Potter & Lloyd (No 2)

Case [2022] FedCFamC1F 284

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Potter & Lloyd (No 2) [2022] FedCFamC1F 284

File number(s): BRC 11323 of 2018
Judgment of: CAMPTON J
Date of judgment: 4 May 2022
Catchwords: FAMILY LAW – PROPERTY – Final property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth).
Legislation:

Evidence Act 1995 (Cth) s 79

Family Law Act 1975 (Cth) ss 90SF 90SK, 90SM

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 7.08, 7.10

Federal Circuit Court Rules 2001 (Cth) r 15.09
Cases cited:

Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116

Browne & Green (1999) FLC 92-873; [1999] FamCA 1483

Chorn & Hopkins (2004) FLC 93-204; [2004] FamCA 633

Franklin & Ennis [2019] FamCAFC 91

Gollings & Scott (2007) FLC 93-319; [2007] FamCA 397

Horrigan & Horrigan [2020] FamCAFC 2

Kowaliw & Kowaliw (1981) FLC 91-092; [1981] FamCA 70

Mallett & Mallett (1984) 156 CLR 605; [1984] HCA 21

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Pierce & Pierce (1999) FLC 92-844; [1998] FamCA 74

Potter & Lloyd [2022] FedCFamC1F 214

Robb & Robb (1995) FLC 92-555; [1995] FamCA 136

Rosati & Rosati (1998) FLC 92-555; [1998] FamCA 38

Singerson & Joans [2014] FamCAFC 238

Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52

Warne & Warne (1982) FLC 91-247; [1982] FamCA 33

Weir & Weir (1993) FLC92-338; [1992] FamCA 69

Division: Division 1 First Instance
Number of paragraphs: 181
Date of hearing: 23 – 24 March 2022
Place: Sydney
Counsel for the Applicant: Litigant in person
Counsel for the Respondent: Litigant in person

ORDERS

BRC 11323 of 2018

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MR POTTER

Applicant
AND:

MS LLOYD

Respondent

ORDER MADE BY:

CAMPTON J

DATE OF ORDER:

4 MAY 2022

THE COURT ORDERS THAT:

1.That within 90 days from the date of these orders the respondent shall do all such things as are necessary to:

(a)Pay to the applicant or as he may direct in writing the sum of $4,600.

(b)Cause the two H Bank mortgages secured upon the property at 1 E Street, Suburb B to be discharged; and

(c)Cause the H Bank mortgage and the ANZ mortgage secured upon 2 E Street, Suburb B to be discharged; and

(d)Cause the ANZ mortgage secure upon 3 E Street, Suburb B to be discharged.

2.That simultaneously upon compliance by the respondent with Order 1 the applicant shall do all such things and sign all such documents as may be necessary as prepared by the respondent at her expense to transfer to the respondent all his right and entitlement and interest in the properties at E Street, Suburb B.

3.That in the event the respondent fails or neglects to comply with Order 1 hereof, then forthwith upon such failure to comply the parties shall do all acts and things as are necessary to effect a sale of the properties at E Street, Suburb B for…

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Potter & Lloyd (No 2) [2022] FedCFamC1F 284
Case
[2022] FedCFamC1F 284
Decision Date

CaseChat Overview and Summary

In the case of Potter & Lloyd (No 2), the court was tasked with determining claims for the alteration of de facto property interests between the parties. The central issue revolved around the valuation and ownership of specific properties, including the Suburb M property, and the Suburb B properties. The court had to make findings on the property's identity, value, liabilities, financial resources, and the legal and equitable interests of the parties. Additionally, the court needed to consider contributions by the parties to the acquisition, conservation, and improvement of their property, and assess whether any further adjustments should be made based on specific statutory provisions.

The court considered several pieces of expert evidence, including valuations of the properties and reports on the condition and potential costs of rectifications. The legal framework for the court's decision was established by the Family Law Act, particularly sections 90SM(4)(d)-(g) and 90SF(3), which guide the court in making just and equitable orders. The court had to balance the contributions of the parties, including financial and non-financial contributions, and any relevant considerations under the Act. The court's decision also had to ensure that any order made was just and equitable, taking into account the unique circumstances of the case.

The court's reasoning involved a detailed analysis of the property's valuation, the contributions of the parties, and the specific statutory considerations. The court found that the respondent's one-half interest in the Suburb M property should not be notionally included in the pool of property available for adjustment, as the applicant had not served the initiating application on the third-party co-owner. Furthermore, the court determined that the rents received by the respondent post-separation should not be notionally added back to the property pool, given the poor condition of the Suburb B properties and the respondent's responsibilities in maintaining the properties. The court's final orders were based on these findings, ensuring a just and equitable distribution of the parties' property interests.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Objections were taken to the parts of the affidavits and determined at the commencement of the hearing. These reasons for judgment assume familiarity with the ex tempore judgment delivered on the first day of trial, being Potter & Lloyd [2022] FedCFamC1F 214, which, on the respondent’s objection, struck out further valuations unilaterally obtained by the applicant of the Suburb B properties served on the day prior to the trial.The expert evidence The expert evidence formed part of the exhibits to the affidavit of the respondent’s trial affidavit, being:·F Valuers Valuation report for L Street, Suburb M dated 27 September 2021, including a retrospective valuation as at 1 January 2008 (“the Suburb M Street valuation”)·F Valuers Valuation report for 1 E Street, Suburb B dated 28 September 2021 (“the 1 E Street valuation”)·F Valuers Valuation report for 2 E Street, Suburb B dated 28 September 2021 (“the 2 E Street valuation”)·F Valuers Valuation report for 3 E Street, Suburb B dated 28 September 2021 (“the 3 E Street valuation”)·O Engineers Building report as to the Suburb B properties dated 22 November 2019 (“the O Engineers report”)·P Pty Ltd Report as to likely costs of rectifications to each of the real properties dated 21 September 2020 (“the P Pty Ltd report”)THE LAW In determining claims for alteration of de facto property interests, I am required to:(a)Make findings as to the identity and value of the property (including superannuation interests), liabilities, and financial resources of the parties, or either of them, at the time of the final hearing, and determine the legal and equitable interests of the parties in such property;(b)Consider, identify and assess the contributions by the parties to the acquisition, conservation and/or improvement of their property, including financial and non-financial contributions and any contributions to the welfare of the family before, during and after the relationship came to an end; and(c)After consideration of altering the interests in the property pool on the basis of contributions, to consider whether there should be any further adjustment to either of the parties on account of the matters set out in s 90SM(4)(d)-(g) of the Act, including any relevant considerations under s 90SF(3); (d)Ensure that any order made is just and equitable.The balance sheet – conclusions identifying the property of the parties By the time of the conclusion of the submissions the joint balance sheet was agreed except as to the following items that were not agreed appearing in bold as determined by me in the following table. The respondent’s affidavit evidence records that she is the joint owner of the Suburb M property at law with her prior husband, Mr W. The respondent and Mr W were divorced in 2008. The respondent gave evidence that they have not engaged in a “family law financial separation”. The respondent’s evidence is that she has not communicated with Mr W subsequent to the making of four sets of family violence orders restricting the conduct of Mr W, the most recent being made in September 2008.

Decision

Reasons for decision

In determining claims for alteration of de facto property interests, I am required to:(a)Make findings as to the identity and value of the property (including superannuation interests), liabilities, and financial resources of the parties, or either of them, at the time of the final hearing, and determine the legal and equitable interests of the parties in such property;(b)Consider, identify and assess the contributions by the parties to the acquisition, conservation and/or improvement of their property, including financial and non-financial contributions and any contributions to the welfare of the family before, during and after the relationship came to an end; and(c)After consideration of altering the interests in the property pool on the basis of contributions, to consider whether there should be any further adjustment to either of the parties on account of the matters set out in s 90SM(4)(d)-(g) of the Act, including any relevant considerations under s 90SF(3); (d)Ensure that any order made is just and equitable.The balance sheet – conclusions identifying the property of the parties By the time of the conclusion of the submissions the joint balance sheet was agreed except as to the following items that were not agreed appearing in bold as determined by me in the following table. The respondent’s affidavit evidence records that she is the joint owner of the Suburb M property at law with her prior husband, Mr W. The respondent and Mr W were divorced in 2008. The respondent gave evidence that they have not engaged in a “family law financial separation”. The respondent’s evidence is that she has not communicated with Mr W subsequent to the making of four sets of family violence orders restricting the conduct of Mr W, the most recent being made in September 2008. The parties agreed that the current value of the property is $805,000 and the respondent’s one half interest at law is valued at $402,500. The respondent contended that her interest in this property ought to be “notionally excluded from the pool of property available for adjustment.” In support of that exercise of discretion the respondent contended that:(a)During the relationship, the applicant said to her that he would never seek monies from her arising from her interest in the Suburb M property. She identified paragraph 131 of her affidavit that recorded: I always made it clear that my interest in the house would always be solely mine that would become my children’s inheritance. [The applicant] acknowledged this event during the time we were separated.The respondent was not challenged on this evidence by the applicant during the course of her cross-examination. (b)On 1 December 2021 the following notation was made by Judge Murdoch which supported her contention:C.The [applicant] potentially seeks to effect the interests of a third party to a property of which the [respondent] at law is a 50 percent owner and her ex-husband is the other 50 percent owner.D.The [applicant] will need to serve a copy of his Initiating Application upon that third party to provide that third party with procedural and substantive fairness.It was not the subject of contest that the property identified in the notations was the Suburb M property. The applicant did not serve a copy of his Initiating Application or Amended Initiating Application on Mr W. (c)On 28 January 2022 Chief Judge Alstergren listed the matter for final hearing in the National Rolling List commencing on 23 March 2022. A further order was made supported her contention:5. No later than 21 days prior to the trial date, the applicant file and serve:a.any Amended Initiating Application setting out with particularity and precision final orders sought. As recorded earlier in these reasons the Amended Initiating Application of the Applicant filed 22 March 2022 did not seek any order adjusting in favour of the applicant any part of the respondent’s legal interest in the Suburb M property. (d)In submissions, the respondent contended that the property is her “children’s home”, and that the applicant wants to “steal [her] children’s inheritance” which she perceived as “morally unfair”, labelling the respondent a “male gold digger”.

Ratio Decidendi

Legal Principle Established

The parties agreed that the vehicle had been disposed of and ought not to be an item in the balance sheet. It will be excluded.Item 15 – Net rents received by respondent post separation It is not controversial that the respondent has received the benefit from all rents from the Suburb B properties from the date of separation. On 3 August 2021 Judge Jarret ordered that:3.Within fourteen (14) days of the date of these orders, the respondent must provide the applicant solicitors a written accounting for the rental received and expenses incurred for [1, 2 and 3 E Street, Suburb B].4.The respondent continue to provide the applicant solicitors with up-to-date written account as described in Order 3 above once every month an no later than 4.00pm on the last business day of each calendar month. The applicant contends that the respondent produced only two of the relevant bank statements recording the receipt of rental funds. He submitted that his unchallenged evidence was that he requested disclosure of the leases for the three Properties and the respondent had failed to disclose them. The applicant gave evidence by way of affidavit not challenged by the respondent that from the date of separation until 1 April 2019 (that is for a period of about nine months), he had observed from the respondent’s bank statements that she was receiving rent for 1 E Street at $370 per week, 2 E Street at $480 per week and 3 E Street at $490 per week, totalling $1,240 per week. His affidavit recorded the following schedule:50.The difference between the rents received by her and the mortgage rates paid by her are: In the course of submissions he confirmed that the table in his affidavit was constructed in the following manner:46.Working on the rents that [the respondent] was receiving in early 2019 without factoring in any increase in rental since then….I calculate the rent for the 3 properties from the date of separation until the date of the trial being in the order of $246,760.(As it was recorded) His evidence was that he had reviewed the respondent’s bank statements and totalled the payments made to H Bank and ANZ Bank in respect of the mortgages held over the properties, being $108,231. He said that he confirmed with City Z Council that the respondent had paid the rates on the Suburb B properties until April 2019 but that the rates are currently in arrears. He gave evidence, conceded by the respondent at trial, that the body corporate had commenced proceedings against the parties seeking recovery of outstanding strata fees and levies due on the Suburb B properties. The respondent submitted that the F Valuers reports recorded the very poor condition of the Suburb B properties and that this in turn reflected the low rents received from the properties. The respondent submitted that it was not appropriate to notionally add-back any of the income she had received from the Suburb B properties post separation. It was her case she had been left with the sole responsibility of “maintaining payment of all expenses and loans” in respect of the Suburb B properties while “working full time and being the sole carer for X”. The respondent gave evidence in her affidavit providing 115 items of disclosure by way of her solicitors from September 2018 to March 2019. She gave evidence as to solicitors she had retained in late 2018 and early 2019 corresponding with the applicant’s solicitors requesting that the applicant contribute to the liabilities in respect of the Suburb B properties. The applicant’s solicitors responded on 22 February 2019 advising that the applicant could “not financially afford to assist contributing to the properties or to X”. This evidence supported, at that time, a shortfall between rents and mortgage instalments, rates and other outgoings in respect of the Suburb B properties. The respondent gave evidence as to that shortfall being met from borrowings obtained from her father after April 2019. Her father’s unchallenged affidavit further supported this evidence.