R and R - [2002] FMCAfam 103

FEDERAL MAGISTRATES COURT OF AUSTRALIA

R & R

[2002] FMCAfam 103

PROPERTY – Second marriage for both parties – wife gave away her property – sole financial contribution by Husband.

Applicant:

G C R

Respondent:

V A R

File No:

ZM 3728 of 2001

Delivered on:

17 May 2002

Delivered at:

Melbourne

Hearing Dates:

23 & 29 March 2001; 24 May 2001;
1 June 2001

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant:

Mr Ramsey

Solicitors for the Applicant:

Rennick & Gaynor

Counsel for the Respondent:

Ms Cooke

Solicitors for the Respondent:

Peter G Arnheim & Associates

ORDERS

THAT the Husband pay to the Wife the amount of $87,300.00.
THAT otherwise each party retain all real estate, chattels, money, bank accounts and choses in action in their possession in their names and indemnify each other against all debts and liabilities in the party’s name.
That otherwise all extant applications be dismissed and removed from the pending cases list.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

ZM 3728 of 2001

G C R

Applicant

And

V A R

Respondent

REASONS FOR JUDGMENT

Introduction

This is a property, financial and spousal maintenance application.
The Wife was born in Italy on 16 December 1942, the Husband on

23 May 1939. They met in December 1992 and married on 5 December 1993. There are no children of the marriage.
Both parties had been married before. The Husband was married to his first Wife in 1960. There were two children of the marriage, a daughter aged 34 now married and living with her Husband and a son aged 22 who is studying to be a C P and living with the Husband. The Husband was divorced from his first Wife in 1987. She now lives in Italy
The Wife’s first Husband died in 1992. She has three adult sons aged 36, 34 and 28.
The parties have separated, but the date is a matter of contention. According to the Wife it occurred in February 2000. The Husband says that while that was the last date that the Wife left the matrimonial home, she spent many periods at her son’s residence and that the marriage ended in February 1996.

Husband’s property

At the date of the marriage the Husband had these assets and liabilities.
Assets
7 G Court G  $250,000.00
384 G Road P  $220,000.00
166 B Parade, R  $70,000.00
$540,000.00
Liabilities
National Bank Loan  $333,000.00
Family and friend  $28,000.00
$361,000.00
Net assets  $179,000.00
G was the Husband’s family home, P a shop and R a workshop for the V A R Family Trust canvas goods manufacturing business. This business is carried on by the Husband. In his affidavit the Husband says that the business pays him a wage of $100.00 per week and he receives $643.00 per week gross rent from the P shop. The profits of the trust are $248.00 per week, which are paid to his son for his living expenses.
The Husband said that he intended working until he was sixty-five if he was able and then retire. The business would cease on his retirement. The bank loan, at the time of the hearing with the National Bank, was largely the result of settling matrimonial property proceedings with his first Wife. His evidence was that when first borrowed it was at high interest and he had to borrow $18,000.00 from his sister to maintain his mortgage payments. He borrowed a further $4,000.00 from her to pay for his daughter’s wedding and still owed her $20,000.00. He borrowed $8,000.00 from a friend to pay for his father’s funeral. He was paying the bank loan as rapidly as he could so that he would have it paid by retirement.
At the time of the hearing the Husband’s assets and liabilities were
Assets
G  $370,000.00
P  $310,000.00
R  $80,000.00
$760,000.00
Liabilities
National Bank Loan  $150,000.00
Family and Friends  $28,000.00
Net assets  $582,000.00
The debts to family and friend are long term debts with nothing repaid. The assertion on the part of the Wife is that they should not be taken into account.

Wife’s property

The Wife and her Husband had carried on a tobacco retailing business. The Wife continued it after his death and assisted by the two younger sons who were then living with her. The business was barely profitable and the sons were not paid a wage. The business had an overdraft and a fully drawn loan.
The Wife sold her former home in T in 1993 for $320,000.00 and at the same time purchased a property at 57 M Street F (M Street) for $90,000.00. The balance of the sale price was used to pay the housing loan on T ($129,119.84) and reduce the business debt. The tobacco business was sold and settled in January 1994. After payment of the business loans the Wife had an amount left over. The settlement of the house transactions was in August 1993, and settlement of the sale of business was in January 1994. The Wife’s evidence was that she spent $15,000.00 on renovations to M Street and paid money to the eldest son to repay his paying for her first Husband’s funeral and money he had paid for the tobacco business. What if any amounts were paid prior to the settlement of the sale of the business is not entirely clear. What the evidence does show is that after settlement of sale of the business, she consolidated her bank accounts into one and on 11 February 1994 her bank account had a credit balance of $37,738.41. There were then withdrawals so that by August 1994, there was almost nothing left. Another bank account was opened on 27 October with a deposit of $5000.00 and that was all withdrawn by March 1995
There was some dispute about the amount of money held by the Wife at various times. This was resolved by production of the bank books. There was also dispute about the sums paid by the eldest son for the funeral and the business. The son then gave evidence and produced records which established what he had paid.
The eldest son paid for the funeral and later for the monument erected at the grave. The tobacco business struggled after the death of the Wife’s first Husband. The son’s evidence was that he had a good job and was able to offer support. He produced a list of payments he had made from his cheque account. In July and August 1991 he made two payments totalling $7,900.00 for the funeral and another payment of $2954.00 in August 1994 for the monument. From 1992 until July 1993 he made a series of cheques in favour of T C and he paid two small amounts for the T house. The total of the amounts from the cheque account was $26,138.00.
In late 1993 the Wife received a re-entry notice from the Landlord because of non-payment of rent. He withdrew $15,000.00 from a term deposit to pay the rent and prevent the closure of the business. He gave evidence that there was another $3000.00 in cash approximately that he gave to the business.
The eldest son's evidence was corroborated by the documents he produced except for the cash payment of $3,000.00. The difficulties with the business, and therefore the need for assistance from the eldest son, were shown in various correspondence. These show that the Wife was in danger of losing the business completely and therefore would have been left with substantial debt. Because of the financial backing of the eldest son a new lease was negotiated with the Landlord to commence from 16 August 1993 for a period of 5 years. The lease in fact was with R G and A G and not the Wife. Because there was a new lease the business could be sold and therefore the balance of debts paid off.
In these circumstances it is proper to take into account as debts of the Wife, the money the eldest son had paid. Therefore I accept that at about January 1994 at the commencement of the marriage, the Wife had a debt to the eldest son of $44,138.00.
The Wife’s evidence was that she spent $15,000.00 on renovations to M Street. It would seem that this must have been after the settlement of the sale of the business and she used some of the money which went out of her bank account. She paid back substantial amounts to her son and consequently, the reduction in her bank account until almost zero by August 1994 is explained.
In June 1996 the Wife sold M Street for $125,000.00. The explanation she gave was that she needed money. Her sons and the Husband could not understand why she did that. At about the same time, she purchased 57 M Street, F for $91,000.00. In October 1996, $19,121.69 was paid into the Wife’s bank account, that being the balance of the sale of M Street after the purchase of O Street. In August 1997 that account was reduced to virtually nil.
The Wife had paid for the purchase of O Street with the property registered in the son's name. They obtained a housing loan of $67,000.00 which took about 6 months and they paid their Mother this amount. This money, paid in about March 1997, went into a term deposit in the Wife’s name. It was gradually drawn upon and transferred into the passbook account, usually in amounts of $1,000.00 until September 1999 when it appears that the balance of the term deposit, at that stage being $20,054.91 was transferred to the passbook account accept possibly for a payment in May 2002 of $4,250.00 and October 2000 of $9,252.75.
The position at the time of the hearing was that the Wife had no savings and was dependent upon her social services pension including a rental supplement.
In about mid 1997 the Wife’s assets consisted of about $75,000.00 in cash.
The Wife’s evidence was that of this money she spent $25,000.00 approximately on renovations to the property at 1 O Street. She gave $20,00.00 to her son to repay money he had lent over the previous years. She spent approximately $1,500.00 on driving lessons and the rest she spent in various expenses, including birthday presents and Christmas and Easter presents for the Husband, his daughter, his son and her own children.
The contention on behalf of the Husband is that the Wife is the equitable owner of O Street.
The O Street house is a 2 bedroom house. The Wife’s two youngest sons live there as they had with M Street and T Crescent. In T Crescent and M Street they paid no rent.
The Wife sleeps in the living room at the O Street house. She receives a rental supplement because she pays rent to her sons and on that basis she has applied and received rental supplement from Centrelink.

History of the marriage

The Wife asserted that the marriage continued more or less as a normal marriage until February 2000. The Husband says that the marriage was not successful. He said that there were numerous separations ranging from a few weeks to months at a time. He said that in early February 1996 the Wife left the matrimonial home, returning at weekends and that she spent long periods living with her sons.
The Wife denies this. She says that she left for a period of about three weeks on one occasion in 1998 when her son, Walter, broke his leg and could not get around and his doctor asked if someone was at home. She said she thought it was in 1998.
The Husband’s evidence is supported by his sister, his daughter and contemporary documents. The daughter lived with the Husband and the Wife until her marriage in 1998. Letters were sent by the solicitor for the Husband in August 1997, March 1999 and January 2000. In August 1997 the letter stated that the Husband had instructed the solicitors that the marriage had irretrievably broken down and that the Wife was to vacate the property in 14 days. In March 1999 the letter stated that the solicitors were instructed that in July 1998 the Wife returned to the house and the parties had lived together since that date. It went on to say that the Husband no longer wished that arrangement to continue and the Wife was required to vacate the premises within 14 days. A similar letter was written in January 2000. The Wife’s son’s evidence was that their Mother did not spend long periods with them.
In addition to the question of living arrangements, the Husband and his sister alleged that the Wife would take various household supplies from the matrimonial home to her son's house. The Wife denied this.
The Wife did not charge her sons rent. She said she took this course because the sons had not received a salary whilst they worked in the tobacco business.
I find that the Husband’s version of living arrangements is closer to the truth than the Wife’s and that from 1996 onwards, the Wife spent considerable time away from the matrimonial home and was living with the sons. I find that she did take various household supplies to the sons. It is not possible to quantify the amount.

The law

In these circumstances the approach to be taken is well established. There is the 3 step approach -
a)Identify and value the net property of the parties;
b)Consider the contributions of the parties within sub section (a) to (c) of Section 17 (4);
c)Consider the Section 75 (2) factors (Section 79) (4) (d) - (g).
Ferraro and Ferraro (1993) FLC 1992 335 and McClay and McClay (1996) FLC 92667.

Conclusion

In 1998 the Wife owned M Street. While it is difficult to assess where she stood in relation to money owed to her eldest son, her evidence was that once she had sold M Street and obtained money from the younger sons for O Street she paid her eldest son back $20,000.00.
She claimed that the Husband had never given her any money and that for personal expenses, including taxi fares to visit her children, she was left to her own resources. The Husband’s evidence was that he paid for food and household expenses. The income from the business or trust went to his son and otherwise he was paying his large loan as rapidly as he could.
It is put against the Wife that she should have obtained rent for the M Street property from her sons and that would have given her an income of say $150.00 per week. There was no evidence of what a commercial rent would have been. If a valuation of $115,000.00 is assumed, 5 per centum of that is $110.00.
The only difficulty in identifying the property is to determine whether the Wife has any property.
The submission on behalf of the Husband was that she should be treated as the equitable owner of the M Street property save for $5,000.00 paid by the two sons. The basis of this submission is that she initially purchased the property with her own money except for $5,000.00 from the sons. She was paid $67,000.00 of that back by the sons. It was submitted that while she acknowledges that she paid two amounts, $8,000.00 and $25,000.00 towards renovations and improvements, the court should find that the balance of the money went to the sons so that in effect she owns the property. The submission was that she should be treated as owning 97.5 per centum of that property. It was then submitted that she should be treated as having a debt due to her from her sons for rent of $80,000.00 for all the period they had lived rent free. It was submitted that the Wife’s share of the house should be valued at $100,000.00 so that with the debt of $80,000.00 owed she has net assets of $180,000.00.
The submission on behalf of the Wife was that O Street should be dealt with in this way. The Wife’s initial contribution to the house was $26,000.00, that being the original purchase price less $67,000.00 paid by the sons. She paid two amounts for renovations, $8,000.00 and $25,000.00. A calculation of the Wife’s reasonable expenditure was put at $16,000.00 expenditure which ought to be put into this equation so that the balance of the funds she had available when the sons paid her $67,000.00 should be treated as having gone into the house at O Street.
The submission is that the Wife should be treated as contributing $75,000 to the O Street property and the two sons $67,000.00, so that they have contributed 47 per centum. The consequence of that it was put was that the Wife’s property should be treated as 53 per centum of the current value of O Street – $101,000.00.
This, I consider, an unrealistic approach. I also consider that the submission put on behalf of the Husband is not correct. The inference to be drawn from the Wife’s evidence is that she considers the money she has paid for the O Street house as a gift to the sons. There is no suggestion that it is otherwise. It was put to her that her motive in doing this was to improve her chances of obtaining a share of the Husband’s property, and also so she could claim rental assistance from the Social Security Authorities. That may or may not be correct. If it is correct, then it confirms her intention to make a gift or gifts to the sons. If it is not correct it does not alter the fact, as I find, that she has made a gift to the sons.
In these circumstances there is no basis of making a finding that the Wife now has any interest in the property.
I consider that the proper way of taking into account the manner in which the Wife has dealt with her property as a factor in the determination of contributions.
The relevant matters are these. At the commencement of the marriage the Wife had the M Street property and probably a small amount of cash after taking into account money that she owed. The Husband had net assets of $179,000.00.
The property pool now consists solely of the Husband’s assets, the sum of $582,000.00 if the loans to family and friends are taken into account. It was submitted on behalf of the Wife that those loans should not be taken into account. The evidence is not disputed that the money was in fact loaned. What is said is that I should infer that it will not be repaid. I do not think I can make that inference. What I can infer is that it is possible that repayment might not be sought. Whether or not it is might depend upon the circumstances of the Husband and the lenders in the future. It may be that one or more of the people who lent the money may have a need for the money and ask for its return and the Husband will do so. It may be that the lenders never see a need for a return for the money and it is never repaid. Again, I think this is a matter that should be taken into account in the overall determination of the discretion.
Given the findings I have made, I consider that I should treat the marriage as being one which from some time in 1996 consisted of only intermittent co-habitation. The position then is that all financial contributions have come from the Husband. The Wife, if anything, has made a negative contribution. The Wife’s contribution has solely been as a homemaker. I assess that at 5 per centum.
In determining needs, I determine it on the basis that the Wife is not capable of obtaining employment and the Husband will shortly be retired. Although the Wife has no property, evidence shows that she is living in the house with the sons and will not be evicted by them. Her sole income is Social Security payments. In the circumstances I think a 10 per centum adjustment for her needs is appropriate. I will order that the Husband pay the Wife an amount equal to 15 per centum of the net assets, an amount of $87,300.00.
Finally, I have to consider whether the order I propose is, in all the circumstances, just and equitable – subsection 79(2) Family Law Act 1975. It was submitted on behalf of the Wife that the Husband should be ordered to pay her an amount which would allow her to purchase a flat.
I do not consider that in the circumstances it would be just and equitable to make an order on this basis. The Wife, had she chosen to deal with her property and finances differently during the marriage, could have kept her own home and had it unencumbered. She chose to provide a home for her sons rent free and then to assist them in purchasing and improving a home owned by them. She is able to live in that home, although there may be some inconvenience. If she had kept her own home, it would have been part of the matrimonial property to be considered in these proceedings. Consideration of contribution and perhaps needs would have been different. To make an order in these circumstances, requiring the Husband to provide a home for the Wife would not be just and equitable.

Given the findings I have made, there is no basis for ordering spousal maintenance. It was not sought in the final submissions put on behalf of the Wife.

I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: