Wife is cohabiting with any other person,
SECTION 75(2)(n)
·The Order sought by the Estate would be sufficient to maintain suitable accommodation for the Wife and two children in the home at [D] with a modest mortgage
SECTION 75(2)(na)
·No child support will be paid for the two children
SECTION 75(2)(o)
·The Court will need to take into account the terms of the Husband’s will and the requirement for the Trustee to apply the income from the estate to the children’s benefit
·The Husband continued to meet the mortgage and expenses of the children and school fees after separation
·The willingness of the Trustee to meet ongoing appropriate expenses for the children from the estate
SECTION 75(2)(p)
·Not applicable as no splitting order is sought.
54.THE ESTATE SUBMITS THAT THERE SHOULD BE AN ADJUSTMENT TO THE WIFE OF 10% AS A RESULT OF THE SECTION 75(2) FACTORS, RESULTING IN ORDERS THAT GIVE THE WIFE 60% AND THE HUSBAND 40% OF THE AVAILABLE PROPERTY PROVIDING NO AWARD IS MADE PURSUANT TO THE FAMILY PROVISIONS ACT
1. ISSUES IN DISPUTE:
JURISDICTION.
PROPERTY SETTLEMENT
1.…
2.The Wife’s contribution based entitlements
3.The parties respective initial financial contributions during the marriage
4.The parties homemaking contributions during the marriage
5.The Husband’s post separation contributions
6.The parties post separation income, and income earning capacity
7.The quantum of the Husband’s financial support for his two children post separation
8.The Wife’s post separation use of the funds received from the estate payment of $100,000
9.The Wife’s current capacity for employment
10.The adjustment, if any, pursuant to Section 75(2)
The approach in proceedings under section 79(8)
Section 79(8) provides:
(8) [Death of party before proceedings completed] Where, before property settlement proceedings are completed, a party to the marriage dies:
(a) the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings;
(b) if the court is of the opinion:(i) that it would have made an order with respect to property if the deceased party had not died; and
(ii) that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to:(iii) any of the property of the parties to the marriage or either of them; or
(iv) any of the vested bankruptcy property in relation to a bankrupt party to the marriage; and
(c) an order made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.There is no dispute as to these matters in this case but in any event I am satisfied that an order would have been made if the husband had not died and that it is still appropriate to make an order. Before he died the parties’ property did not include the proceeds of the life insurance policy. The joint tenancy had been severed and the husband was gravely ill. In my view a change was warranted to the legal title of the property in those circumstances. Today, the legal title would have the wife with a one half interest in the D property and nothing else. That situation warrants a change to the interests in property.
The approach in proceedings under section 79
The case law reveals that there is a permissible approach to the determination of an application brought pursuant to the provisions of s 79. That approach involves four inter-related steps. First, I am to make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Second, I should identify and assess the contributions of the parties within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Third, I should identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of s 79(4)(e), the matters referred to in s 75(2) 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 two. Fourth, I should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case. [1]
[1] This summary of the effect of the authorities is paraphrased from the comments of the Full Court in In the Marriage of Hickey (2003) 30 Fam LR 355 at 370
The property of the parties at the date of the hearing
A separate pool for superannuation
In the Marriage of Coghlan (2004) 33 Fam LR 414 the Full Court allowed that superannuation may be included in the list of property drawn up as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. The Full Court suggests that that:
“… approach could be adopted where the parties agree that it should be adopted, or where the court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the court to conclude that this would be an appropriate approach.”
Here counsel each included the wife’s superannuation in a general list. In any event her superannuation interest is of modest value in the context of this case. I will include the wife’s superannuation interest in the general list.
Notional assets
The Court is required to make a finding as to the property of the parties at the date of the hearing. There are circumstances which the Court has found in other cases, have justified the inclusion of property that no longer exists, in the pool of property for settlement. Similarly the Court has sometimes found that debts that do exist should not be included in the list that goes to make up the net pool of assets. In In the Marriage of Omacini (2005) 33 Fam LR 134 the Full Court noted:
[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 In the Marriage of DJM and JLM (1998) 23 Fam LR 396; (1998) FLC 92-816; [1998] FamCA 97 the Full Court said at [11.6]:
[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 In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at Fam LR 509; FLC 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 with 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 In the Marriage of Kowaliw (1981) 7 Fam LN N13; (1981) FLC 91-092 at FLC 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 s 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.
Dealing then with claims that notional assets be included in the list of assets for division:
$7,990 being the proceeds of shares sold by the husband
In July or August 2005 the husband sold shares with AMP and I. He told his mother that he was in dire straits and had bills to pay. He said that he had to pay money on the truck. The net effect of the evidence is that from separation the husband paid $1,000 per fortnight to the wife and paid school fees until at least March of 2005. It is the case of the estate that those contributions or some financial contributions continued until about July of 2005. The husband went into hospital for the last time in November 2005 and died on 1 January 2006. It is the estate’s case that through 2005 until October or November the husband was running his lawn mowing / garden care business in some fashion. The wife is not in a position to establish that the sale proceeds should be read back into the balance sheet because they were applied to legal costs, were a preliminary distribution in the sense of Townsend or wasted in the Kowaliw sense.
$14,000 advanced by the husband to his mother
The wife claims that $14,000 advanced by the husband to his mother in about October 2005 should be read back into the list of assets. The evidence is that the husband received a $14,000 payment from a client of his lawn mowing business. He paid that sum to his mother. The wife asserts that the transaction was a loan. The husband’s mother says that the advance was made by way of reimbursement of moneys spent by his mother on his behalf and to meet “bad” debts in the future. She made a record of relevant transactions which comprises annexure E to her affidavit. There is no evidence about it being a contemporaneous record or a later summary. It could be read to mean that $6,710 of the $14,000 was applied in certain ways. Two of the entries however, appear to refers to deposits rather than payments out. Those two are:
“15.12.05 NRMA 2 cheques rebate $365” &
“19.12.05 RTA cheque refund $15”
The husband’s mother has not fully accounted for the $14,000. It was not put to her that she still has the money. On the other hand, she was not a party to the marriage and has a role in the proceedings only in a representative capacity. In my view care is needed before imputing to her any motivation to hide funds. The first principle is that the assets to be divided are those identified and valued at the day of the hearing. I cannot find that the $14,000 or any part of it exists and I do not propose to deem that the husband’s estate holds $14,000 or some part of it, being funds that were paid to the husband’s mother in 2005, prior to the husband’s death.
Debts of the husband paid by the Estate
The wife originally contended that there ought be read back into the list of assets, moneys paid by the estate for the following debts:
Payment to Commonwealth Bank for credit card debt (H) $19,307.00 Payment to ANZ Consumer Finance (H) $9,321.00 Payment to Virgin Finance (H) $7,143.00 Payment to Toyota Financial Services (H) $7,221.00 Total $42,992.00
It was then conceded by learned counsel for the wife that those funds need not be read back as there would otherwise be debts of the husband which the estate was obliged to pay. That is a sensible concession. The wife cannot make a case that the funds were wasted by the husband or the estate. During the period that these debts were incurred the husband was running a ‘one man’ garden care business, was making his own arrangements for accommodation (including 12 months in rented premises) and for much of the period he was providing financial contributions to the wife’s household. For the later part of the period the husband was ill. It is not hard to imagine that the husband had need of funds. In relation to the payment of those debts, it is not as though, if they had not been paid, the pool of assets would now be greater. The debts would still exist and, being part of the husband’s estate, would reduce the net value of the assets.
Legal fees paid by the estate for family law proceedings
It is conceded that the estate paid $34,000 on legal fees associated with the family law proceedings. It is submitted on behalf of the wife that the estate paid $37,512.99 on legal fees associated with these proceedings. Although not detailed in the course of submissions I gather that the difference between the parties on this issue goes to the purpose or the primary purpose of the expense. In the copy of the estate ledger and the handwritten summary which form exhibit 5 the only ambiguous payment seems to be $1,564.20 to Ms S and Associates for advice on estate taxation implications. The question is whether that advice was needed for these proceedings or for the purposes of the administration of the estate. Ms S provided an affidavit which was relied on in these proceedings. On that basis I will treat her fee as primarily related to the family law proceedings. The amount to be read back in as paid legal fees is $37,512.99.
Other costs of the estate
In the case outline document filed on behalf of the wife there is reference to costs of $13,287, incurred by the estate being read back into the list of assets for division. The assets to be divided are generally the assets as at the date of the hearing. It is not suggested that the estate had any choice about those costs. They are akin to taxes, they are the price of crystallising the assets of the estate. I will not read back those expenses into the list of assets.
$100,000 advanced to the wife
It appears that it is agreed that the $100,000 advanced pursuant to an order made on 5 December 2006 be included in the list of assets. That figure is included in both case outline documents. I will include the figure and for that reason I will exclude the amounts that came from that source eg. the wife’s savings and the paid legal fees. In the latter regard it is conceded that the wife has paid $19,458.55 in legal fees associated with the family law proceedings. All but $191 of those fees were paid from the advance of $100,000. In her Financial Statement the wife discloses savings of $39,914 with the St George Bank. It would be double counting to include the wife’s savings or to read back her paid legal fees.
There would be an available argument that some of the other expenditure from the $100,000 should not be read back into the list of assets. The wife spent part of that sum on repairing or improving the swimming pool or pool surrounds at the former matrimonial home (nearly $9,000). Similarly moneys were spent on car repairs (about $500), school fees (over $15,000) and other child expenses and normal living costs. Given the parties agreement on this issue I must include the whole $100,000 in the list of assets but those matters must then be recognised in the assessment of contributions made after separation.
I find that the assets of the parties are:
Assets Value D (former matrimonial home) $800,000.00 ANZ joint account $672.00 Household contents $8,000.00 Mitsubishi Magna motor vehicle (W) $1,500.00 Wife’s interest with First State Superannuation $4,500.00 Funds advanced to the wife pursuant to order $100,000.00 SGB controlled money account (H) $410,999.00 Estate trust account $7,237.00 Moneys paid for the legal fees of the Estate in these proceedings $37,512.99 Total $1,370,420.99
Liabilities:
There is little dispute about the liabilities. As to the disputed issues:
Legal fees payable by the estate for family law proceedings
This issue is not relevant to the identification of the net assets of the parties. However, it is impossible to reconcile the evidence in relation to this issue. There is a letter in evidence dated 2 March 2007 (exhibit 4) that puts the total fees at $42,279.17 and the amount actually paid at $21,722.54. Thus the estate owes $20,556.63. In that same letter the executrix is advised that there would be a further $12,000 payable to the end of the case. That would mean that the estate owes $32,556.63. It is not possible to reconcile that evidence with the estate ledger (exhibit 5) which puts the amount paid at $37,512.99. I will put the figure for unpaid costs at $32,556.63.
Wife’s Visa card debt
The wife has a debt to Visa card of $6,000. It is submitted on behalf of the estate that it should not be included in the liabilities that go to make up the net assets for division. Given that the husband’s credit card and other debts have been taken into account in identifying the net assets of the parties, I can seek no logical reason for excluding this debt. The wife was not challenged in relation to the debt or the purposes for which it was incurred. I will include the debt.
I find that the liabilities of the parties as at the date of the hearing are as follows:
Liabilities Amount Mortgage to RESI $215,000.00 Joint overdraft $9,000.00 Wife’s Visa card debt $6,000.00 Wife’s legal fees $11,998.00 Estate family law fees $32,556.63 $283,554.63
The legal fees are not a joint expense and therefore the net assets have a value of $1,140,420.99 ($1,370,420.99 - $230,000).
Financial Resources
There is no evidence that either of the parties has any other financial resources.
Contributions
The obligations placed on the Court by s 79 call for an assessment of the respective contributions of the parties. The manner of assessing contributions has been the subject of previous decisions. The contributions of a parent and homemaker are to be assessed, not in any merely token way, but in terms of their true worth to the building up of the assets[2]. There are said to be risks in taking an overly technical approach to the assessment of the respective contributions of the parties in that the Court can become involved in questions of the quality of contributions which go far beyond the real world expectations of parties[3]. In this case the parties agree that the contributions were equal.
[2] Mallett v Mallett (1984) 9 Fam LR 449; In the Marriage of Ferraro (1992) 16 Fam LR 1
[3] In the Marriage of Shewring (1987) l2 Fam LR 139
As to whether the Court should assess contributions asset by asset or globally the authorities have it the latter approach is preferred, in appropriate circumstances either approach is permissible and sometimes the asset by asset approach is best. See In the Marriage of Lenehan (1987) 11 Fam LR 615; In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712; In the Marriage of Zyk (1995) 19 Fam LR 797.
The submissions were made on the basis of a global assessment of contributions and I will adopt that approach.
Contributions
It is an agreed fact that the parties’ contributions until the date of separation were equal. The parties separated after more than 23 years of cohabitation. During those years they were each engaged in paid employment and in non-financial contributions. They have two children and were each involved as parent and homemaker although the wife had more time away from paid employment in pursuit of those roles. The parties approach to contributions to the date of separation is sensible and appropriate. As to the contributions made after separation:
Section 79(4)(a) Contributions
The wife conceded in cross-examination that her income for 2002, 2003, 2004, 2005 and 2006 was less that the income tax threshold. The income tax threshold is $6,000 per annum.
The wife has had some work as a tutor. In her Financial Statement of December 2005 the wife declared an income of $160 per week from tutoring. Her income from that source is now up to $440 per week.
The husband contributed $1,000 per fortnight to the wife until at least March 2005. He paid the school fees at about $970 per month until 3 October 2005. It is argued that that contribution continued up until his death in January 2006. The wife denies that proposition. It is said on behalf of the estate that the husband was largely available for his business from March 2005 until October 2005. He was briefly hospitalised in October and then permanently, in November 2005.
The reality is that the husband was not in a position to make that level of contribution from income alone after the 2001-2002 financial year. The parties separated in March 2001. Over the years following separation the husband’s taxable income was:
Financial year ending
30 JuneTaxable income 2001 $50,935 2002 $53,607 2003 $10,445 2004 $13,720 2005 $6,471
It may be that the business income for the 2005-2006 year increased from that of recent years. In October 2005 the husband received $14,000 from Mr A and paid that to his mother to apply to various debts. The business banking records suggest that much of the business income came from Mr A. The husband’s mother says that on one occasion the husband had $1,000 in cash and told her he was going to give it to the wife. There is no other evidence of cash income. It follows that the husband’s contributions to the wife’s household after 30 June 2002 were subsidised from other sources. At least some of that subsidy was ultimately reflected in the borrowings that were ultimately paid out by the estate ($42,992); in the sale of assets ($7,990 from the sale of I and AMP shares in mid 2005). In other words, much of the financial contribution of the husband made to the wife’s household ultimately came from joint funds.
There was no financial assistance from the estate to the wife in 2006.
In addition the mortgage debt increased. The wife has borrowed moneys from family and friends to make ends meet. She does not claim those debts in the context of these proceedings but they must then represent contributions made by her.
The upshot of the evidence is that the husband was making a financial contribution of the order of $1,000 per fortnight and paying school fees until at least March 2005. The school payments continued until 3 October 2005. For more than one half of the period from March 2001 to January 2006 the husband’s payments were heavily subsidised from joint assets.
The only estate funds contributed to the wife’s household are represented in the advance of $100,000 in these proceedings. Every dollar of that advance has been included, by agreement, in the list of assets for distribution, as a preliminary distribution to the wife. Therefore no financial contributions were made by the estate.
Counsel for the estate proposed a contribution effectively made by the husband in the form of the life insurance payout. The unchallenged evidence of the wife is that contributions to the policy came from the joint account. Nothing turns on this submission.
Section 79(4)(b) contributions
After separation the parties continued to share roles in the gardening business. The wife’s role was limited to the bookwork, banking, invoicing and purchasing for the business, including plants and gardening supplies. The wife also did the correspondence for the business. She continued to do that until early 2005. The main role in the business was undertaken by the husband, indeed the husband made the greater contributions to the business after separation and from 2005, when the wife handed over responsibility for the books, his was the only contribution. From separation in 2001 until January 2006 the wife had the use and occupation of the former matrimonial home to the exclusion of the husband. That is a contribution by the husband as he was living with his parents, save for two periods of 6 months, when he lived in rented premises. The husband paid neither rent nor board when living with his parents.
Section 79(4)(c) contributions
There are two children of the marriage. After separation the husband visited the former matrimonial home about once a week and had a meal with the family. Apart from one occasion, whenever the husband took the children out, the wife always accompanied them. The wife made the overwhelming contribution as parent and homemaker after separation. That is not to say that the husband did not love the children dearly. It is clear that despite his illness, the husband strove to make proper provision for their welfare. That much is apparent from the evidence of the wife and his mother. It must be the case that each of the parties, and particularly the wife, was required to assist the children through the period from November 2005 up to and following the death of their father.
Conclusion on Contribution
The parties contributions were equal up until the date of separation in March 2001.
It is submitted for the wife that her contributions exceeded those of the husband after separation. The estate contends that the contributions were equal.
The upshot of the evidence is that the husband was making a financial contribution of the order of $1,000 per fortnight and paying school fees until at least March 2005. The school payments continued until 3 October 2005. In 2005 they were made at the rate of about $970 per month. For more than one half of the period from March 2001 to January 2006 the husband’s financial contributions were heavily subsidised from joint assets. No financial contributions were made by the estate. Indeed, the wife spent part of the $100,000 advanced by the estate on repairing or improving the swimming pool or pool surrounds at the former matrimonial home (nearly $9,000). Similarly she spent moneys on car repairs (about $500), school fees (over $15,000) and other child expenses, furniture and normal living costs. The wife made the overwhelming contribution as parent and homemaker and after the husband died, she made the only contribution.
The wife was able to occupy the former matrimonial home to the exclusion of the husband. He was required to pay rent for 12 months.
The contributions of the wife after separation exceed those of the husband. There is a significant disparity for that period. The difficulty comes in dealing with the impact of an imbalance of contributions that arose over the period from March 2001 to date, in the context of contributions made over more than 29 years. It is argued for the wife that the overall contributions were 65% by the wife and 35% by the husband. In my view that cannot be the outcome here. The events of 6 years cannot cause the wife’s overall contribution to approach twice that of the husband. I believe the proper allowance is 7.5%. The contributions of the wife overall were 57.5% and by the husband - $42.5%.
The other matters in Section 79
Dealing with the matters identified in the legislation:
Section 79(4) (d)
Pursuant to s 79(4)(d) I am required to take into account the effect of any proposed orders on the earning capacities of the parties. There is no such effect.
Section 79(4)(e) - Section 75(2) Factors
In the circumstances, the focus here is very much on the wife.
In Parrott and the Public Trustee of NSW as Administrator of the Estate of the late L J Parrott (1993) 17 Fam LR 785 The Full Court observed:
….
However we note the comments of Lindenmayer J in In the Marriage of Doyle (1989) 13 Fam LR 200; [1989] FLC 92-027 at Fam LR 202; FLC 77,398, that it must be presumed, from the enactment of s 79(8), that the legislature intended that one party to a marriage which has broken down to the point that proceedings have been commenced for orders altering the interests of the parties in property should not profit by the fortuitous death of the other party prior to the determination of those proceedings.
While this is so, it is clear enough that the death of one party has a profound effect upon the balance of s 75(2) factors, as the Full Court pointed out in Tasmanian Trustees Ltd v Gleeson (1990) 14 Fam LR 189; [1990] FLC 92-156.
The relevant matters in Section 75(2) would seem to be paragraphs (a), (b), (c), (d), (k), (l) and (o).
(a) the age and state of health of each of the parties;
The wife is 51 years of age. The wife has had serious health problems. In October 2004 the wife was diagnosed with breast cancer. In November 2004 the wife underwent a partial mastectomy and then in December 2004, a full mastectomy. She then had chemotherapy treatment. The wife later had 25 sessions of radiotherapy treatment between May and June 2005. The wife continues to receive other treatment and is tested every 3-6 months. She spent 8 days in hospital in January 2006, associated with previous treatment. During the mastectomy 8 lymph nodes were removed and the wife has lost full movement of her right arm. She has poor circulation in that arm, has tingling and numbing sensations in it and is unable to lift heavy objects. She has lost some feeling in her fingertips and in her feet. She also suffers from hot flushes, hair thinning and nausea. The wife has a specialist appointment (Dr E) in March 2007 in relation to pain in her lower abdomen.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The wife’s income is $813 per week made up of her salary as a part-time teacher/tutor of $440, and a Single Parenting Payment of $373 per week. The wife lives with the parties’ children, neither of whom has any income. Reference is made below to the proposals of the executrix of the husband’s estate to apply investment income to the needs of the children in the future. The wife’s fixed expenses are as follows:
Expense Amount Mortgage payments $400.00 Rates $25.00 Life insurance premium $24.00 Personal loan overdraft payments $30.00 Commonwealth Bank Visa card repayments (note wife says the minimum payment is $80 pw) $50.00 Total $529.00
There is no evidence about the household living expenses. Evidence about the wife’s assets and liabilities is set out earlier in these reasons.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
The son is 16 and the daughter is 13 years of age. The children attend I School. The son is on a half scholarship and full fees are paid for the daughter. The son is in Year 11 and I take it that the daughter is in Year 9. If that is right then the wife will have some parenting responsibilities through to 2010 when the daughter would normally complete the HSC. No person is identified in the evidence as someone who will provide some respite to the wife from her parenting duties. The wife says that both children are bright. They are likely to go on to tertiary education and, subject to distributions of income and the body of the estate, are unlikely to be self supporting for many years.
(d) commitments of each of the parties that are necessary to enable the party to support:
himself or herself; and
a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
I have dealt with the wife’s fixed commitments. I take it that the school fees are a total of about $12,000 per annum. The school plan payments made in 2005 were $970 per month. The wife says that she expects that the Semester 1 fees for the two children will be about $6,000.
In addition the wife pays about $500 each term for music lessons for the children and $180 per month for swimming squad fees. There is $200 in registration fees for the daughter’s water polo together with the weekly price of pool admission. Then there will be the living expenses, including the cost of food for two, sport loving, teenagers.
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
any law of the Commonwealth, of a State or Territory or of another country; or
any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia,
and the rate of any such pension, allowance or benefit being paid to either party;
Nothing here requires further attention beyond what has already been identified.
(g) where the parties have separated or the marriage has been dissolved, a standard of living that in all the circumstances is reasonable;
There is little evidence in relation to the standard of living of the parties during the marriage. Each of the children of the marriage attends a non-government school.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
This is not relevant.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
The wife gave up her teaching position in 1989 when the parties entered the GIFT program. Since that time she did the books for the gardening business and in the early days, undertook physical work in the business. She has worked as a tutor since separation but on a limited basis. The result is that the marriage adversely affected the wife’s earning capacity. She lost the opportunity of the benefits that come with unbroken service as a teacher, such as leave entitlements, incremental increases in salary, let alone the opportunity for advancement to more senior teaching or administrative positions. She lost the chance to build a worthwhile superannuation entitlement.
(l) the need to protect a party who wishes to continue that party's role as a parent;
The wife does not make this part of her case. It is her evidence that she intends to build up her paid work. Nevertheless, there is a parenting task still to be done. The parties wanted the children to be involved in extra curricular activities and those activities make their own demands on time and transport. The wife’s earning capacity will be affected to some extent by those demands.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The wife lives with the parties’ children. Subject to distributions from the estate, the children are fully dependent on the wife.
(n) the terms of any order made or proposed to be made under section 79 in relation to the property of the parties;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
There is no current child support assessment.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
A very important issue going forward is the extent to which the expenses of the children will be met from the estate during their minority.
The remarkable aspect of the husband’s mother’s evidence related to requests made by the wife of the estate for the benefit of the children during 2006. It is her evidence that she received letters from the wife’s solicitors during 2006, including follow up letters, requesting payment for various expenses. Although it is the unchallenged evidence of the wife that in a conversation in October 2006 the husband’s mother told the wife that she had “ok’ed” the requests, there is no doubt that she did not authorise any payments. The husband’s mother said that she sought and obtained advice from her solicitors about the payments. She could not say why she did not authorise the payments but at one point in her cross-examination said that she did not authorise the payments because “she (the wife) never asked”. As I understand her evidence the husband’s mother refused to authorise payments from the estate for the benefit of her grandchildren because her daughter in law made the request through solicitors rather than writing or asking directly. She conceded that the wife was in financial difficulty during 2006. She conceded that apart from the amount of $100,000 released pursuant to a court order the only payments made for the benefit of the children by the husband’s mother or the estate was the $20 attached to the Christmas and birthday cards for those children. The husband’s mother was asked if she had any regrets about refusing the requested payments and she said “no”.
It is submitted on behalf of the estate that it is in the best interests of the children and the parties that a significant sum be left with the estate. The key submission is that the form of orders proposed by the executrix will address any concerns about the proper application of the estate funds. Given the events of 2006 one can understand that the wife might have some doubts about the flow of funds from the estate.
The orders proposed by the executrix are as follows:
1. That the Executor of the estate of the late [husband], cause to be invested the balance of the estate funds currently in St George Bank, and being Account No. […] and […] and cause to be paid the unpaid legal fees incurred in these proceedings of the executor and the wife with the balance remaining to be invested with a recognised financial institution in two term deposits of equal value on the following terms:
1.3.The 1st term deposit account to be an estate trust account for [the son] born [September 2990] with a maturity date of [September 2011] with interest to be paid quarterly to the estate of the late [husband]
1.4.The 2nd term deposit account to be an estate trust account for [the daughter] born [April 2002] with a maturity date of [April 2013] with all interest to be paid quarterly to the estate of the late [husband]
2. That within 7 days of the receipt of the quarterly interest payments on the two term deposits being received by the estate, provided for in Order 1.1 and 1.2 herein, the executor to forthwith cause to be paid any outstanding taxes, charges or fees incurred by the trust in the day to day management of the trust, and thereafter to cause the balance to be paid forthwith in the following priority:
2.5Any fees, expenses and charges incurred by or on behalf of the children for their secondary and/or University education, sporting activities, and extra curricular activities upon the production of any invoice, account, or validated payment request.
2.6Any fees, expenses and charges incurred by or on behalf of the children for their school or university uniforms, clothing, footwear and/or sporting equipment and accessories upon production of any invoice, account, or validated payment request.
2.7Any travel and accommodation expenses incurred or to be incurred by the children in any school or university excursion or sporting activity whilst so ever the children remain in secondary or university education, upon the production of any invoice, account, or validated payment request.
2.8Any balance remaining of the quarterly interest, to the wife as trustee for the children to be applied by her in the day to day expenses of the children, (including any mortgage or rental payments of a residence occupied by the children) as determined by the wife in her absolute discretion.
3. That the Executor of the estate of the late [husband] provide to each of the children no later than 31 July each year for the duration of the term deposits provided for in Orders 1.1 and 1.2 herein, a statement and relevant bank statements of all interest received by the estate and disbursements made from the estate in accordance with these Orders.
I take it that the orders proposed by the executrix are intended to demonstrate to the Court and to the wife, the benefits to the children of maximising the amount of funds in the estate. Those benefits may be described as a tax effective distribution of the income of the estate and a guarantee as to the application of that income for the benefit of the children during their minority. If the proposed orders provide such a guarantee then in my view the orders should not be made because they would be against public policy. There appears nothing in the orders that would prevent funds being withdrawn from the invested capital prior to the children turning 21. That is as it should be. What if one of the children needs a capital sum for health, education or some other proper reason, prior to turning 21. How does the executrix know today, that she can properly discharge her responsibilities without making such a payment? Similarly, how is the executrix to know today that the priority of payments specified in the proposed order will necessarily meet her obligations under the will in all circumstances that might arise in the future?
At the end of the day this is not a decision about whether the wife or the executrix would be a more appropriate steward of family funds for the benefit of the children. I am to undertake the task under section 79. Although these proceedings affect the children, they are not parties and any questions of stewardship can be taken up elsewhere. In the case of the administration of the husband’s estate, there is a mechanism for reviewing the decisions of the executrix, should that be required.
Coming back to the proposals of the executrix – I was told that she intends to adopt the approach identified in the proposed orders whether the estate has $400,000 in it or a much lesser sum. In the opinion of the wife’s accountant, Anne Squires, an estate fund of $400,000 would generate an annual after tax benefit to each of the children of the order of $11,100. (She says that a distribution of a total of $24,000 from the interest on that sum would mean each child could receive $6,000 tax free and then would pay 15% on another $6,000). Subject to either child having additional income which would affect their liability for tax. I take it then, that an estate fund of $200,000 could generate a net benefit of the order of $6,000 per child; a fund of $150,000 could generate a net benefit of the order of $4,500 per child each year; and a fund of $100,000 could generate a net benefit of the order of $3,000 per child each year. I take those matters into account.
(p) the terms of any financial agreement that is binding on the parties.
There was no binding agreement made between the parties.
Section 79(4)(f)
There are no relevant orders.
Section 79(4)(g)
There is no child support assessment.
Conclusion
It is agreed that there should be an adjustment in favour of the wife. The submission on behalf of the wife is that the adjustment should be such as to take the wife’s claim to 85% ie. a 20% adjustment and on behalf of the estate an adjustment of 10% was proposed. The relevant matters arising from the remaining elements of s 79, which include the s 75(2) factors referred to above are:
Ø The wife will have the sole responsibility for the housing and supervision of the children;
Ø There is at least three and one half years to go of secondary education and the children are not likely to be self-supporting once they respectively leave school;
Ø The children attend a private school and have significant and expensive extra-curricular activities;
Ø As discussed above, depending on the ultimate result under section 79, the wife can expect that the estate will contribute in the range of $3,000 (based on an estate balance of $100,000) to $11,100 (based on an estate balance of $400,000) per child per annum towards the costs of the children;
Ø The wife is optimistic about increasing her income from paid employment but she has had serious health problems and continues to be affected by those problems and/or the consequences of the treatment for those problems;
Ø As a result of the marriage the wife is well into her working life and has no provision for a self-funded retirement;
In my view the adjustment by virtue of the other matters in section 79(4) should be 25%.
In Parrott and the Public Trustee of NSW as Administrator of the Estate of the late L J Parrott (above) at 790 the Full Court discussed Tasmanian Trustees Ltd v Gleeson saying:
Their Honours accordingly distinguished the decision of Smithers J in Menzies v Evans (1988) 12 Fam LR 519; [1988] FLC 91-969, while agreeing with his Honour’s view that the deceased has a prima facie moral entitlement to the share gained by contribution during his or her lifetime and if so desired, to dispose of the same by will to persons who are strangers to the marriage.
The distinction was made upon the basis that the estate was a sizeable one in Menzies’ case and that the surviving husband was of an extremely advanced age and his needs were small and adequately catered for out of the portion of the estate to which he was entitled by reason of contribution, whereas in the case before them, the estate was small and the needs of the wife overwhelming.
In the present case, his Honour found that the net residue for distribution was $91,000 after making an allowance in favour of the Public Trustee for “the costs of these proceedings'’. It is not clear whether his Honour meant by this, the costs of the proceedings before him or the costs incurred prior to those proceedings. However, his finding was not attacked, so that we will proceed upon the basis that the amount for distribution in the hands of the Public Trustee is $71,000 and that in addition, the wife has already received $17,265 as a condition of a stay of the order of the judicial registrar pending this appeal.
If one were to envisage a continuum, with cases typified by the Tasmanian Trustees case at the one end and the Menzies case at the other, this case would fall closer to the Tasmanian Trustees case.
In the Tasmanian Trustees case, the wife was an invalid pensioner who was unable to work due to an arthritic condition and was aged 54 years. The parties had been married for 20 years and the estate consisted of a house and land worth $60,000.
In Parrott and the Public Trustee of NSW as Administrator of the Estate of the late L J Parrott the Full Court upheld an appeal, among other things, in relation to an allowance at first instance of 7.5% under section 75(2) and substituted its own allowance of $50,000 which was an adjustment of about 55%.
The case before me is close to the middle of the continuum referred to. It is not a small pool case with overwhelming section 75(2) factors, nor is this a case where the wife’s needs will be adequately met from a distribution warranted by virtue of her contributions alone. Had the husband been alive and well, the wife may have expected an adjustment of the order of 10-15%. Given the authorities referred to, an adjustment of 25% is proper in this case.
I acknowledge that the adjustment is greater than that sought on behalf of the wife. However, the adjustment should be seen in the context of a claim for an overall distribution in the proportion 85% to the wife and 15% to the husband. In that context, in my view it is permissible to make a greater individual adjustment than the wife submitted was appropriate.
The alternative would have been to make a further adjustment in the next step – in identifying a just and equitable result. In any event the outcome would have been the same.
Just and Equitable
Based on their contributions and the other matters in s 79 the appropriate division of property is a division that is 82.5% to the wife and 17.5% to the estate. Finally, I must consider whether it would be just and equitable within the context of s 79 if the net assets of the parties were divided in those proportions. The outcome of a division in those proportions would be that the net assets of $1,140,420.99 would be divided so that the wife had $940,847.32 and the estate $199,573.67.
The wife currently has the benefit of the following:
Assets Value D (former matrimonial home) $800,000.00 ANZ joint account $672.00 Household contents $8,000.00 Mitsubishi Magna motor vehicle (W) $1,500.00 Wife’s interest with … Superannuation $4,500.00 Funds advanced to the wife pursuant to order $100,000.00 Minus Mortgage to RESI -$215,000.00 Joint overdraft -$9,000.00 Wife’s Visa card debt -$6,000.00 $684,672.00
If she was to have 82.5% of the net assets she would receive a further $256,175.32 ($940,847.32 - $684,672). I will round that payment down to $256,000. She will owe her lawyers about $12,000 and owes an unspecified amount to friends and relatives. The net effect will be that the wife can retain the D property and will be able to discharge the mortgage, the overdraft, her Visa card debt and her legal fees.
That would leave the estate with:
Assets Value SGB controlled money account (H) $410,999.00 Estate trust account $7,237.00 Moneys paid for the legal fees of the Estate in these proceedings $37,512.99 Minus payment to the wife -$256,000.00 $199,748.99
The estate owes about $32,556.63 in legal fees. Given the fees already paid and the fees to be paid, in dollar terms that will leave about $130,000 in the estate.
Although I will make no orders about it, I note that under the proposals of the executrix and extrapolating from the calculations of Ms S, on the basis of that division of property, the wife might expect a contribution from the estate in excess of $3,000 per child per year, until each child respectively turns 21 years of age.
Conclusion under Section 79
In my view the outcome I have foreshadowed would be just and equitable pursuant to s 79.
As to the form of the orders – for the reasons given I will not make orders in the form sought by the executrix.
I certify that the preceding one hundred (141) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Ian Loughnan.
Associate:
Date: 16 March 2007
IT IS NOTED that this judgment for all publication and reporting purposes be referred to as PITCHER & THE ESTATE OF PITCHER
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies