Ranchie and Best

[2013] FCCA 1132

FEDERAL CIRCUIT COURT OF AUSTRALIA

RANCHIE & BEST [2013] FCCA 1132

Catchwords:
FAMILY LAW – Property – de facto relationship –short relationship with no children.

Legislation:

Family Law Act 1975, ss.79(2), 79(4)(a)-(e), 90SF(3), 90SM(3)

Bevan & Bevan [2013] FamCAFC 116
Calverley v Green (1984) 155 CLR 59, (1984) FLC 91-565

Ferguson & Ferguson (1978) FLC 90-500
Foregeard v Shanahan [1994] NSWLR 206
Rogers & Rogers (1980) FLC 90-874

Applicant: MR RANCHIE

Respondent: MS BEST

File Number: CAC 242 of 2012

Judgment of: Judge Brewster

Hearing date: 29 & 30 July 2013

Delivered at: Canberra

Delivered on: 23 August 2013

REPRESENTATION

Counsel for the Applicant: Mr Webster

Solicitors for the Applicant: Bede Webster

Counsel for the Respondent: Mr Howard

Solicitors for the Respondent: See Well Law

ORDERS

1. That the Applicant forthwith transfer to the Respondent the whole of his interest in the property situated at Property R, in the Australian Capital Territory (“the property”).

2. That contemporaneously with this transfer the Respondent effect the discharge of the mortgage on the property or obtain the release by the mortgagee of the Applicant’s liability under the mortgage.

3. That as against the other each party be entitled to retain the chattels in his or her possession and the choses in action in his or her name.

IT IS NOTED that publication of this judgment under the pseudonym Ranchie & Best is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT CANBERRA

CAC 242 of 2012

MR RANCHIE

Applicant

And

MS BEST

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter involves a dispute between the parties as to property division.

2. Whilst the parties were never married, I propose in this judgment to refer to them as the husband and the wife.  I trust that this does not cause any offence.  I find that when I use the terms Applicant and Respondent I sometimes get them confused.

3. At the outset I point out that this is a very unfortunate case which has had a lamentable history.  The parties were in a short relationship and there are no children of that relationship.  By far the most significant property was brought into the relationship by the husband.  The husband’s financial contributions during the relationship significantly exceeded those of the wife.  It should have been obvious that whatever share the wife might obtain of the property pool would be a small share only.  This is what has happened.  Indeed when one looks at the husband’s application and the wife’s response it was a case which one would have thought would inevitably settle.  The husband’s application was that a property that the parties owned in Property R be sold and the net proceeds divided equally between the parties.  The wife’s response sought that the Property R property be transferred to her.  She also sought an order that she keep her bank accounts, furniture, superannuation and motor vehicle and life insurance.  The final order she sought was in the following terms:

   That a cash adjustment be made to ensure that I receive 75% of the net pool of assets accumulated during the relationship.

4. The principal assets consisted of a property at Property M acquired by the husband before the relationship and the Property R property.  It appeared therefore that the last order sought was meaningless and that what the wife was seeking by way of an alteration of property interests was the whole of the Property R property.  The present equity in the Property R property is about $54,000 and so the parties appeared to be in dispute to the tune of about $27,000.  The notion of running a case such as this to a final hearing is unthinkable.

5. However the case did not settle and was run through to a final hearing.  I assume that the order I have quoted actually meant something.  I imagine that it related to the fact that a mortgage on the Property M property was paid off during the relationship.  Given that the husband’s financial contributions during (and after) the relationship greatly exceeded those of the wife, it is impossible to comprehend how she could claim 75% of the increase in the equity of that property but presumably she believed, or was advised, that she would get more than the Property R property.  If parties for whatever reason litigate a small claims case it is vital that everyone involved be conscious of issues of proportionality.  That did not happen in this case.  The affidavit material is voluminous.  The court file runs to two volumes.  There were three interlocutory applications filed.  One, which was filed by the wife seeking orders for discovery and an injunction to restrain the husband’s lawyer from acting for him, was accompanied by written submissions running to 83 paragraphs.  In addition the litigation was not confined to this court.  An application was made by the husband to the Australian Capital Territory Administrative and Civil Appeals Tribunal (“ACAT”) seeking orders against the wife.

6. I add that Mr Howard, who appeared for the wife, only became involved in the case shortly before the final hearing and bears no responsibility for what has occurred.

Background

1. The parties met in 2007 and commenced to live together in about (omitted) 2008.  Their relationship broke down in 2011 and on 5 June 2011 the wife moved from the husband’s home in Property M where they had been living to a property at Property R which was purchased by the parties as tenants in common.

2. As I have indicated there are no children of the relationship although each of the parties has children by a former relationship.  The husband has two children now aged 13 and 9 and the wife two children aged 19 and 15.

The Parties’ Applications

1. The husband now seeks an order that the wife transfer to him all her interest in the Property R property.  On the face of it this would appear to be an alteration of property interests in his favour but the reality is somewhat different.  The property was purchased for $395,000 but with additional costs such as stamp duty the parties expended $411,728.  An amount of $354,585 was borrowed by way of mortgage.  The husband paid a deposit of $39,500 and additional monies of $17,643.  His contributions therefore total $234,435.  This is the $39,500 plus the $17,643 plus half the mortgage of $177,292.  This equates to about 57% of the purchase price of the property.  In the absence of evidence to the contrary, it is assumed that the parties intended their beneficial interests in the property to be proportionate to their contributions.  See Calverley v Green  (1984) 155 CLR 59, (1984) FLC 91-565. This would mean that the wife has a beneficial interest in the property of about 43%. The property is valued at $395,000 so her share equates to about $170,000. From that she would have to pay her half share of the mortgage. This now stands at about $341,000 so her half would be about $170,500. In reality therefore the husband would be entitled to all the equity in this property.

2. The husband also sought an order for payment to him by the wife of $57.14 a day in terms that I found very confusing but, as I ultimately understood it, the application was that she pay this amount until she vacated the Property R property following its transfer to the husband.  The basis of this is, as I understand it, a written agreement entered into by the parties when they purchased that property.  This is a curious aspect of the case which I will now relate.

3. The agreement was signed at the same time as a tenancy agreement for the Property R property where the lessee was the wife’s daughter X.  It is not necessary to discuss this in detail but as I have indicated, as I understand it, it forms the basis of the husband’s claim for payment of $57.14 a day whilst the wife occupies the Property R property and was the basis of his ACAT proceedings.  The parties came to an agreement that the wife could occupy the Property R property and pay half the market rent on that property.  The market rent was agreed at $400 a week with complicated provisions for its variation.  The result would be that she would pay $200 a week.  At the same time a tenancy agreement was entered into between the parties and X whereby X became the lessee of the property at a rent of $200 a week.  The husband says that it was never envisaged that X would actually pay any rent or occupy the property but that this was a device which would enable him to obtain a tax deduction for the interest on the mortgage and on other outgoings in relation to the property.  He maintains that the wife was supposed to pay him $200 a week.  The wife agrees that it was never envisaged that X would pay any money and she says it was verbally agreed that she (the wife) would not pay any money either.  It is not necessary to dilate further on this aspect of the case.  Assuming that the agreement is a valid agreement and did not need to comply with the provisions of the Family Law Act1975 in relation to binding financial agreements, when looked at with the tenancy agreement with X, it was plainly part of a scheme designed to mislead the revenue authorities.  As such the law of contract may permit me to decline to enforce it.  However I do not need to explore this and will take a short cut.  The husband’s rights under the agreement constitute a chose in action.  This is property.  I can alter his interest in this property and extinguish that interest.  I do so.  As will appear I will take into account the wife’s occupation of the Property R property.

4. The wife seeks an order that the husband transfer the Property R property to her and pay her a sum of money such that her share of the pool would be 15% of the total property pool. This is calculated on the basis of a 10% adjustment in relation to contribution issues and a 5% adjustment in relation to section 90SF(3) matters.

The Process to be applied

1. The Full Court of the Family Court of Australia has indicated that in property division cases a four stage process should be applied. The first stage is to make findings as to the pool of property. The second stage involves a consideration of contributions made by or on behalf of each party. If appropriate an alteration in their property interests may be made on this basis. The third stage, for the purposes of this case, involves a consideration of the matters set out in section 90SF(3) as may be appropriate. The final stage involves taking an overview of the result derived from any alterations under the second or third stages to determine if, overall, that result is just and equitable.

2. Before I can make any order altering the interests of the parties in their property I must be satisfied that it is just and equitable to do so. See section 90SM(3). I will return to this later in this judgment. In this respect I bear in mind the comments of the Full Court in Rogers & Rogers (1980) FLC 90-874. That case involves section 79(2) which is in identical terms to section 90SM(3). The court quoted with approval the judgment of Strauss J in Ferguson & Ferguson (1978) FLC 90-500 where at page 77,615 Strauss J said:

   It seems to me, that the main purpose of sec. 79(2) is to ensure that the Court will not alter the property rights of the parties, unless it is satisfied that cogent considerations of justice require it to do so, and that if the Court decides that it is requisite to make any order under the section, the Court must be satisfied that the alterations so ordered, will go no further than the justice of the matter demands.

3. Rogers has recently been cited with approval by the Full Court in Bevan & Bevan [2013] FamCAFC 116.

The Pool

1. The husband is the owner of a property at Property M.  It has an agreed value of $680,000 and is unencumbered.

2. The parties are joint owners of the Property R property.  Its agreed value is $395,000 and it is subject to a mortgage of about $341,000.  This leaves an equity of about $54,000.

3. The husband has a boat with an agreed value of $15,000 and shares valued at $22,000.

4. The husband also has bank accounts the value of which appear to be in dispute.  Given that the parties separated some time ago, and that I do not know how much he had in the bank at the date of separation, I do not propose to include bank accounts in the pool.

5. The husband has superannuation but in the context of this case I regard this as irrelevant.

Contributions

1. In the discussion that follows, I refer to the role each party played as a step-parent. I am aware that this aspect of the case falls within the rubric of section 90SF(3) rather than as a contribution issue but it is convenient to deal with it when considering contributions.

2. The husband owned the Property M property prior to the commencement of the relationship.  It was then encumbered but the mortgage has since been repaid.  This property forms the overwhelming bulk of the pool. 

3. Financial contributions during the relationship favour the husband.  His income greatly exceeded that of the wife.  He estimated, and I accept his evidence, that he earned about three times as much as she during the relationship.

4. The wife’s children lived with the parties.  They were probably a financial drain.  It appears common ground that early in the parties’ relationship their father’s child support payments were erratic but later became regular.  However no figure has been given as to the amount of child support paid.  I believe I am justified in inferring that it would not have covered the whole cost of maintaining those children.

5. The husband also made non-financial contributions.  As I have indicated the wife’s children lived with the parties during the relationship and he was involved in activities with them and performed the role of stepfather.  He also performed domestic tasks.

6. The husband also contributed all the funds that were not borrowed for the purchase of the Property R property.  I already detailed this.

7. Post separation the husband shared the payment of mortgage instalments with the wife until August 2012.  The instalments totalled $630 a week and his share was $315.  In August the wife ceased to contribute to the mortgage and the husband has been solely responsible for the payment of the instalments since that time.

8. The husband paid half the rates on the Property R property up until the 2012/2013 rating year.  He says that he paid the whole of the rates for this financial year in the sum of $1,384 and I accept his evidence.

9. Post separation the husband gave monies to the wife.  I accept the evidence of the wife that this was in the sum of $1,500.

10. The husband gave evidence that after separation renovations were done on the Property M property at a cost of about $90,000.  He said that the overwhelming bulk of these renovations were paid for by his present partner.  As I understood it his counsel submitted that some $90,000 of the value of the property can be attributed to post separation events.

11. There are a number of problems with this.  I am not aware of any valuation of the property and what I have is an agreed value.  I have no evidence of how much value has been added to the property by the renovations.  Another difficulty is establishing or verifying the accuracy of the husband’s evidence.  There is no reference to these renovations in any affidavit and the first the wife came to learn of it was when leave was sought to ask questions in chief of the husband at the hearing.  He produced no documentation to verify the amount of the expenditure and his partner is not on affidavit.

12. However I accept that work was done on the property post separation and will take that into account.  I accept that the husband’s partner would be able to claim a constructive trust to give her a share of the property were their relationship to end.  If the relationship continues beyond two years then her share of any subsequent property settlement under the Family Law Act would be increased by reason of the monies she has applied to the Property M property.

13. It was submitted on behalf of the husband that I should take accounts in relation to the Property R property to require, in effect, the wife to pay an occupation fee.  In my opinion the wife is not liable to pay an occupation fee.  As I understand the law such a fee is payable only if there has been an ouster.  See Foregeard v Shanahan [1994] NSWLR 206. Whilst it was submitted to the contrary it is plain that there was no ouster in this case. I do take into account the fact that the wife has had the benefit of occupying this property and, until August 2012, only paid half the mortgage payments and has made no such payments since that date. Effectively since August 2012 she has occupied the property “rent free”.

14. Whilst the wife’s income was substantially less than that of the husband, I am satisfied that her income was an economic benefit to the parties.  She also contributed a lump sum of about $9,000 from a redundancy payment.  There was a joint bingo win of $10,000, $3,000 of which was spent on air conditioning the Property M property.  However her right to a contribution based share of the pool is based predominantly on her non-financial contributions.

15. Whilst for much of the relationship the parties employed a cleaner, I am satisfied that the wife performed the great majority of the domestic tasks during the parties’ relationship.  The husband’s children stayed with the parties each alternate week and she performed the role of stepmother.  This included things such as making school lunches for those children.  At one stage there was a threat that the after school care facilities at the school the husband’s children attended would be closed.  The wife became involved in the Parents and Citizens Committee and agitated for the facility to continue.  This is what occurred.

Section 90SF(3) factors

1. This was a short relationship.  It had had no impact on the wife’s earning capacity.  There are no children of the relationship.  But for two things I would not make any adjustment under this section in her favour. 

2. The first of the two matters to which I have referred concerns the wife’s leaving her accommodation in 2008 to move in with the husband.  The wife was a tenant of an ACT government house.  She was concerned about the impact of her giving up this house.  She says the parties came to an agreement that if they were to separate the parties would buy a jointly owned home in which she would have the right to live for 10 years.  There is some dispute about the precise terms of this agreement and I make no finding as to this issue which I do not regard as particularly relevant.  I accept that she had concerns about giving away her government house.  I believe I can take judicial notice of the fact that government housing is quite secure and that tenants are only evicted for non-payment of rent, a breach of the conditions of the lease or if they become high income earners.  Furthermore, the rent is capped at a maximum of 25% of the lessee’s income.  At present the wife is earning about $85,000 a year so she would be effectively paying about $400 a week in rent were she to have continued to occupy her government house.  However she is on a short term contract and it is by no means guaranteed that she will continue to earn an income at this level.  The advantage of having a government house is that there is a guarantee that the rent payable will not exceed 25% of one’s income and so, had she remained in government housing, she would have been insulated to a degree from the impact should her income reduce.  It was submitted that she can go on the waiting list for government housing but my understanding is that she would not meet the income test.

3. The second matter concerns the ACAT proceedings.  These were in relation to enforcing the agreement to which I have previously referred.  The wife spent $6,391 defending those proceedings.  In my opinion the decision to institute these proceedings was totally misconceived.  Assuming for present purposes that the Family Law Act does not cover the field in relation to the agreement and assuming the ACAT would enforce an agreement that was part of a scheme to mislead the Commissioner of Taxation there was never any realistic possibility that that Tribunal would deal with this matter whilst there were concurrent and overlapping proceedings in this court.  In those proceedings I could make orders having the effect of enforcing the agreement, declining to enforce the agreement or, as I have done, extinguishing the husband’s rights under the agreement.  This was an expense to which the wife should never have been put.  In the result the Tribunal stayed the husband’s application because of the pendency of these proceedings.  That was inevitable.

1. I take both these matters into account under s. 90SF(3)(r).

2. Offsetting them to a degree is the fact that the wife has had the benefit of occupying the Property R property for the last two years.

Conclusion and Overview

1. I do not propose to make separate adjustments for contribution factors and section 90SF(3) factors but instead I have made an order taking both matters into account in a global way and which I believe in all the circumstances will provide a just and equitable outcome. I propose to alter the parties’ interests in the Property R property and order that the husband transfer his interest in that property to the wife. The pool totals some $771,000. The equity in the Property R property of $54,000 is about 7% of the total pool. Making such an order would involve a division of 93% to the husband and 7% to the wife. In my opinion the range in this case is an adjustment between 5% and 7.5% in favour of the wife. Given that I can make an award within this range and allow the wife to retain the Property R property in my opinion it is just and equitable to make an order to this effect.

2. To summarise first I am satisfied that it is just and equitable to make an order altering the parties’ interests in their property.  Secondly I am satisfied that it is just and equitable to make that alteration to the extent of giving the wife the Property R property.  I so order.

Costs

1. Any application for costs should be made within twenty eight days.  The party seeking costs should write to the court and indicate the basis of the application.  A copy of any Calderbank letter should be provided.  I will then decide if the matter should be re-listed or if it should be dealt with by way of written submissions.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Judge Brewster

Date:  23 August 2013