Porritt & Anderson and Ors
[2008] FamCA 1127
•24 December 2008
FAMILY COURT OF AUSTRALIA
| PORRITT & ANDERSON AND ORS | [2008] FamCA 1127 |
| FAMILY LAW - PROPERTY SETTLEMENT – Contributions – Adjustment for other matters |
| Family Law Act 1975 (Cth) ss 75 & 79 |
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Grant v Edwards [1986] Ch 638
Cierpiatka (1999) FLC 92-864
Nelson v Nelson (1995) 18 CLR 538
Charles Marshall Pty Ltd v Grimsley (1956) CLR 353
In the Marriage of Hickey (2003) 30 Fam LR 355
Mallett v Mallett (1984) 9 Fam LR 449
In the Marriage of Ferraro (1992) 16 Fam LR 1
In the Marriage of Shewring (1987) 12 Fam LR 139
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
In the Marriage of Coghlan (2004) 33 Fam LR 414
| APPLICANT: | Mr Porritt |
| RESPONDENT: | Ms Anderson |
| 2nd & 3rd RESPONDENT: | Mr and Mrs Anderson (Snr) |
| FILE NUMBER: | SYC | 6983 | Of | 2007 |
| DATE DELIVERED: | 24 December 2008 |
| PLACE DELIVERED: | Sydney |
PLACE HEARD: | Sydney |
| JUDGMENT OF: | Judicial Registrar Loughnan |
| HEARING DATE: | 11 & 12 December 2008 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms L. Judge | |
| SOLICITOR FOR THE APPLICANT: | Moira Ryan Lawyers | |
COUNSEL FOR THE 1ST RESPONDENT: | Mr G. Foster | |
| SOLICITOR FOR THE 1st RESPONDENT: | Haydon Fowler Corbett Jessop | |
| COUNSEL FOR THE 2ND & 3RD RESPONDENT: | Ms A. Rees | |
| SOLICITOR FOR THE 2nd & 3rd RESPONDENT: | Navado Lawyers and Solicitors | |
Orders
The husband and wife shall do all acts and things and sign all documents as may be required to direct Messrs. Haydon Fowler Corbett Jessop Solicitors to pay out the funds held by those solicitors upon trust for the husband and wife from the sale of the property at O (“[O property] trust funds”) forthwith upon the quantification of the following liabilities, in the following manner:
(a)The costs payable to Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the O property trust funds.
(b)Payment of any liability the wife may have to the Australian Taxation Office, including income tax, interest, penalties and other amounts, referrable to the wife claiming negative gearing deductions in relation to the property at O (“wife’s taxation liability”).
(c)The costs payable to the accountant engaged by the wife of and incidental to work done relating to that taxation liability.
(d)Payment to the wife of the amount of $30,872.44 (representing an adjustment for payments made by the wife after separation).
(e)Division of the then remaining balance as to 57% to the wife and 43% to the husband.
The parties forthwith do all acts and things and sign all documents as may be required to direct Messrs. Haydon Fowler Corbett Jessop Solicitors to pay out the funds held by those solicitors upon trust for the wife from the sale of the property at G (“[G property] trust funds”) in the following manner:
(a)The costs payable to Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the G property trust funds.
(b)Payment to the 2nd and 3rd respondents of one half of the then remaining balance plus a further $38,812.63.
(c)Payment upon notification by the Australian Taxation Office of the additional income tax payable by the Wife arising from Capital Gains Tax referrable to the sale of the said G Property (“wife’s CGT liability”).
(d)The costs payable to the accountant engaged by the wife of and incidental to work done relating to the wife’s CGT liability.
(e)The balance as to 57% to the wife and 43% to the husband.
Unless otherwise specified in this Order, each of the husband and wife is solely entitled to the exclusion of the other to all other property of whatsoever nature and kind in the possession of such party as at the date of the making of this order.
In the event that any party refuses or neglects to sign any document required to be signed to comply with this Order, the Registrar of the Family Court of Australia is hereby appointed to execute all Deeds and documents in the name of that party and do all acts and things necessary to give validity and operation to this Order pursuant to s106A Family Law Act.
IT IS NOTED that publication of this judgment under the pseudonym Porritt & Anderson is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6983 OF 2007
| MR PORRITT |
Applicant
And
| MS ANDERSON |
Respondent
| MR AND MRS ANDERSON (SNR) |
2nd & 3rd Respondents
REASONS FOR JUDGMENT
After living together for about 5 years the husband and wife cannot agree on a settlement of their property. A declaration is sought by the wife’s parents in relation to the proceeds of sale of a property. Although they are divorced, for convenience I will refer to the applicant and first respondent as husband and wife.
Applications
The husband seeks orders in accordance with his Initiating Application filed 8 October 2008 as follows:
1.That the parties forthwith do all such acts and things and sign all such documents as may be required to give directions to the Solicitors, Haydon Fowler Corbett Jessop to cause the monies held by them by way of controlled monies in account number […] with the Commonwealth Bank, […], to be withdrawn and divided in equal portions to each of the parties.
2.That the husband and the wife do all such acts and things and sign all such documents as may be necessary to complete the sale of the property situate and known as [G property] pursuant to a contract entered into on 3 August 2007 between the wife and the purchasers, [Mr and Ms …].
3.Upon completion of the sale of the property situate and known as [G property], the proceeds of the sale be applied as follows:
i.Firstly to pay all costs, commissions and expenses of the sale and to pay any Council and water rates outstanding in respect of the real property.
ii.Secondly to discharge any encumbrances affecting the real property.
iii.The balance then remaining to be divided in equal proportions as between the parties.
4.Unless otherwise specified in these Orders and except for the purposes of enforcing the payment of any money due under these or any subsequent Orders:
a.Each party be solely entitled to the exclusion of the other to all property in the possession of such party as at this date.
b.Each party be solely entitled to bank accounts held in their respective names.
c.Each party hereby forgoes any claim they may have to any superannuation benefits belonging to or earned by the other.
d.All insurance policies are to become the sole property of the policy owner named therein.
e.Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
5.That the wife pay the husband’s costs of and incidental to the conduct of these proceedings.
The wife seeks orders in accordance with a minute of orders foreshadowed during the hearing but provided to the Court and the other parties by email by her counsel on 16 December 2008 as follows:
AMENDED MINUTE OF PROPOSED ORDERS SOUGHT BY WIFE
1.That the parties forthwith do all acts and things and sign all documents as may be required to direct Messrs. Haydon Fowler Corbett Jessop Solicitors to pay out the funds held by those solicitors upon trust for the parties from the sale of the property at [O] (“[O property] trust funds”) in the following manner:
(a) The costs payable to Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the [O property] trust funds.
(b) Payment of any liability the wife may have to the Australian Taxation Office, including income tax, interest, penalties and other amounts, referrable to the wife claiming negative gearing deductions in relation to the property at [O] (“wife’s taxation liability”).
(c) In the event that the wife’s taxation liability has not been finally determined at the date of distribution of the [O property] trust funds, retention by Messrs. Haydon Fowler Corbett Jessop Solicitors upon trust for the wife of such amount as may be assessed by the wife’s accountant, Mr. [M], as being the maximum amount which may be payable by the wife to the Australian Taxation Office on account of the wife’s taxation liability pending final determination by the ATO of the wife’s taxation liability to be paid as follows:
(i)payment to the ATO of the wife's taxation liability when assessed;
(ii)payment of any legal costs payable to Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of those funds;
(iii)the remaining balance, if any, to be paid in the same manner as set out in subparagraph 1(f).
(d) The costs payable to the accountant engaged by the wife of and incidental to work done relating to the wife’s taxation liability.
(e) Payment to the wife of the amount of $39,445.44 (representing payments made by the wife after separation).
(f) Division of the then remaining balance as to 70% to the wife and 30% to the husband.
2.In the event that the amount paid or retained on account of the wife’s taxation liability in accordance with subparagraphs 1 (b) and (c) is insufficient to discharge the wife’s taxation liability the husband and wife shall pay in equal shares such further amount as is required to be paid and shall each indemnify the other from and against any claims on, or payments made by, the other party for the indemnifying party’s share of such further amount.
3.That the parties forthwith do all acts and things and sign all documents as may be required to direct Messrs. Haydon Fowler Corbett Jessop Solicitors to pay out the funds held by those solicitors upon trust for the wife from the sale of the property at [G] (“[G property] trust funds”) in the following manner:
(a) The costs payable to Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the [G property] trust funds.
(b) Payment to the 2nd and 3rd respondents of one half of the then remaining balance plus a further $37,813.13
(c) Payment of the additional income tax payable by the Wife arising from Capital Gains Tax referrable to the sale of the said [G] Property (“wife’s CGT liability”) and in the event that the wife’s CGT liability has not been finally determined at the date of distribution of the [G property] Trust Funds then retention by Messrs. Haydon Fowler Corbett Jessop Solicitors upon trust for the wife of such amount as may be assessed by the wife’s accountant, Mr. [M], as being the maximum amount which may be payable by the wife to the Australian Taxation Office on account of the wife’s CGT liability pending final determination by the ATO of the wife’s CGT liability and thereafter to be paid out on assessment of the wife's CGT liability.
(d) The costs payable to the accountant engaged by the wife of and incidental to work done relating to the wife’s CGT liability
(e) The balance as to 70% to the Wife and 30% to the Husband.
4.That unless otherwise specified in this Order, each party is solely entitled to the exclusion of the other to all other property of whatsoever nature and kind in the possession of such party as at the date of the making of this order.
5.That in the event that either party refuses or neglects to sign any document required to be signed to comply with this Order, the Registrar of the Family Court of Australia is hereby appointed to execute all Deeds and documents in the name of the Husband or Wife and do all acts and things necessary to give validity and operation to this Order pursuant to s106A Family Law Act.
The Second and Third Respondents seek orders in accordance with an Amended Minute as follows:
1. That the Court declare that the 2nd and 3rd respondents had, at all relevant times a 50% interest in the property situates at [G].
2.That the net proceeds of sale of that property, held in trust be paid as follows:
2.1as to one half to the 2nd and 3rd respondents;
2.2as to the sum of $37,813.13 to the 2nd and 3rd respondents;
2.3as to the balance to the husband and wife in accordance with the orders of the court.
3.That the Husband pay the costs of the 2nd and 3rd respondents on an indemnity basis.
Affidavits
The written evidence in chief is contained in the following documents:
Affidavit of the husband sworn 14 October 2008 and filed 15 October 2008
Financial Statement of the husband sworn 14 October 2008 and filed 15 October 2008
Affidavit of Mr S sworn 14 October 2008 and filed 15 October 2008
Affidavit of Ms L Porritt sworn 13 October 2008 and filed 27 October 2008
Affidavit of Mr B sworn 9 October 2008 and filed 27 October 2008
Affidavit of the wife filed 3 November 2008
Financial Statement of the wife filed 10 December 2007
Financial Statement of the wife filed 3 November 2008
Affidavit of the second respondent sworn 13 October 2008
Affidavit of the third respondent sworn 13 October 2008
Issues for determination
Counsel for the parties identified the following as the contested issues requiring findings of fact:
1.The nature and extent of any interest of the 2nd and 3rd respondents in the property at G;
2.Whether the husband made an initial contribution of $10,000.00 from a tax refund;
3.The balance of contributions by the husband and the wife undertaking of physical labour associated with building maintenance during the relationship.
4.The balance of contributions by the husband and the wife as a homemaker during the marriage.
Short History
The husband and wife are 35 years of age. They commenced cohabitation in April or November 2001, were married in March 2003 and separated on 29 January 2007. The parties’ divorce was granted by the Federal Magistrates Court on 26 June 2008 and became final on 27 July 2008.
Children
The husband and wife have no children. The husband has a baby with his current partner.
Background Facts
In early 1999 the wife received $40,000 from an earlier property settlement.
In February 1999 there were discussions between the wife and her parents about purchasing a property together.
On 10 February 1999 contracts exchanged for the purchase of G property at a price of $335,000 by the wife. She borrowed $299,496 of that from the St George Bank by way of mortgage. The repayments were then $1,917 per month ($442.38 per week). The balance of the purchase price was contributed equally by the wife and her parents. On 1 April 1999 the wife’s parents deposited $20,000 in the wife’s account being their half share of the deposit and costs of purchase.
On 6 April 1999 the purchase settled. The wife’s parents moved into the property and arranged to deposit $351.80 each week into the wife’s account. They paid all of the utilities and rates. The wife’s parents thereafter undertook maintenance and some improvements and the parties paid for other improvements.
The husband contends that the husband and wife commenced living together in his rented unit at C in April 2001. The wife and her parents say that she was living with her parents much of the time until November 2001. Neither the husband nor the wife conceded on this issue. The wife bought $5,000 worth of furniture for the husband’s unit. During this period the wife contributed to food and related expenses but not to the rent of the C unit.
In May 2001 the wife bought a Mazda motor vehicle for $42,977 with lease finance from Macquarie Leasing. The payments were $800.00 per month.
The wife contends that she and the husband were spending most nights together from September 2001 at the husband’s unit and the G property. In November 2001 they both moved into the wife’s property at O.
The wife owned a half interest in the G property, the Mazda vehicle subject to a lease, MTAA Superannuation with a balance of $16,037 and STA Superannuation with a balance of $2,350. The wife worked at T Company on a net salary of $93,878 per annum. She had worked there since 1996.
At that time the husband owned a BMW motor vehicle, subject to a lease and he had no equity in the vehicle. He had a small amount of savings and personal effects. He had $8,487.43 in his account with the Commonwealth Bank of Australia which he says was sourced in a tax refund of approximately $10,000.00. The husband was on a net salary of $55,323 per annum.
The wife discharged the mortgage over G property with St George Bank in the sum of $273,059.04 and refinanced with the Commonwealth Bank. A break amount was paid to the St George Bank in relation to the discharge of the G property mortgage. The refinance with the Commonwealth Bank was in the sum of $285,000.00.
On 16 November 2001 the wife purchased O property. Together with the costs of purchase, she paid $493,783. The wife borrowed $465,967 from the Commonwealth Bank and the balance came from the wife’s savings. The wife’s parents consented to the G property being used as security for that loan.
The husband sold his BMW motor vehicle.
In March 2002 the wife borrowed an additional $20,000 from the Commonwealth Bank by way of personal loan to purchase her engagement ring.
The husband and wife were married on 16 March 2003.
The husband’s mother and his uncle gave the husband a total of $21,000.
At some point soon after the wedding the husband and wife purchased a Lexus motor vehicle for $75,222.00 in the wife’s name with finance through Lexus Finance. At the conclusion of the lease period the wife was required to pay $19,000.00.
In April 2004 the wife refinanced the G property with a second mortgage in sum of $60,000. Those funds were used to meet expenses associated with the G property, to pay out the wife’s Mazda car lease, and credit card and other debts. The husband says the wife told him that she intended to refinance to obtain $40,000.00 to pay out the Mazda lease and do work on G property.
In May 2004 the wife sold the Mazda and paid the sale proceeds into the husband’s account in sum of $23,000. Those funds were used to pay debts.
In December 2004 the husband commenced employment with V Company. He received a net sum of $3,400.00 per month and paid $3,000.00 per month into the wife’s account. He worked there until March 2006 when he was dismissed.
The husband subsequently took wrongful dismissal proceedings against V Company and received $14,051.34. He paid $12,000.00 into the wife’s bank account.
On or around 11 February 2005 the wife sold the Lexus vehicle at auction and purchased a convertible motor vehicle, also financed with Lexus Finance. As far as the husband is aware the wife paid a further $12,940.00 for the convertible. The husband is unaware of the source of those funds.
In 2005 the wife borrowed a further $22,000 secured over the O property to pay debts.
In June 2006 the husband commenced employment with P Company, earning $61,000.00 pa and a car allowance of $23,000.00 plus commissions.
The husband and wife separated on 29 January 2007 when the husband left the O property for three weeks. Thereafter the husband moved back into the O property and the wife moved out. The husband believes she moved to the G property. The wife then returned to the O property where the husband and wife lived separately and apart.
The wife continued to pay property and other outgoings without contribution from the husband as follows:
O property: $ 7,521.02
G property: $14,506.85
Credit Cards $ 24,938.59
$ 46,966.46
From 6 February 2007 the husband occupied the O property alone for 13 weeks.
On 12 February 2007 the husband lodged a caveat over the G and O properties.
On 5 or 8 June 2007 the wife sold the O property for $593,000. The husband and wife agreed to pay certain debts.
The net proceeds of sale of $107,913.82 (according to the wife) or $115,389.89 (according to the husband) were held in trust.
On 3 June 2007 the wife ceased her employment with T Company.
On 26 October 2007 the G property was sold. The net proceeds of $186,852.74 were paid to the Haydon Fowler Corbett Jessup trust account where they remain, pending determination of these proceedings.
In February 2008 the wife purchased a home in Queensland with her new partner for $360,000. They borrowed $348,379 and the balance came from the parents of the wife and her partner.
On 3 March 2008 the husband and wife prepared a document setting out the terms of an order they sought as follows:
PROCEDURAL ORDERS
In the Family Court at Sydney
[MR PORRITT] (Applicant)
[MS ANDERSON] (Respondent)
STC 6983/2007
BY CONSENT:
1. That the parties jointly engage Mr [M], Accountant, to enquire into and report upon the potential tax liability, including interest and penalties, of the wife in relation to the properties at [O] and [G] re the manner in which those properties were treated in the past for tax purposes.
2. That the wife authorise Mr [M] to discuss the issues referred to in paragraph 1 with the husband.
3. That the cost of engaging Mr [M] for the purposes of paragraph 1 be paid in the first instance from the funds from the sale of [O property] and the parties by their execution hereof authorise Messrs Haydon Fowler Corbett Jessop, Solicitors, to so pay those costs, with the trial Judge/Judicial Registrar to determine at hearing how those costs should be treated.
It is not clear that orders were formally made in those terms but the husband and wife acted on the agreement.
At some point the wife has requested a reassessment in relation to her falsely claimed deductions in respect of the O property. The wife has been advised by Mr M that similar claims in respect of G property, which she says were equally false, go back too far in time for the ATO to require a report.
On 9 July 2008 orders were made by consent whereby funds totalling $25,427.26 were paid from the G property funds to meet the credit card debts of the husband and wife. The moneys were applied to an Earthward Debt and a Citibank MasterCard Debt.
Credit and Submissions
The evidence of the witnesses
The only witnesses called for cross-examination were the parties.
There are a number of significant factual disputes and the credit of the parties is an important issue. Unfortunately, the principle parties, the husband and wife, mislead the ATO, financial institutions and others by making false representations directly and through agents over many years. In the case of the wife it is her evidence that from prior to her relationship with the husband she intended to make a false income tax claim in relation to the G property. It is likely that the husband went along with that. In any event he actively took part in the false claims associated with the O property. The wife’s parents in turn knew that they were relied on for the false claims. The wife’s mother provided a statement[1] that the wife could use in relation to her recent purchase of a property in Queensland. A statement which the wife’s mother and the wife say is false.
[1] Exhibit 10
The fact that the wife has subsequently sought a re-assessment of her income tax does not help the damage done to her credit. She was caught short because of the difference between what she had told the ATO and what she wanted to argue in these proceedings.
As I put to the parties’ counsel during the hearing there is little if any high moral ground left. Although the fact of previous false representations does not relieve the court of the obligation to try and make findings of fact on disputed issues of fact, it means that findings cannot be made on credit alone.
Submissions
The submissions on behalf of the husband.
The written submissions of the husband were overtaken by events to some extent. For example the contentions in relation to the list of assets and liabilities were refined by agreement to a significant extent. Nevertheless I have included the entire written submissions. Footnotes have been omitted.
G. SUMMARY OF ARGUMENT - PROPERTY
Relevant Factors
The Husband relies upon the following contributions pursuant to Section 79(4)(a), (b) and (c):
5.The contribution of his earnings for the purposes of the family and the household including the purchase of food and household goods, the payment of the mortgages and loans and the costs of improvements.
6.The initial contribution of $10,000.00 from his tax refund.
7.Gifts from his relatives in the sum of $21,000.00.
8.The contribution from his wrongful dismissal compensation payment in the sum of $12,000.00.
9.The undertaking of physical labour associated with building maintenance during the relationship.
10.A significant contribution as a homemaker during the marriage.
11.Such other contributions as are revealed by the evidence.
H.OTHER RELEVANT FACTORS
1.The Husband relies upon the following further matters pursuant to Section 79(4),(d),(e),(f) and (g).
a.Each of the parties have the capacity to earn sufficient income to support themselves adequately.
b.The wife has the financial support of a new partner.
c.The husband has the obligation to support the child of his new relationship.
d.Such other matters as are disclosed by the evidence.
I. LIST OF ASSETS AND LIABILITIES
Note: The following is a schedule of the property which the Husband alleges is likely to be relevant and the values as alleged by each of the parties. This schedule is prepared to assist the Court only and is subject to amendment following evidence being taken in the matter.
LIST OF ASSETS
ASSET
WIFE’S
VALUE
HUSBAND’S VALUE
AGREED VALUE
Amounts held in a controlled monies account pending the determination of this matter from the sale of [G rproperty]
172,328.00
Amounts held in a controlled monies account pending the determination of this matter from the sale of [O property]
124,398.00
Husband’s bank Account
10.00
Husband’s 2008 Holden commodore
37,000.00
Wife’s 2007 Mazda Motor Vehicle
15,000.00
Wife’s engagement ring
15,000.00
Wife’s half interest in [Queensland property]
180,000.00
506,726.00
37,010.00
Estimate total gross assets based on Husband’s Values (Estimate subject to evidence): $543,736.00.
LIST OF LIABILITIES
LIABILITY
WIFE’S
VALE
HUSBAND’S VALUE
AGREED VALUE
Husband’s Personal Loan - Bank of Queensland
9,100.00
Husband’s Citibank MasterCard
1,000.00
Husband’s GE MasterCard
3,000.00
Husband’s bank of Queensland MasterCard
5,000.00
Husband’s GE Finance Debt
47,500.00
Wife’s CBA MasterCard Debt
4,700.00
Wife’s CBA Personal Loan
32,900.00
Wife’s alleged debt to her parents
9,200.00
Wife’s David Jones Account
150.00
Wife’s Alleged 50% share of CBA Loan for [Queensland property]
Wife’s alleged debt to her parents
9,200.00
Wife’s alleged obligation to account to her parents form the proceeds of sale of [G property]
98,415.00
Wife’s ATO Obligation
NK
$154,565.00
$65,600.00
Estimated Gross Liabilities: (Estimate only not including alleged amounts due to the wife’s parents and prior to an indication of the amount due to the ATO and prior to resolution of disputed sums): $121,750.00.
TOTAL NET ASSETS (Husband’s estimate subject to evidence): $ 421,986.00
SUPERANNUATION
FUND
WIFE’S
VALE
HUSBAND’S VALUE
AGREED VALUE
Husband’s ING Corporate Super
6,001.00
Husband’s ANZ Advantage Super
279.00
Husband’s MTAA Superannuation fund
25,209.00
Wife’s MTAA Super
$75,317.00
75,317.00
31,489.00
Total Superannuation Assets: $106,806.00
SUMMARY OF ARGUMENT - CONTRIBUTIONS AND SECTION 75(2) FACTORS
Generally
1.It is submitted on a preliminary basis only, that at the commencement of hearing, the contributions of the Husband to the assets (including superannuation and non superannuation assets) are approximately 45% and the Wife 55%%.
2.In the event that the Court was to find that the overall contributions are as have been asserted by the Husband it is submitted that in the particular circumstances of this case no further adjustment in favour of either party pursuant to Section 75(2) is warranted.
3.Overall (and on a preliminary basis prior to the taking of evidence) it is submitted that the Husband should receive 45% of the current matrimonial assets.
4.This is a preliminary case outline only. Those representing the Husband reserve the right to make further submissions and amend the outline as required in the conduct his case.
J.SUMMARY OF ARGUMENT - THIRD PARTY ISSUE
1.The status of the interveners’ claim to the proceeds of sale of the [G] property is to be determined on equitable principles and not on the basis of the matters set out in Section 79.
2.It is presumed that intention as to ownership is reflected in the legal title and the presumption is not to be lightly displaced.
3.The presumption of advancement applies as between the First Respondent and the Interveners. The onus in on the Interveners to adduce evidence sufficient to rebut the presumption.
4.Where the presumption of advancement does not apply, there is a presumption of a resulting trust in favour of a party providing part of the purchase price of a property, subject to any evidence of conflicting intention that may rebut that presumption. The onus is on those asserting the trust.
5.It is well established and clear law that where a contribution to a purchase price is being relied upon to ground an equitable claim to an interest in property, the person who has obtained a mortgage borrowing in their name and applied it to the acquisition cost of the subject property has contributed to the purchase price to the full extent of the value of that borrowing.
6.In equity the whole of the purchase price is considered and the contribution through borrowing secured by the mortgage has the same status as a contribution through a cash payment.
7.The case law in this area is well established.
Calverley v Green (1984) 59 ALJR 111, 56 ALR 483 at 251, 257-258, 267-268.
Ryan v Dries [2002] NSWCA3 (6/2/03)
Currie v Hamilton [1984] 1 NSWLR 687 at 691 at 692
8.In the recent decision of Brennan v Duncan [2006] NSWCA674 (27 June 2006) White J. in the Supreme Court of New South Wales summarised the principles at paragraph 42 of his judgment, “...Mr Brennan's primary claim is that all of Ms Duncan's interest is held on trust for him because he provided all of the "net equity". That contention must be rejected. Where parties intend to acquire property subject to a mortgage, the monies raised on the mortgage are treated as a contribution by the parties who have borrowed the money from the mortgagee (Ingram v Ingram at 102, Currie v Hamilton at 692, Calverley v Green at 251, 257-258 and 267-268).”
9.The relevant principles were further addressed by His Honour at paragraphs 8 and 9 of the judgment as follows:
8. As the parties were joint borrowers from Perpetual Trustees Australia Limited, the application of the advance of $481,000 towards the purchase of the property should be treated as a contribution to the purchase of the property made by them equally (Ingram v Ingram [1941] VLR 95 at 102; Currie v Hamilton [1984] 1 NSWLR 687 at 692; Calverley v Green 1. [1984] HCA 81; (1984) 155 CLR 242 at 251, 257-258 and 267-268).
9. Accordingly, Ms Duncan contributed $240,500 to the purchase price and associated expenses of $661,405, or 36.4%, and Mr Brennan contributed the balance. For the purposes of this calculation, contributions to the purchase price include incidental costs, fees and disbursements involved in the acquisition of the property (Ryan v Dries (2002) 10 BPR 19,497 at 19,508-19,509; [2002] NSWCA 3 at [52]- [53].)
10.If the Court accepts that the Third Parties are entitled to a resulting trust to the extent of the percentage represented by the alleged contribution of $20,000.00, then applying appropriate equitable principles their resulting trust is, at best, the percentage proportion of $20,000.00.00 over the whole of the purchase price. The wife’s percentage is represented by whatever cash contribution she made plus the whole of her borrowing.
11.Assuming the total costs of purchase were $350,000.00 as asserted by the wife, then in the event that the third parties successfully establish a resulting trust, that trust is no more than the proportion of $350,000.00 represented by their alleged $20,000.00. That is 5.71%.
12.The resulting trust could not even on the best case of the interveners to be in the sum of 50% of the net proceeds of sale. The mortgage contribution was solely the contribution of the wife - see see Ryan v Dries (supra) and also Brennan and Duncan (No.2) [2006] NSWSC 851 (11 August 2006).
13.It is submitted however that the wife conducted herself in a fashion immediately after purchase in a manner which would readily lead to a finding that the intention was that the contribution through the mortgage would be exclusively hers and the property was in fact hers.
14.In Brennan v Duncan (supra) at paragraph 14 White J summarised the law in relation to evidence as to such matters as follows:
14. The parties' actual intentions may be determined by what they said and did when the property was purchased, and by their later conduct in so far as it throws light on what those intentions then were. Subsequent declarations of intention are only admissible against interest (Calverley v Green at 262 and 269; Charles Marshall Pty Ltd v Grimsley at 365; Bryson v Bryant (1992) 29 NSWLR 188 at 215).
15.The whole of the wife’s actions upon acquisition of the property and thereafter were consistent with her total ownership of the property and the taking by her of sole responsibility for the mortgage.
16.The wife immediately following acquisition and throughout the ownership pf the property represented to the ATO that her parents were tenants and paid her rent. She commenced to do this prior to her relationship with the husband.
17.She made the same representation to both lending institutions.
18.The third parties were paying rent in relation to the property. If in fact it is asserted that the payments that they made were anything other than rent (for example mortgage payments) on normal equitable accounting principles there should be an allowance back to the wife for occupation rent - see Ryan v Dries (supra) and also Brennan and Duncan (No.2) [2006] NSWSC 851 (11 August 2006).
19.The mortgage obligation has always been acknowledged as that of the wife by the interveners. If it is asserted that the interveners have contributed to the mortgage this is a matter of equitable accounting. The wife would be entitled to have occupation rent set off.
20.The evidence clearly shows an intention that the interveners were paying rent as opposed to making any contribution to the mortgage.
21.This is supported by the fact that the wife freely refinanced the mortgage and extended it for personal loan purposes with no reference to the interveners and that the wife represented to the lenders and the ATO that the interveners were paying rent.
22.In Summary the husband asserts that:
a.the interveners have no interest in the proceeds of sale of the property at [G].
b.in the alternative it is asserted that any resulting trust could not on the basis of the facts or the applicable law to be more than 5.71% of the proceeds of sale.
This is a preliminary case outline only. Those representing the husband reserve the right to make further submissions and amend the outline as required in the conduct his case.
In oral submissions the husband’s counsel argued that the husband and the wife had a close relationship from about April 2001. Contributions commenced about that time with the wife purchasing $5,000 worth of furniture for the husband’s C apartment. He paid the rent and she paid some living expenses. The husband anticipated that he would receive a refund of the order of $10,000, by September or October of 2001 he still had over $8,000. The wife agrees that she knew of the refund.
It is submitted that the husband and wife intended the O property to be their joint home. A loss of $18,000 was incurred in breaking the St George bank mortgage. At all times the wife had the carriage of the family finances. It is submitted that I would find that the husband relied on the wife to apply his earnings as she sought fit. It is submitted that I should not focus on the application of particular amounts. It is an agreed fact that the income of the husband and wife was applied to the purposes of their household.
The wife had a superannuation interest at the start of the relationship of about $16,000 and she made additional contributions to that interest. Similarly, during the relationship there was some growth in the husband’s superannuation interest. It is submitted that there is no evidence that the wife had about $27,000 in savings to apply to the O property purchase. The wife cannot point to a bank statement or other evidence showing the existence of those funds. Therefore it is submitted that I would find that the cost of the O property purchase was largely met from borrowings.
It is submitted for the wife that the husband cannot argue that the trust claim is a matter of recent invention because the thrust of that claim was contained in the letter from the wife’s solicitors to the husband’s solicitors dated 6 March 2007. More importantly, the husband conceded in cross-examination, that at the start of their relationship, he was told by the wife that she owned an investment property with her parents. An email from the husband to the wife dated 10 August 2006 contained a calculation which, it is submitted, can only be read as acknowledging a property interest for the wife’s parents.
It is submitted that the CGT assessed on the sale of the G property is a debt that should be born by all of the parties. Some clarification is needed but the early advice is that it will be of the order of $12,000. It is agreed that it should be paid out of the fund representing the proceeds of sale of that property, prior to any distribution.
It is submitted that the revised tax assessment and any penalty arising from the O property are rightly obligations of the husband and wife, as they benefited from the original deductions. The wife had refunds in excess of $40,000 in the period 2003 – 2006. The husband joined in the deception. It is submitted that the fund representing the proceeds of sale of the O property should not be distributed until the tax and any penalty has been assessed and paid out.
It is submitted that this was a short marriage, with no children and that the Court would focus on financial contributions. It is submitted that the husband and wife did not intermingle their finances until November 2001, when they moved into the O property. There was an equity of about $200,000 in the G property at that time. (The property was worth $475,000 and the mortgage was $270,000) In addition the wife had superannuation interests that then stood at $16,000 and $2,350. Her income was $118,000 per annum. On the other hand the husband had a motor vehicle that had a negative value and $2,000 in savings. His income was $69,400 per annum. It is submitted that the wife made the overwhelming initial contribution and that her interest in the G property enabled the husband and wife to buy the O property. Throughout the marriage the wife earned $794,000 compared to $394,000 by the husband.
The husband brought it $21,000 from his mother and uncle after the wedding and had a wrongful dismissal settlement of $12,000. Because the husband agreed in cross-examination that he provided no part of the funds going to the purchase of the O property, it is submitted that the wife must have provided the following sums in relation to that purchase:
· Stamp duty $16,869
· Fee for deposit bond $492
· Balance owing on settlement $10,454.80
It is submitted that the husband and wife were largely in full-time employment and both performed homemaker duties as they were available.
It is submitted that the wife made the greater contribution to separation. After separation the husband paid $1,320 in joint debts while the wife paid $7,521 on O property, $14,506 on G property and $17,411.57 on credit card debts. Thus the wife paid out $39,445 in joint debts while the husband paid $1,320. That imbalance occurred notwithstanding that the husband lived at the O property either with the wife or alone, for a total of 13 weeks after separation. It is submitted that the wife’s post separation contribution should be repaid prior to any adjustment between the husband and the wife.
As to the application by the wife of the advance of $60,000 drawn on the mortgage, it is submitted that the wife was not challenged as to her evidence about the application of those funds in paragraph 42 of her affidavit.
It is submitted for the second third respondents that a constructive trust exists in favour of the wife’s parents because the wife (and the husband) could not in good conscience retain for themselves the benefit of all of the net proceeds of sale of the G property in breach of the wife’s equitable obligations to her parents.
It is submitted that this is founded on the following facts that are agreed between the wife and her parents:
1.An agreement was entered into between them to the effect that they would purchase a property “half and half”.
2.That the wife would enter into a mortgage but that they would be equally liable to pay the mortgage instalments.
3.The wife’s parents would live in the property and pay the utilities and rates.
4.They would equally share in the eventual proceeds of sale.
5.The wife’s parents paid $20,000 towards the deposit.
6.The wife’s parents paid half of the mortgage instalments.
7.The wife’s parents paid the utilities and rates.
8.The wife’s parents performed work on the property and paid for work to be done in the course of their occupation.
Learned counsel for the wife’s parents refers to a number of authorities and then Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. At paragraph 30 Mason CJ and Wilson J said:
30. One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has "played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it": per Dixon J. in Grundt, at p 675; see also Thompson, at p 547. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption.
Grant v Edwards [1986] Ch 638 is cited as authority for the proposition that a constructive trust can arise on the basis of common intention provided that the applicant acted on the intention to his or her detriment. It is submitted that the existence of the common intentions can be demonstrated in various ways based on the conduct of the parties. As to whether the wife’s parents have acted to their detriment I am referred to Nourse LJ in Grant v Edwards for the proposition that it must be conduct on which the claimant could not reasonably be expected to embark unless he or she was to have an interest in the house. It is submitted in the proceedings before me that the contributions of the wife’s parents by way of deposit money and both effort and money spent on improvements could not be classified other than conduct embarked upon in the understanding that they had an interest in the property.
Finally, the wife’s parents’ counsel submits that the imposition of a constructive trust is the only appropriate remedy. I am referred to Cierpiatka (1999) FLC 92-864 which reviewed a number of authorities for the proposition that the court should consider if there is an appropriate equitable remedy falling short of imposing a constructive trust. It is submitted that there is no other appropriate remedy.
The approach in proceedings under section 78
Section 78 provides as follows:
[s 78] s 78 Declaration of interests in property *
78 (1) [Court may declare interests] In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.
(2) [Consequential orders] Where a court makes a declaration under subsection (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.
Thus there is power, in the context of proceedings between the parties to a marriage, for the Court to make a declaration as to the rights that a party has in property. That can relate to property in the name of a person who is not a party to the marriage and where that person is also a party to the proceedings, the declaration and consequential orders can affect the rights of that third party.
The exercise of discretion
A key issue in the proceedings relates to the beneficial ownership of the proceeds of sale of the G property. The wife held the legal title to the property. She and her parents say that the beneficial owners of the property were the wife as to one half and her parents as to one half. The husband contends that the wife is the beneficial owner or if not, that the wife’s parents have a 5% interest by reference to the payment they made towards the deposit.
The wife’s evidence is to the effect that in 1999 she was paid $40,000 by her former partner by way of property settlement. After she received that payment she decided to purchase a property. She made an application for a loan in her name to assist with the purchase. Her parents were living in rented accommodation and did not own their own home. The wife says she approached her parents and said:
“Why don’t you sell your shares and put the money in with me to buy a home. You could live there. I can borrow the rest of the money we need and we will go halves in payment the mortgage payments”
She says that her parents later agreed with her proposal. She says that there was a series of further discussions in the course of which she put the following proposition to her parents:
“(a) We will pay the mortgage payments equally. You pay all the rates on the property and you can live there.
(b) I will put the property in my name. I already have a loan approval. That way you won’t need to sign any documents.
(c) If we sell the property you will get half of the money from the sale.
The wife says that her parents responded in the affirmative, saying words to the effect of:
“Yes. We agree with that.”
The wife’s mother says that in or about February 1999 the wife approached her and her husband and said words to the effect:
“You are wasting all your money paying rent, why don’t we get a property together. That way you will have an asset. I’ll get a loan because I’m earning good money. It’s easier for me to obtain a loan. I’ll negatively gear it off my tax.”
The wife’s mother says that at that time she and her husband did not own a house. They had been required to sell their home as a result of an unsuccessful business. She discussed the proposal with her husband and they agreed to accept it. She recalls that the wife said:
“We can go halves in mortgage payments and any upkeep needed on the property. You can live there until such time as we decide to sell it. Upon which we will divide the proceeds 50/50.”
The wife’s mother says that she and her husband replied with words to the effect:
“We agree.”
The wife says she located the G property, showed her mother and suggested that she put in a bid before auction. She says her mother responded:
“Yes. I will leave that side of things to you, but I am happy if we buy that property, your father will be too.”
The property was purchased in the wife’s name for $335,000, the total cost being about $350,000. She put in $20,000, her parents put in $20,000 and the wife borrowed $299,500 from the St George Bank.
The wife’s mother says that after seeing the property the wife put an offer on it and said to her:
“I’ve put an offer on the house in the sum of $335,000.00. We need to put a deposit it (sic) to secure it.”
The wife’s mother says she replied:
“Your father and I have some AMP shares which we will have to sell.”
The wife’s mother says the wife replied:
“We need the money urgently.”
The wife’s mother says she and her husband were not able to sell the shares fast enough and they borrowed $20,000 from her mother and then repaid that money when the shares sold.
The wife’s parents moved into the property in about April 1999 and lived there until it was sold in October 2007. The wife’s parents paid the council and water rates and the utilities for the property.
The wife says that her parents paid half of the mortgage instalments on the basis of the instalment rate fixed from time to time. When the mortgage was increased the wife says her parents paid one half of the normal instalment rate for the original mortgage and pro rata for the extension of the loan, based on the uses to which the extension was put.
In cross-examination the wife’s mother said that she and her husband paid $350 per week at first, matching $350 paid by the wife and that that rate $700 per week was in excess of the minimum repayment required by the bank. She said that at some point later she and her husband paid $211 per week and the wife also paid $211.
It is the husband’s case that the wife told him that she had told the Commonwealth Bank that her parents were paying her rent. Whether directly or through a mortgage broker, the wife did tell that to the Commonwealth Bank.
It is the husband’s case that the claim that the wife’s parents had a beneficial interest in the G property is a recent invention. That is manifestly not so. In cross-examination about the commencement of the relationship, he was asked about the investment property owned by the wife and her parents. He responded to the effect that he knew she had an investment property. He was asked if he knew about the investment property she had with her parents ‘half half’ and he responded to the effect that he was not aware of the proportions in which the property was held. As the husband’s evidence was given, at one point he made a reference to hearing about the property when the wife did her tax. Correspondence between solicitors in March and September 2007 includes reference to claimed beneficial interest. Whatever might be said about the claims of the wife’s parents, they are not of recent invention.
The matter is confused by the fact that the wife caused the St George Bank, the Commonwealth Bank and the Australian Taxation Office to be mislead. The wife represented that the G property was hers and that her parents paid rent to occupy the property. After some dissembling in relation to only making representations through a mortgage broker, the wife’s case is that she lied to the banks and the ATO. The wife says she did that so as to obtain the benefits of negative gearing.
Just to add to the confusion, the wife’s first Financial Statement makes no reference to her parents having any interest in the proceeds of sale of the G property and in the course of her cross-examination the wife’s mother used the word ‘rent’ to refer to the payments that she, her husband and her daughter (the wife) contend were contributions to the mortgage.
The fact of prior inconsistent statements or of an illegal or improper purpose does not relieve me of the obligation to make a finding about the true circumstances, assuming that a finding is possible. In Nelson v Nelson (1995) 18 CLR 538 the High Court was dealing with a situation described by Dawson J as follows:
DAWSON J. This is a case in which a mother provided the purchase money for a house which was transferred into the names of her son and daughter, both of whom were adults. The purpose of this arrangement was to enable the mother, should she subsequently wish to purchase another house for herself, to obtain a subsidised advance upon favourable terms under the Defence Service Homes Act1918 (Cth). Under that Act, the mother would not have been eligible for the subsidised advance if she were the owner of another house.
2. More than a year and a half later the mother did purchase another house for herself. She applied for and received a subsidised advance under the Defence Service Homes Act, falsely declaring that she did not own or have a financial interest in a house other than the one for which the advance was sought. This declaration was false because the mother claimed, as she does in this litigation, that she was the beneficial owner of the house for which she had previously provided the purchase money.…..
4. The house which was in the names of the son and daughter was sold and the mother claims to be entitled to the proceeds. The son concedes his mother's entitlement, but the daughter, having fallen out with her mother, claims half of those proceeds.
An advance from a parent to a child attracts the presumption that the parent intended to benefit the child. The New South Wales Court of Appeal had determined that obtaining the subsidy on the purchase of the property involved Mrs Nelson in an illegal purpose and that illegal purpose could not be relied upon to rebut the presumption of advancement in respect of the Bent Street property.
Justices Deane and Gummow said:
23. There is an interplay of three doctrines or principles. They are that concerned with the imputation or presumption of a resulting trust in favour of Mrs Nelson as the source of the purchase moneys, the countervailing presumption of advancement which would leave the equitable title to Bent Street at home with the legal title, and the effect of what was classified as the illegal purpose in the later concealment by Mrs Nelson, to obtain the subsidy for the Kidman Lane property, of what she was found always to have intended to be her beneficial ownership of the Bent Street property. Do the circumstances of the case, as disclosed by the findings on the evidence, supply sufficient reason for concluding that the equitable title to Bent Street was not at home with the legal title when Bent Street was sold?
The appeal was allowed and orders were made declaring a trust in favour of the mother but making provision for her to repay the illegally obtained subsidy. Thus evidence of the illegal purpose was allowed to rebut the presumption of advancement.
In the proceedings before me the presumption of advancement would have the wife’s parents intending to benefit the wife by paying half of the deposit on the property.
In Charles Marshall Pty Ltd v Grimsley (1956) CLR 353 at 364 the High Court held that there is a rebuttable presumption that if a parent pays for property in the name of their child, then it is presumed to be a gift:
“But if the purchaser is the father of or a person in locus parentis to the legal owner, the presumption arises from the relationship that the father intended to purchase the property to advance his child and to make the child not only the legal but also the beneficial owner of the property.”
The Court also held in that case that subsequent acts and declarations by a parent ‘are not evidence to support the trust, although subsequent acts and declarations of the child may be so.’
Here the presumption of advancement arises. The wife did make later representations consistent with that presumption. She told banks and the ATO that she held the legal and beneficial interest in G property. On balance however, the presumption is rebutted here. I accept the evidence of the wife that she misrepresented the real position to the banks and the ATO.
The onus lies with the wife and her parents if they want to disturb the legal title. They need to identify a trust if the wife is to be found to hold her title in the G property as a trustee. Trusts fall into two broad groups, the second group containing two elements often dealt with separately[2]:
[2] Equity & Trusts by Michael Evans published by Lexis Nexis: Chapter 12 page 294
1. Express trusts are trusts arising from express declaration, which can be effected by some agreement or common intention held by the parties to the trust…
2. Trusts arising by operation of law might be either:
(a)resulting trusts, which may arise from a failure to dispose of the entire beneficial interest in property under a settlement or other instrument creating a trust, or upon the purchase of property by one person in the name of another where there was no intention to make a gift…;or
(b)constructive trusts, which are trusts imposed by the court irrespective of the intentions of the parties, in circumstances where it would be unconscionable for the legal titleholder to deny the beneficial interest claimed by the other party;
This case is argued on the basis of a constructive trust.
It is conceded on behalf of the 2nd and 3rd respondents that there is no express trust. In any event Section 23C of the Conveyancing Act 1919 (NSW) requires a declaration of trust in relation to an interest in land to be evidenced in writing.
In Grant v Edwards [1986] Ch 638, the Vice Chansellor (Sir Nicolas Browne-Wilkinson) dealing with the nature of the substantive right of a person claiming a constructive trust said:
….the other party ("the claimant"), in order to establish a beneficial interest, has to establish a constructive trust by showing that it would be inequitable for the legal owner to claim sole beneficial ownership. This requires two matters to be demonstrated: (a) That there was a common intention that both should have a beneficial interest; AND (b) That the claimant has acted to his or her detriment on the basis of that common intention.
On balance, I am satisfied about those matters here. The wife’s parents and the wife always intended that the wife’s parents would have a beneficial interest in the G property. Although it is not as clear as it might be, the wife’s parents acted to their detriment. Prior to moving in to the G property they were paying $280 per week in rent. At G they started contributing $350 per week. There is no evidence about the comparative charms of the two properties. At times the G property contribution was less than $280 per week. The wife’s parents paid rates which would normally be a landlord’s responsibility. They undertook maintenance and improvements both by physical effort and by making financial contributions. In relation to improvements they paid for some things and joined with the husband and wife in paying for others. I am satisfied that the wife’s parents had a beneficial interest in the G property and therefore, in the fund representing the net proceeds of its sale.
Next, I must consider whether there is an appropriate equitable remedy falling short of imposing a constructive trust. I am referred to Cierpiatka (1999) FLC 92-864 which reviewed a number of authorities for that proposition. One of those authorities was from the NSW Supreme Court as follows:
In Morris v Morris ([1982] 1 NSWLR 61) the plaintiff spent money on an extension to the home of his son and daughter-in-law in the expectation of being permitted to live there. McClelland J. held that it would be unconscionable and inequitable for the defendants to retain the benefit of that expenditure and that "consequently an equity arises in favour of the plaintiff and the court must determine how, in all the circumstances, justice requires that that equity be satisfied. What a plaintiff in a case such as this should receive will not necessarily correspond with what, when the relevant expenditure was made, he expected to receive".
In the case before me the property concerned is no longer held by any of the parties. It is now represented by a fund held on trust by the wife’s solicitors, being a fund to which, subject to these proceedings, the wife has the only legal entitlement. It is not seriously contended that the imposition of an equitable charge is an appropriate remedy.
There is a devil in the detail of the calculation of the wife’s parents’ “half” interest but they should be paid out of the fund on the basis of a constructive trust.
As to the value of the interest of the wife’s parents, it is argued on behalf of the wife and her parents that in order that they are not involved in the Capital Gains Tax implications of the sale, the wife’s parents should have their share calculated prior to any allowance for that liability. Thus it is submitted that after payment of the costs of Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the G property trust funds, the wife’s parents should receive one half of the then remaining balance plus a further $37,813.13. The latter sum is said to represent advances made and borrowings secured on the G property for the exclusive purposes of the husband and wife. Albeit adding up to a greater sum than that claimed, the calculation is as follows:
Advance Refund half $12,000 cost of refinance to fund the O property purchase $6,000 $25,427.26 drawn for credit card repayments for the husband and wife $12,713.63 $60,000 drawn for various purposes of the husband and wife (including repaying the wife’s parents for moneys they expended for the parties on the G property) $20,099 Total $38,812.63
The second and third respondents did not benefit from those advances. In determining the extent of their beneficial interest in the property, those amounts must added back. I am satisfied that the beneficial interest of the 2nd and 3rd Respondents in the net proceeds of sale of the G property is one half of the fund after the deduction of the costs of Messrs. Haydon Fowler Corbett Jessop Solicitors plus $38,812.63. Minds might differ about the wife’s parents being responsible for half of the costs of holding and disbursing the proceeds of sale. In my view they should pay half. They were aware at all times of the treatment of the G property. That treatment lead to the issue arising in these proceedings. In other words the interest is worth $125,763.63 (($173,902 ÷ 2) + $38,812.63) minus half the solicitors costs.
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 husband and wife at the date of the hearing. Second, I should identify and assess the contributions of the husband and wife within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the husband and wife expressed as a percentage of the net value of the property of the husband and wife. 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 husband and wife 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. [3]
[3] 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 husband and wife at the date of the hearing
The Court is required to make a finding as to the property of the husband and wife at the date of the hearing. As to the disputed issues:
The value of the wife’s interest in the proceeds of sale of the property at G
In accordance with the findings made above, the wife’s interest in the fund representing the net sale proceeds of the G property is worth $48,138.37 (($173,902 ÷ 2) - $38,812.63) minus half the solicitors costs.
Thus the assets of the husband and wife are:
Assets Value Wife’s interest in the sale proceeds of G property $48,138.37 Sale proceeds of O property $125,532 Wife’s Engagement Ring $15,000 MTAA Superannuation(W) 75,317 ING Superannuation (H) $6,001 ANZ Super Advantage Superannuation (H) $279 MTAA Superannuation (H) $25,209 Total $295,476.37
Liabilities:
The wife has applied for a reassessment in relation to her tax related to her false disclosures in respect of the O property. There is an estimate agreed between the parties as to the combined impact of that application and the CGT implications of the sale of the G property. However, the parties so not know the exact amount and there may be additional penalties. I will include the estimated figure in the list of liabilities but will take up the general approach suggested on behalf of the wife for the O property proceeds to be held pending the decision of the ATO.
On the basis of the findings referred to above, I find that the relevant liabilities of the husband and wife as at the date of the hearing are as follows:
Liabilities Amount ATO debt of the wife (including Capital Gains Tax on G property) E$28,794 One half of the costs of Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the G property trust funds Not Known The costs of Messrs. Haydon Fowler Corbett Jessop Solicitors of and incidental to the holding and distribution of the O property trust funds Not Known The costs of the wife’s accountants in relation to work done relating to the wife’s taxation liability (reassessment on O property and CGT on G property) Not Known
Assuming the allowance for the debt to the ATO is correct, the net assets have a value of $266,682.37 ($295,476.37 - $28,794) minus those other unquantified expenses.
Financial Resources
There are no financial resources of the husband and wife that are not included in the table of assets.
Contributions
The obligations placed on the Court by s 79 call for an assessment of the respective contributions of the husband and wife. 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[4]. There are said to be risks in taking an overly technical approach to the assessment of the respective contributions of the husband and wife in that the Court can become involved in questions of the quality of contributions which go far beyond the real world expectations of husband and wife[5].
A separate pool for superannuation
[4] Mallett v Mallett (1984) 9 Fam LR 449; In the Marriage of Ferraro (1992) 16 Fam LR 1
[5] 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 that 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.
In the Marriage of Coghlan (2004) 33 Fam LR 414 the Full Court opined that it is preferable for contributions to superannuation to be assessed separately from those made to other assets. However the 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 the husband and wife have themselves adopted a global approach to the assessment of contributions. On that basis, I too will employ a global approach.
Contributions
The submissions made on behalf of the husband is that the contributions favour the wife 55% to 45% by the husband. The wife argues that if she is repaid for her post separation contributions of $39,445.44, then the resultant pool should be divided on the basis that her contributions were 70% compared to 30% by the husband.
Section 79(4)(a) Contributions
Irrespective of the commencement of cohabitation, contributions were made from about May 2001.
The wife had a 50% interest in G property at that time. The property cost $335,000 in 1999 and the mortgage was $273,000 in 2001. It may be that in May 2001 the equity was about $60,000, of which the wife was beneficially entitled to half. In addition the wife had superannuation interests that then stood at $16,000 and $2,350. Her income was $118,000 per annum. The wife spent $5,000 on furniture which was initially located in the husband’s unit at C. On the other hand the husband had a motor vehicle that had a negative value and about $8,500 in savings. His income was $69,400 per annum. The wife made the greater initial contribution.
It is an agreed fact as between the husband and wife that their income was applied to matrimonial purposes. The wife earned more than the husband. For example, over the period of cohabitation contended for by the wife (November 2001 to separation), she earned $794,000 compared to $394,000 by the husband.
The husband brought in $21,000 from his mother and uncle after the wedding and had a wrongful dismissal settlement of $12,000. Because the husband agreed in cross-examination that he provided no part of the funds going to the purchase of the O property, the wife provided 27,815.80 made up of the following sums:
· Stamp duty $16,869
· Fee for deposit bond $492
· Balance owing on settlement $10,454.80
Section 79(4)(b) contributions
There is little evidence of non-financial contributions. The wife’s parents undertook physical maintenance and improvements to the G property but in this case they were not contributions made on behalf of the wife. It was also their property.
Section 79(4)(c) contributions
There are no children of the marriage.
The husband and wife disagree as to the performance of homemaker tasks. The husband would have it that he made the greater contribution. He usually finished work earlier than the wife and says that he did the majority of the housework including cooking and cleaning. The husband and wife employed an ironing lady and a cleaner who came fortnightly. The husband says that between the cleaner’s visits, he tidied and cleaned the house. The husband says that the wife cooked once a week and otherwise, he did the cooking. The husband attended to the exterior of the O home albeit that after the mower broke down, a neighbour mowed the lawn and the husband did the edges for both properties.
The wife says that she attended to all of the grocery shopping, food preparation and cooking. She also prepared the husband’s lunch for periods. The wife says she cleaned and tidied up between the cleaner’s visits. The wife concedes that the husband did the clothes washing. The wife says she folded the clothes and put them away. The wife says she did some ironing and that the rest was performed by the ironing lady.
In cross-examination the wife agreed that the husband was usually home earlier than her but asserts that she left for work later than him.
Neither the party recanted their written evidence. Given the various false representations made by the husband and wife, neither has much credit. The husband and wife probably undertook some household tasks. Happily, the main focus of the proceedings is on financial contributions.
Conclusion on Contribution
The wife made the greater contribution. The main focus of the proceedings is on financial contributions and the wife brought more assets into the marriage and consistently earned at a higher rate than the husband. The husband and wife agree that earnings were applied to matrimonial purposes.
The hybrid approach proposed on behalf of the wife whereby she is repaid her post separation contributions and otherwise is credited with a percentage for her other contributions has some attractions. The argument is that after separation the husband paid $1,320 in joint debts while the wife paid $7,521 on O property, $14,506 on G property and $17,411.57 on credit card debts. Thus the wife paid out $39,445 in joint debts while the husband paid $1,320. The wife seeks that she be refunded $39,445.44 spent by her after separation. There are some problems with that approach. First the husband is given no credit for the $1,320 paid by him and second, it is not clear why it is the husband and not also the wife’s parents who are to be affected by the repayment to the wife of the $14,506 she paid in relation to the G property. It is as if the argument for an adjustment is not as compelling between the wife and her parents. That is a matter for them, but the husband should not bear all of the adjustment.
I will facilitate the wife receiving one half of the $14,506 from the husband and will adjust the total to credit the husband for his $1,320. Thus the wife will be repaid $30,872.44 ($39,445.44 - ($14,506 ÷ 2) - $1,320). The wife can pursue her parents for the balance of the $14,506 if she wishes.
Turning then to the overall contributions as between the husband and wife. The wife brought in her equity in the G property based on her contributions towards the deposit on that property and the equity built up until about May 2001. She brought in about $5,000 for furniture for the C apartment, $27,815.80 towards the O property purchase and some superannuation. The husband brought in the balance of about $8,000 from his income tax refund, $21,000 in gifts from family members, $14,051.34 from a wrongful dismissal claim and his superannuation.
This is not a mathematical exercise but this was a relatively short marriage, with no children and so the focus is on financial contributions. At 65:35 the wife’s contributions would be about twice those of the husband. In my view that case is not made out. A finding of the wife’s contributions at 60% and the husband’s at 40% gives a differential of 20% and better meets the circumstances of the case. After the allowance referred to above for the imbalance in post separation contributions, the wife’s contributions were 60% compared to 40% by the husband.
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 husband and wife. There is no evidence about this.
Section 79(4)(e) - Section 75(2) Factors
The relevant matters in Section 75(2) would seem to be paragraphs (a), (b), (d), (m) and (o).
(a) the age and state of health of each of the parties;
First, as to the age and state of health of each of the husband and wife. Each of the husband and wife is 35 years of age and there is no evidence about their health.
(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 husband receives an income of $1,866 per week made up of his salary of $1,173 per week from his work as at P Company, a car allowance of $443 and an estimated $250 in commissions. He lives with his partner who has an income of $1,653 per week. According to the husband’s Financial Statement she pays no expenses for the husband’s benefit, nor does he for her benefit. I think the husband said that his partner gave birth to their baby some days prior to the hearing. The husband gives no evidence about his living expenses. His fixed expenditure is as follows:
Expenditure
Amount
Income tax $420.00 Rental payments $480.00 Motor vehicle insurance AAMI $35.00 Private health insurance MBF $20.00 Household contents insurance NRMA $10.00 Motor vehicle registration Holden Commodore $21.00 Hire purchase payments Holden Commodore – GE Finance $210.00 Personal loan – Bank of Queensland $52.00 GO Mastercard payments – GE $100.00 Mastercard payments – Citibank $20.00 Mastercard payments – Bank of Queensland $50.00 Total $1418.00
There is no suggestion that the husband is not exercising his earning capacity.
The wife’s income is $1,661 per week made up of her salary of $961 and commissions which average $700 per week. The wife lives with her partner who earns $900 per week. According to the wife’s Financial Statement he pays no expenses for the wife’s benefit, nor does she for his benefit.
The wife’s expenses are as follows:
Expense Amount Income tax $497.00 Contributions to MTAA superannuation $113.00 Mortgage payments to the CBA $380.00 Rates and unit levies $60.00 Motor vehicle insurance – Allianz $27.00 Health insurance – MBF $21.00 House contents insurance – Citibank / QBE $6.00 Motor vehicle registration – Mazda 3 $13.00 Motor vehicle hire purchase – Alphera Finance - Mazda 3 $85.00 CBA personal loan $165.00 CBA Mastercard $51.00 David Jones store card $3.00 Living expenses $669.00 Food $150.00 House supplies $10.00 Gas & Electricity $18.00 Telephone $23.00 Petrol $40.00 Motor vehicle maintenance $23.00 Fares and parking $40.00 Clothing and shoes $50.00 Medical dental and optical $5.00 Entertainment and hobbies $50.00 Holidays $100.00 Chemist pharmaceuticals $5.00 Cleaning $50.00 Repairs to furnishings and appliances $5.00 Dry cleaning $30.00 Books and magazines $10.00 Gifts $20.00 Hairdressing toiletries $40.00 $669.00 Total $2090.00
Evidence about the wife’s assets and liabilities is set out earlier in these reasons.
The wife’s earning capacity was not the subject of cross-examination. The wife’s recent move to Queensland is likely to have contributed to the reduction in her income. Her income has always exceeded that of the husband and all other things being equal, it is likely that her current income will increase in the medium term.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
There are no children of the marriage.
(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 set out the detail of those commitments above.
(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;
The husband and wife have been able to generate some superannuation entitlements. Neither of the husband and wife seeks a splitting order.
(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 husband and wife during the marriage.
(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;
This is not 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;
This is not relevant.
(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;
This is not relevant.
(l) the need to protect a party who wishes to continue that party's role as a parent;
This is not relevant.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The husband lives with his partner who has an income of $1,653 per week. According to the husband’s Financial Statement she pays no expenses for the husband’s benefit, nor does he for her benefit. That is a very unusual arrangement and is probably not true. It is very hard for a couple to live in one house and have no intermingling of expenses. I think the husband said that his partner gave birth to their baby some days prior to the hearing.
The wife lives with her partner who earns $900 per week. According to the wife’s Financial Statement he pays no expenses for the wife’s benefit, nor does she for his benefit. Again, that is probably not true.
There is no other evidence of the financial circumstances of the cohabitation of the husband and wife and their respective new partners.
(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 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;
The division based on contributions will provide the wife with more assets than the husband. The wife has some financial support from her parents. Otherwise, there is nothing further requiring attention under this provision.
(p) the terms of any financial agreement that is binding on the parties.
There was no binding agreement made between the husband and wife.
Section 79(4)(f)
There are no relevant orders.
Section 79(4)(g)
There is no child support assessment.
Conclusion
The wife will have more assets than the husband. Otherwise the parties are both in paid employment. The wife has the capacity to earn more than the husband. The parties are both in new relationships and their partners have income from paid employment. The husband has a new dependant. There are no compelling factors warranting an adjustment. I will make no adjustment to the outcome warranted by reason of contributions alone.
Just and Equitable
Based on their contributions and the other matters in s 79 the appropriate division of property is $30,872.44 to the wife and then the balance divided as to 60% to the wife and 40% to the husband. I must consider whether it would be just and equitable within the context of s 79 if the net assets of the husband and wife were divided in those proportions.
Subject to the several unquantified liabilities, the net assets have a value of $266,682.37. The outcome of the division proposed above would be that the husband receive about $94,323.82 and the wife about $172,358.40 ($30,872.44 + $141,486).
That would leave the husband with the benefit of:
Assets Value ING Superannuation (H) $6,001 ANZ Super Advantage Superannuation (H) $279 MTAA Superannuation (H) $25,209 Total $31,489.00
In order to bring him to the division proposed he would receive a further $62,834.82. He will owe his legal fees and any other personal debts.
The wife has or will have, the benefit of:
Assets Value Wife’s Engagement Ring $15,000 MTAA Superannuation(W) 75,317 Total $90,317.00
In order to bring her to the division proposed she would receive a further $82,041.40. She will owe her legal fees and any other personal debts.
The ultimate outcome will depend on the amended assessment of the wife’s tax and the costs of Messrs. Haydon Fowler Corbett Jessop Solicitors in relation to holding and distributing the trust funds and the relevant charges of the wife’s accountant. I will express the orders as proposed on behalf of the wife save that the proceeds of sale of the O property will be held until the relevant liabilities are identified and paid out. The proposal of holding the equivalent of the accountant’s estimate of the taxation liability seems an unnecessary complication in what are already very complicated orders. Naturally the husband and wife could agree to some other approach.
We do not know exactly what the remainder of the account will be but the justice of the case will be met if that remainder is divided between the wife and the husband in the approximate proportions 82,041.40 : 62,834.82 which I will round out to 57% to the wife and 43% to the husband.
I certify that the preceding one husband and seventy (170) paragraphs are a true copy of the reasons for judgment of Judicial Registrar Ian Loughnan.
Associate:
Date: 24 December 2008
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Family Law
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Tax Law
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Equity & Trusts
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